Forest Policy for Private Forestry: Global and Regional Challenges (Cabi Publishing)

Forest Policy for Private Forestry

Global and Regional Challenges

Forest Policy for Private Forestry Global and Regional Challenges

Edited by

Lawrence Teeter Forest Policy Center School of Forestry and Wildlife Sciences Auburn University Auburn, Alabama, USA

Benjamin Cashore Global Institute for Sustainable Forestry Yale School of Forestry and Environmental Studies Yale University New Haven, Connecticut, USA and

Daowei Zhang Forest Policy Center School of Forestry and Wildlife Sciences Auburn University Auburn, Alabama, USA

CABI Publishing

CABI Publishing is a division of CAB International CABI Publishing CAB International Wallingford Oxon OX10 8DE UK Tel: +44 (0)1491 832111 Fax: +44 (0)1491 833508 E-mail: [email protected] Web site: www.cabi-publishing.org

CABI Publishing 10 E 40th Street Suite 3203 New York, NY 10016 USA Tel: +1 212 481 7018 Fax: +1 212 686 7993 E-mail: [email protected]

©CAB International 2003. All rights reserved. No part of this publication may be reproduced in any form or by any means, electronically, mechanically, by photocopying, recording or otherwise, without the prior permission of the copyright owners. A catalogue record for this book is available from the British Library, London, UK. Library of Congress Cataloging-in-Publication Data Forest policy for private forestry: global and regional challenges / edited by Lawrence Teeter, Benjamin Cashore, and Daowei Zhang. p. cm. Includes bibliographical references (p. ). ISBN 0-85199-599-3 (alk. paper) 1. Forest management--Congresses. 2. Tree farms--Congresses. 3. Forest policy--Congresses. I. Teeter, Lawrence Dale. II. Cashore, Benjamin William, 1964– III. Zhang, Daowei. SD131.F6746 2002 2002004463 ISBN 0 85199 599 3

Typeset by AMA DataSet Ltd, UK Printed and bound in the UK by Biddles Ltd, Guildford and King’s Lynn

Contents

Contributors

ix

Preface

xiii

Acknowledgements

xix

PART 1. CHANGING PHILOSOPHIES OF FOREST MANAGEMENT

1

Forestry in the Long Sweep of History C.S. Binkley

1

2

International Dialogue on Forests: Impact on National Policies and Practices J.S. Maini

9

3

New Trends in Forest Policy and Management: an Emerging Postmodern Approach? J. Schelhas

17

4

Utilizing Issue Network Analyses to Assess Potential Policy Implications of Sustainable Forest Management in the United States S.O. Moffat, F.W. Cubbage, T.P. Holmes and E. O’Sullivan

29

5

Private Sector Participation on Public Forestlands: Challenges and Policy Issues B.N. Ganguli

41

6

Planning Private Native Forest Use in Australia R.D. Spencer, M.F. Ryan, P.K. Tickle and C.I. Howell

49

PART 2. CHALLENGES ABOUND: DESIGNING AND IMPLEMENTING POLICIES FOR PRIVATE FORESTRY

7

The Three Impediments: Time, Fire and Taxes G.H. Weyerhaeuser, Jr

61

v

vi

Contents

8

Global Initiatives, Public Policies and Private Forestry in Bolivia: Lessons to Date and Remaining Challenges G.F. Taylor II, J. Nittler and I. Kraljevic

9

Today and Tomorrow of Private Forestry in Central and Eastern Europe J.P. Siry

81

10

Redesigning Forest Policy Tools Under a Transitional Economy Setting M. Polyakov and L. Teeter

95

11

Private Land and Public Goods: Process Lessons from Habitat Conservation Planning 107 D. Ostermeier and D. Keele

12

Ensuring the Application of Sound Forest Practices on Private Forests: Challenges Facing the Design and Implementation of State Compliance Monitoring Programmes M.A. Kilgore, P.V. Ellefson and M.J. Phillips

13

Spatial Assessment of a Voluntary Forest Conservation Programme in North Carolina K. Cassingham, E. Sills, S. Pattanayak and C. Mansfield

67

117

129

PART 3. SUSTAINABLE FORESTRY ECONOMICS

14

Policy Developments Affecting Demand, Supply and International Trade of Forest Products: a European Perspective B. Solberg

143

15

Private Forest Management and Investment in the US South: Alternative Future Scenarios R.J. Alig, D.M. Adams, J.R. Mills, B.J. Butler and R.J. Moulton

149

16

An Economy-wide Assessment of a Forest Carbon Policy in the USA G.Y. Wong, J.R.R. Alavalapati and R.J. Moulton

17

Forestry Implications of Agricultural Short-rotation Woody Crops in the USA P.J. Ince and A.N. Moiseyev

177

18

Management of the Forest Biodiversity: Feasibility, Efficiency and Limits of a Contractual Regulation A. Stenger and D. Normandin

189

19

Case Studies Examining the Economic Impacts of New Forest Practices Regulations on NIPF Landowners K. Zobrist and B.R. Lippke

203

20

Effect of the Federal Estate Tax on Rural Landholdings in the USA J.L. Greene, T. Cushing, S. Bullard and T. Beauvais

165

211

Contents

21

Global Trade Liberalization and Forest Product Trade Patterns J. Gan and S. Ganguli

vii

219

PART 4. PERSPECTIVES ON FOREST CERTIFICATION

22

Gaining Leverage: NGO Influence on Certification Institutions in the Forest Products Sector E.N. Sasser

229

23

Company Choices on Sustainable Forestry Forest Certification: the Case of JD Irving, Ltd J. Lawson and B. Cashore

245

24

Improving Forest Management Through the Supply Chain: an Assessment of Wood Procurement Management Systems in the Forest Products Industry S. Harris and R. Germain

25

Perspectives on Forest Certification: a Survey Examining Differences Among the US Forest Sectors’ Views of their Forest Certification Alternatives G. Auld, B. Cashore and D. Newsom

259

271

26

Certification: a Comparison of Perceptions of Corporate and Non-industrial Private Forestland Owners in Louisiana 283 R.P. Vlosky and J.E. Granskog

27

Forest Certification in the Heart of Dixie: a Survey of Alabama Landowners D. Newsom, B. Cashore, G. Auld and J.E. Granskog

Index

291 301

Contributors

Darius M. Adams, Department of Forest Resources, College of Forestry, Oregon State University, Corvallis, OR 97331, USA Janaki R.R. Alavalapati, University of Florida, School of Forest Resources and Conservation, PO Box 110410 Gainesville, FL 32611-0410, USA Ralph J. Alig, USDA Forest Service, Pacific Northwest Station, 3200 SW Jefferson Way, Forestry Sciences Laboratory, Corvallis, OR 97331, USA Graeme Auld, Department of Forest Resources Management, University of British Columbia, Main Mall, Vancouver, British Columbia, Canada V6T 1Z4 Ted Beauvais, USDA Forest Service, 201 14th Street SW, PO Box 96090, Washington, DC 20090-6090, USA Clark S. Binkley, Hancock Timber Resources Group, 99 High Street, 26th Floor, Boston, MA 02110-2320, USA Steve Bullard, Forest and Wildlife Research Center, Mississippi State University, PO Box 9820, MS, USA Brett Butler, USDA Forest Service, Northeastern Research Station, 11 Campus Blvd, Suite 20, Newtown Square, PA 19073, USA Benjamin Cashore, Global Institute for Sustainable Forest Management, Yale School of Forestry and Environmental Studies, 360 Prospect Street, Room 34, New Haven, CT 06511-2189, USA Kirsten Cassingham, US Geological Survey, 3916 Sunset Ridge Road, Raleigh, NC 27608, USA Frederick W. Cubbage, Department of Forestry, North Carolina State University, 3120 Jordan Hall, 2800 Faucette Drive, Raleigh, NC 27695-8008, USA Tamara Cushing, F & W Forestry Services, 2330 Whispering Pines Road, Albany, GA 31707, USA Paul V. Ellefson, Department of Forest Resources, University of Minnesota, 1530 North Cleveland Avenue, St Paul, MN 55108-1027, USA Jianbang Gan, Department of Forest Science, Texas A&M University, College Station, TX 77845-2135, USA Barin N. Ganguli, Foundation for Forestry and Rural Development, I-1783, Chittaranjan Park, New Delhi 110019, India Sabyasachi Ganguli, Forest Resources Program, Tuskegee University, Tuskegee, AL 36088, USA René Germain, College of Environmental Science and Forestry, State University of New York, Syracuse, NY 13210, USA James E. Granskog, USDA Forest Service, Southern Research Station, 701 Loyola Ave., New Orleans, LA 70113, USA John L. Greene, USDA Forest Service, Southern Research Station, 701 Loyola Ave., Room T-10034, New Orleans, LA 70113, USA Stephen Harris, State University of New York, College of Environmental Science and Forestry, 100 Avondale Place, Syracuse, NY 13210, USA Thomas P. Holmes, USDA Forest Service, Southern Research Station, Economics of Forest Protection and Management, Research Triangle Park, NC 27709, USA ix

x

Contributors

Claire I. Howell, Bureau of Rural Sciences, PO Box E11, Kingston, Australian Capital Territory 2604, Australia Peter J. Ince, USDA Forest Service Forest Products Laboratory, One Gifford Pinchot Drive, Madison, WI 53711, USA Denise Keele, Department of Forestry, Wildlife and Fisheries, University of Tennessee, PO Box 1017, Knoxville, TN 37996, USA Michael A. Kilgore, Department of Forest Resources, University of Minnesota, 1530 North Cleveland Ave., St Paul, MN 55108-1027, USA Ivo Kraljevic, Chemonics International, Washington, DC 20036, USA James Lawson, Forest Policy Center, School of Forestry and Wildlife Sciences, Auburn University, AL 36849-5418, USA Bruce R. Lippke, Rural Technology Initiative, College of Forest Resources, University of Washington, PO Box 35100, Seattle, WA 98188, USA Jagmohan S. Maini, Secretariat of the United Nations Forum on Forests, Department for Economic and Social Affairs, 2 UN Plaza, Room DC2-1259, New York, NY 10017, USA Carol Mansfield, Research Triangle Institute, 3040 Cornwallis Road, Research Triangle Park, NC 27709, USA John R. Mills, USDA Forest Service, Portland Forestry Sciences Laboratory, 1221 SW Yamhill, Suite 200, Portland, OR 97205, USA Steverson O. Moffat, USDA Forest Service, Southern Research Station, Room T-10034, 701 Loyola Avenue, New Orleans, LA 70113, USA Alexander N. Moiseyev, European Forest Institute, Torikatu 34, Joensuu, FIN-80100, Finland Robert J. Moulton, USDA Forest Service, PO Box 12254, 3041 Cornwallis Road, Research Triangle Park, NC 27709, USA Deanna Newsom, TREES Program, Rainforest Alliance, Goodwin-Baker Building, 65 Millet Street, Suite 201, Richmond, VT 05477, USA John Nittler, Chemonics International, 1133 20th St NW, Suite 600, Washington, DC 20036, USA Dominique Normandin, Laboratoire d’Economie Forestière (LEF), UMR ENGREF/INRA, 14 Rue Girardet, CS 4216-54042, Nancy, France David Ostermeier, Department of Forestry, Wildlife and Fisheries, University of Tennessee, PO Box 1071, Knoxville, TN 37901, USA Elizabethann O’Sullivan, Department of Political Science and Public Administration, North Carolina State University, Raleigh, NC 27695-8102, USA Subhrendu Pattanayak, Research Triangle Institute, 3040 Cornwallis Road, Research Triangle Park, NC 27709, USA Michael J. Phillips, Environmental Protection Programs, Division of Forestry, Minnesota Department of Natural Resources, 500 Lafayette Road, St Paul, MN 55155, USA Maksym Polyakov, Forest Policy Center, School of Forestry and Wildlife Sciences, Auburn University, AL 36849-5418, USA Michael F. Ryan, Bureau of Rural Sciences, PO Box E11, Kingston, Australian Capital Territory 2604, Australia Erika N. Sasser, Nicholas School of the Environment and Earth Sciences, Box 90328, Duke University, Durham, NC 27708-0328, USA John Schelhas, USDA Forest Service, Southern Research Station, 112 Campbell Hall, Tuskegee University, Tuskegee, AL 36088, USA Erin Sills, Department of Forestry, North Carolina State University, Raleigh, NC 27695-8008, USA Jacek P. Siry, Department of Forestry, North Carolina State University, 3120 Jordan Hall, 2800 Faucette Drive, Raleigh, NC 27695-8008, USA. New address: Warnell School of Forest Resources, University of Georgia, Athens, GA 30602-2152, USA Birger Solberg, Department of Forest Sciences, Section for Resource Economics and Planning, Agricultural University of Norway (NLH), PO Box 5044, N-1432 Ås, Norway Ray D. Spencer, Bureau of Rural Sciences, PO Box E11, Kingston, Australian Capital Territory 2604, Australia Anne Stenger, Laboratoire d’Economie Forestière, UMR ENGREF/INRA, 14 rue Girardet, CS 4216, F-54042, Nancy, France

Contributors

xi

George F. Taylor II, US Agency for International Development, 3007 North Tuckahoe Street, Arlington, VA 22213, USA Lawrence Teeter, Forest Policy Center, School of Forestry and Wildlife Sciences, Auburn University, AL 36849-5418, USA Philip K.Tickle, Bureau of Rural Sciences, PO Box E11, Kingston, Australian Capital Territory 2604, Australia Richard P. Vlosky, School of Renewable Natural Resources, Room 227 Forestry, Wildlife and Fisheries Building, Louisiana State University, Baton Rouge, LA 70803, USA George H. Weyerhaeuser, Jr, Weyerhaeuser Company, CH 1K35C, PO Box 9777, Federal Way, Takoma, WA 98063-9777, USA Grace Y. Wong, School of Forest Resources and Conservation, PO Box 110410, University of Florida, Gainesville, FL 32611-0410, USA Kevin Zobrist, Rural Technology Initiative, College of Forest Resources, PO Box 35100, University of Washington, Seattle, WA 98188, USA

Preface

Increasing concerns at the global, national and regional levels about the role of private forestry in enhancing forest sustainability are converging to provide new opportunities for refocusing forest policy debates. In both developed and developing countries, forests are no longer seen solely as economic development engines, but also as important protectors of ecosystems, watersheds, endangered and threatened species, and homes for endangered cultures and rural communities. As a result, much more attention needs to be placed on developing polices governing private forestry, and the impacts they might have on economic, social and environmental goals. This book addresses key issues currently shaping the future of private forestry and is presented in four parts. The first part begins by outlining how society’s perceptions of appropriate roles for forests and forestry are changing, fostering the emergence of a new paradigm for public involvement in private forestry. In his keynote address, Clark S. Binkley describes forestry’s transition from a primarily gathering activity to a highly technical production activity driven by increasing demands for wood-based products and the increasing costs of exploiting the remaining forests on the extensive land-use margin. Incentives now favour intensive forestry relative to the high costs of removing timber from remote areas. In addition to the more attractive financial returns associated with plantation forestry, Binkley argues that the spread of plantation forestry will lessen pressures on the remaining natural/wilderness areas in the future, thus ensuring a positive global environment benefit. The argument that plantation forests will help to contribute to environmental health is a controversial one, and emphasizes the need to conduct rigorous analysis into the relationship of intense industrial activity and forest sustainability (Lucier, 1997). The relationship between economic health and environmental quality comes at a particularly critical time according to Jag Maini. Dr Maini’s keynote address outlines the expectations of the international community for international cooperation on key forest management issues that are linked to global environmental quality and quality of life concerns. These concerns are deemed so encompassing that international policies on the use of forests are needed, and crafting appropriate policies amenable to all sovereign participants is a goal of the United Nations Forum on Forests. As John Schelhas describes in this section, the changing expectations of citizens regarding their role in determining how natural resources are utilized has acted as a catalyst for policy makers. He explains how disparate claims to forest benefits are being incorporated in forest management decision making and reviews how some of these changes are being reflected in people–forest relationships from Costa Rica to the USA. In this regard, Moffat, Cubbage, Holmes and O’Sullivan reveal how the structure of existing forest policy networks often impedes consensus building on issues of forest sustainability, suggesting that broad policy actions on sustainable forestry issues are unlikely in the short term. However, with the recognition that very different policy networks exist concerning private and public forestland management in the USA and elsewhere, attention has turned to the different roles that private forestlands and private forest companies play in sustainability. Some argue that public and industrial forest xiii

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land management will make the most significant accommodations for sustainable forestry, while nonindustrial private forest, given the disparate ownership and property rights concerns, will make the fewest direct accommodations. Likewise, developing and developed countries appear to have fundamentally different concerns and ideas about forest sustainability – divisions so intense that they largely explain the failure of efforts at the Rio Earth Summit to develop a binding global forest convention (Humphreys, 1996). Barin Ganguli addresses these differences by presenting a model of private sector participation in forest management for developing countries that recognizes their limited financial capability to develop forest resources. His suggestions for developing market-based instruments to encourage the private sector to invest in this development are intended to improve the efficiency of forestry activities in these countries, resulting in larger contributions to the economy and less degradation of public forests than currently. Finally, in this section, Spencer, Ryan, Tickle and Howell bring us back to a fundamental underpinning of policies promoting sustainable forestry – the need for a current accounting of the condition of the forest and information on the prospects for change through alternative scenarios of growth and harvest. Developing policies to generate comprehensive inventories of forests can be controversial, pitting development interests against protectionist groups, and state governments against national governments (especially regarding who should pay). We learn that, in Australia, developing a cooperative approach just to implementing a national forest inventory policy is fraught with significant institutional and structural hurdles. Just what might be the most effective tools for implementing policies promoting sustainable private forestry is addressed in Part 2, in which three broad sets of policy instruments available to policy makers charged with promoting forest sustainability are identified: (i) educational programmes that encourage forest owners and managers to act in ways consistent with the goals of the policy, (ii) regulatory programmes that restrict the actions of owners and managers, and (iii) market-oriented approaches that encourage particular management actions that support the policy. Combinations of all three of these approaches are used in most developed economies, but when it comes to encouraging private forestry interests to support new policy goals, George Weyerhaeuser, Jr argues that appropriately designed financial mechanisms can be expected to perform most effectively. In his keynote address, Weyerhaeuser documents how the responses of a 150-year-old family business were often the result of changing incentive structures that came with significant changes in national and regional forest policies. From the early years, where the incentive was inexpensive access to timber in exchange for clearing western lands for development, to later periods when the company accepted responsibility for implementing a sustained yield policy in exchange for government-supported fire-control programmes and tax treatment that allowed replanting and forest management to be profitable, governmental policies had a significant impact on forest company operations and forest sustainability. Carrying on this theme, David Ostermeier and Denise Keele explore in detail the impact of the United States Endangered Species Act on forestland management choices. They argue that the provision of the act to permit more flexible Habitat Conservation Plans (HCPs), where companies make certain commitments, has emerged as an important conservation tool with which to balance private forestland owners’ property rights with public conservation interests. Ostermeier and Keele present the results of 11 case studies and conclude that plans vary widely in terms of how data are assembled and shared and how the decision-making process is conducted. Compliance monitoring is an important tool for assessing the effectiveness of forest practice laws or guidelines and can be used by governments to credibly report the extent to which public policies are being achieved in the forestry sector. In a similar vein, Kilgore, Ellefson and Phillips use a case study of a state’s efforts to design and implement a compliance monitoring programme to raise some of the issues they believe are necessary to ensure that the programme is effective and efficient. Like Ostermeier and Keele, they argue that voluntary conservation agreements are emerging as another viable policy implementation tool specifically designed to acknowledge the private property rights of landowners. Cassingham, Sills, Pattanayak and Mansfield describe an assessment of the effectiveness of a particular form of these agreements found in the National Heritage Programme. They conclude that voluntary programmes can play an important role in raising awareness regarding the significance of ecologically sensitive habitats and the potential for individuals to contribute to the protection of those areas.

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Likewise, Taylor, Nittler and Kraljevic make similar conclusions about policy development in developing countries, raising the idea that globalization might be contributing to a policy instrument convergence between developed and developing countries. Taylor and colleagues trace the sweeping reforms of the forestry sector in Bolivia in the 1990s, finding that market incentives permitted sustainable forestry concerns to be addressed in ways that traditional regulatory ‘command and compliance’ approaches were unable to do. Foreshadowing Part 4, Taylor and colleagues argue that much of that change was driven by the prospect of economic opportunities associated with forest certification (ecolabelling) initiatives in which market access or price premiums may modify behaviour. They cite Friedman (2000) who argues, ‘the best way to win adherence to laws and norms is by trying to channel economic self-interest – the very metabolism of the globalization system – in a way that makes it restorative rather than destructive’. Private sector incentives also frame Jacek Siry’s overview of the situation in Central and Eastern Europe, where transformations of the previous communist governments have resulted in significantly larger roles for private forestry in addressing economic efficiency and environmental concerns. One of the major challenges in these former communist countries is to develop strategies for implementing forest policies that are effective and efficient. Maksym Polyakov and Lawrence Teeter thus offer a modification of a policy tool developed in the Ukraine before private forestry interests were important. The modification addresses the flexibility that they argue private economic actors need to efficiently manage forest resources. Their chapter also addresses the importance of identifying the appropriate scale for implementing particular forest policies, so that other goals for the sector and the general economy are taken into account. The third section of the book highlights the economic challenges to implementing and promoting sustainable forestry. Birger Solberg’s keynote address outlines recent European policy developments that affect demand, supply and international trade. He suggests that some of the significant challenges facing forestry in Europe relate to forest certification, environmental issues and international agreements on climate change and preserving biodiversity. Careful economic analysis of new policy developments and their implications for forestry are warranted to ensure a viable forest sector in Europe. Solberg calls on forest economists to assume a more prominent role in forest policy analysis. Alig, Adams, Mills, Butler and Moulton take up this call to arms, analysing the private forestry investment climate in the US South and use their economic skills to forecast significant increases in softwood plantations and softwood production. Supporting Binkley’s argument, they project that increases in productivity on intensively managed plantations will reduce pressure to harvest from natural forests, explicitly linking the role of private forest land management to opportunities on public land. Over the years, a number of analysts have speculated that short rotation woody crops might eventually play a similar role by competing with timber in pulpwood markets, thereby reducing the pressure to harvest from natural forests. Ince and Moiseyev explore the future of short-rotation woody crops and their effects on markets for hardwood pulpwood and timber supply. Under assumptions consistent with current production experiences, these technologies will become only marginally efficient within the next few decades and will only impact markets for hardwood pulpwood in a limited way. However, improvements in the productivity of these operations, reduced hardwood timber supply from natural forests or increases in demand for fibre relative to base case assumptions, could significantly affect the future role of short-rotation woody crops. Grace Wong, Janaki Alavalapati and Robert Moulton turn their attention to the important but complex roles that forests play in carbon sequestration and climate change rates. Focusing on the US forest sector, Wong et al. explore the economic implications of implementing a carbon subsidy policy. Using a computable general equilibrium model, they assess likely effects of extending subsidies for planting on timber supply, markets for timber products, and changes in land use. The interrelationships among the economic and ecological factors involved in such policy proposals are myriad, raising the need for additional research in these key areas. Anne Stenger and Dominique Normandin address the paradoxical issue of society’s interest in biodiversity and environmental services production generally and the lack of market incentives to encourage their production in sufficient quantities by private landowners. They explore the potential for implementing model contracts with owners that would aim to encourage production of biodiversity and other non-market environmental goods. Their economic analysis leads

