Trade-related climate measures (TrCMs) are fundamentally reshaping global soft commodity markets. While the European Union Deforestation Regulation (EUDR) pursues the legitimate goal of reducing global forest degradation, its heavy reliance on punitive due diligence – enforced primarily through the loss of market access – poses severe, unintended development risks for smallholder-dominated economies.

In Ethiopia, the birthplace of coffee, over 90% of production relies on smallholders farming small plots under native forest canopies. While these traditional systems are inherently biodiversity-rich and ecologically sustainable, complying with rigid digital plot geolocation and complex proof-of-legality requirements presents an acute structural challenge.

Despite regulatory postponements moving large-operator enforcement to late 2026, progress across decentralised value chains remains uneven. Without coordinated interventions, compliance hurdles risk triggering widespread "green squeeze" market exclusion, threatening rural livelihoods, foreign exchange reserves and national macroeconomic stability.

Report by the Overseas Development Institute