By Mei Mei Chu
KUALA LUMPUR (Reuters) -A new&nbsp;European Union&nbsp;law&nbsp;preventing the import of commodities linked to&nbsp;deforestation&nbsp;risks&nbsp;sidelining&nbsp;small&nbsp;farmers&nbsp;who are unable to meet the burdensome cost of compliance, the head of the Roundtable on Sustainable&nbsp;Palm&nbsp;Oil&nbsp;(RSPO) said on Tuesday.
Joseph D'Cruz told Reuters larger RSPO-certified members will not face difficulties complying with&nbsp;EU&nbsp;requirements as their certification standards already prohibit&nbsp;deforestation&nbsp;and the conversion of primary forests.
"There is a human, social and developmental cost there, which&nbsp;smaller, marginal producers may be forced to bear in order for the&nbsp;EU&nbsp;deforestation&nbsp;regulation to be implemented the way it is being set up right now," the RSPO chief executive officer said in an interview.
The&nbsp;EU&nbsp;in December agreed on a new&nbsp;deforestation&nbsp;regulation that requires companies to produce a due diligence statement showing when and where their commodities were produced and provide "verifiable" information that they were not grown on land deforested after 2020, or risk hefty fines.
The regulation has been welcomed by environmentalists as an important step in protecting forests as&nbsp;deforestation&nbsp;is responsible for about 10% of global greenhouse gas emissions.
The&nbsp;law&nbsp;will apply to&nbsp;palm&nbsp;oil, soy, beef, wood, cocoa and coffee and some derived products.
Small, sustainable producers across Asia, Africa and Latin America who benefit the most from access to premium markets will not be able to sell to the&nbsp;EU&nbsp;because they lack a supply chain that can demonstrate traceability from the farm to the&nbsp;European market, D'Cruz said.
More than seven million&nbsp;smallholders globally cultivate&nbsp;palm&nbsp;oil&nbsp;for a living, according to RSPO data. In top producers Indonesia and Malaysia,&nbsp;smallholders account for about 40% of the total area for&nbsp;palm&nbsp;oil&nbsp;production.
The two countries have accused the&nbsp;EU&nbsp;of blocking market access for their&nbsp;palm&nbsp;oil, with Malaysia saying it could stop exports to the bloc.
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Activists have for years accused the&nbsp;palm&nbsp;oil&nbsp;industry of rampant clearing of Southeast Asian rainforests and abuse of workers' rights, although the RSPO has addressed these issues in their certification criteria.
Market share for RSPO-certified sustainable&nbsp;palm&nbsp;oil&nbsp;has stayed at 19.8% for years, due to stagnating demand for the more pricey certified product, especially in price-sensitive markets like India and China.
RSPO is focusing on opportunities in India and China where consumer perceptions of sustainability are changing, D'Cruz said.
"When those perceptions shift, I think demand will reach a tipping point and start to grow quite significantly."
(Editing by Kanupriya Kapoor)

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EU deforestation law risks sidelining small farmers, says palm oil watchdog