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them to conclude that the seriousness and importance of this issue means that it is critical that significant work should be done to identify the joint production possibilities for market (wood) and non-market goods and the appropriate production period (contract length). Kevin Zobrist and Bruce Lippke analyse the economic impacts of the Forest and Fish rules in the state of Washington. The rules were developed to meet the requirements of the Endangered Species Act and the Clean Water Act. The economic impacts of these rules for small private landowners were determined to be large (in certain cases negative bare-land values result from the restrictions), but offsetting Forest Riparian Easements are available to mitigate some of the impact. Because the rules substantially reduce the economic value of forestland for timber production, they predict future pressures to convert severely impacted properties to other land uses. Greene, Cushing, Bullard and Beauvais outline the impacts of the US federal estate tax on timberland ownership, land conversions and timber supply. Through their survey research they found that 29% of timberland sold to pay estate taxes is converted to another land use. In addition, the authors determined that over 1 million ha of timber are harvested each year to pay estate taxes. The authors suggest several modifications to current estate tax provisions that would serve to mitigate the economic inefficiencies of unplanned harvests, forest fragmentation and conversion of forestland brought about by the tax in its current form. The final chapter in this section outlines some of the US and global implications of freer trade policies such as NAFTA and GATT/WTO on forest products trade. Jianbang Gan and Sabyasachi Ganguli developed a computable general equilibrium model of world trade in forest products. They found that in most cases, trade restrictions and tariffs are quite low for forest products and, as a result, trade flows in forest products are not impacted as much by the new policies to reduce trade barriers as other sectors might be. Developed countries with strong forest products sectors are projected to remain dominant although opportunities for the forest products sectors of developing countries to expand are enhanced as a result of trade liberalization. The increasing focus, by activists, government officials and the private sector, on market instruments as a method to achieve sustainable forestry, has led us to devote a complete section to the case of forest certification (ecolabelling), which is emerging as a new ‘non-state, market-driven’ (NSMD) governance system with which to address and promote forest sustainability. Eschewing traditional governmental policy processes, forest certification programmes recognize forest companies and forest landowners for practicing sustainable forestry according to predefined principles and criteria. Forest certification gained considerable attention and interest following the failure of the 1992 Rio Earth Summit to achieve a binding global forest convention. Environmental groups, retailers and some timber companies worked to create the internationally focused Forest Stewardship Council (FSC) in 1993 in Toronto, Canada (but currently headquartered in Oaxaca, Mexico). The FSC’s global principles and criteria guide the national and regional working groups who must develop specific standards for their geographical areas. The FSC has sparked considerable attention in the broader forest policy community, with many forest industry and landowner associations concerned about the scope and structure of FSC rules. As a result, industryand landowner-initiated forest certification programmes have emerged to compete with the FSC for rule making authority. The chapter by Erika Sasser offers a sophisticated framework to explore the effects of these trends on the case of the USA. She explains the way in which environmental groups have been able to harness global pressures to increase awareness of forest certification in the USA, and the way in which the American Forest and Paper Association’s Sustainable Forestry Initiative (SFI) is attempting to divert retailer and forest company support to their programme. Auld, Cashore and Newsom also focus on the US case, where their research has indicated that the USA represents the most highly charged and polarized country over competing forest certification systems. Auld and colleagues undertook a survey of the large industrial forest companies in the USA, as well as the broader manufacturing sector, revealing two important trends: (i) industrial forest companies are almost completely behind the SFI, with very little support for the FSC; and (ii) most of the broader value added forest manufacturing sector has not heard of forest certification. The findings reveal the difficult environment in which prescriptive forest certification systems find themselves in the USA, which Sasser’s chapter reveals, is often limited to qualified support from retailers, lumber dealers and homebuilders wishing to shield themselves from being targets of ENGO direct action campaigns. Similarly Newsom, Cashore, Auld and Granskog’s chapter, and Vlosky and Granskog’s chapter on non-industrial private forest land owners reveal that not only have most private

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forest landowners not heard of forest certification, they are also unlikely to support FSC-style programmes without significant changes being made. As Newsom et al. point out, unlike the general public, forest landowners mistrust environmental groups the most, and will not generally participate in a programme that does not explicitly allow for their direct involvement in policy making decisions. Likewise the chapter by Lawson and Cashore reveals that even proactive companies who are predisposed to support the FSC, such as the JD Irving Company operating in the US Northeast and the Canadian Maritimes, must believe they are being adequately represented in the certification programme’s policy making process. This chapter details that when Irving’s role was explicitly limited in the Canadian Maritimes regional standards working groups process, and ensuing draft regional standards rules were much stricter than the FSC working group draft standards in the Northeast, the company removed its support from the FSC in Canada, but maintained its support for the FSC in the Northeast, where it had a much greater role in this region’s standards development process. The chapter by Harris and Germain reveals the difficulty in implementing forest certification of any type where poorly developed wood procurement systems exist. They find that in such cases certification will have difficulty influencing NIPF behaviour, though it may impact negatively on the competitiveness of such landowners vis-à-vis those that are well integrated with industrial production. All of this highlights the issue of using forest certification to increase sustainable forestry standards, without setting them so high as to limit participation to niche players. Recent developments on the part of the Worldwide Fund for Nature that recognize the important role the US forest sector has played in promoting sustainable forestry (Howard and Stead, 2001), have helped to build mutual respect among ENGOs and may represent a way out of the current polarized atmosphere in which forest certification in the USA (and in many other countries) finds itself.

References Friedman, T.L. (2000) The Lexus and the Olive Tree. Anchor Books, New York, 490 pp. Howard, S. and Stead, J. (2001) The Forest Industry in the 21st Century. WWF International, Godalming, UK. Humphreys, D. (1996) The global politics of forest conservation since the UNCED. Environmental Politics 5, 231–256. Lucier, A.A. (1997) Certification and regulation of forestry practices in the United States: implications for intensively managed plantations. Biomass and Bioenergy 13, 193–199.

Acknowledgements

The chapters included in this book were selected from papers presented on 25–27 March 2001 in Atlanta, Georgia, at a conference titled Global Initiatives and Public Policies: First International Conference on Private Forestry in the 21st Century. The conference was the first major outreach activity of Auburn University’s Forest Policy Centre. Many people deserve credit for contributing to the establishment of the Forest Policy Centre and the success of the conference. In particular, about a decade ago, Vaughn Stough and Emmett Thompson envisioned a programme of forest policy research that would focus on the unique circumstances facing private timberland owners. Through their efforts and the generous contributions of Earl and Sandra Weaver, Hall W. Thompson, Harry E. Murphy, the Landegger Charitable Foundation, International Paper, Resource Management Service, AmSouth Bancorporation, Thompson Tractor Company, the Weyerhaeuser Company Foundation, and others to the Endowment for Excellence in Forest Policy, the Forest Policy Centre was established in 1999. Over 200 attendees from 20 countries contributed approximately 100 papers at the conference. It was difficult to select the subset of papers contained in this volume from the many fine pieces of research that were presented. All the papers contained in this volume (other than keynote speeches) were selected following blind peer review and approval by the editors. We would like to thank all contributors to the conference, and particularly the authors of the papers presented here, for their help in the review of manuscripts and in preparing these chapters for publication. Many worthy papers had to be left out of the book due to thematic and space limitations. The planning of the conference and organization of this book required the contributions of many individuals including the members and adjunct members of the Forest Policy Centre (Conner Bailey, Benjamin Cashore, Mark Dubois, David Laband, Ken Muehlenfeld, John Schelhas, Lawrence Teeter, Robert Tufts and Daowei Zhang) and members of the FPC Advisory Committee (James Granskog, John Heissenbuttel, Stephen Newton, Chris Oberholster and Charles Tarver). Special thanks go to our conference keynote speakers, Clark S. Binkley, Jagmohan Maini, George H. Weyerhaeuser, Jr and Birger Solberg, and to our regional reviewers (of initial abstracts), William Bentley, Karen Potter-Witter and John Bliss. Many thanks to Marjorie Teeter for handling the organizational aspects of the conference in a manner that kept attendees happy and the conference running smoothly. We would also like to thank Maksym Polyakov, John Hogland and Ulrike Bauer from the School of Forestry and Wildlife Sciences, Auburn University, for their help as facilitators before, during, and after the conference. Organization of the peer review process was aided substantially by Anthony Stewart and Jamie Lawson. Finally, we would like to thank the members of SOFEW (Southern Forest Economics workers) for agreeing to schedule this conference in conjunction with their annual meeting in order to maximize attendance at both meetings. The Forest Policy Centre also appreciates the contributions of our conference co-sponsors including the School of Forestry and Wildlife Sciences and the Center for Forest Sustainability at Auburn University, the Society of American Foresters, the International Union of Forestry Research Organizations, xix

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Acknowledgements

Weyerhaeuser Company Foundation, Westvaco Corporation, and Willamette Industries, Inc. A successful conference and publication of this volume would not have been possible without their support. Finally, the editors thank Tim Hardwick of CABI Publishing for giving us the opportunity to publish this book. Lawrence Teeter Benjamin Cashore Daowei Zhang

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Forestry in the Long Sweep of History (Keynote Address)

Clark S. Binkley Hancock Timber Resources Group, 99 High Street, Boston, MA 02110–2320, USA

The title of this chapter is stolen, shamelessly but I think appropriately, from a paper of a similar name by Marion Clawson (Clawson, 1979) – perhaps one of the two most important papers ever written about forest economics, the other being ‘A view from John Sanderson’s farm’ by Hugh Raup (Raup, 1966). My comments rely heavily on the half a century of path-breaking work on resource economics done by Clawson and his colleagues at ‘Resources for the Future’, so the title is meant to invoke the spirit of these contributions. I am not going into any of the mathematics in this chapter. Instead, I intend to translate the mathematics into English and, based on that analysis, draw some conclusions about the logical and desirable directions for the forest sector and for forest policy. I begin by describing the long-term economic dynamics of the forest sector. The depletion of natural forests drives these dynamics. The dynamics rely heavily on both technological innovation and capital/resource substitution – the substitution of capital for timber in the manufacture of forest products, and the substitution of capital for land in the production of timber. Based on this analysis, I examine two areas of contemporary forest policy – the appropriate role of timber plantations in timber supply, and the appropriate role for forests in climate-change policy. First let me be clear on what I mean by ‘forests’, ‘forestry’ and ‘the forest sector’. The first written definition of ‘forest’ was published, not surprisingly, in the first dictionary of the English

language, Samuel Johnson’s, printed in 1701. Johnson defined a forest as a certain territory of woody ground and fruitful pastures privileged for wild beasts and fowl of forest, chase and warren to rest and abide in, in the safe protection of the king for his pleasure.

By implication, this also defined forestry. A forester’s sworn duty was to protect the ‘vert and venison’, that is, the wildlife habitat and the wildlife itself. According to the Assize of Henry, the forester’s failure to do so was punishable by flogging or death. I doubt that even Greenpeace would support such tough sanctions for violations of forest practice laws today! In many ways, this definition is as relevant today as it was 300 years ago. Forests in their totality must respect and support a wide variety of uses.

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Forests where human interference is absent, or nearly so, provide important spiritual, ecological and cultural values. Forests help to regulate key global biogeochemical cycles. Forests are the inspiration for poets and artists. For billions of us, forests form the core of our recreational activities and the backdrop for everyday life. Forests provide wood, one of the most ubiquitous and important sources of raw materials and energy in the world today. Millions of aboriginal people have another word for forests – they call them ‘home’.

©CAB International 2003. Forest Policy for Private Forestry: Global and Regional Challenges (eds L. Teeter, B. Cashore and D. Zhang)

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In my terminology, the forest sector encompasses this broad array of goods and services, and any useful policy concerning the forest sector must recognize and support the entire spectrum.

Timber Depletion and Transition in the Forest Sector Two factors distinguish the timber side of the forest sector: a long production cycle for forests and the presence of a standing inventory of timber that is large when compared with annual usage. As a result of these two factors, the forest sector possesses an unusual degree of temporal momentum, which is present in few other aspects of human endeavour. This momentum permits us to foresee the outline of developments over the next few decades, even if the details are unclear and uncertain. To describe the dynamics of forest sector development, consider forests on a global scale and in the ‘long sweep of history’, as promised in the title of this chapter. I will take the economist’s perspective of holding everything else constant, recognizing, of course, that the real world is made of a much richer fabric of complications. The underlying story is the transition from the hunter–gatherer stage of forestry to the husbandry-stewardship phase. For agriculture this transition began about 10,000 years ago, when some of our ancestors wandered over a mountain ridge top in ancient Mesopotamia and discovered einkorn wheat growing wild in what is now known as the Fertile Crescent. Prior to that discovery, human existence required us to glean sustenance from numerous wild organisms. Now most of us get virtually all of our food from about ten domesticated plants and five domesticated animals. In developed countries, a few of us still scavenge the wild earth, but only for sport or other atavistic reasons; the wild landscape is the source of only a tiny fraction of our food. So, for agriculture the transition is now complete. Since the production cycle for trees is long when compared with that for annual crops, and the inventory of standing timber is large relative to annual consumption, the transition in our use of forests will take a much longer time than it did for agriculture. This transition still has a few

more decades to run, but it explains much of our situation today. Timber depletion drives the transition. Early on, timber prices are low, and forest land is more valuable for other uses, especially the production of food. So the trees are removed and not replaced. In an old-growth forest, the accumulation of merchantable timber is low or negative, especially on the economic margin where all the interesting economic action occurs. As a consequence, any harvest at all causes the standing inventory to decline. As the standing inventory declines, timber becomes increasingly scarce. For an economist, increasing scarcity means rising prices. Timber prices rise for two reasons. First, as logging moves into more difficult terrain, increased costs push prices up. Second, as Hotelling taught us, the markets for natural resources are connected with the markets for capital. In the absence of biological growth, equilibrium between these two markets requires that timber rents increase at the rate of interest. Long-term trends in US timber prices are consistent with this theoretical model. Three factors limit the inevitable upward pressure on timber prices. The first factor is a shift in the extensive margin. As prices in one region increase, it becomes economical to operate in other regions that harbour primary forests. For example, the relatively high timber prices in the USA in the late 1960s and early 1970s opened the door for expanded timber production in the British Columbia interior. Of course, once the infrastructure was in place, supply did not contract as prices fell again because the costs of entry were already paid. Similarly, higher prices in British Columbia opened the door for the Russian Far-East to expand production into Asian markets. Such interregional shifts in the extensive margin obviously comprise only a finite response to timber scarcity. There are only so many new regions to be exploited, and each one is apt to be more costly than the last. Secondly, as prices rise for timber in natural forests, the purposeful husbandry of planted forests becomes economic. Examples abound around the world, but probably none of them are clearer than what we see in the southern states of the USA. The first step is usually the exclusion of wildfire and the protection of natural regeneration. Such management actions evolve into the quite sophisticated agronomic practices we observe in many regions of

Forestry in the Long Sweep of History

the world today. These practices can supply wood at a relatively modest cost. Dennis Neilson, a forestry consultant in New Zealand, recently completed a comprehensive and definitive study of the costs – including land rental, silvicultural costs and interest on capital – of producing timber in modern plantations. Across nearly 200 site/species combinations, he found the median cost to be about $7 m−3 for teak, $8 m−3 for eucalypts, and $20 for southern pine. These costs are far below current stumpage prices for natural forests in much of the world. For example, current stumpage prices in the southern USA are in the range of $40 to $50 m−3. The gulf is even wider for hardwoods. Timber depletion has driven timber prices to a high enough level so that the remaining natural forests in the world will be protected by the most prosaic mechanism of all – it will simply be too costly to log them, given the availability of lower-cost plantation-grown fibre. Finally, increases in timber prices drive technological innovation. On the supply side, higher timber prices and higher land costs force innovations in tree-growing technologies. Despite 10,000 years of agricultural innovation, maize yields are still increasing at about 2% per year. I have seen no good data for forest plantations, but anecdotal estimates by scientists at Westvaco Corporation suggest that specific timber yields may be increasing at about 3% per year – a reasonable figure given the relative infancy of timber production technologies. On the demand side, higher timber costs lead to resource conservation in manufacturing. For example, over the last decade the lumber recovery factor (the amount of lumber produced per unit of log input) in British Columbia – the only place where I have seen good data – has increased by an average of 1.4% per year, despite a deterioration in log quality. The increase has been steady over the 13-year history of the data series. That represents phenomenal technical progress, and has an enormous impact on the demand for timber. As an another example, engineered wood products use wood more efficiently than traditional wood products. Parallam® and Timberstrand® recover 60–90% more of the tree as usable product than does lumber. Wooden I-beams now command perhaps one-third of the North American floor joist market, displacing wide-dimension lumber. An I-beam floor-joist system uses about half as much wood fibre as the traditional 2 × 10 system.

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The Rise of Environmental Services from Forests What about the other important element of the forest sector – environmental services? Forest sector development and timber depletion affect the supply/demand balance for these services. The demand for most environmental services is highly correlated with personal income. The evidence for a connection between income and the demand for environmental services is very well established for some aspects of the environment – clean air, clean water and outdoor recreation – and I believe the relationship is more generally true as well. That humans value aesthetic aspects of the natural world more once their material needs are satisfied is not surprising. In his excellent review of the human relationships with forests in antiquity, the historian John Perlin commented Seneca articulated the romantic view of forests shared by many of the leisure class of his time. ‘If you ever come upon a grove that is full of ancient trees, which have grown to unusual height, shutting out the view of the sky by a veil of pleated and intertwining branches, then the loftiness of the forest, the seclusion of the spot, and the thick, unbroken shade on the midst of open space, will prove to you the presence of God’.

One cannot help but note the similarity of this comment made two millennia ago with contemporary descriptions of old-growth forests. Of course, most environmental services operate outside formal markets, either because they are public goods or because society has simply chosen not to allocate them through markets. It is a simple truism that, because they are not priced, such goods are systematically over-consumed and under-produced. Market-based patterns of land use do not and cannot reflect the societal values of these inputs and outputs. Forest sector development may decrease supply of these environmental services, and increased income (ironically, created in part by exploitation of forests) will increase the demand for them. So we have a reduction in supply and an increase in demand, but there are no prices available to signal relative scarcity and to induce socially appropriate changes in production and consumption. Once the mismatch between supply and demand for environmental services becomes great enough, governments intervene through forest practice regulations and land set-asides.

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These are just the broad outlines, but these predictable trends have three important implications for thinking about forest management and policy. First, price increases for timber are limited by the availability of plantation technologies to grow industrial roundwood and by our capacity to substitute wood-saving technologies and other materials for traditional wood products, so timber prices will not continue to rise forever. Secondly, the implicit price of environmental goods and services provided by the forests is not bounded. There are no limits on increased income – or so economists say – so there is no limit on demand for environmental services, especially if there is no charge for them. In addition there are few, if any, technical substitutes for environmental services of the forest. The third point follows from the first two. Forest land has become scarce. That is, there are many competing demands for forest land. It is therefore logical to substitute other factors of production, especially capital and technology, for land. This is particularly true for industrial timber production because it is easier to do so for this purpose than for production of the environmental goods and services of forests. These facts have important implications for forest policy. Space does not permit a comprehensive treatment of such a broad and important topic, so as a consequence, I will only discuss a couple of specific issues, important in their own right and as exemplars. The first relates to enhancing the role of plantations in timber production. The second relates to the carbon sequestration services that are available from forests.

Enhancing the Role of Plantations The challenge for contemporary timber production is to craft management approaches that respond affirmatively to the overarching economic imperatives already outlined. Broadly speaking, there are two sources of timber supply – natural forests and plantations. As I have argued, the general trend in the sector is for supply to shift from the former towards the latter. Management and policy interventions could fruitfully work to accelerate this transition. I have argued elsewhere that natural forest management technologies face daunting

challenges – they are too costly, they cannot reliably produce positive environmental outcomes, they are not economically sustainable – to name just a few. However, if natural forest management is not the answer, where are we going to get our wood? Timber plantations permit foresters to substitute capital and technology for land. That is exactly what the economic forces are telling us to do. This is an extraordinarily powerful tool. Studies initiated by John Gordon in the early 1970s examined maximum theoretical timber yields based on the biochemical efficiency of trees in turning sunlight and water into economically usable plant parts. The Weyerhaeuser Company applied these models to two sites where they manage lands about as intensively as anywhere in the world – one in the Pacific Northwest and one in the southern USA. Yet on these sites, best management practices achieved only 40–50% of the modelled maximum yields. And on those same sites, natural stands produced only 10–25% of the maximum yields. When examined across the globe, two- to fivefold increases in specific timber yields appear to be technically feasible and economically attractive. Plantations for timber production are appealing due to this large capacity to free natural forests from intensive exploitation for industrial purposes. Within a region every hectare of plantation forest can free up to 5 ha of natural forest from industrial use. The substitution is far greater across regions with, for example, 1 ha of timber production on plantations in Brazil substituting for perhaps 20 ha of land in Siberia or the Canadian interior. Combined with sophisticated wood-products technology, the plantation-grown wood can substitute for most, if not all, of the products obtained from the natural forest. Indeed the uniform and possibly custom designed fibre characteristics of plantationgrown wood make it more desirable for many products. The use of sophisticated engineering concepts and small amounts of non-wood materials in such products as laminated veneer lumber or oriented-strand lumber will obviate the need for the thing we now call a sawlog. At Hancock Timber we recently did some aggregate simulations of global timber supply and demand in order to understand the role of planted forests in the future balance. The simulation assumptions were simple – extend current rates of plantation establishment and productivity. The only innovation was to permit the plantations to

Forestry in the Long Sweep of History

become more productive over time – based on the Westvaco experience mentioned earlier. We imagined that demand would first be met by plantation supply, and only then by natural forests. With these assumptions, by 2025, logging on natural forests would fall by more than half – from about 1.3 billion m3 today to about 600 million m3 then. As a point of reference, this latter quantity of wood could be supplied by taking half the current harvest of natural forests in the eastern USA, and half the current harvest from natural forests in Europe. Under this scenario, we would plant about 100 million ha of degraded agricultural lands for timber plantations. About two-thirds of this area would be used for timber supply, and the remainder would be devoted to restoring and protecting riparian areas, and creating landscape-scale biodiversity. Under this scenario, there would be no need to log the old-growth forests of Canada, Russia or the tropics. From an environmental perspective, this is a most attractive proposition. It also offers the forestry industry a stable, uniform and perhaps less controversial source of fibre. Finally, it offers forestry investors a reliable source of returns – biological growth and technical innovation. To achieve this vision, the forest sector needs a global agreement among conservation organizations, government and industry on the pivotal role of intensively managed plantation forests in achieving an economically, ecologically and socially sustainable forest sector. This agreement should include such factors as the critical need for plantation projects to maintain and enhance landscape-scale biodiversity, with perhaps 20–30% of the landbase of plantation projects devoted to the ecological services of forests. We see fine examples of such management at the Klabin and Aracruz operations in Brazil, and at Westvaco’s forests on the South Carolina coast. The agreement should include the careful and close control of the off-site impacts of plantation-based timber production – especially the movement of silt, fertilizer or herbicides into waterways or groundwater. The agreement should include an acceptable regime for using yield-enhancing chemicals such as fertilizers and herbicides, focused on minimizing use and maximizing impact. The agreement should support the use of genetically modified organisms (GMOs) only in circumstances where it can be clearly demonstrated that gene flow out of the plantation is not possible (for example, in asexual trees). As with New Zealand’s Tasman

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Forest Accord, the agreement should include a commitment not to log old-growth forests.

