Unravelling the Global Impact of the EU Deforestation Regulation through a Bayesian Poisson High Dimensional Fixed Effects Structural Gravity Model — Discussion paper

Abstract International trade in agricultural and forestry commodities has been a key driver of deforestation and biodiversity loss, particularly in tropical regions. Soybean production, in particular, exemplifies the geographic asymmetry between cultivation in biodiversity-rich areas like Brazil and consumption in high-income economies. In response, the European Union introduced the European Union Deforestation Regulation (EUDR) in 2023 to reduce its deforestation-linked imports. This study assesses the potential impact of the EUDR on international trade flows using a Bayesian Poisson High Dimension Fixed Effects (BPHDFE) structural gravity model. Applying this framework to an extensive dataset of bilateral soybean trade from 2009–2018, we estimate trade-demand elasticity and evaluate the EUDR’s potential effectiveness in reshaping trade between Brazil and the EU. Our findings contribute to the broader discussion on trade policy and environmental conservation. Citation Ringwald, L. J. C., Leclère, D., Krisztin, T., & Meinhart, B. (2026). Unravelling the Global Impact of the EU Deforestation Regulation through a Bayesian Poisson High Dimensional Fixed Effects Structural Gravity Model — Discussion paper (Version v01). BrightSpace Horizon Europe project Grant Agreement No. 101060075. https://doi.org/10.5281/zenodo.19845529 Funding acknowledgement Funded by the European Union. Grant Agreement No. 101060075. Views and opinions expressed are those of the authors only and do not necessarily reflect those of the European Union or the European Commission. Neither the European Union nor the granting authority can be held responsible for them. Legal notice This document was produced under the terms and conditions of Grant Agreement No. 101060075 for the European Commission. It does not necessary reflect the view of the European Union and in no way anticipates the Commission’s future policy in this area. The European Commission is not liable for any consequence stemming from the reuse of this publication. © BrightSpace, 2026 The reuse of this document is authorised under a Creative Commons Attribution 4.0 International (CCBY 4.0) licence (https://creativecommons.org/licenses/by/4.0/). This means that reuse is allowed provided appropriate credit is given and any changes are indicated. For any use or reproduction of elements that are not owned by the BrightSpace consortium, permission may need to be sought directly from the respective right holders. Project information BrightSpace Horizon Europe project Grant Agreement No. 101060075 https://cordis.europa.eu/project/id/101060075 CALL: Innovative governance, environmental observations and digital solutions in support of the Green Deal WORK PROGRAMME Topic ID: HORIZON-CL6-2021-GOVERNANCE-01-12 EU agriculture within a safe and just operating space and planetary boundaries BrightSpace Project coordination: Wageningen Economic Research, The Hague, NL Contact: [email protected] | Website: www.brightspace-project.eu Project duration: 1 November 2022 – 31 October 2027.