Enhancing the Role of Forests in Carbon Sequestration In the early 1950s, Roger Revelle wondered what was happening to the by-products of all the oil, coal and natural gas that humans were consuming. To find out, he went to the top of Mauna Loa in Hawaii, where the air was free from local industrial pollution, and began careful measurements of the concentration of CO2 in the atmosphere. The data have two components, an upward trend and significant within-year fluctuations. The five decades of these measurements clearly demonstrate that CO2 concentrations are increasing. Interestingly, the intra-annual fluctuations also clearly demonstrate the significant effect of the summer-time growth of the plants that occupy the large land masses of the northern hemisphere. Theoretical models of global heat flux indicate that the Earth’s surface should warm as a consequence of these higher levels of CO2, with CO2 playing the same role in the atmosphere as glass does in a greenhouse. A paper published recently compares satellite measurements of incoming and outgoing radiation made in the early 1970s with contemporary ones. These comparisons clearly demonstrate that more of the incident solar radiation is being absorbed now than was the case three decades ago, just as the heat-flux ‘greenhouse’ models would predict. Despite George Bush’s recent proclamations to the contrary, it becomes ever more difficult to doubt that the well-documented and unarguable build-up of CO2 in the atmosphere will produce higher global temperatures and, therefore, probably changes in precipitation patterns and perhaps also the frequency and intensity of storm events. Such matters concern foresters in several different ways. In the first place, the clearing of forests for other uses is estimated to contribute about one-fifth of the total increase in CO2. In the second place, increases in atmospheric concentrations of CO2 – an important plant food – will tend to increase forest growth. In the third place, changes in climate are apt to change the range of particular forest types, and the productivity of forest lands;

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some of the changes will be positive, and some negative. Finally, trees comprise one of the only technologies available to reduce atmospheric levels of CO2 – and at a comparatively low cost. The Kyoto Protocol seeks to reduce atmospheric levels of CO2. Under the not-yet-ratified protocol, certain countries agreed to reduce their contributions to the build-up of CO2 and other greenhouse gases, either by reducing their carbon emissions or by enhancing the sequestration of CO2. The total agreed-upon reduction was about 4 billion tonnes (t) of CO2-equivalents. Articles 3.3 and 3.4 of this protocol deal with the potential role of trees in helping to reduce the build-up of carbon dioxide in the atmosphere. Article 3.3 relates to afforesting lands that were not covered by trees in 1990. Article 3.4 relates to carbon fixed in all other forests, and all other forestry activities. The Clean Development Mechanism, if extended to forests, would permit those in the developed world to invest in creating new forests in the developing world. The forestry community has been deeply divided in its support of the Kyoto agreement. Some argue for so-called ‘wall-to-wall’ accounting for forest-sector-related carbon. Under this approach all carbon fixed by all forests, including carbon sequestered in forest products, would be included in national accounting. For the USA, this approach would offset about one half of the country’s Kyoto commitment. Because the carbon sequestered under this accounting rule is, arguably, not truly additive to the baseline, this approach is widely opposed in the international community. Others, especially those from parts of the environmental community, argue that no carbon dioxide sequestered in forests should credited. They base their position on two arguments: (i) the carbon sequestered in forests is difficult to measure and may be lost through natural disturbances, and (ii) forest-based sequestration takes away from the real business of reducing emissions. I suggest a modest, positive, step-by-step approach. First, the USA should develop and adopt a policy framework that would enable private actions related to carbon sequestration in forests. This policy framework should include a carbon accounting standard, first for plantations and then for the more complex issues related to natural forests. It should enable a registry of carbon credits (either public or private), and the associated legal framework to attach ‘carbon covenants’ to land deeds. It should agree to credit ‘early action’

against any mandatory reductions that might subsequently be imposed. None of this is rocket science, indeed, much of this infrastructure is already in place in other countries such as Australia. All of this is very conservative and very Republican – simply create the rules so that private market transactions can take place. Because such actions reduce regulatory uncertainty, they would receive wide support among the enlightened elements of the energy industry as well as from the conservation movement. Those of us in the forest sector should actively support this modest first step. Secondly, the forestry community should support Article 3.3 activities, and the inclusion of forests under the Clean Development Mechanism, and this support should be unconditional on the outcome of Article 3.4 discussions. Recall that a key feature of forest sector development is the substitution of capital for land. Establishing the 100 million ha of new forests mentioned in the simulations above will require about $250–500 billion. Even if forest-related sequestration is capped at 10% of the total committed reduction, with the right policy framework, carbon credits could pay for perhaps half of this. This would comprise perhaps the largest single capital injection into the sector ever.

Conclusions In the long sweep of history, the objectives of forestry have changed little. They are the same as they were when Johnson penned his definition quoted at the beginning of this chapter: stewardship and husbandry of forest lands for the wide range of values that forests provide. But time has passed, natural forests are being depleted, and predictable economic adjustments are taking place. Important among these are the rise in timber prices and a cascade of associated adjustments. Technical innovation – in tree growing, in forest products manufacturing and in the kinds of wood products we use – is a major force in the development of the sector. The autonomous economic dynamics of the sector tend to force us to substitute capital for natural resources: capital for timber in the production of forest products and capital for land in the production of timber. It is logical and appropriate that forest policy responds and adapts to these new circumstances. In

Forestry in the Long Sweep of History

situations where goods are private and externalities few, a key objective of forest policy is to enhance the efficacy of markets in allocating resources. For timber production, this means greater reliance on planted forests and far less on natural forests. Natural forests will, naturally, be the source of many environmental services and products. In situations where such public goods are at stake, governments have a useful role in establishing the rules so that markets can help to mediate the supply and demand of these needed outputs. In the case of carbon sequestration in forests, the result could be a

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huge influx of capital into the sector. Interestingly, in this particular case, provision of the public good will enhance provision of the private one.

References Clawson, M. (1979) Forests in the long sweep of American history. Science 204, 1168–1174. Raup, H.M. (1966) The view from John Sanderson’s farm: a perspective for the use of the land. Forest History 10, 2–11.

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International Dialogue on Forests: Impact on National Policies and Practices (Keynote Address)

Jagmohan S. Maini Secretariat, United Nations Forum on Forests, Department for Economic and Social Affairs, United Nations, Room DC2–2286, Two UN Plaza, New York, NY 10017, USA

Introduction

A Global Overview of Forests

During the past two decades, forests have emerged as a priority issue on international policy and political agendas. This international focus on forests is associated with the alarming rates of deforestation and forest degradation that continue, and the consequent loss of multiple benefits provided by forests, many of which extend beyond the borders of countries where the forests are located. The international community has been actively engaged in forest policy deliberations since the initiation of the preparatory process and at the United Nations Conference on Environment and Development (UNCED), held in 1992 in Rio de Janeiro. Notable progress has been made in international forest policy development since the Earth Summit at Rio. This chapter provides a background to the emergence of forests as a global issue, describes some of the highlights of the progress during the past decade and notes the implications of these international deliberations on national forest policies and practices.

Forest cover Forests are a predominant feature of planet earth’s landscape. According to the current estimates: the total area under forest and open wooded lands is about 3.9 billion ha, or about one-third of the world’s land area, of which nearly 95% is under natural forests and 5% is planted forest. About 47% of the total forest cover is tropical, 9% subtropical, 11% temperate and 33% boreal. Forest and open wooded lands are unevenly distributed around the world. About 85% of the total forest cover is located in only 25 countries. Only seven of those countries, namely, Australia, Brazil, Canada, China, Democratic Republic of Congo, Russia and the USA, account for about 60% of the world’s forests.

Changes in forest cover It is estimated (FAO, 2001) that during the past decade, tropical forest cover decreased at the rate

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of 12.3 million ha per annum, non-tropical forest cover increased by 2.9 million ha per annum and the total global forest cover decreased by 9.4 million ha per annum. While most of the conversion of the forestland to non-forest land-use is attributed to the need to create agriculture land, devastating forest fires in many parts of the world and recent severe storms in Europe have also contributed to forest removal and forest degradation.

Forest protection About 10% of the world’s forests now have protected status, as defined by IUCN categories I to VI. A number of neighbouring countries are working together to establish transboundary protected forest areas.

Wood production Total worldwide production of wood is estimated to be 3300 million m3 annually. Approximately half of the wood extracted from the forests is used as fuelwood, 90% of which is produced and consumed in developing countries. On the other hand, nearly 90% of the wood harvest in developed countries is utilized for industrial purposes.

Human well-being and forests In addition to supplying fuelwood and industrial wood, forests and open wooded lands simultaneously provide a wide range of benefits and environmental services including: biological diversity; carbon sequestration; combating desertification and land degradation; soil and water conservation; and wildlife habitat. It has been estimated that nearly 400 million people in developing countries live in and around forests and depend on them for their daily subsistence, for example, food, fuelwood, shelter, forage and medicinal plants, among others. While extensive tracts of natural forests still remain in Africa, Asia, Russia and the New World countries, centuries of harvesting and manipulation in Europe and other parts of the world have

altered the structure and composition of forests. Large areas of forest land worldwide are now under pressure from increasing population and enhanced demand for forest products, as well as for recreation, environmental benefits and services.

Forests as an International Issue The sovereign right of countries to manage, protect and utilize their forest, in order to meet their national policy objectives and priorities, is unquestioned and universally recognized. However, a number of considerations, including the following, have internationalized the issue of the management, conservation and sustainable development of all types of forests.

Negative impact of deforestation and forest degradation In many parts of the world, the alarming rate of deforestation has resulted in many negative impacts, for example: threats to the subsistence and livelihoods of the people who live in and around forests; concerns about the displacement of forest dwellers and loss of their human rights and of property rights as well as an impact on their social and cultural integrity; and concerns about inequitable sharing of economic benefits with the local population. The impact of deforestation on the lives and livelihoods of people has been and continues to be a cause of considerable international concern.

Environmental concerns The environmental role of forests has received increased recognition during the past two decades and many of the environmental benefits and services extend beyond the borders of the countries where the forests are located. Some of the environmental consequences of deforestation include loss of biological diversity and wildlife habitat, impact on hydrological and biogeochemical cycles including carbon sequestration, as well as soil and water conservation. Extensive and prolonged forest fires in a country, for example in Indonesia, have raised

International Dialogue on Forests

concerns beyond its borders in neighbouring countries, in terms of haze, air pollution and its potential impact on human health, such as respiratory problems.

International trade Increasing population and expanding economic development in many parts of the world have led to a steady increase in the demand for pulp, paper and other wood products. In many developed countries, there is now a demand for products derived from forests that are certified to be sustainably managed. This has resulted in the need to establish an international agreement on the parameters and norms (Maini 1993, 1996) that characterize sustainable forest management (SFM) as well as to the establishment of many certification schemes. Among the main international forest policy concerns factors that have placed forests, a national resource, on the international agenda are the negative impact of deforestation and forest degradation on: environmental benefits and services provided by forests; the lives and livelihoods of forest dwellers and people who live around forests; and the demand for international trade in products from sustainably managed forests.

Geographical Scope of Forest Issues It is widely recognized that the management, conservation and sustainable development of forests, at the national and sub-national levels, is primarily the responsibility of countries where the forests are located. However, there are also transboundary issues that require close cooperation among neighbouring countries. These include the management of forests located in the watersheds of international rivers or protection of the forest habitat of wildlife that migrate across the borders of the countries; mismanagement of forests and landscape, or deforestation in one country could have a negative impact downstream in a neighbouring country. Many environmental dimensions of forests also require a regional and eco-regional perspective and action. For example, the conservation of biological diversity of the Amazon forest would

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require collective efforts by all the countries that share the Amazon basin. Similarly, the role of forests in hydrological and biogeochemical cycles, such as carbon sequestration, requires global cooperation and action. The scale and scope of understanding and addressing these forest issues has expanded during the past decade. Sound approaches towards sustainable forest management at the national and sub-national level now need to consider the transboundary, regional and global contexts. National forest policies can no longer be formulated in isolation from this broader geographical context. Consequently, while countries have the sovereign right to manage and utilize their own forests, they also need to recognize their regional and global responsibility and consider the implications of their policies and practices on a wider geographical scale. A large number of regional and global fora have now been organized to address forest issues and foster cooperation at the appropriate geographical level.

Progress Towards International Forest Policy Formulation of international forest policy requires three steps: first, recognition of the diverse priority concerns of various stakeholders; second, development of a common understanding of various components of forest policy; and third, formulation of agreed approaches to address the issues. While there is a universal agreement on the need to promote and practice SFM, there is, however, considerable diversity among countries about areas of priority concerns. This diversity appears to be associated with the level of economic development and the magnitude of forestland endowment.

Four realities Based on per capita income as an indicator of economic development and per capita forest cover as an indicator of forest endowments, it is possible to recognize ‘four realities’ in the world (Fig. 2.1). As far as the forest cover is concerned, there are two broad categories of countries, ‘forest-rich’ and ‘forest-poor’. From the viewpoint of economic

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Fig. 2.1. The influence of per capita income and per capita forest cover on the areas of priority concern in different countries (after Maini, 1996).

development, countries are identified as ‘industrialized’ and ‘developing’. The typology (Fig. 2.1) represents a broad clustering of countries in accordance with their priority concerns, and the possible reasons that drive these priorities. It is interesting to note that:

• •

•

•

forest-rich developing countries, such as Brazil and Indonesia, view forests as an important instrument for economic development; forest-rich industrialized countries, such as Canada and Finland, recognize both the economic and environmental value of forests and have the economic and technical means, as well as political and public support, to practise sustainable development; forest-poor developing countries, such as India, Kenya and the Philippines, have nearly 400 million people living in and around forests who depend on forests for their subsistence and their daily needs for food, forage, fuelwood, shelter and medicinal plants; forest-poor developed countries, such as the Netherlands and Denmark, rely on forestrich countries to meet their high demand for forest products and services. These countries place a high value on the environmental aspects of forests.

It is critical to recognize these ‘four realities’ and their respective areas of priority concern in order to build international consensus and to formulate a meaningful international forest policy framework.

Intergovernmental Forest Policy Deliberations Institutional aspects Forests have been an integral component of a large number of international agreements negotiated prior to the Earth Summit in Rio (e.g. Convention on International Trade in Endangered Species, World Heritage Convention), as well as agreements negotiated at Rio (e.g. Framework Convention on Climate Change, Biological Diversity Convention, Convention to Combat Desertification). However, the Earth Summit provided the first unique opportunity where management, conservation and sustainable development of all types of forests was the primary focus of the intergovernmental negotiations. At Rio, the forest issue was one of the most controversial issues negotiated by the participating countries. The

International Dialogue on Forests

industrialized and developing countries were strongly polarized on priorities assigned to sustainable development and to environmental concerns by the North in comparison with the emphasis on economic development by the South. In spite of these divergent views and frequent confrontation between the North and the South, the successful negotiation of ‘Forest Principles’ at Rio is considered to be a landmark accomplishment in intergovernmental deliberations on forest policy. The period between 1992 and 1995 was one of building confidence and trust between the South and the North, followed by the establishment of the ad hoc Intergovernmental Panel on Forest (1995–1997) as a subsidiary body of the UN Commission on Sustainable Development (UNCSD). In light of the significant progress made in building consensus on a large number of politically sensitive and complex forest policy issues, the countries decided to extend their deliberations under a new subsidiary body of UNCSD, namely, the Intergovernmental Forum on Forests (1997–2000). This was, again, a period of further consensus building and enhanced partnerships among various stakeholders. Both the IPF and IFF process resulted in defining the scope and scale of a large number of issues and in reaching agreement on a large number of proposals for action. However, a number of issues still remain unresolved. These include the need to initiate negotiations on a Convention on Forests, the need for enhanced international financial cooperation to support sustainable forestry in developing countries and to strengthen the mutually supportive relationship between international trade and SFM. During the IPF/IFF process, about 25 international meetings were organized to clarify the scientific and technical aspects of forests and to propose policy options for the issues under intergovernmental deliberation. Most of these meetings were co-sponsored by governments in the South and the North as well as by representatives of the scientific community and non-governmental organizations. These meetings, which produced nearly 300 technical documents, and the multistakeholder co-sponsorship contributed significantly to building broad consensus (Grayson, 1995; Grayson and Maynard, 1997; Soderlund and Pottinger, 2001). Furthermore, the IPF and IFF process was greatly facilitated by the co-chairmen of IPF and IFF. Both bodies were co-chaired by senior scientists, policy advisors and diplomats

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from both the developing and industrialized countries. The decade since Rio may be considered the period of richest international forest policy understanding, analysis and development. In consideration of the significant progress made in the formulation of the international forest policy and the critical need to implement the agreed IPF/IFF proposals for action, the countries decided, in 2000, to establish the United Nations Forum on Forests as a subsidiary body of the Economic and Social Council (ECOSOC) of the United Nations. This new forum reports to the UN General Assembly through ECOSOC and is established at the highest political level to discuss and implement the various components of the international forest policy. UNFF particularly aims to mobilize political, financial, scientific and technical support in order to implement sustainable management of all types of forests. Also, the UNFF has made provisions to organize high-level Ministerial involvement as well as to facilitate the contribution of major groups, including the private sector, professional foresters, indigenous peoples and various other components of society. Another unique feature of the IPF/IFF/ UNFF process is the fostering of close collaboration between a core group of major multilateral and international organizations and instruments. A Collaborative Partnership on Forests1 (CPF) has now been established to support UNFF deliberations and to facilitate the implementation of its plan of action.

Policy aspects International deliberations on forest policy have contributed to wide recognition of a number of characteristics of forests and forest policy including the following:

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Forests simultaneously provide a number of benefits and this feature has resulted in the organization of multiple constituencies and of special interest groups related to forests. Conflicts result when these different groups attempt to advance their specific agendas on the same forestland (e.g. harvesting versus conservation). Sustainable forest management now also requires an ability to build consensus among divergent demands and to resolve conflicts.

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Forest policy is a cross-sectoral issue and SFM requires harmonization of crosssectoral policies at the national level. For example, approaches to address deforestation and forest degradation may lie in agricultural or energy (e.g. fuelwood) policy. Harmonization of cross-sectoral policies and resolution of conflicting demands requires open, transparent, inclusive and participatory decision-making processes. There are about 40 international and multilateral organizations (e.g. FAO, ITTO, World Bank, etc.) and about 20 international agreements that deal with some aspect of forest (e.g. sustainable forestry) or forestrelated issues (e.g. carbon sequestration, biological diversity, indigenous people). Individually, these organizations and agreements do not have an adequate mandate or the capacity to address the forest issue in a cohesive and comprehensive manner. Consequently, close cooperation among key multilateral agencies and agreements is essential to coordinate the otherwise fractionated agenda (UNDP, 1997). During the past decade, there has been a significant shift in perspectives on forests, i.e. from sustained yield to SFM, which requires a corresponding shift from forest management to forest ecosystem management (Maini, 1989). Collectively, the ‘Rio Forest Principles’ and the IPF/IFF proposals for action represent the most comprehensive, intergovernmentally agreed framework on international forest policy. The UNFF has now been established with the primary focus to mobilize political and financial support and to facilitate the implementation of this agreed agenda for action on forests.

Impact on National Policies and Practices Considering the transboundary, regional and global dimensions of forests, it is evident that national and sub-national forest policies are no longer isolated from international forest policy dialogue and from broad geographical context. In addition to the environmental benefits and

services that extend beyond the borders of a country, a number of international agreements and treaties (e.g. CITES, Biodiversity Convention) address forest-related issues. Countries that are signatory to these treaties have already committed themselves to accept certain international rules and norms. International trade in products derived from sustainably managed forests, for example, would necessitate the establishment of some internationally agreed standards and measures of performance regarding SFM. Recent progress in the formulation of criteria and indicators of sustainable forest management by several regional processes and the compatibility between these processes, is another illustration of the influence of international deliberations on national forest policies and practices.

Epilogue The social, economic and environmental consequences of the alarming rate and magnitude of deforestation have transboundary, regional and global dimensions. Furthermore, the increasing demand by many industrialized countries for forest products from sustainably managed forests has also contributed to the emergence of forests as an international issue. It is important to understand various forces that drive the forest issue, recognize diverse interests, ‘realities’ and areas of priority concern. National forest policies and practices must take into account regional and international deliberations on forests. Intergovernmental negotiations on forests at the Earth Summit at Rio and during the subsequent decade have been intense and have evolved from North–South confrontation to building North–South consensus on a large number of politically sensitive and complex forest issues. This consensus-building process has been facilitated by about 25 meetings of international experts, co-sponsored by both the developing and industrialized countries as well as nongovernmental organizations. The production of a very rich body of literature on international forest policy and on SFM has further contributed to the progress in international forest policy. The establishment of UNFF, a body set up to consider and implement international forest policy at the highest political level, represents a major step towards the

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promotion and implementation of sustainable management of all types of forests. This process is being facilitated by the inter-agency Collaborative Partnership on Forests.

Endnote 1 Convention on Biological Diversity (CBD), Convention on Combating Desertification (CCD), Centre for International Forestry Research (CIFOR), Department of Economic and Social Affairs (DESA), Food and Agriculture Organization (FAO), Framework Convention on Climate Change (FCCC), Global Environment Facility (GEF), International Tropical Timber Organization (ITTO), United Nations Development Programme (UNDP), United Nations Environment Programme (UNEP) and the World Bank (WB).

References Food and Agriculture Organization (2001) State of the World’s Forests: 2001. FAO, Rome, 181 pp.

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Grayson, A.J. (ed.) (1995) The World’s Forests: International Initiatives since Rio. Commonwealth Forestry Association, Oxford, 72 pp. Grayson, A.J. and Maynard, W.B. (eds) (1997) The World’s Forests – Rio +5: International Initiatives Towards Sustainable Management. Commonwealth Forestry Association, Oxford, 147 pp. Maini, J.S. (1989) Sustainable development and the Canadian forestry sector. Forestry Chronicle 66, 346–349. Maini, J.S. (1993) Sustainable development of forests: a systematic approach to defining criteria, guidelines and indicators. In: Proceedings of a Seminar of Experts on Sustainable Development of Boreal and Temperate Forests. Canadian Forestry Service, Ottawa, pp. 61–70. Maini, J.S. (1996) Keynote speech. In: Proceedings of the International Conference on Certification and Labelling of Products from Sustainably Managed Forests, 26–31 May 1996. Department of Primary Industry and Energy, Brisbane, Australia, pp. 13–20. Soderlund, M. and Pottinger, A. (eds) (2001) Rio +8: Policy, Practices and Progress Towards Sustainable Forest Management. Commonwealth Forestry Association, Oxford, 310 pp. United Nations Development Program (1997) Synergies in International Implementation: the Rio Agreement. UNDP, New York, 69 pp.

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New Trends in Forest Policy and Management: an Emerging Postmodern Approach? John Schelhas

USDA Forest Service, Southern Research Station, 112 Campbell Hall, Tuskegee University, Tuskegee, AL 36088, USA

Forest policy and management throughout most of the 20th century was firmly rooted in patterns established during the progressive era in the USA, which can be characterized as seeking to provide the greatest good for the greatest number through science and governmental allocation of resources. Many of the key elements of this approach to conservation were challenged during the last two decades of the 20th century, and a number of new approaches have emerged. These new approaches, such as ecosystem management and sustainability, challenge many established tenets of natural resource policy and management, and some authors have characterized these changes as a switch from modern to postmodern natural resource management. This paper uses examples from the USA and Costa Rica to evaluate the claim that a new postmodern conservation has emerged in the practice of natural resource management and policy.

From Modern to Postmodern Conservation Natural resource policy and management began in earnest in the USA at the beginning of the 20th century, when de facto environmental policies promoting conversion of resources into commodities and disposal of government-owned resources to

private entrepreneurs were replaced by new policies emphasizing planned management and use of resources based on the progressive philosophies of government (Andrews, 1999). Theodore Roosevelt, one of the principal proponents of progressivism, saw government as an active force in serving the public interest by being a counterweight to the power of big business (Andrews, 1999). This period of time saw the development of a new role for government in the regulation and management of natural resources, including the creation of most of the current government resource management agencies and the beginning of formal natural resource management on public lands (Andrews, 1999). One of the key ways in which this was carried out was by staffing government agencies with what were regarded as neutral scientific and technical professionals charged with the task of promoting efficiency in natural resource management on both public and private lands (Andrews, 1999; Cortner and Moote, 1999). Fairfax and Fortmann (1990) have summarized the key tenets of progressive-era natural resource management as follows: (i) the use of non-partisan technical expertise as the basis for decision making; (ii) the advocacy of large-scale, comprehensive government resource management; (iii) an emphasis on providing fibre for industry (e.g. silviculture as forestry); and (iv) a view of natural resource management as a biological undertaking, with social factors being viewed as constraints and

©CAB International 2003. Forest Policy for Private Forestry: Global and Regional Challenges (eds L. Teeter, B. Cashore and D. Zhang)

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problems rather than as a source of the goals and values to be achieved by natural-resource professionals. McCay (2000) presents a similar argument, suggesting that the dominant conservation approach of the 20th century can be characterized as modern conservation. McCay sees modern conservation as having the following features: (i) organized around utilitarian values, emphasizing ‘the greatest good for the greatest number’; (ii) an emphasis on marketable commodities (and when recreational or subsistence values are recognized, a tendency to express them in market terms); (iii) science and policy relying on single-species data and models; (iv) a hierarchical approach to natural resource management, organized by the government in a top-down fashion; (v) decisions based on scientific data or scientific thinking; (vi) a tendency to use deterministic scientific models that expect predictable relationships among variables; and (vii) little attention to people, except as constraints and demands on the system. Several authors have discussed the changing natural resource management and policy approaches and philosophies during the 20th century. Fedkiw (not dated) focuses on changing management of the US national forests, noting that the emphasis has shifted from a focus on forest resource use alone to a broader vision that includes the protection of resources, maintaining watershed and ecosystem values, and maintaining pristine wilderness areas. Fedkiw sees these changes as largely reflecting two developments: (i) greater and more diverse demands from society for products, services, and values from the national forests, and (ii) new scientific knowledge that recognizes the greater complexity of managing ecosystems for these diverse values – in particular, the need to manage larger spatial units and to include humans in ecosystem science. Mazmanian and Kraft (1999) find that there was a paradigm shift in environmental policy in the latter two decades of the 20th century, away from policies based in government ownership and regulation towards, at first, market-based approaches and, later, community- and sustainability-based approaches. They argue that these new approaches: (i) work at the level of complex, linked human and natural systems; (ii) focus on development of new social mechanisms and institutions; (iii) work at multiple levels; and (iv) promote collaboration, partnerships and community capacity building.

Honadle (1999) sees these options as not necessarily replacing each other but, rather, cumulatively creating a diversity in available policy and management options that include command and control, self-management and incentives (direct and indirect) that can be matched to the particular context at hand. Wallace et al. (1996) note that scientists, land managers and others have proposed that natural resources can be best managed through an ecosystem management approach, and distil five main themes of ecosystem management from the literature: (i) desired ecological states and means of achieving them are socially defined; (ii) attention to the parts, functions and structures of the ecosystem as a whole; (iii) management at larger spatial and longer temporal scales than was previously the norm; (iv) open communication and collaborative decision making; and (v) institutions need to be adaptable so as to respond to complexity and uncertainty. McCay (2000) goes further than these other authors, using the example of ecosystem management to argue that a new, ‘postmodern’ natural resource management has emerged. She describes the tenets of ecosystem management as follows: (i) utilitarian values existing alongside less anthropocentric values such as biodiversity and ecosystem integrity; (ii) a tendency to look at whole systems, and to view them as non-deterministic (i.e. capable of complexities, discontinuities and surprises); (iii) scientific uncertainty creating openings for other sources of knowledge, ranging from traditional knowledge to junk science; (iv) formalization of uncertainty into science-based management models, such as adaptive management; (v) recognition of the importance of local and user knowledge, through bottom-up and collaborative approaches; (vi) people as active participants in the system, for example as monitors and managers (McCay, 2000). The key elements of McCay’s analysis that go beyond other descriptions of changes include the recognition of multiple interests unresolvable by an authoritarian scientist or manager, and a questioning of the authority of science itself. McCay’s (2000) fundamental point is that ecosystem management is a new approach to natural resource management and policy that reflects broader cultural changes from modernism to postmodernism. Gabardi (2001) describes modernism as being bound up with the rationalist and progressive spirit of 18th century enlightenment,

New Trends in Forest Policy and Management

and postmodernism as a critique of modernism rooted in French structuralism, post-structuralism and the German Frankfurt school of critical theory. Rudel and Gerson (1999) note the importance of postmodernism as a scholarly trend in the last two decades of the 20th century. They summarize postmodernism as having five components: (i) rejection of comprehensive explanations and grand theories; (ii) ever-changing social conditions that require people to be flexible and adaptable, producing constant change and reinvention in individuals and institutions (thereby making them more contingent and less subject to essentialist explanations); (iii) rejection of universal, and a corresponding emphasis on the local and particular; (iv) polyvocality, or the existence of multiple groups with different concerns and voices; and (v) attention to the interpretation of signs and texts, in which meaning is contingent on social relations. Rudel and Gerson (1999) believe that many universitybased scholars have found postmodern thinking attractive, accounting in part for its importance in the social sciences today. If McCay’s (2000) analysis is correct, its influence within academia has included natural resource management and policy.

Purpose of this Chapter There can be little doubt that natural resource management and policy have undergone fundamental changes in recent years. While analysis of broad trends and paradigm changes is often left to historians, it is also important to attempt to understand trends and changes as they are happening. Postmodern thinking has profound implications for society, and it is appropriate for us to question the extent to which the actual practice of natural resource policy and management reflect this burgeoning postmodernism, and what this means. To address these questions, I draw on examples from the two countries in which I have been most involved in natural resource research: Costa Rica and the USA. Natural resource management and policy in these two countries will be evaluated across four general trends, all of which reflect to some extent the attention to multiple perspectives that is characteristic of postmodernism, i.e. shifts from: (i) simple to multiple interests in natural resources; (ii) simple ownership to bundles of rights; (iii)

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deterministic science to multiple knowledge systems; and (iv) public interest to stakeholder groups.

From Simple to Multiple Resource Interests For many years, natural resource management tended to be organized around single resources – for example a huntable wildlife species or harvestable timber species. The limitation of concern to a relatively few species and their economic benefits made it possible to develop straightforward management plans and to apply them at relatively small geographical scales. Recently, attention has been focused on a greater variety of forest products and services, values for socio-cultural as well as economic reasons, which often accrue at a variety of spatial scales. In the USA, there has been a broadening in the number and type of species that are of interest and concern, with greater attention being paid to non-commodity values (Farnham et al., 1995). Wildlife management broadened beyond game species beginning in the late 1970s, with increasing attention paid to wildlife viewing, birding and biodiversity (Shaw and Zube, 1980; Hunter, 1990). In forestry, increasing attention has been paid to non-timber forest products across the US (von Hagen et al., 1996; Greene et al., 2000). Part of the shift involves recognition by managers of longstanding uses of forest products, while another aspect is the rise of new uses as a result of immigration (bringing in user groups with different cultural values) and new international markets. The Pacific Northwest shows this clearly (Hansis, 1996). Native American, Asian and Hispanic people are now collecting berries, mushrooms, foliage and other specialty products from forests that were previously regarded mostly as sources of timber. These new products are important economically, particularly in the informal economy and as a source of occasional or safety-net income to many of these people (requiring a very different sort of economic analysis than that which has typically been done by forest economists). These products are also important for reasons far beyond their economic value, including their relationship to culturally important subsistence uses and socially important experiences for families and communities.

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In Costa Rica, this shift is exemplified by the emergence of new agricultural and forest commodities. A great deal of attention has been directed to non-traditional forest products such as vines, butterflies, iguanas and forest foods that can provide economic returns from forest lands without conversion to agricultural land-use (Watson et al., 1998). As in the USA, these non-timber forest uses often involve groups and communities that have previously received little attention in forest management, including the poor and ethnic minorities. Other areas of interest include agroforestry options, such as shade-grown coffee, windbreaks and mixes of agricultural crops and trees (Perfecto et al., 1996; Harvey and Haber, 1999; Harvey, 2000). Many of these options are oriented towards ecological and social services rather than products – for example, trees as windbreaks, shade canopies, bank accounts, and natural areas for various social and cultural values (Schelhas et al., 1997; Watson et al., 1998; Langholz et al., 2000). Concern for biodiversity and ecosystem service has grown, expanding management responsibility to much larger scales. The biodiversity limitations of US national parks has been analysed (Newmark, 1995), and a number of NGO (non-governmental organization) efforts have arisen to work on conservation planning on larger regional scales (e.g. the Wildlands Project and the Yellowstone to Yukon, or Y2Y, wildlife corridor). The watershed is emerging as an important management unit, for example the management of the Columbia River Basin for mixed objectives (including hydroelectric power generation and salmon fishing) and the management of land use in the mountains that supply water to New York City (Lubchenco, 1998). There are also new trends in forest management and policy in Costa Rica that reflect concern for broader scales and ecosystem services. A major share of the international attention and funding for forest protected areas and biodiversity conservation in recent years has been directed at conservation corridors, ranging from regional corridors, which protect seasonal altitudinal migrants, to the MesoAmerican Biological Corridor, which proposes a Central-America-wide framework to improve connectivity between parks and protected areas (Boza, 1993; Schelhas, 2001). Carbon sequestration has also been a growing area for forest policy and international funding, with deals being brokered for Costa Rica to maintain

forests as carbon sinks to counteract the release of carbon dioxide into the air through the burning of fossil fuels in industrialized countries (Watson et al., 1998). Costa Rica has been an innovator in developing market arrangements for biochemical prospecting, such as the relationship between Merck and INBio (Watson et al., 1998).

From Simple Ownership to Bundles of Rights Perhaps one of the most fundamental changes in resource management is the tendency for concepts of simple and complete ownership to give way to a tenure relationship that fits more closely with the sociologists’ view of a bundle of rights that can be disarticulated and held by different people. In some ways, this view of tenure has been quietly with us for a very long time. Wildlife has long been legally viewed as owned and managed by the state, not by individual landowners, and there is wide recognition that easements can be used to separate development rights from land ownership. What has changed is that previously widely accepted and stable distributions of tenure rights are being contested much more frequently. There are many examples of this: for instance, in the USA, endangered species laws have been used to limit habitat modifications on private lands. The argument for government intervention is essentially that endangered species are a resource of value to the public as a whole (or at least to large segments of the population), and therefore a landowner does not necessarily have the right to do anything he wishes with resources found on his own property. Such claims on the ‘private property’ of others have gone far beyond government-initiated laws and regulations. Several states have had citizen ballot initiatives seeking to limit certain forestry practices, and radical environmentalists have taken direct action ranging from civil disobedience (e.g. tree sitting, blocking roads) to sabotage and property destruction (e.g. burning of ski-resort facilities and houses). That these efforts have a mixed record of success is largely beside the point. They have become standard tactics and options in environmental disputes, indicative of the rising importance of tenure claims that reach across physical property boundaries marked with fences or other markers.

New Trends in Forest Policy and Management

In Costa Rica, similar trends exist, although they have played out in different ways. International and urban interests have advocated for forest and wildlife conservation to encourage biodiversity and mitigate global climate change; for example, through opposition to the conversion of forests to pasture on private lands. However, the less-developed country context appears to have produced less attention to broad-based citizen action, and more to expert-led government regulation, incentives and environmental development projects. One innovative area is the use of government and private payments to landowners for public environmental benefits on their lands, for example for wildlife or for ecosystem services (Watson et al., 1998; Langholz et al., 2000). In both the USA and Costa Rica, explicit and implicit claims of rights to resources or their functional attributes on land owned by other people has been problematic. There is no one point at which these rights and claims can be balanced, resulting in a constant process of social and legal renegotiation. Complicating this is the fact that many of these issues involve externalities and crossboundary resource concerns. The policy tools that support these complex questions are not well developed, and there are fundamental questions about regulation, property rights and compensation that remain to be worked out. But clearly there is an emergence of a number of different fora and techniques in and by which these issues are contested and balanced, including markets, social norms (moral questioning of the rights to do certain things with natural resources), legal and policy restrictions on certain practices (which may be implemented at many different levels of government or society), and collaborative decision-making processes. In addition to individual stakeholder group and public sector claims on the attributes of private property, there has been a tendency to break down or unpack previously uncontested notions of private and public property. In Costa Rica, only a portion of the national parks are owned by the government agency that manages the parks, with large percentages owned by other government agencies and private individuals (Zúniga Villegas, 1998). The situation is very similar in the USA, where inholdings, public–private mosaics, lease agreements and divisions of tenure for different resources are often controlled by different individuals or groups, resulting in complex, overlapping tenures (Fairfax et al., 1998; Geisler, 2000). While

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the facts on the ground have not changed, there is a new, explicit recognition that many of these conditions are not necessarily temporary anomalies and that natural resource management and policy must therefore develop the means to incorporate these complexities rather than to act as if they did not exist (Fairfax et al., 1998). Along with a blurring of public–private ownership categories, there has been a growing legitimacy given to other ownership options. Modern conservation was firmly based in the idea, expressed in Hardin’s classic ‘Tragedy of the Commons’, that we are faced with a choice between the free-market and government regulation to avoid the failures inherent in common ownership. At the theoretical and case study levels, a large body of literature has emerged that counters Hardin’s argument by showing four property options: open-access, communal, private/ individual and government (McCay and Acheson, 1987; Feeny et al., 1990). Of particular interest is the distinction between open-access and communal options. What Hardin called common property, recent scholarship has argued, is in fact the free-for-all of open access. Common property comes with many social institutions that make use of the resources and lands that are held in common (Feeny et al., 1990). This has led to increased attention to and respect for persisting examples of communal ownership and management of forests and rangelands (Gibson et al., 2000). In the USA, examples include the Hispanic communities in the Southwest and the communal forests of New England (McCullough, 1995; Peña, 1998). In Costa Rica, this has been reflected in community-based approaches and conservation on indigenous reserves (Watson et al., 1998.)

From Deterministic Science to Multiple Knowledge Systems In recent years, there have been significant changes in science itself, and the relationship between science and other knowledge systems. The change from deterministic to chaotic models in natural resource management shows up mainly in the literature on fisheries management in the USA (e.g. Acheson and Wilson, 1996; Walters, 1997), with relatively little work in this area in forest management research evident in either the

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USA or Costa Rica. There has been more attention paid to interdisciplinary approaches, and their links to adaptive management in both countries. Examples include the Interior Columbia Basin Ecosystem Management study (Quigley et al., 1996) in the USA, and Cornell University and Organization for Tropical Studies research efforts in conservation biology and sustainable development in Costa Rica (Rich et al., 1996; Schelhas, 2000). These efforts reflect a growing regard for disciplinary pluralism, and a corresponding effort to find multidisciplinary and interdisciplinary approaches that integrate different perspectives and approaches (Zube, 1982; Norgaard, 1989; Schelhas et al., 2001). Movement beyond science to other knowledge systems, including indigenous and folk knowledge, is also evident in both countries. The uncertainty of traditional science in addressing some of the forest management issues in the western USA is one example where multiple knowledge claims are being put forth in the USA. For example, the finding that many of the species most widely harvested by indigenous people in western USA are currently on threatened or endangered species lists suggests that these practices had certain biodiversity advantages over scientific natural resource management approaches (Anderson, 1993; Anderson and Nabhan, 1991). Berkes et al. (2000) suggest that traditional ecological knowledge may take into account some of the long-term lack of predictability in complex ecosystems that has often not been fully appreciated by scientists. McCay (2000) observes that recognizing multiple knowledge systems, like the local knowledge of user groups, also leaves the door open to many other types of knowledge claims. Among these are ‘fractious interest-driven claims to knowledge masquerading as science (i.e. ‘junk science’)’ (McCay, 2000: 4). Recognizing multiple claims to knowledge can mean that each interest group puts forth its own version of the truth, raising questions about how to mediate between these ‘truths’ and the role of science and other knowledge forms as the basis for decision making. The trend towards certified sustainably grown and harvested forest products is another example of greater pluralism in the knowledge systems that are considered in management and policy. Certification of timber, for example, explicitly challenges the forestry profession (and its claim of authority in science) by arguing that foresters alone cannot

make all the judgements about the ‘right’ way to manage forests. Although there is great variation among certification systems, most expand the values that need to be accounted for in forest management beyond those related to production of a single commodity. Biodiversity, ecosystem processes, ecosystem health, social issues and off-site environmental concerns may all enter into the process. In addition to bringing professionals and scientists from different disciplines into the process, non-scientific values (consumer, environmental groups, public, etc.) often also become a part of the certification criteria. The struggle for legitimacy in certification plays out in the social and political arena, and expresses the power relationships among interest groups as well as the science that underlies these positions. For example, de Camino and Alforos (2000), reviewing certification in Latin America, suggest that certification is driven by the interests of northern NGOs with questionable benefits for the South (given that price premiums are often not realized by forest landowners).

From the Public Interest to Stakeholder Groups One of the fundamental tenets of progressive-era conservation was management for ‘the public interest’. Postmodernism looks for power relationships along class, racial and ethnic lines that might distort any such claimed ‘public interest’ in favour of certain groups who have been historically privileged. Ultimately, this approach leads to breaking down the public into stakeholder groups – smaller groups who share common interests – that receive different sets of costs and benefits from natural resource management and policy decisions. Viewing interests in natural resources from a stakeholder perspective ultimately leads to supplementing, or even replacing, scientific determination of the public interest with new governance procedures to listen to, consider and balance the interests of stakeholder groups. Under this view, each group is now able to articulate their interests themselves (as opposed to having these interests determined by scientists), and resolving disputes and reaching workable management decisions requires participation and collaboration. Natural resource management and policy become processes of governance, supported by, but not driven by,

New Trends in Forest Policy and Management

science. Ultimately, decisions are made not through hierarchical processes where the lines of authority and responsibility are clear, but through panarchies – emergent sets of loosely connected institutions in which action can be initiated from any level (Gunderson et al., 1995). In the USA, this change is manifested in a number of different arenas. Planning for the National Forest, for example, has embraced the notion of collaborative stewardship to deal with the multiple pressures of interest groups and stakeholders (Committee of Scientists, 1999; Wood, 2000). However, the change has gone far beyond government-driven processes. In many places where natural resource management involves contentious issues, grass-roots groups have sprung up which include stakeholders on all sides of the issues. Many of these groups have a collaborative philosophy, looking for management strategies that consider environmental, community and economic variables. The Quincy Library Group is one such example of a stakeholder-based collaborative group that is distinctly different from, and sometimes challenges, science-based management approaches (Ruth, 2000). The less-developed country context of Costa Rica shows different manifestations of similar trends. In 1991, the national parks were organized into regional conservation areas, which worked across park boundaries and sought to include NGOs and local people along with scientists and government agencies. Similar to the USA, these processes are not always controlled by the government. Environmental protests and new social movements have sufficient power to drive elements of the natural resource management and policy process (Watson et al., 1998).

Discussion The above exposition presented examples from two countries of four important recent trends in natural resource management and policy (see summary in Table 3.1). Many of these trends reflect efforts to come to terms with complexity. Ecological systems and their relationships with human systems are inherently complex and interconnected. This is reflected in attention to broader scales and cross-scale relationships (see point 1c in Table 3.1), multiple values in ecosystems (points

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1a, b), and the shift from simple ownership to bundles of rights (points 2a, b, c). These changes are not inherently postmodern, and may have taken place even in the absence of the postmodern trend. Nethertheless, it is important to note that their recognition and rise to prominence was facilitated by paying attention to multiple points of view, which has been fostered by postmodernism. ‘Modern’ natural resource management could incorporate much of the complexity in natural and social systems and still remain a science-driven, hierarchical management and policy process. The trends towards multiple knowledge systems (particularly openings for non-scientific knowledge) (points 3a, b, c) and participatory and collaborative processes involving stakeholder groups (points 4a, b, c), however, are fundamentally postmodern. Like postmodernism, they recognize the importance of hearing multiple voices and perspectives, and multiple knowledge systems. They reject management based in grand theories and universal policy and management approaches in favour of management addressing the particularities of each situation. They recognize contingency – including the possibility of shifting the behaviours of actors in broad but nondeterministic ways through participatory approaches; for example, discursive approaches of participatory environmental management that lead to civic discovery (Uphoff, 1992; Rudel and Gerson, 1999; Fischer, 2000). Table 3.1. Summary of recent trends in natural resource policy and management. 1. Simple to multiple interests a. Mixes of products, rather than single commodities b. Non-commodity values c. Broader scales and cross-scale relationships 2. Simple ownership to bundles of rights a. Cross-boundary claims on private lands b. Intermixed public–private domains c. Legitimacy of communal ownership 3. Deterministic science to multiple knowledge systems a. Unpredictability, surprise, chaos b. Interdisciplinary science and management c. Traditional knowledge 4. Public interest to stakeholder groups a. Power as influencing ‘public interest’ b. Stakeholder groups c. Panarchies replace hierarchies

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However, in spite of the important influence of postmodernism, it is more difficult to assert that a truly postmodern management and policy has emerged. Strict, or strong, postmodernism places competing claims on equal footing, providing little basis for choosing among them. A truly postmodern natural resource management and policy would become simply a struggle between interest groups, determined by different parties’ discursive claims and the power behind them. While some would seem to welcome this, there is little evidence of it gaining credence in management and policy. The reasons for this are found in the emerging critique of postmodernism. Postmodernism has by no means been uncritically accepted within academia, and in the past few years it has been assaulted by considerable backlash and criticism. One of the principal criticisms is that postmodernists overstate the extent to which ‘reality’ is socially constructed, and ignore substantial evidence that there is an underlying empirical reality to our socially constructed interpretations. Harris (1999) makes these points in his argument against the excesses of postmodernism. He agrees with the ‘postmodernist discovery that science is culturally embedded and culturally constructed’, and therefore influenced by values, race and class (Harris, 1999: 154). His objections are with what he terms ‘strong postmodernism’ – arguments that go beyond showing bias in scientific inquiry to maintain that there can be no ‘privileged’ paradigms or indeed truth itself. A number of authors have argued that ‘strong’ postmodernism, in privileging discursive claims over empirical observations, risks social irresponsibility by ignoring social or biophysical realities. Edelman (1999) criticizes postmodernism for ignoring important social facts in history and political economy related to resource and income distribution, including poverty, inequality and power. McCay (2000) suggests that the emphasis on social construction and contingency have gone too far, that academic postmodernism’s emphasis on texts and interpretations neglects engagement with the real needs and concerns of people. She suggests that respecting people’s lives, institutions and environments demands the apparent bane of postmodernism: ‘careful, empirical, and reproducible research’ in the natural and social sciences (McCay, 2000: 6). Rocheleau (1999) suggests that, in addition to purely social analyses, we need to conduct material ecological analyses of the

movements of energy and materials in different socially structured environments. Stonich (1999) similarly cautions against overestimating the power of human behaviours to change environmental forces while underestimating the transformative power of the environment (nature) on social relations. She argues, then, for balancing the social/cultural construction of nature with what she terms ‘the natural construction of the cultural and social’ (Stonich, 1999: 24). Ignoring the biophysical processes that give rise to social issues, and social factors such as power and exploitation, in favour of discourse risks ignoring factors that are very ‘real’ in many people’s lives at the expense of what many see as largely academic discussions. Natural resource management and policy cannot simply offer critique or align itself with the victims of central authority. It must find a balance between the benefits of postmodernism, which include attention to diverse perspectives and interests and greater self-reflectivity, and the benefits of more traditional science-based approaches to natural resource management, which include the discovery of empirical regularities in complex social–natural systems. The task before us is then to develop a new approach to resource management that incorporates aspects of both modernism and postmodernism. Gabardi (2001) calls this critical postmodernism, and defines it as the combination of scepticism with a pragmatic experimental approach to daily living. Kai Lee’s seminal book, Compass and Gyroscope (1993), proposed an approach that integrates a science-based process of adaptive management with democratic processes of governance Buck et al. (2001) build on this idea, proposing the concept of ‘adaptive collaborative management’ and exploring worldwide experiences that fit within this general model. If the future of natural resource management and policy will place science and governance on more equal footings, there are changes and challenges ahead. For science, the social and political spheres must be incorporated into the very heart of our approaches, and not considered as problems or mere afterthoughts. We must seek a genuine articulation between disciplinary theories and models, forming new interdisciplinary approaches. Governance, in turn, must find ways to systematically incorporate science into its processes. Somewhat paradoxically, science then becomes more important, by producing empirically verifiable research that helps to sort out competing knowledge.

New Trends in Forest Policy and Management

However it must be a more bounded, humble, pluralistic and interdisciplinary science which recognizes the ways that values infuse its processes and influence its outcomes. Governance will need to avoid the anarchy of multiple discursive claims underlain by power and self-interest and develop new governance processes that take into account multiple viewpoints but lead to effective management practices to create and protect social and biophysical states that truly do produce value across all segments of society over time. The outlines of a new approach – neither modern nor postmodern – is taking shape in the form of the trends described in this chapter, for us to recognize and engage as we move into a new century of natural resource management and policy.

References Acheson, J.M. and Wilson, J.A. (1996) Order out of chaos: the case for parametric fisheries management. American Anthropologist 98, 579–594. Anderson, K. (1993) Native Californians as ancient and contemporary cultivators. In: Blackburn, T.C. and Anderson, K. (eds) Before the Wilderness: Environmental Management by Native Californians. Ballena Press, Menlo Park, California, pp. 151–174. Anderson, K. and Nabhan, G.P. (1991) Gardeners in Eden. Wilderness 55, 27–30. Andrews, R.N.L. (1999) Managing the Environment, Managing Ourselves: a History of American Environmental Policy. Yale University Press, New Haven, Connecticut. Berkes, F., Colding, J. and Folke, C. (2000) Rediscovery of traditional ecological knowledge as adaptive management. Ecological Applications 10, 1251–1262. Boza, M.A. (1993) Conservation in action: past, present, and future of the national park system in Costa Rica. Conservation Biology 7, 239–247. Buck, L.E., Geisler, G.C., Schelhas, J. and Wollenberg, E. (eds) (2001) Biological Diversity: Balancing Interests through Adaptive Collaborative Management. CRC Press, Boca Raton, Florida. Committee of Scientists (1999) Sustaining the People’s Lands: Recommendations for Stewardship of the National Forests and Grasslands into the Next Century. US Department of Agriculture, Washington, DC. Cortner, H.J. and Moote, M.A. (1999) The Politics of Ecosystem Management. Island Press, Washington, DC. de Camino, R. and Alforos, M. (2000) Certification in Latin America: experience to date. Forest, Trees, and People Newsletter 43, 25–27.

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Edelman, M. (1999) Peasants Against Globalization. Stanford University Press, Stanford, California. Fairfax, S.K. and Fortmann, L. (1990) American forestry professionalism in the third world: some preliminary observations. Population and Environment 11, 259–272. Fairfax, S.K., Fortmann, L.P., Hawkins, A., Huntsinger, L., Peluso, N.L. and Wolf, S. (1998) The federal forests are not what they seem: formal and informal claims to federal lands. Ecology Law Quarterly 25, 630–646. Farnham, T.J., Taylor, C.P. and Callaway, W. (1995) A shift in values: non-commodity resource management and the Forest Service. Policy Studies Journal 23, 281–295. Fedkiw, J. (not dated) Managing Multiple Uses on National Forests: a 90-year Learning Experience and it Isn’t Finished Yet. Resource Use and Valuation Research, USDA Forest Service, Washington, DC. Feeny, D., Berkes, F., McCay, B.J. and Acheson, J.M. (1990) The tragedy of the commons: twenty-two years later. Human Ecology 18, 1–19. Fischer, F. (2000) Citizens, Experts, and the Environment: the Politics of Local Knowledge. Duke University Press, Durham, North Carolina. Gabardi, W. (2001) Negotiating Postmodernism. University of Minnesota Press, Minneapolis, Minnesota. Geisler, C. (2000) Property pluralism. In: Geisler, C. and Daneker, G. (eds) Property and Values: Alternatives to Public and Private Ownership. Island Press, Washington, DC, pp. 65–87. Gibson, G.C., McKean, M.A. and Ostrom, E. (2000) People and Forests: Communities, Institutions, and Governance. MIT Press, Cambridge, Massachusetts. Greene, S., Hammett, A.L. and Kant, S. (2000) Nontimber forest products marketing systems and market players in Southwest Virginia: crafts, medicinal and herbal, and specialty wood products. Journal of Sustainable Forestry 11, 19–39. Gunderson, L.H., Holling, C.S. and Light, S.S. (1995) Barriers broken and bridges built: a synthesis. In: Barriers and Bridges to the Renewal of Ecosystems and Institutions. Columbia University Press, New York, pp. 489–532. Hansis, R. (1996) The harvesting of special forest products by Latinos and Southeast Asians in the Pacific Northwest: preliminary observations. Society and Natural Resources 9, 611–615. Harris, M. (1999) Theories of Culture in Postmodern Times. AltaMira Press, Walnut Creek, California. Harvey, C.A. (2000) Windbreaks enhance seed dispersal into agricultural landscapes in Monteverde, Costa Rica. Ecological Applications 10, 155–173. Harvey, C.A. and Haber, W.A. (1999) Remnant trees and the conservation of biodiversity in Costa Rica pastures. Agroforestry Systems 44, 37–63.

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Honadle, G. (1999) How Context Matters: Linking Environmental Policy to People and Place. Kumarian Press, West Hartford, Connecticut. Hunter, M.L. (1990) Wildlife, Forests, and Forestry: Principles of Managing Forests for Biological Diversity. PrenticeHall, Englewood Cliffs, New Jersey. Langholz, J., Lassoie, J.P. and Schelhas, J. (2000) Incentives for biological conservation: Costa Rica’s private wildlife refuge program. Conservation Biology 14, 1–10. Lee, K.N. (1993) Compass and Gyroscope: Integrating Science and Politics for the Environment. Island Press, Washington, DC. Lubchenco, J. (1998) Entering the century of the environment: a new social contract for science. Science 279, 491–497. Mazmanian, D.A. and Kraft, M.E. (1999) Toward Sustainable Communities: Transition and Transformations in Environmental Policy. MIT Press, Cambridge, Massachusetts. McCay, B.J. (2000) Post-modernism and the management of natural and common resources. The Common Property Resource Digest 54, 1–8. McCay, B.J. and Acheson, J.M. (1987) The Question of the Commons: the Culture and Ecology of Communal Resources. University of Arizona Press, Tucson, Arizona. McCullough, R. (1995) The Landscape of Community: a History of Communal Forests in New England. University Press of New England, Hanover, New Hampshire. Newmark, W.D. (1995) Extinction of mammal populations in western North American national parks. Conservation Biology 9, 512–526. Norgaard, R.B. (1989) The case for methodological pluralism. Ecological Economics 1, 37–57. Peña, D.G. (1998) Los animalitos: culture, ecology, and the politics of place in the Upper Rio Grande. In: Peña, D.G. (ed.) Chicano Culture, Ecology, Politics: Subversive Kin. University of Arizona Press, Tucson, Arizona, pp. 25–57. Perfecto, I., Rice, R.A. and Van Der Voort, M.E. (1996) Shade coffee: a disappearing refuge for biodiversity. Bioscience 46, 598–608. Quigley, T.M., Haynes, R.W. and Graham, R.T. (1996) Integrated Scientific Assessment for Ecosystem Management in the Interior Columbia Basin and Portions of the Klamath and Great Basins. General Technical Report PNWGTR-382. US Department of Agriculture, Forest Service, Pacific Northwest Research Station, Portland, Oregon. Rich, P., Calvo, J., Campos, J., Carroll, C.R., Gavin, T., Gomez, L.D., Haines, B., Hamrick, J., Holl, K., Schelhas, J., Schnell, C., Sisk, T., Stone, D. and Timm, R. (1996) Coto Brus Corridor White Paper. Organization for Tropical Studies, Durham, North Carolina; University of Kansas, Lawrence, Kansas.

Rocheleau, D.E. (1999) Comment on Arturo Escobar’s After Nature: Steps to an Antiessentialist Political Ecology. Current Anthropology 40, 22–23. Rudel, T.K. and Gerson, J.M. (1999) Postmodernism, institutional change, and academic workers: a sociology of knowledge. Social Science Quarterly 80, 213–228. Ruth, L. (2000) Changing course: conservation and controversy in the national forests of the Sierra Nevada. In: Sedjo, R.A. (ed.) A Vision for the US Forest Service: Goals for its Next Century. Resource for the Future, Washington, DC, pp. 211–255. Schelhas, J. (2000) Catalyzing sustainability: Cornell University’s Field Practicum in Conservation and Sustainable Development. In: Fihlo, W.L. (ed.) Communicating Sustainability. Peter Lan Scientific Publishers, Bern, Switzerland, pp. 155–171. Schelhas, J. (2001) Ecoregional management in southern Costa Rica: finding a role for adaptive collaborative management. In: Buck, L., Geisler, C., Schelhas, J. and Wollenberg, E. (eds) Biological Diversity: Balancing Interests through Adaptive Collaborative Management. CRC Press, Boca Raton, Florida. Schelhas, J., Jantzi, T., Thacher, T., Kleppner, C. and O’Connor, K. (1997) Costa Rica: meeting farmers’ needs through forest stewardship. Journal of Forestry 95, 33–38. Schelhas, J., Buck, L.E. and Geisler, C.G. (2001) The challenge of adaptive collaborative management. In: Buck, L., Geisler, C., Schelhas, J. and Wollenberg, E. (eds) Biological Diversity: Balancing Interests through Adaptive Collaborative Management. CRC Press, Boca Raton, Florida. Shaw, W.W. and Zube, E.H. (1980) Wildlife Values. Center for Assessment of Noncommodity Natural Resource Values, School of Renewable Natural Resources, University of Arizona, Tucson, Arizona. Stonich, S.C. (1999) Comment on Arturo Escobar’s After Nature: Steps to an Antiessentialist Political Ecology. Current Anthropology 40, 23–24. Uphoff, N.T. (1992) Learning from Gal Oya: Possibilities for Participatory Development and Post-Newtonian Social Science. Cornell University Press, Ithaca, New York. von Hagen, B., Weigand, J.F., McLain, R., Fight, R. and Christensen, H.H. (1996) Conservation and Development of Nontimber Forest Products in the Pacific Northwest: an Annotated Bibliography. PNW-GTR-375, Pacific Northwest Research Sation, Forest Service, US Department of Agriculture, Portland, Oregon. Wallace, M.G., Cortner, H.J., Moote, M.A. and Burke, S. (1996) Moving toward ecosystem management: examining a change in philosophy for resource management. Journal of Political Ecology 3, 1–36. Walters, C. (1997) Challenges in adaptive management of riparian and coastal ecosystems. Conservation Ecology 1, 1. (http://www.consecol.org/vol1/iss2/art1)

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Watson, V., Cervantes, S., Castro, C., Mora, L., Solis, M., Porras, I.T. and Cornejo, B. (1998) Making Space for Better Forestry. Policy that Works for Forests and People Series No. 6. Centro Cientifico Tropical and International Institute for Environment and Development, San José, Costa Rica and London. Wood, C.A. (2000) The next decade of the Forest Service: does the past hold the key to the future? In: Sedjo, R.A. (ed.) A Vision for the US Forest Service: Goals for its

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Next Century. Resource for the Future, Washington, DC, pp. 49–56. Zube, E.H. (1982) Increasing the effective participation of social scientists in environmental research and planning. International Social Science Journal 24, 481–492. Zúniga Villegas, R.A. (1998) Protected natural area development: an assessment of the interrelationships between park biodiversity and human communities in Costa Rica. Masters thesis, Cornell University, Ithaca, New York.

4

Utilizing Issue Network Analyses to Assess Potential Policy Implications of Sustainable Forest Management in the United States

Steverson O. Moffat,1 Frederick W. Cubbage,2 Thomas P. Holmes3 and Elizabethann O’Sullivan4

1USDA Forest Service, Southern Research Station, Forest Resource Law and Economics, Room T-10034, 701 Loyola Avenue, New Orleans, LA 70113, USA; 2Department of Forestry, North Carolina State University, 3120 Jordan Hall, 2800 Fancette Drive, Raleigh, NC 27695-8008, USA; 3USDA Forest Service, Southern Research Station, Economics of Forest Protection and Management, PO Box 12254, 3041 E. Cornwallis Road, Research Triangle Park, NC 27709-2254, USA; 4Department of Political Science and Public Administration, North Carolina State University, Raleigh, NC 27695-8102, USA

Introduction Sustainable forest management (SFM) has generated a high level of interest throughout the US forestry community, although many people are unsure what SFM will mean to them and to forestry (Sedjo et al., 1998). While some consider SFM to be a passing issue akin to the ‘new forestry’ paradigm that affected forest policy discussions in the late 1980s and early 1990s, others see SFM as a continuation of a process that in the USA began with the introduction of scientific forestry methods in the early 20th century. Although some claim that SFM results in new markets and market premiums for certified forest products in the USA, concerns have been raised that SFM will limit management options and raise costs (Berg and Olszewski, 1995; Viana et al., 1996). Based upon previous debates among US foresters about the merits of regulation, one question may have universal interest: Will sustainable forest management result in new federal or state regulatory policies?

This chapter proposes and tests a method to answer that question. Network analysis studies the organizations and individuals that form around an issue problem (Heclo, 1978). An issue network can consist of dozens, and even hundreds, of interest groups, prominent knowledgeable individuals, federal and state agencies, and legislative committees and subcommittees (Berry, 1997). Networks play a key role in the policy process by identifying problems and getting them on a policy agenda, starting a process that can result in new policies and programmes (Anderson, 1984; Kingdon, 1984). Consequently, this chapter assumes that to predict the effect of SFM one starts with the players who initiate the policy process.

Network analysis Research on issue networks began with qualitative studies to demonstrate that networks existed (Milward and Provan, 1998). The next generation

©CAB International 2003. Forest Policy for Private Forestry: Global and Regional Challenges (eds L. Teeter, B. Cashore and D. Zhang)

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of studies used quantitative methods as part of social network studies (Aldrich and Whetten, 1981). With the introduction of quantitative methods, research on issue networks grew rapidly and moved beyond documenting relationships among members. Various studies characterized the structure of networks (Heinz et al., 1993) and developed taxonomies of network types (Rhodes and Marsh, 1992; Blom-Hansen, 1997). Some researchers attempted to link network types to associated sets of policy outcomes (Knoke, 1990; Lehmbruch, 1991; Marin and Mayntz, 1991; Sciarini, 1996) and focused on influence relations among network members (Wilks and Wright, 1987). Others concentrated on methodology (Laumann and Knoke, 1987; Knoke et al., 1996) to study networks. The largest body of literature consists of case studies describing how the relationships between network members affected a discrete policy event (Borzel, 1998). According to Borzel, two schools of thought dominate current network research: the interest intermediation school, centred in the USA, and Germany’s governance school. The interest intermediation school interprets networks as a generic concept that applies to relations between public and private actors, whereas the governance school sees issue networks as a specific form of governance. Scholars in Canada and the UK have articulated a third and comparative approach that more accurately reflects their own parliamentary system of government’s influence on the structure, function and effectiveness of what have been termed ‘policy communities’ (Coleman and Skogstad, 1990; Atkinson and Coleman, 1992; Hoberg, 1993; Cashore, 1997). The interest intermediation school largely regards issue network analysis as a tool for examining relationships between the state and organizations of civil society. It assumes the existence of policy networks, which reflect the relative status or influence of particular interests in a policy area, and which affect policy outcomes (Borzel, 1998). Given the lack of a governing structure and the openness of transactions between government agencies and civic organizations in the SFM issue network, and our lack of need to compare the structure and function of different networks, the interest intermediation approach seemed most appropriate to this study. Practically all network analysis has been applied to past events. This is largely because the

researchers want to develop an explanatory model that links network types and network relationships to past policy action in a effort to provide greater insights into the process of governance, rather than to chart potential outcomes. Another reason is stability: network conditions related to active issues are constantly changing. Such changes create a degree of imprecision that limits the effectiveness and explanatory power of models, but is less of a concern in research to identify potential short-term outcomes. An exception to this historical research trend was an investigation into the network motivated by the threat of earthquakes in the Pacific Northwest (Michaels, 1992). Network analysis has been applied to numerous environmental policy actions. Selected examples include: Daugbjerg (1998), Lenschow (1997), Richardson (1997) and Steward and Conway (1998). Considerably less attention has been given to issue network analysis and forestry policy (Howlett and Rayner, 1995; Wellstead, 1996; Hoberg and Morawski, 1997; Cashore and Vertinsky, 2000), although it is worth noting that these studies were all conducted in Canada. At the time this research was conducted, the technique had not been used to study US forestry issues by US researchers. Prior to committing to a network analysis for SFM, however, a methodology needed to be chosen. Laumann and Knoke’s (1987) book The Organizational State has a good reputation among scholars. Furthermore, their research linked influence relationships within the networks they studied with policy outcomes, which suggests that network analysis could be appropriate to predict whether SFM will result in new policies. A closer look at Laumann and Knoke’s methodology found three limitations: (i) their method of identifying the network population had the potential to weave a net that would miss many in the SFM issue network; (ii) the information they requested from respondents regarding allies and collaboration had the potential to reduce participation by government actors who do not want to appear to show favouritism; (iii) their approach used a costly but effective methodology, i.e. they conducted face-toface interviews and achieved a 92.3% response rate. While mail-based surveys have problems with response rates, limited funding usually rules out interviews as a practical methodology. The first two concerns apply directly to the problems with studying an active issue. Discussion

Utilizing Issue Network Analyses

with others indicated that these problems would probably remain regardless of the method. Accordingly, the Laumann-Knoke approach was utilized, but the Delphi method was incorporated as a way to minimize these two problems. The Delphi method collects and distils knowledge from a group of experts by means of a series of questionnaires interspersed with controlled feedback (Ziglio, 1996). This method is often compared to a committee meeting where a brainstorming session yields group consensus. Proponents of Delphi claim that the anonymity, controlled feedback and mathematical summarization of this approach are advantages over face-to-face meetings where dominant personalities may stifle others or monopolize the session, lack of agenda control can allow irrelevant digressions, and consensus may be assumed but not proven (Baumann et al., 1982). Incorporating Delphi into network analysis addresses the criticism that highly quantitative studies simplify complex and difficult-to-model relationships between network members in the quest for reliability. Marin and Mayntz (1991) suggest that combining the qualitative and quantitative approaches may achieve quantitative precision while at the same time disclosing details that would otherwise have been missed. Delphi asks qualitative questions in a quantitative fashion that avoids much of the interviewing, coding, and other concerns of qualitative research methods. Numerous Delphi studies have been conducted on environmental problems (Baumann et al., 1982; Brogan, 1997; Wilenius and Tirkkonen, 1997). Delphi has also been applied to forestry research (de Steiguer et al., 1990; Egan et al., 1995). At the time this study was initiated, no research incorporating Delphi methods with issue network research had been conducted, and none appears to have been performed in the intervening months.

Methodology Applying the Laumann-Knoke issue network analysis methodology Laumann and Knoke’s methodology was used to: (i) identify members of the SFM issue network, (ii) survey them, and (iii) specify the coalitions and perceptions of each member’s influence. The list

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of potential network members was generated from: (i) a Lexis-Nexis search of articles in newspapers and news magazines covering all regions of the country; (ii) SFM-related hearings before major congressional subcommittees; (iii) ‘friendof-the-court’ participants in SFM-related cases before the federal appellate courts; (iv) lobbyist registrations specifically for SFM; and (v) suggestions by individuals familiar with SFM. A list of 177 groups was generated and categorized into six sectors: academia, federal government, forest industry, non-governmental organizations, foundations and private research institutions, and state government and state associations. A survey instrument was constructed from Laumann and Knoke’s (1987) interview questions and implemented using Dillman’s (1978) Total Survey Design Method. The survey was posted on the World Wide Web. Calls to target organizations identified the appropriate contact person who was sent a letter directing him/her to the survey’s URL address and offering to send a paper survey if preferred. Responses were returned by e-mail and conventional mail. A total of 85 surveys were returned, giving a response rate of 48%. An additional 31 people indicated that they would not complete the survey, making the total contact rate 66%. Some nonrespondents gave their reasons for declining to participate. Most of the federal organizations cited concerns about impartiality as their reason for not completing the survey; all non-responding research institutions cited lack of time; 7% of the respondents indicated that they were not involved in SFM, including four of the seven responding federal government actors. Another federal organization refused to identify others with whom it communicates about SFM. The end result was a representation rate of 10% for the federal government sector. To measure influence in the network, respondents were asked to identify the organizations that they regarded as particularly influential. The organizations were then ranked by the total number of votes each received. The ranked list was divided into five quintiles, and the percentage of votes given to each sector in each quintile was calculated. This procedure reveals an influence structure. For example, Laumann and Knoke’s (1987) study of energy and health policy found that 64.4% and 82.3% of the groups in their respective top quintile

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were federal government organizations, thus suggesting that federal agencies dominated the energy and health policy process. To identify collaborative memberships and describe the relationships between coalition members, Laumann and Knoke’s procedures were closely followed. Respondents were asked to: (i) list the groups they join with when trying to influence policy and (ii) give the names of the major organizations (including government agencies) which often oppose their policy positions. Based on the responses, a set of x,y coordinates can be generated for each organization by calculating (i) its perceived influence in the network and (ii) its relationship (cooperative, non-cooperative) with other network members. These x,y coordinates can be plotted on a graph in a manner that reveals detail about the coalitions of members within a given network and the influence that each coalition and coalition member is perceived to have. These influence relationships, in turn, can be linked to the policy process.

Applying the Delphi method The Delphi method was used to create an alternative list and ranking of network members and to identify and estimate the likelihood of a set of policy outcomes. A panel of experts was convened; they supplied the information and ratings for each member of six forestry sectors in the SFM network. The process of identifying experts used a reputational approach (Sanders, 1966): each selected expert had to be an acknowledged leader or recognized authority in the given sector, or be recommended by at least two consultants for this project. This generated a list of 50 potential panellists: ten from the forestry industry; seven from the federal government; six representing state government or state associations; five from foundations or private research institutions; 12 from NGOs; and ten from academia. Each was contacted by telephone and invited to participate; 94% of those identified as potential panellists agreed to participate. Three rounds of surveys were conducted. The survey items were measured using 5-point scales that allowed panellists to indicate their level of agreement with a statement or to indicate their opinion regarding the likelihood of an

event or outcome. Panellists were provided with definitions to increase the reliability of their answers, e.g. the term ‘very likely’ was defined using several parameters. Open-ended questions were used to identify network members. Finally, panellists were free to add their comments and questions. The first round of the survey: (i) identified the SFM network’s type; (ii) characterized desired policy outcomes; (iii) identified factors motivating network members; and (iv) nominated organizations and individuals in the SFM network. The second round built on the first round and asked panellists to: (i) finalize their evaluation of the network’s type, and (ii) rank the influence of the groups they had listed in the first survey. The final round expanded upon the policy outcomes and motivating factors by asking the panellists to: (i) rank nine motivating factors and (ii) indicate the likelihood of a series of possible outcomes. Response rates varied among the three survey rounds. Some participants answered the first round but not the second and third rounds; a few skipped the first and third rounds and completed only the second round; and two did the first two rounds but not the third. Response rates were 79% in round one, 95% in round two and 89% in round three.

Results The Laumann-Knoke survey Using the ‘quintiles’ influence procedure outlined earlier, we counted the number of times a group was identified as influential, and ordered the list of groups from highest to lowest by the number of influential votes they received. The list was divided into five sections or quintiles, and each quintile’s influence structure was described. Laumann and Knoke (1987) caution the user against over-valuing this information. They note that doing so has theoretical and empirical limitations, but they also note that it seems reasonable to expect that participants can discriminate between those actors who count in their and others’ calculations and those who are largely ignored. Accordingly, each organization’s rank is less useful than is the distribution of influence among sectors in each quintile, with particular emphasis placed on the top one-fifth.

Utilizing Issue Network Analyses

To provide greater detail among the sectors, government and NGOs were separated into federal government and state government and into environmental NGOs and forestry NGOs. This division results in the influence distributions shown in Table 4.1. Influence in the top quintile was fairly evenly distributed among government (31.4%), NGOs (31.4%) and industry (25.7%). The federal sector had the highest share of influence with 28.5% as compared with state government’s share of 2.9%. The timber industry and environmental NGOs each had a 25.7% share of influence, with forestry NGOs, foundations and academia sharing 5.7% each. The proportion of influence among government actors shifts through the lower quintiles with the state and federal sectors gaining and losing shares, respectively. All other distributions remained relatively constant throughout all quintiles. Unlike the energy and health domains described by Laumann and Knoke (1987), no single sector dominates the top level of influence in the sustainable forest management network. Unfortunately, the low response rate from the federal sector (10%) and the research institutions and foundations (17%) prevented a valid application of the influence-graphing ordination procedures. Accordingly, we were unable to complete the planned analyses to obtain Laumann and Knoke’s constituency view of influence structure and coalition memberships. Table 4.1. survey.

The Delphi survey Panellists were initially asked to determine whether the groups promoting SFM form: (i) the most common type or ‘open’ issue network; (ii) a public policy network (defined as an issue network seeking the formulation and implementation of public policy); or (iii) a private policy network (defined as an issue network seeking the formulation and implementation of private policy). The panel indicated the highest level of agreement (84%) that SFM groups form an issue network, although there was also agreement that the SFM network fits the public policy network and private policy network (45 and 56%, respectively) definitions. This result validated our decision to proceed with the methodology and approach we selected. Finally, the panellists nominated 312 different organizations, agencies and individuals as being active in promoting or pursuing SFM in the USA – in other words, to their thinking, the network is quite large. In the second round, the rankings that the panellists assigned to each network member were used to describe the influence structure of the SFM network. As can be seen in Table 4.2, the results are similar to the Laumann-Knoke-based rankings, with the federal/state governments having a 23% and 6.6% share of influence in the top quintile, with these proportions switching in the lower quintiles. Environmental (23%) and forestry NGOs (6.6%)

Distribution of influence votes (%) across ranked quintiles of split sectors: quantitative

Top quintile Second quintile Third quintile Fourth quintile Fifth quintile

Table 4.2.

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Federal govt

State govt

Forest industry

Env. NGO

Forestry NGO

Found./ Research

Academia

28.5 11.1 8.6 8.1 5.9

2.9 11.1 25.7 13.5 14.7

25.7 27.8 37.1 40.5 32.4

25.7 25.0 14.3 21.6 23.5

5.7 0.1 0.1 8.1 5.8

5.7 8.3 5.7 0.1 0.1

5.7 16.7 8.6 8.1 17.7

Distribution of influence (%) across ranked quintiles of split sectors: Delphi survey.

Top quintile Second quintile Third quintile Fourth quintile Fifth quintile

Federal govt

State govt

Forest industry

Env. NGO

Forestry NGO

Found./ Research

Academia

23.1 21.1 8.2 0.1 3.2

6.6 9.7 13.1 16.1 24.6

21.3 11.3 14.8 50.1 44.3

23.1 32.2 23.1 17.7 11.5

6.6 8.1 0.1 1.6 0.1

13.1 8.1 9.8 3.23 6.6

6.6 9.7 31.2 11.3 9.8

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have roughly the same proportional influence throughout all quintiles. Forest industry firms represent 21.3% of the top quintile and vary between 11 and 50% in the other four. Academia and research institutions comprise the smallest share, although research institutions and foundations have double the proportion in the Delphi top quintile (13.1%) than they have in the Laumann-Knoke (5.7%), while academia has roughly the same proportion in both (6.6 vs. 5.7%). With some exceptions in the middle quintiles, these distributions remain similar throughout.

Comparing the ratings The results of the Laumann-Knoke and the Delphi influence distributions were compared using the χ2 test to determine whether the distributions of influence were statistically different between methods and between influence quintiles. There were no statistically significant differences between the methods for any of the quintiles, with most important top influence quintile showing the highest degree of similarity. The pertinent statistics for the χ2 test are summarized in Table 4.3.

Desired policy outcomes and motivating factors In the first round survey, a majority of the panel agreed that federal policy (66%), state policy (66%) and avoiding policy (82%) were desired outcomes for at least some of the groups participating in the SFM network, illustrating conflicting objectives and lack of consensus among network members. The panellists also evaluated a list of factors likely to motivate organizations to participate in the network. The panellists expressed the most agreement that worries about other groups (100%) and societal interest in the environment (97%) were important motivators; less important were the demand for certified products, United Table 4.3.

χ

2

Nations’ (UN) efforts, and tropical forestry programmes. This suggests that groups taking action about the SFM issue are doing so partly to protect themselves from what they perceive might be undesirable actions by others. In the third round, these factors were revisited for a more detailed analysis. Panellists ranked the importance of nine motivating factors (the original five plus four nominated by panellists). The topranked motivating factors were dissatisfaction with past forest management practices, societal interest in the environment, and the desire to sustain forests, suggesting that SFM has been absorbed into the broader debate over the desired management of US forests. Further support for this observation exists in the lower rankings for the UN and other tropical forest programmes that served as the origins for the modern concept of SFM. The overall confidence rate expressed by the panel was 51%. Results of the ranking process are presented in Table 4.4. The panellists were asked questions to determine how likely it was that various possible policy actions might be taken in each sector. Results for the federal-sector outcomes indicate that new policy (84% agreement) and policy changes (90% agreement) are more likely to apply to federal lands and to selected federal land management agencies (USDA Forest Service, 87%; Bureau of Land Management (BLM), 67%) than are new policies (25%) or changes to old policies (42%) affecting private landowners. The Forest Service is projected to be the most likely to change management (80%) and structure (58%), with the BLM, Fish and Wildlife Service, and National Park Service being increasingly less likely to incorporate SFM into their management and structure. The complete results for this exercise are summarized in Table 4.5. The panel indicated similar patterns in statelevel outcomes, although there is a substantially higher probability of state-level actions with respect to private lands. A total of 61% of the panellists believed that new forestry policies affecting private landowners are likely as a result of SFM, and 48% projected that changes in existing state policies for

Results of comparing the Delphi quintile rankings to the quantitative quintile rankings. Top quintile

2nd quintile

3rd quintile

4th quintile

5th quintile

2.345

9.110

13.105

9.605

11.020

(df = 6, P < 0.01)

Utilizing Issue Network Analyses

private landowners will occur. This compares with 80% agreement with the likelihood of new policies for state lands and 58% agreement with policy changes for state lands. According to the combined

35

opinion of this group of experts, SFM will have significant policy impacts in the public and private sectors at the state level. Complete results are presented in Table 4.6.

Table 4.4. Results of the exercise to rank factors motivating participation in the sustainable forest management issue network (1 = most important factor, 9 = least important factor). Rank 1 2 3 4 5 6 7 8 9

% Ranka

Median rank

61 52 29 16 26 9 6 3 0

2 2 3 4 5 6 7 8 9

Factor Dissatisfaction with past practices Societal interest in the environment Desire to sustain forests Dissatisfaction with past conflicts Worries about how SFM will be defined Efforts by the United Nations New scientific discoveries Efforts for tropical timber Demand for certified forest products

a

Percentage of panellists who ranked the factor as the first or second most important.

Table 4.5.

Results of outcome projections for the federal sector. Federal level outcomes Very likely (%) Likely (%) Possible (%) Unlikely (%) Very unlikely (%)

New policy for private land New policy for federal land Policy changes: private land Policy changes: federal land Policy of USFS Policy of BLM Policy of FWS Policy of NPS Change in USFS management Change in BLM management Change in FWS management Change in NPS management Structure of USFS Structure of BLM Structure of USFWS Structure of NPS Table 4.6.

6 29 10 45 39 19 10 6 48 23 10 6 19 10 6 6

29 10 29 10 13 23 32 35 16 29 29 39 23 29 39 29

19 55 32 45 48 48 23 19 32 35 19 16 39 26 6 3

39 6 26 0 0 10 32 35 3 13 42 35 19 35 42 45

6 0 3 0 0 0 3 3 0 0 0 3 0 0 6 16

Results of outcome projections for the state sector. State level outcomes Very likely (%) Likely (%) Possible (%) Unlikely (%) Very unlikely (%)

New policy for private land New policy for state land Policy changes for private land Policy changes for state land Policy changes for agencies Management of state lands Structure of state agencies

16 32 13 26 23 29 13

45 48 45 32 39 42 19

26 19 29 35 29 26 42

13 0 13 6 10 3 26

0 0 0 0 0 0 0

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Private sector outcomes are projected to have the greatest impacts within the forest industry (84%) and in the way that the forest industry procures wood and fibre from non-industrial private forest owners (NIPF) (61%). Less agreement (33%) exists regarding the likelihood of changes to NIPF lands. On the market side, 61% project an increase in the supply of certified wood products, but only 16% predict that a price premium will develop, while 25% project that a differentiated market for certified/non-certified wood products will develop. Most panellists believe that consumers will spot efforts by the industry to ‘greenwash’ itself by paying only lip service to sustainability issues. The full results are summarized in Table 4.7. The panellists indicated that SFM was likely to change university curricula, extension programmes and research.

Discussion Identifying issue network members The 312 actors generated by the Delphi and the 177 yielded by the Laumann-Knoke study compare favourably with the numbers found by Laumann and Knoke (1987) in the health domain (135 members) and energy domain (198 members). Other researchers have determined that studying a high number of participants adds little to the overall quality of the research. For example, in a study of a private policy network, Kenis (1991) utilized the Laumann-Knoke bounding method and then eliminated all but the 40 most influential groups based on consultation with experts. Nevertheless, at this stage of research into SFM, the full lists may be more interesting and also may be potentially useful for other purposes. Table 4.7.

Ranking In the majority of cases, the individual groups in each sector that were judged to be the most influential were those that had taken concrete steps to implement SFM programmes. Among the federal actors, executive branch agencies, such as the USFS, the BLM and the President’s Council on Sustainable Development, headed the list. At the state level, programmes which had been certified by independent, third-party forest management groups, which had comprehensive forest practices laws or which had hosted certification demonstration projects, were the highest ranked. Industry leaders were either involved in the American Forest and Paper Association’s Sustainable Forestry Initiative or were among the companies with properties certified by Forest Stewardship Council-accredited firms. This trend was carried through the research institutions and foundations, where the leaders had all been involved in funding or facilitating certification projects. With few exceptions, NGOs were also headed by certification-oriented groups but also included the Society of American Foresters, the National Association of State Foresters and a few traditional environmental groups. Finally, universities that had been among the first to establish active research programmes in SFM, or that had been influence leaders for some time headed the influence categories.

Motivating factors and possible outcomes The low response rates and omissions in the Laumann-Knoke approach negatively affected our ability to perform certain analyses. The few responses from organizations in the federal sector

Results of outcome projections for the private sector. Private sector outcomes Very likely (%) Likely (%) Possible (%) Unlikely (%) Very unlikely (%)

Changes to industry Changes to NIPF Changes to procurement Increased demand Increased supply Price differential Public approval ‘Greenwashing’ Differentiated markets

26 3 6 16 13 3 0 6

58 30 55 23 48 13 10 19

13 23 26 45 32 37 45 35

3 43 13 16 3 40 45 39

0 0 0 0 3 7 0 0

Utilizing Issue Network Analyses

raised questions about the validity and accuracy of conducting an analysis to quantify and diagram the relationships between network members. The findings would have been particularly useful in projecting strategic alliances in the sustainable forest management network, especially given the roughly equal distribution of influence in the top quintile. The Delphi results compensated for this limitation, however, and provided us with most of our key findings. According to the Delphi panel, SFM appears to have moved beyond its roots in UN activities and third-party certification programmes and has been pulled into the broader and deeper debate about how, why and for whom US forests will be managed. The three highest ranked motivating factors (dissatisfaction with past practices, societal interest in the environment, and the desire to sustain forests) have shaped the forest policy climate in the USA since the late 1800s. The incorporation of SFM into this pre-established framework weakens claims that SFM has hidden agendas or is a passing fad. Market forces appear to have little impact on motivating participation in the SFM network: the panel ranked demand for certified products last among the nine possibilities. Mid-ranked motivators are: (i) worries that actions by individual members and coalitions in the network will negatively impact other members and (ii) dissatisfaction with past conflicts. Our research on potential outcomes predicts that activities to promote sustainable forest management in the US will most probably happen within existing sectors, and will not be mandated by the domination of one sector over another. At the federal level, it is estimated that changes will be confined primarily to the USDA Forest Service, to other federal agencies and to the management of federal lands. State governments are deemed more likely than the US federal government to implement new or to revise old policies that affect activities on private lands, and appear only slightly less likely than the USDA Forest Service to adopt new or to revise old policies and management practices for state lands. Despite projections that SFM will have weak impacts on the market and demand side in the private sector, forest industry is projected to change its management and procurement practices in response to SFM. NIPF owners are estimated to be the least likely to change. A slight majority projects that academic curricula, extension programmes,

37

and research directions will change due to SFM. The panellists’ response to the potential outcomes further supports the relatively equal distribution of influence among the major sectors in the top quintile: activities for SFM appear to be confined within the individual sectors at the moment. For example, changes at the federal level are projected to affect federal agencies and management; state-level changes are projected to affect state agencies and management, and so on. These findings should provide some encouragement for those in the private sector most worried about government policy outcomes or other regulatory mandates resulting from SFM.

Methodological issues The results of the Delphi surveys and of the Laumann-Knoke (L-K) approach overlapped. Delphi performed in a similar way to the L-K methodology in each area; 77% of the individual organizations ranked in the top quintile by the L-K approach were also included in the top Delphi quintile. Further support for the similarity between the two methods is the lack of statistically significant differences between them in the distribution of influence. These outcomes support the conclusion that the Delphi method can be a useful tool in network analysis applications. While of limited value in identifying communication patterns and coalition memberships, the technique can allow for consensus regarding potential outcomes of the network’s activities, which may prove useful to political scientists interested in how issue networks function to make policy. The results also suggest that traditional network analysis methods are not as effective at identifying the relationships in active issue networks, as opposed to their perceived efficacy at evaluating relations in networks that are no longer active. Perhaps a merging of the two approaches can address the shortcomings of each for this particular application. Of course, one way to test the validity of this combined approach would be to track the actual policy outcomes and compare them to these projections, and then perform interviews with the network members to determine how the relationships and influence structure between groups affected the actual policy outcomes. To

38

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increase the accuracy of such Delphi projections, however, one would need to define the issue or sub-issue of focus with a high level of clarity to reduce conflicts in interpretation as well as specify the type of policy change (tax, protective-regulatory, state, federal) anticipated. Our use of ‘sustainable forest management’ as an issue may have been too broad, and ‘policy change’ as an outcome may not have been specific enough to test this approach in the most robust manner.

Conclusion An analytical framework was developed to meet the research objectives of: (i) describing the relationships between members in the sustainable forest management issue network and (ii) discerning potential public and private outcomes for SFM given the relationship structure of the network’s members. A review of the literature suggested that issue network analysis meets these objectives. Network analysis has traditionally been applied to describe how policy was made. Applying network analysis to an issue that had yet to generate policy action provided an opportunity to attempt something new. The primary concerns with applying network analysis to an emerging issue were the usual low response rates that limit the ability to perform the necessary data analyses and the potential of the method to overlook important participants. Efforts to address these concerns led us to apply the Delphi technique to the research problem. This again presented a research opportunity because the Delphi methodology had never been applied to network analysis research. Accordingly, the objectives of the study were expanded to include the testing of the hypothesis that the Delphi methodology could provide results comparable to network analysis. Both methods were applied. The approach to issue network analysis developed by Laumann and Knoke (1987) was utilized. This entailed identifying the network’s population and surveying it to determine: (i) the patterns of influence among network members, and (ii) the number of and membership in the network’s coalitions. The Delphi method required the creation of a panel of experts and using an iterative survey process to: (i) identify the network population; (ii) identify the patterns of

influence among the actors; and (iii) estimate the likelihood of potential outcomes at the federal, state, and private levels. Results were generated in three areas: (i) methodology, (ii) network character, and (iii) potential outcomes for SFM. The results indicate that Delphi can produce results comparable to traditional methods of network analysis, which typically are concerned first and foremost with different relations between the state and societal actors, and have only seldom been utilized to forecast potential, discrete policy actions. While this particular Delphi has proven to be less adept at determining these relationships, it shows promise in identifying areas where policy action is likely to result, which may be of use to political scientists and to others in the forestry community. Results of the Delphi predict that SFM is likely to affect forest practices within individual sectors, but that broad-scale policy actions are unlikely in the short term. Results also show that no single sector is dominant. Finally, the apparent absorption of SFM into the broader debate over the management of public and private forests in the USA suggests that although the terminology may be transitory, the philosophy of economically viable, environmentally sound, and socially responsible forestry may be with us for quite some time.

References Aldrich, H. and Whetten, D.A. (1981) Organization-sets, action-sets, and networks: making the most of simplicity. In: Starbuck, W.H. (ed.) Handbook of Organizational Design. Oxford University Press, Oxford. Anderson, J.E. (1984) Public Policy-Making, 3rd edn. Holt, Rinehart and Winston, New York. Atkinson, M.M. and Coleman, W. (1992) Policy networks, policy communities, and the problem of governance. Governance 5, 154–180. Baumann, N., Ervin, O. and Reynolds, G. (1982) The policy delphi and public involvement programs. Water Resources Research 18(4), 721–728. Berg, S. and Olszewski, R. (1995) Certification and labeling: a forest industry perspective. Journal of Forestry 93(4), 30–32. Berry, J.M. (1997) The Interest Group Society, 3rd edn. Longman, New York. Blom-Hansen, J. (1997) A ‘new institutional’ perspective on policy networks. Public Administration 75(4), 669–693.

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Borzel, T.A. (1998) Organizing Babylon – on the different conceptions of policy networks. Public Administration 76(2), 253–273. Brogan, S. (1997) Expert estimates of climate change impacts on southern Appalachian coldwater fisheries. MS thesis, North Carolina State University, Raleigh, North Carolina. Cashore, B. (1997) Governing forestry: environmental group influence in British Columbia and the United States Pacific Northwest. PhD dissertation, University of Toronto, Canada. Cashore, B. and Vertinsky, I. (2000) Policy networks and firm behaviours: governance systems and firm responses to external demands for sustainable forest management. Policy Sciences 33 (March), 1–30. Coleman, W. and Skogstad, G. (1990) Introduction and policy communities and policy networks: a structural approach. In: Coleman, W. and Skogstad, G. (eds) Policy Communities and Public Policy in Canada. Copp Clark Pitman, Toronto. Daugbjerg, C. (1998) Linking policy networks and environmental policies: nitrate policy making in Denmark and Sweden 1970–1995. Public Administration 76(2), 275–294. de Steiguer, J.E., Pye, J.M. and Love, C.S. (1990) Air pollution damage to US forests: a survey of perceptions and estimates by scientists. Journal of Forestry 88(8), 17–22. Dillman, D.A. (1978) Mail and Telephone Surveys: the Total Design Method. John Wiley & Sons, New York. Egan, A.F., Jones, S.B., Luloff, A.E. and Finley, J.C. (1995) The value of using multiple methods: an illustration using survey, focus group, and delphi techniques. Society and Natural Resources 8(5), 457–465. Heclo, H. (1978) Issue networks and the executive establishment. In: King, A. (ed.) The New American Political System. American Enterprise Institute, Washington, DC. Heinz, J.P., Laumann, E.O., Nelson, R.L. and Salisbury, R.H. (1993) The Hollow Core: Private Interests in National Policy Making. Harvard University Press, Cambridge, Massachusetts. Hoberg, G. (1993) Regulating Forestry: a Comparison of Institutions and Policies in British Columbia and the US Pacific Northwest. Forest Economics and Policy Analysis Research Unit, the University of British Columbia, Canada. Hoberg, G. and Morawski, E. (1997) Policy change through sector intersection: forest and aboriginal policy in Clayoquot Sound. Canadian Public Administration – Administration Publique Du Canada 40(3), 387–414. Howlett, M. and Rayner, J. (1995) Do ideas matter? Policy network configurations and resistance to

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policy change in the Canadian forest sector. Canadian Public Administration – Administration Publique du Canada 38(3), 382–410. Kenis, P. (1991) The preconditions for policy networks: some findings from a three-country study on industrial restructuring. In: Marin, B. and Mayntz, R. (eds) Policy Networks: Empirical Evidence and Theoretical Considerations. Campus Verlag, Frankfurt, Germany. Kingdon, J.W. (1984) Agendas, Alternatives, and Public Policies. Little Brown, Boston, Massachusetts. Knoke, D. (1990) Networks of political action: toward theory construction. Social Forces 68 (June), 1041–1063. Knoke, D., Pappi, F.U., Broadbent, J. and Tsujinaka, Y. (1996) Comparing Policy Networks: Labor Politics in the US, Germany and Japan. Cambridge University Press, New York. Laumann, E.O. and Knoke, D. (1987) The Organizational State. The University of Wisconsin Press, Madison, Wisconsin. Lehmbruch, G. (1991) The organization of society, administrative strategies, and policy networks. In: Windhoff-Heritier, A. (ed.) Political Choice, Institutions, Rules and the Limits of Rationality. Campus Verlag, Frankfurt, Germany. Lenschow, A. (1997) Variation in EC environmental policy integration: agency push within complex institutional structures. Journal of European Public Policy 4(1), 109–127. Marin, B. and Mayntz, R. (1991) Introduction: studying policy networks. In: Marin, B. and Mayntz, R. (eds) Policy Networks: Empirical Evidence and Theoretical Considerations. Campus Verlag, Frankfurt, Germany. Michaels, S. (1992) Issue networks and activism. Policy Studies Review 11(3/4), 241–258. Milward, H.B. and Provan, K.G. (1998) Measuring network structure. Public Administration 76 (Summer), 387–407. Rhodes, R.A.W. and Marsh, D. (1992) New directions in the study of policy networks. European Journal of Political Research 21(1–2), 181–205. Richardson, T. (1997) The trans-European transport network: environmental policy integration in the European Union. European Urban and Regional Studies 4(4), 333–346. Sanders, I.T. (1966) Allocation of Power, the Community: an Introduction to a Social System, 2nd edn. Ronald Press, New York. Sciarini, P. (1996) Elaboration of the Swiss agricultural policy for the GATT negotiations: a network analysis. Schweizer Zeitschrift für Soziologie 22(1), 85–115. Sedjo, R.A., Goetzl, A. and Moffat, S.O. (1998) Sustainability of Temperate Forests. Resources for the Future, Washington, DC.

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Steward, F. and Conway, S. (1998) Situating discourse in environmental innovation networks. Organization 5(4), 479–502. Viana, V.M., Ervin, J., Donovan, R.Z., Elliott, C. and Gholz, H. (1996) Certification of Forest Products: Issues and Perspectives. Island Press, Washington, DC. Wellstead, A.M. (1996) The role of the advocacy coalition framework in understanding forest policy changes: two case studies of Alberta and Ontario. MS thesis, University of Toronto, Canada.

Wilenius, M. and Tirkkonen, J. (1997) Climate in the making – using delphi for Finnish climate policy. Futures 29(9), 845–862. Wilks, S. and Wright, M. (1987) Comparative Government–Industry Relations: Western Europe, the United States and Japan. Clarendon Press, Oxford. Ziglio, E. (1996) The delphi method and its contribution to decision-making. In: Adler, M. and Ziglio, E. (eds) Gazing Into the Oracle: the Delphi Method and its Application to Social Policy and Public Health. Jessica Kingsley, London.

5

Private Sector Participation on Public Forestlands: Challenges and Policy Issues Barin N. Ganguli1 Foundation for Forestry and Rural Development, I-1783, Chittaranjan Park, New Delhi – 110019, India

Introduction The private–public partnership initiative in sustainable forest management (SFM) and private sector participation (PSP) in plantation establishment on public forestlands have increased markedly over the past few years. Public forest agencies in many developing countries are contemplating handing over greater responsibility to private entities. These countries are increasingly adopting market-based instruments (MBIs) to encourage private sector participation in SFM. In parallel, forestry authorities are being restructured to reflect the changing roles of the private sector (Lendell-Mills and Ford, 1999). Three discernible trends in this regard are:

• • •

increased PSP in ownership/lease of forestland; adoption of MBIs to promote PSP (tax incentives, security of forestland tenure, forest certification and global transfers for forest conservation); and moves to restructure forestry authorities.

This chapter has been divided into sections: the first provides the theoretical framework for PSP in public forestlands, the second examines a list of constraints to mainstreaming PSP, and the third provides options to promote PSP in plantations on public forestlands with particular reference to India. The final section discusses the new policy orientation and policy research

that must be undertaken to move the concept forward.

Theoretical Frameworks for Private Sector Participation (PSP) in Public Forestlands Incompatibility of production objectives Plantation forestry is an economic/agricultural activity like other forms of agriculture, e.g. wheat or maize cultivation. The only real difference is the time frame of production and the recreational opportunities that this activity presents. Virtually all the benefits from plantation forestry flow through the market, so the public sector forest agencies may not have any particular incentive or gain any advantage from engaging in this form of forestry activity. Furthermore, public forestry agencies, with their elaborate bureaucratic structures, multiple layers of accountability and complex cross-checks, are institutionally incompatible with the demands of commercial production in a competitive, fast-growing economy. The public agencies’ main functions in forestry are to manage indigenous forests, to offer services to communities, and to provide policy and regulation guidelines. It is not their job to provide raw materials to business entities. Thus mixing market and non-market products in its mandated

©CAB International 2003. Forest Policy for Private Forestry: Global and Regional Challenges (eds L. Teeter, B. Cashore and D. Zhang)

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functions creates incompatible objectives for a public sector agency (Binkley, 1999). It is therefore argued that plantation forestry activities should be the responsibility of the private sector. It would, therefore, be logical for the forestry agencies to spin-off functions and assets to the private sector, through leasing or selling lands that are particularly suitable for industrial plantations. This rationale is particularly valid for those countries where the public forestry agencies own all the forestlands and there is no scope for leasing or buying forestlands in the market place.

Pros and cons of public–private partnership in the management of public forests The key challenge in the natural forest management of the future is to produce industrial timber at an acceptable cost. This should be accomplished while promoting a range of goods, services, experiences and values that contribute to community well-being, economic opportunities, social and personal satisfaction, spiritual and cultural fulfilment, as well as recreational enjoyment, from the same area. Furthermore, in the future, forest management will be enhanced by policies that encourage public and private investment in long-term sustainable forest management. The management of natural high forests on public lands in the future will respond more to the demands for non-market goods, and industrial timber production from these forests will decline. These outcomes may be due to the difficulty that a public sector agency faces in appropriately balancing all possible outputs against an economic yardstick, restrictions on commercial timber harvesting in public forests due to the adoption of forest certification as a criterion for good forest management, and the relative importance of a range of non-market goods in the production mix. This will act to reduce the revenue being earned from the timber harvest. Thus public forestry agencies will be unable to attract more funds through the budgetary process, since the budget is generally proportional to revenueearning capacity. This implies that the resources available for forest management will decline just at the time when management problems become more complex. Those interested in the non-timber aspects of forestry do not lobby for increased

budgets for integrated forest management (Binkley, 1999: 6). The establishment of industrial plantations on public forestlands with private sector participation becomes more relevant in this context. The private sector will have more resources and the wherewithal to undertake industrial plantation on an intensive scale. Technology-based industrial plantation will provide higher productions per unit area and thus greater areas of natural forests will be available for non-timber production and other environmental facilities. Limited public resources can be effectively deployed for meeting the social, cultural, spiritual and recreational needs of society, for which the public agencies are ideally suited. Outright sale or leasing of forestlands to the private sector becomes pertinent as these lands can then be intensively managed for plantation. This is particularly relevant for India where private market for forestland is non-existent and the land tenure system does not encourage the private sector to take up extensive forest plantations. Involving the private sector in plantation establishment on public forestlands has become more important because of some newly emerging areas where public forest agencies can only have a regulatory role. One example is the area of carbon sequestration. Even while detailed negotiations on carbon trading proceed on post-Kyoto arrangements for tradable carbon rights,2 it is clear that third-party countries such as India may be admissible as beneficiaries and participants in carbon trading. The flexibility and non-bureaucratic nature of the proposed tradable pollution rights is what gives them potential importance as a major investment source by the private sector in future forestry development.3

Current status of private sector participation in public forestlands Private sector participation (PSP) in the forestry sector has increased markedly over the past ten years (Lendell-Mills and Ford, 1999). Governments are adopting market-based instruments to encourage the private sector to act sustainably. In parallel, forestry authorities are being restructured to reflect the changing roles of the public sector. A detailed worldwide study across countries has revealed the following trends in PSP in the forestry

Private Sector Participation on Public Forestlands

sector: (i) increased PSP in forest ownership; (ii) the adoption of MBIs to encourage sustainable forest management (SFM), including financial and material incentives, conditions attached to forest concessions, trade liberalization, promotion of markets for non-timber benefits, forest certification and global transfers for forest conservation; and (iii) a move to restructure forestry authorities in order to increase their exposure to market forces through contracting out, corporatization and privatization.4 A review reveals that many countries have implemented or are implementing reforms and incentives to increase PSP in the forestry sector. All of these countries have introduced at least one MBI, and almost 70% of the countries have restructured their forestry authorities. While the private sector is getting involved in forest ownership, utilization and management, increased PSP is most noticeable in forest management. Of the MBI’s investigated, financial incentives (e.g. subsidies, compensation payments, cheap loans, and/or tax exemptions) have been most widely implemented over recent decades, followed by the promotion of the market for non-timber benefits (Jaakko Pöyry, Finland, 1999, personal communication). The underlying arguments for the introduction of incentives are: that the forest resources have been historically exploited; dwindling forest resources near consumption areas have resulted in higher transport costs of raw materials; sustainable sources of raw material are necessary in order to satisfy increasing demands for wood products; reliable sources of wood will expand the industry’s domestic and international markets and countries would benefit from this trade; the plantation industry is labour intensive and would generate employment both through backward and forward linkages; and the private sector has adequate financial resources and the wherewithal to establish plantations on forestlands under their control. The most common types of incentives offered to private investors are direct subsidies, tax deductions, subsidized loans, and secure tenure of public forestland through innovative tenurial instruments. Direct subsidies have been used successfully in Chile,5 Uruguay,5 New Zealand,6 Indonesia7 and Portugal.8 Tax deductions have been provided in Chile, Brazil, Uruguay, Argentina, Australia, Portugal and South Africa. In Brazil, income

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deductions were used essentially as a form of subsidy whereby the investor could allocate a proportion of their tax liability to plantation establishment.9 In addition, income tax deduction is also available in Australia allowing a 100% deduction of costs incurred against taxable income that year. Security of land tenure has been used in conjunction with subsidized loans and direct subsidy for promoting plantations on cut-over forestlands in the Philippines and Indonesia. These examples best illustrate how the government can provide the correct policy environment and incentive to attract the private corporate sector as well as the community in order to stimulate forest plantation establishment on degraded forestlands as well as implementing the management of residual production forests in lieu of timber licensing agreements. The means used are: allocation of state forestlands to the private sector under renewable long-term lease arrangements, initially 25 years and thereafter for another 25 years;10 providing a financing facility consisting of equity participation and non-interest or concessional interest-bearing loans; establishing a special reforestation fund in the commercial banking sector to provide loans at reduced interest rates to private investors engaged in establishing forest plantations and repairing environmental damage; and the allocation of residual production forests through Community Forest Management Agreements (CFMA).11

Fiscal mechanism of resource transfer for environmental rehabilitation and resource regeneration – Malaysian case study The Government of Malaysia (1984) used financial incentives to promote industrial plantation objectives in the constituent states. The project design was to meet two simultaneous objectives: (i) to rapidly cover the degraded forestlands with fast-growing, high-yielding, general utility timber species to stop further encroachment and discourage their use; and (ii) to help reduce the pressure on natural forests and thus prolong their sustainable use. The project had another feature, which was an interest-free loan by the federal government to the states to build up the renewable asset. The Malaysian Government approached the Asian Development Bank and received a

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blended finance of $25 million. There was also a second loan and the country has now established about 88,000 ha of industrial plantation of Acacia, Gmelina and Paraserianthes (Ganguli, 1995: 156).

Constraints in Promoting Private Sector Participation (PSP) There are a large number of impediments to promoting PSP on public forestlands. These include: inadequacy of policies, diverse interests of stakeholders, trade and marketing constraints, lack of private entrepreneurial initiative, and lack of initiative among bureaucrats in charge of the forest agencies.

Inadequacy of policies There is a broad category of policy failures or inadequate policies, which have resulted in a slowing down of PSP. Among these are: absence of a clear statement on the role of the private sector in plantation establishment and management on public forestlands; failure to introduce appropriate incentives for promoting PSP; and reluctance of the concerned agencies to involve the private sector in industrial plantations on public forestlands. The Indian Forest Policy states: As far as possible a forest-based industry should raise the raw material needed for meeting its own requirements preferably by establishing partnership arrangements with individuals and farmers.

The Government has thus absolved its responsibility in the production of industrial timber, leaving it to the private sector. It owns 69 million ha of forestlands and is unable to raise plantations on degraded forests because of lack of investment funds. The other impediments are: the absence of tenurial rights on the public forestlands, thus limiting the prospects of private sector participation; legal restrictions on buying forestland for the purposes of industrial plantations in the market place; a lack of institutional support where privatization has been set as a goal but agencies have not been willing to implement the policy goal; and the fact that public–private partnership on forestlands is politically unpopular.

Stakeholders’ resistance There are multiple stakeholders in forestry. This has stemmed from increased global environmental awareness and, perhaps more importantly, international publicity for controversial naturalresource issues. The private sector, particularly the corporate sector, is seen by a group of stakeholders as destroyers of forest resources. These stakeholders firmly believe that the corporate sector in the pursuit of profit will not be able to take the long-term view which forest rehabilitation requires. Further involvement of the public agencies in all spheres of forestry activities in some countries is supported by these stakeholders on the grounds that the requisite expertise in the private sector is not available. These stakeholders also resist reforms to promote PSP, as they fear that the powerful corporate sector may establish an unholy alliance with politicians and bureaucrats and the welfare aspect of the people’s movement in forestry will be derailed.

Market and trade constraints The reluctance of the private sector to get involved in plantation forestry establishment and management has been due to market and trade uncertainties. Forestry is a long-term venture and there are two associated market risks. These are the fluctuating prices of forest products and the risks associated with changing costs of production. Even though these are not unique to the forestry sector, they are seen as constraints by the private sector. They therefore look for incentives other than security of land tenure to encourage them to participate in long-term plantation ventures and to take care of the associated market risks. The trade policies that are targeted at raising domestic timber processing levels also act as constraints to good forest husbandry practices and often act as constraints to the promotion of PSP in plantation forestry.

Lack of entrepreneurial initiative The lack of private sector entrepreneurial initiative has been considered as a constraint to

Private Sector Participation on Public Forestlands

promoting PSP in plantation forestry, particularly in India. The importance of a sustained supply of raw materials for national-level use in defence, communications and industry has been underscored in the Forest Policy. However the post-independence rapid development process has led to the setting up of a number of paper, plywood and other wood-based industries in all regions, leading to a sharp increase in demand for timber and pulp wood. This was initially met from commercial harvests from forests under the control of the public forest agencies. The idea of attracting industries in the constituent states led to the allocation of raw material to industries at concessional prices for long periods without applying any economic yardstick. This led to some complacency on the part of the industry, both in terms of not investing in raw material development and in continuously using the leverage to obtain raw materials at less than market prices. This has also resulted in a lack of entrepreneurial initiative, as the administered pricing of produce from public forests removed the incentive for the industry to grow its own raw material. Some of the industry owners who have pioneered the business in India appear to welcome globalization and believe that captive plantations are necessary in order to have the level playing field necessary to achieve cost competitiveness.

Lack of information and understanding among bureaucrats A lack of understanding of the rationale of PSP contributes to public agency resistance to reform. Even in India, where the industries are willing to invest in technology-based plantations and have provided this assurance to the government, the signals are conflicting. There is no forum in India where global issues concerning forestry and issues on privatization and other emerging areas of importance to forestry development are discussed. Thus decision makers are not able to reach a considered view on enabling the conditions and environment for convergence on a national position on these issues vis-à-vis international positions.

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Options to Promote Private Sector Participation in Plantation on Public Forestlands with Particular Reference to India Views on the issue There are two opposing views on the role of the private sector in plantation establishment on public forestlands in India. For those who support it, their argument is based on the rationale that the resources required for large-scale, technologybased, high-yielding plantations on degraded public forestlands are considerable and may not be easily available in the public budget. Promoting PSP in some partnership arrangement may result in accelerated rehabilitation of these degraded lands. The investment of private capital in industrial plantations is also cost-effective, as more public resources could then be diverted for better protection and conservation of natural forests. Those who oppose it argue that the private sector in India, particularly in the wood-based industries, has traditionally been an exploiter of forests and therefore cannot be trusted in their new role as the developer of forest resources. Leasing or outright sale of degraded forestlands, according to them, may result in the diversion of forestlands for other uses. Furthermore, they argue that public forestlands should, as far as possible, be managed for the promotion of biodiversity and meeting the community’s needs and should not be used for industrial plantations. Land for such plantations should be procured from government nonforestlands and private lands in the market place. The contribution of natural forests to commercial timber production will continue to decline and technology-based plantation will be the main source for meeting industry’s requirements for timber. Should large areas of degraded forestlands which are currently producing very little continue to remain under the management of the public agencies, particularly since they do not have enough resources to invest to make these lands productive? Would it not be better for these agencies to divest this resource as a non-performing asset in the market place, as is being done in respect of the Public Sector Units (PSUs)? The proponents of PSP argue that that such a policy option will also

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B.N. Ganguli

open new opportunities for investment in forestry plantations, as well as in carbon trading in the international market, given that forestlands are available to the private sector at reasonable prices in the market place or in some sort of long-term tenurial arrangement.

Option 1: Divesting degraded forestlands in the market place Option 1 examines the possibility of divesting in the market place about 5 million ha of degraded forestlands (at 0.25 million ha year−1) which can be converted to technology-based, high-yielding plantations. This option will bring in an additional investment of US$130 million per annum (for the next 20 years) by the private corporate sector. This may, at the end of the period, yield enough industrial timber to meet the demands of the timber-based industries on a sustainable basis. Furthermore, it may enable the private sector to earn an income through carbon trading while at the same time providing an annual rural employment of 220 million days. The outright sale of these 5 million ha of lands after proper valuation may provide a total quantum of resources ranging from US$1–2 billion to the Government. Funds received from this sale could be redeployed in a trust fund to support non-timber and other aspects of development on the remaining forests (e.g. nontimber forest production) that provide substantial public values. This option to generate funds for the forestry sector may be a good option, as more funds can then be injected into the sector through the trust fund mechanism (Binkley, 1999).

Option 2: Joint sector plantation companies with private corporate sector This option is proposed as the second-best solution in view of the political difficulties that may constrain selling off forestland in the market place and the difficulty in dedicating the sale proceeds specifically to the forestry sector due to the budgetary process. This option considers the establishment of a tripartite venture with state forest corporations (SFDCs), the private corporate sector and the local communities. The SFDCs may provide equity in terms of forestlands which will be

valued, the private sector will bring in technology, financial resources and management expertise, and the communities may provide indigenous know-how as well as other inputs, as required. The choice of species and sharing of products, especially the wood, may be regulated through a management plan acceptable to the three stakeholders, along with a memorandum of understanding (MOU) for the sharing of produce.

New Policy Orientation and Policy Research New policy orientation In order to promote PSP in public forestlands, several new policy initiatives are necessary. Among these are adequate and appropriate incentives, innovative tenurial reforms, and favourable trade policies, redefining the role of the public forest agencies, and mainstreaming of information. The appropriate incentive framework to promote private sector participation will depend upon specific country conditions and commitment. However there are some common theme incentives, such as tax deductions, subsidized credit and other market-based instruments, which have proved successful in promoting PSP in many countries and can be pursued further. The policy option of tenurial reforms in the context of countries where the government controls the forestlands is of primary importance. In this respect, several policy options are available, namely: outright sale/disinvestment of public forestland; leasing of forestland on renewable basis; and a tripartite venture with the public agencies, private sector and the local community. In order to dispose of or sell off public forestland, an appropriate valuation of the land will be a prerequisite. If outright sale of public forestland is politically unacceptable, a long-term renewable leasing arrangement, as has been carried out in the Philippines, may be a second-best solution. The alternative of a tripartite public–private–community venture may also be a good option. This will enable the public agencies to keep the land as equity, with the private sector providing the financial resources and the technical know-how and the community providing the protection and labour within the framework of some cost-sharing arrangements.

Private Sector Participation on Public Forestlands

The trade policy, which concentrates on increasing the productivity of domestic industry, is very important and in this regard any policy that promotes self-sufficiency in raw material production is important. If the production functions of the forests are going to be privatized through policy changes and tenurial reforms, then the role of the public sector agencies has to be redefined so that they undertake to preserve the management of natural forests, parks and protected areas, and to promote forestry as an alternative land-use. It is also necessary for the public sector agencies to modify the present unclear institutional arrangements in order to improve their efficiency and to enhance PSP. Domestic pressure from causeoriented pressure groups who oppose PSP should be resisted by information dissemination. The institutional culture should be modified to integrate broader reforms in the forestry sector along with the other sectors of the economy. The institution should also align itself with the directional shifts being adopted by the global community.

Policy research Forest policy-related research could play a crucial role in promoting PSP. The challenge is to make it demand-driven and an interactive process involving the private sector. Due to it attracting less economic interest than, for example, agricultural research, financial investment in forest policy-related research has traditionally been low, resulting in an inadequate infrastructure and facilities, a smaller number of research personnel and a low level of skill. Research capacities (infrastructure and human capital) need to be improved, while the planning and coordination of research and development activities and the cooperation of people and institutions need to be strengthened. In this regard changes are required in the planning and management of forestry policy-related research with a view to involving users of research in identifying problems and opportunities and to provide the appropriate field orientation. A list of worthwhile policy-based research may include the following: identification, listing and analysis of a set of conditions that will promote PSP in plantation development on public forestlands; an inquiry into the nature and need for specific incentives that may encourage PSP in plantation as well as

47

carbon sequestration on public forestland; analysis of costs and benefits of various land tenure options – open-market sale, long-term leasing, joint sector ventures for involving PSP on public forestlands; analysis and synthesis of conditions for promoting PSP on public forestlands; analysis of benefits and costs of alternative models of private–public– community partnership and criteria for selection of the private sector for participation in public forestlands.

Building partnership initiatives and cooperation with global and regional initiatives The complementarity and close relationship of the private corporate sector and the public agencies in forest resource management in the pursuit of achieving environmentally sustainable development have resulted in many international and regional initiatives in support of PSP. Special attention needs to be given to building partnerships with the new funding organizations such as the Sylvan Fund and the Geneva-based World Business Council for Sustainable Development, a body of 150 corporate groups who have decided to promote international transfers aimed at PSP and SFM and to follow the sustainable development path as their corporate goal. Forestry in the developing countries, particularly in India, is heading towards a new process change. Foresters will find it difficult to function in the new environment if they follow the traditional forest management practices, which espouse multiple-use forestry but basically focus on timber management. Social pressures are pushing foresters of the developing countries to take a wider landscape or ecosystem approach to management. Thus, forestry in these countries, particularly India, is at the crossroads where the consequences of the choices made will have a great bearing on the way that forests will be managed in the future.

Endnotes 1 Formerly Senior Forestry Specialist, Asian Development Bank, Manila, The Philippines. 2 The planned negotiations in The Hague in 2000 did not result in an agreement on this.

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3 There are a few examples of forestry-sector carbon-offset projects under implementation or being developed in the Asia–Pacific region including a reduced impact logging project in Indonesia and Malaysia, and a proposal for a plantation offset project in Fiji, Solomon Islands and Papua New Guinea. The Forest Rehabilitation Project in Sabah is being implemented by the Sabah Foundation and the Dutch Electricity Generating Board and since 1992 has established 3000 ha of forest plantations. 4 Country-level information is provided in the IIED publication Privatising Sustainable Forestry: A Global Review of Trends and Challenges by Natasha Landell-Mills and Jason Ford (1999). This publication provides consolidated information on the variety of forest management activities being handed over to the private sector in line with mainstreaming the private sector in sustainable forest management. 5 Chile, through Decree Law 701 enacted in 1974, provided a 75% subsidy for plantation establishment costs of acceptable forest species based on a standard cost calculated annually by the National Forestry Corporation. The owner retains the ownership of the land – mostly eroded and sand-dune areas. In 1996, DL 701 was extended by another 15 years. In Uruguay, to boost afforestation, Forestry Law NO.15.939 has established a system of subsidy (50% of the national average cost of planting, determined by the government). 6 A Forest Encouragement Grant Scheme introduced in 1970 which enabled recovery of 50% of cost per ha, as a subsidy subject to a maximum of NZ$ 593 ha−1, which was later modified to cover all costs with no maximum to stimulate plantation establishment on degraded lands. A major change in ownership structure occurred due to the sale of government forests between 1990 and 1996. 7 Government subsidies are used to establish plantations on Hutan Tanaman Industry (HTI) land.

8 Private landowners enter into a joint venture with the state, in which the landowner provides the land and 10% of plantation costs and the state provides 90% of the plantation costs but also receives 40% of the future revenues. 9 The government objective was to encourage investors to directly provide funds to establish large plantation estates rather than collecting taxes and reallocating them as subsidies. 10 The instrument is called the Industrial Forest Management Agreement (IFMA). Under IFMA some of the larger and contiguous areas of degraded forestlands with residual growth under government control have been made available to the private corporate sector for development into industrial forest plantations. The objective is to involve the private corporate entities in order to pay for the development of its own resources to be used in industry and at the same time fulfilling the government’s obligation to rehabilitate the degraded forests. 11 CFMA is a renewable 25-year lease agreement for forest management and utilization granted to local communities, which enables the community to manage and harvest existing forest resources according to a mutually agreed plan.

References Binkley, C.S. (1999) Forestry in the Next Millennium: Challenges and Opportunities for USDA Forest Service. Discussion Paper 99–15, Resources For the Future, Washington, DC. Ganguli, B.N. (1995) Breakthroughs in Forestry Development – Experience of the Asian Development Bank. Asian Development Bank, Manila, 269 pp. Lendell-Mills, N. and Ford, J. (1999) Privatising Sustainable Forestry, a Global Review of Trends and Challenges. International Institute of Environment and Development, London.

6

Planning Private Native Forest Use in Australia

Ray D. Spencer, Michael F. Ryan, Philip K. Tickle and Claire I. Howell Bureau of Rural Sciences, PO Box E11, Kingston, ACT 2604, Australia

Introduction Australia’s land area is approximately equivalent to the area of the contiguous USA, but whereas US forests cover some 295 million ha, a third of the land area (Powell et al., 1993), Australia’s forests1 only cover 157 million ha (including plantations), representing 20% of its land (National Forest Inventory, 1998). This includes 112 million ha of woodland; timber-producing forests make up only a small proportion of the total forest area. Almost 73% of Australia’s forests are in public ownership, but 70% are managed by the private sector, including freehold land and public land leased to private interests, primarily for cattle grazing. The remaining 30% is on public land managed by state and territory agencies. Under Australia’s federal system of government, powers relating to land-use and natural resource management reside primarily with the governments of six states and two territories. National jurisdiction on these matters, vested in the Commonwealth of Australia, relates mainly to international treaties, international trade, and achieving consistency between different states and territories (Commonwealth of Australia, 1997). The Commonwealth Government can exert considerable influence in some policy areas, such as through its export licensing powers that control a large international trade in wood chips. However the states and territories are responsible for strategic and tactical planning for managing their

public forests and overseeing requirements for private forests (Chikumbo et al., 2001). In 1992 the Commonwealth, state and territory governments reached agreement on a National Forest Policy Statement (Commonwealth of Australia, 1992), which provides strategic directions for achieving sustainable management of publicly owned forests and a framework for coordinating planning and management of all forests. As in the USA, Australia’s forests have been the subject of intense debate covering wide-ranging issues, but particularly old-growth, clear felling and wood chip exports. This debate reached fever pitch in 1995, culminating in a blockade of the federal parliament by logging personnel and trucks from around Australia. Their protest was against Commonwealth delays in renewing wood chip export licences that were threatening their livelihoods and the survival of many dependent rural communities. The delays were due to community concerns and environmental group lobbying about the wood chip industry. The Government’s dilemma was how to appease the loggers and a broad constituency of vocal conservationists who were seeking to seriously change or curtail harvesting activities in native forests. The immediate impasse was resolved when the Commonwealth agreed to renew export licenses on condition that all parties – representing state, industry and conservation interests – entered into a Commonwealth/State government process – the Regional Forest Agreement (RFA) process –

©CAB International 2003. Forest Policy for Private Forestry: Global and Regional Challenges (eds L. Teeter, B. Cashore and D. Zhang)

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R.D. Spencer et al.

to be established under the National Forest Policy Statement. Commenced in 1995 and completed in 2001, the Regional Forest Agreement programme covered 45 million ha in 12 regions in five states (Fig. 6.1). While these regions only represent approximately 6% of the total forest area, they include a substantial portion of Australia’s commercial forests (Commonwealth of Australia, 1997). At the start of the programme approximately 17.6 million ha of the publicly owned forests were in formal conservation reserves and an additional 13.4 million ha were being managed for multiple uses, including

Fig. 6.1.

timber production (National Forest Inventory, 1998). On completion of the programme in 2001 the area in conservation reserves had been increased to 20.4 million ha and multiple-use forests reduced to 11.9 million ha. Subject to these being managed in accordance with ecologically sustainable principles, the multiple-use forests were committed to provide a sustainable flow of timber to industry for the next 20 years, at which time each Agreement would be reviewed. Although rezoning of forest uses only occurred on public forests being managed by public authorities, there were serious repercussions for private forest management.

Regional Forest Agreement regions and distribution of private native forests.

Planning Private Native Forest Use in Australia

The Regional Forest Agreement programme had three major aims:

•

• •

the development of a first class ‘comprehensive, adequate and representative’ (CAR) conservation reserve system for Australia’s forests to maintain regional environmental, heritage and social values; to lay the foundations for ecologically sustainable management of multiple use forests; and to secure access to timber resources for sustainable, internationally competitive forest industries over the ensuing 20 years and beyond, subject to satisfactory reviews.

The comprehensive regional assessments to underpin these agreements considered environmental, economic and social issues, including international conventions for protecting biodiversity and endangered species. A rigorous process was implemented to define a scientifically based set of criteria for establishing a national system of conservation reserves (Commonwealth of Australia, 1997). Various analytical tools were developed to assist this planning process, including the design of conservation reserves to meet specified conservation criteria and industry’s requirements for sustainable timber supplies from designated multiple-use forests. This required complex analyses and negotiations, involving flexibility to allow for regional variations in data, analytical requirements and expertise, modelling and system constraints, stakeholder involvement and political context (Bugg et al., 2002). Both the National Forest Policy Statement and Regional Forest Agreement programme address issues that have the potential to impact on private forests. However the overwhelming area of private forests and particular issues relating to their use and management have received only scant attention.

Purpose This chapter outlines the characteristics and significance of Australia’s private native forests and discusses policy initiatives and processes that can contribute to improved understanding of their values and potential contributions to national and regional conservation and industry goals. It focuses on:

• • •

51

the size, distribution, use and management of Australia’s private native forests; the planning processes used to resolve forest-use conflicts in key production regions; and recent policy initiatives to address data and planning deficiencies for private native forests.

Australia’s Private Native Forests Resources and use Australia has 156 million ha of native forest (Table 6.1) representing 20% of the continent. Approximately 71% of these forests are woodland (20–50% crown cover); 25% are open wet and dry sclerophyll forest (51–80% crown cover); and 3% are closed forest (81–100% crown cover) consisting of 80% rainforest and 20% mangroves. While ownership is 73% public and 27% private, about 42% of the public native forest is leased by the private sector, mainly for pastoral use. Consequently almost 70% of all forested land is managed by the private sector. This compares with approximately 9% under public multiple-use forest management. Extensive areas of the private native forests have no commercial timber value. The majority of commercial native forests under private ownership are in the states of Queensland, New South Wales, and Tasmania, with smaller areas in Victoria and Western Australia. There are negligible areas of private native forest with commercial timber value in South Australia and the Northern Territory. Across the RFA regions, approximately 25% of sawlogs are sourced from private freehold forest, while in some regions such as northern New South Wales and south-east Queensland, the production from private forests exceeds that from multiple-use public forests. In 1997/98, 455 sawmills relied entirely on the private forests for their timber resource; a further 397 sawmills sourced timber from both public and private forests (ABARE, 2000). An annual average of 3.9 million m3 per year of sawlogs and 6 million m3 per year of pulpwood were removed from Australia’s native forests in the period 1994/95–1999/2000. Of this, 720,000 m3 per year of sawlogs and 2 million m3 of pulpwood came from private forests (Ryan et al., 2002).

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Table 6.1. 1998.

R.D. Spencer et al.

Forest types and areas by tenure (’000 ha). Source: Australia’s National Forest Inventory,

Forest type

Private

Leasehold

Public and other tenures

% Private and leasehold

Total area (’000 ha)

Eucalypt Tall Medium Low Mallee Unknown Acacia Melaleuca Rainforest Casuarina Mangrove Callitris Other Totals

33,178 1,372 28,640 28,988 2,174 28,175 2,784 28,949 1,017 28,181 28,422 28,197 3,390 42,018

50,681 28,583 35,121 12,056 2,920 28,<1 8,525 2,560 28,414 28,919 28,118 28,300 2,586 66,103

40,604 4,588 27,689 1,656 6,670 28 ,<1 28,989 28,584 2,152 28,152 28,505 28,370 2,459 47,714

67.4 29.9 69.7 88.7 43.3

124,463 6,543 91,450 14,700 11,764 281,166 12,298 4,093 3,583 1,052 1,045 281,867 8,435 155,835

Private native forests in the Regional Forest Agreement regions are also important for their conservation values; 45% of the native forest ecosystems occurring on private land have been identified as priorities for conservation. However the private forests in these regions only represent a small proportion of the national total.

Forest management Management of Australia’s private native forests is mainly subject to state and local government controls, with Commonwealth jurisdiction limited to export licensing and obligations under various international conventions, such as those protecting endangered species and biological diversity. Each state has its own legislative requirements and facilitation arrangements for managing private native forest, ranging from a relatively noninterventionist approach in Queensland through to substantial agency involvement in Tasmania, Victoria and New South Wales. Additional complications arise with the level of approvals required for private native forest management compared with other agricultural activities, in addition to the substantial public-good values that private landowners are expected to consider in the management of their land. Complicating factors are the number of private native forest owners and the respective variety of management intent, the varying range of forest

92.0 85.7 39.9 95.1 51.7 57.3 70.8 69.4

management expertise, and the fragmented area and condition of these forests. In addition to the public forest/land management agency involvement in private forests, Regional Plantation Committees have been established through the Commonwealth Department of Agriculture, Fisheries and Forestry to facilitate plantation establishment and advise on private native forest management. They provide an important mechanism for facilitating private native forest networks for information dissemination and communication. Through the Natural Heritage Trust, the Commonwealth government has also provided support for a wide range of local, regional and national initiatives contributing to the management and understanding of the private native forest resource.

The Planning Dilemma Forest use and management are major political issues in Australia at all levels of government. However, relevant powers are primarily vested in the states and territories, which are fiercely independent. This provides significant challenges to policy making and coordination, as it is first necessary to get agreement on priority issues and then to define mechanisms to address them. The National Forest Policy Statement provided a foundation for the Regional Forest Agreement programme covering the major timber-producing regions in Australia. However the programme

Planning Private Native Forest Use in Australia

only covered a small part of the national forest estate and focused on publicly managed forests. Policy for the Regional Forest Agreement programme was to evaluate all forests, public and private, to assess ecological, economic and social values and to reach balanced decisions about future forest use. When a need to protect more vegetation communities in permanent reserves was identified, it was usually achieved by expanding the area of public land reserves. Measures to ensure higher levels of protection of private forests were only implemented in exceptional circumstances because of the limited availability of relevant Commonwealth and state powers and the political sensitivities relating to controls over private resources. Although the ecological values of private forests were assessed in all of the Regional Forest Agreement regions, their economic resources (particularly timber) were only partially assessed. This is in spite of the fact that private timber represents a significant component of the industrial resource in some regions (e.g. about two-thirds in south-east Queensland). The conservation and industry policy implications of these approaches are considerable. First, if the area of public conservation reserves is increased, the allocation of land for competing uses (e.g. timber production) must decrease. This affects the level of sustainable yield for industry when alternative resources are not available. Current alternatives are timber from private native forests or, in the longer term, plantations, if the processing plants and timing can accommodate it (the exception). If additional supplies come from private forests, this increases pressures on a resource for which the level of information and management expertise are generally low. Consequently there is an urgent need to improve our understanding of private forests as a first step towards implementing sustainable management.

Planning Model for Key Production Forest Regions The recently completed Regional Forest Agreement programme covering major commercial forest resources highlighted the conservation and resource importance of private native forests and identified gaps in understanding regarding their condition and management. More importantly, it

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advanced recognition of the value of planning processes that foster ongoing collaboration for policy development and implementation and that incorporate continuous learning and adjustment to take account of new data and understanding (Chikumbo et al., 2001). These processes are iterative and cyclic (Fig. 6.2) and show close similarity to the processes discussed in the early planning literature (e.g. Faludi, 1973a,b; Bather et al., 1976). The model illustrated in Fig. 6.2 encapsulates several interconnected adaptive processes that are driven and constrained by strategic policies, shown as new strategies along the top of the figure. Strategies provide a policy framework for plans and actions designed to meet more specific objectives. Conservation objectives for the Regional Forest Agreement programme are identified as ‘JANIS’ in Fig. 6.2. The JANIS objectives provide explicit criteria for assessing the merits of different reserve designs. Having generated each new reserve design, the next step was to assess impacts on sustainable timber supply. Figure 6.2 identifies the first stage of this iterative process as ‘resource data and modelling tools’, which leads into ‘model runs’, followed by ‘new data and tools’, etc. Output from resource analysis is input for ‘social and economic modelling’. The end result is an agreed design for conservation reserves and multiple-use forests that provides an acceptable package of social and economic effects, followed by an ongoing process of monitoring and review. Although Fig. 6.2 does not explicitly identify stakeholder inputs, they were a major contributory factor to data collection, reserve design, evaluation, and policy decisions. The model illustrated in Fig. 6.2 has wider potential application.

Policy responses for private native forests Among other outcomes, the Regional Forest Agreement process identified a serious need for better information on private forests to facilitate sustainable planning and management, resulting in new strategies to address these deficiencies by the Commonwealth and states. One strategy under the auspices of the National Forest Inventory is to develop and implement a ‘top-down’ inventory procedure to complement existing ‘bottom-up’ state inventory programmes

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to provide national statistics. The procedure is required to provide Interim Biogeographic Regionalization of Australia (IBRA)-level information that can be consistently aggregated to meet national and international reporting needs. A complementary strategy is directed specifically to the design and implementation of a regional inventory of private native forests for planning and management purposes. Both approaches are discussed in the next section.

reserves (Ferguson, 1996). This includes reliable current information at regional and finer wood catchment scales for strategic and operational planning (Howell and Donaldson, 1998). This in turn requires responsive, flexible, forest inventory methods and processes to provide the required information. Without strategic regional inventory information it is not possible to determine requirements for sustainable forest management or to attract long-term investment.

Private Native Forest Inventory

Continental forest sampling framework

Need for private native forest inventory

Since its establishment in 1988, Australia’s National Forest Inventory (NFI) has employed a ‘bottom-up’ approach using data, largely in the form of mapping, supplied by the states and territories. The majority of National Forest Inventory funds have been spent on filling gaps in mapping and ‘normalizing’ data collected using different methods, scales and standards (Tickle, 1996). This approach has successfully mapped the type, extent

A fundamental requirement for sustainable management of any natural resource, both for production and conservation purposes, is to quantify the landscape components. Adequate knowledge of the area and condition of the forest estate is a prerequisite for creditable land-use planning, determining sustainable yields or creating conservation

Fig. 6.2. Iterative cyclic planning process for developing and improving regional forest policy. Source: Bugg et al. (2001).

Planning Private Native Forest Use in Australia

and ownership of forests across the entire continent at scales ranging from 1 : 25,000 to 1 : 1,000,000, in addition to completing regional mapping in priority areas and identifying information gaps. It has also demonstrated that it is not economically feasible for the National Forest Inventory to meet many of its reporting requirements in a timely manner through continued rolling-up of traditional forest mapping. Nor is it possible to obtain many of the required attributes for forest planning and management from satellite remote sensing. Therefore a new inventory approach is required. The rolling-up method contrasts with a ‘top-down’ approach, such as the USA National Forest Inventory, which uses a national grid of aerial photo samples, followed by ground measurements on a subsample of permanent ground plots (Spencer and Czaplewski, 1997). The US system is very flexible and allows redefinition of stratum boundaries as new questions arise. However, although the system has been in place for more than 70 years, only recently has it produced maps of forest type and extent at resolutions finer than the grid spacing from satellite data of 1 km resolution (Hershey and Reese, 1999). Australia’s National Forest Inventory is now pursuing the development of a Continental Forest Sampling Framework to provide a top-down approach to produce data for a suite of parameters that address industry and conservation values at national and sub-national levels. Framework objectives are to provide a responsive, flexible,

efficient system to provide authoritative nationallevel data for all forests; and establish a standardized and repeatable system to conduct successive inventories and make statements about change, relevant for 5-yearly reporting (National Forest Inventory, 2001). Importantly, it will establish a sampling design that allows for integration between different levels of assessment. This should provide for scaling up of sample data collected by highresolution remote sensing and/or ground assessment methods, and intensification of sampling in areas where further details are required, such as regions, municipalities, neighbourhoods or properties. Another objective is to provide a framework for implementing timely, cost-effective, regional private native forest inventories (Fig. 6.3).

Regional private native forest inventory There is wide consensus, confirmed at a national workshop in December 2000, on an urgent need for strategic, private forest inventories to provide estimates of acceptable precision over whole regions for policy and planning purposes. These should be designed to facilitate aggregation or more detailed sampling to meet information requirements at other scales, such as more detailed information on smaller operational areas, or higher level information such as for national reporting. It is neither practicable nor necessary to address all reporting levels over all areas at the same time, but

National Farm Forest Inventory

National Plantation Inventory

Framework for forest inventory

National

State and national forest inventory

NATIONAL FOREST INVENTORY (NFI)

¥ ¥ ¥ ¥ ¥ ¥

55

native and plantation forests all tenures state and Commonwealth process

Data elements common to both NFI and PNFI

¥ ¥ ¥ ¥ ¥

Montreal process implementation group (MIG) Temporal and Boreal Forest Resource Assessment (TBFRA)

¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥

State of the Forest report (SoFR) and State of the Environment (SoE) National Plantation Inventory Report National Farm Forest Inventory Report National Carbon Accounting System (NCAS)

Regional Local and regional inventory

Local

Fig. 6.3.

Regional Private Native Forest Inventory (PNFI)

Sustainable management and regional development

¥ ¥ ¥

private native forests public native forests public and private plantations

Development of forest policy

National framework for native forest inventory and reporting.

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the inventory framework should facilitate data integration across various levels. Indicative information types for three levels of inventory show that, in many cases, similar types of information are required at different scales (Fig. 6.4). Common data elements between the three tiers (national, regional and local), combined with hierarchical sampling methods, could produce data to meet multiple stakeholder needs. For example, some or all of these requirements could be met with a mapping and sampling framework using multiple stage assessments (e.g. multi-stage, multi-phase), possibly including:

•

•

•

wall-to-wall mapping with Landsat imagery to get national and regional vegetative cover and change information (Barson et al., 2000), or systematic point sampling using Landsat or IKONOS imagery for quick, repeatable estimates; systematic or random sampling within satellite mapping units using small to medium scale aerial photographs to determine characteristics such as forest type, structure, disturbance and land-use (Anon., 1999); sampling within the photo-interpreted strata using large-scale aerial photo and/or laser systems to measure and interpret stand

Fig. 6.4.

•

and individual tree parameters (e.g. Biggs and Spencer, 1990; Spencer, 1992; Tickle et al., 1998; Lefsky et al., 1999; Means et al., 2000; Witte et al., 2000); ground assessments, possibly on double samples, to obtain quantitative/qualitative data (e.g. species, stem volumes) to correlate with remote sensing data.

Figure 6.3 illustrates a national framework that provides for inventories at a range of scales to meet a variety of reporting requirements. Regardless of the framework design, the sampling requirements for individual strata at each level are similar (e.g. national, regional, local, property) to achieve a specified level of precision. However the required number of samples increases exponentially as the number of strata and level of spatial detail are increased.

Landowner cooperation In addition to the technical aspects of inventory design, it will be crucial to gain landowner cooperation to engender broad support for private forest inventory and to gain access to properties for

Key information types for three inventory levels.

Planning Private Native Forest Use in Australia

ground sampling. All owners should be informed of the benefits of better information, such as better policies, improved context for business planning, and possibly site information for whole-farm planning. Such information should be provided to all property owners to gain their support, not just owners interested in timber values.

Discussion Australia’s federal system of government gives the Commonwealth major revenue raising powers through income tax, with the states and territories having limited taxing powers but major responsibilities for delivering services, including public forest services. State governments rely on Commonwealth grants, limited direct taxing powers (e.g. motor car registration charges) and, more recently, returns from a goods and services tax. These arrangements provide strong incentives for cooperation between the Commonwealth and states, plus opportunities for state–state rivalry and Commonwealth–state disagreement. Minor issues can usually be resolved by officials, but large contentious issues can inflame political debate and influence election outcomes. The states are fiercely independent and exercise a great deal of influence, which is enhanced when they are the guardians of needed information, which is often the case. The power of information ownership is moderated by community expectations and actions and Commonwealth and State Freedom of Information (FOR) legislation. While there has always been a need for Commonwealth/state collaboration to address national priorities and coordination, the need has intensified for forests because of new international obligations and increased public awareness and influence. The 1992 National Forest Policy Statement articulates strategic national priorities and directions for forest use and management. For example, it provides support for a national forest inventory and was a valuable framework for establishing the Regional Forest Agreement programme to address a major political issue. The National Forest Inventory, established in 1988, is a collaborative Commonwealth/state programme that relies on the states to provide most of the data and the Commonwealth to coordinate its collection and synthesis. The Commonwealth

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also provides additional funds to assist the states in collecting important missing data. Most of the National Forest Inventory work to date has involved patching together and harmonizing sometimes disparate data from the states to compile national statistics. This process has produced valuable results in terms of products, systems and working relationships, but it has also highlighted technical and political difficulties relating to the collection and synthesis of data from a variety of agencies. Technical difficulties include reconciling different state data types, standards, scales and recording methods. Political aspects relate to factors such as data ownership, transfer, use and cost. Data issues are a bigger problem with private land, where it is often unclear which state agency or agencies have primary responsibility. In part this reflects past tendencies for state forest agencies to be primarily responsible for managing traditional timber values in public forests and their reluctance to become involved with private forests. It also includes a traditional reluctance to share information, which is ‘justified’ under a variety of premises, including the notion that only experts can understand the complexities of managed forests and that novices might reach erroneous interpretations and conclusions if raw data is made available to them. Determination of sustainable timber is a good example. In some states, government controls over private forests and collection of statistics on them are responsibilities shared among several agencies; in others it falls to no particular agency (Ryan et al., 2002). Local government, the third most important tier of government in Australia, is becoming increasingly involved in private forest issues through the exercise of land-use planning powers including, for example, powers to control the clearing of vegetation and the location and treatment of plantations. Further involvement of local governments relates to their responsibility for construction and maintenance of local roads, and their leadership role in local communities. Local governments raise revenues through property taxes and state and Commonwealth grants. The southern island state of Tasmania has an efficient private forestry model with a specific state agency – Private Forests Tasmania – primarily responsible for the collation of predominantly timber inventory data on private land. In New South Wales, situated in the mid-east, the situation is far less clear cut, with a number of agencies

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having some responsibilities over regulatory aspects and provision of management advice. However the Regional Forest Agreement process made recommendations to improve state agency involvement in relation to private forests, including the establishment of a new Office of Private Forestry. Queensland, in the north-east, is in the process of changing its administrative structures for forest management, including the way that planning occurs on private land. However much of this state’s efforts have so far been directed towards controlling land clearing rather than promoting sustainable private native forest management (Ryan et al., 2002). While the low commercial importance of private native forests in Victoria, Western Australia, South Australia, Northern Territory and the Australian Capital Territory has traditionally provided little incentive for their state forest authorities to collect private forest data, increasing community demands for protection of conservation values are increasing the requirement for better information. While the state and Commonwealth governments have major responsibilities for promoting wider use of efficient inventory and informationcollation processes, they have also been stimulated and greatly assisted by a large array of community interest groups. For example, the Commonwealth/ State National Forest Inventory, established to compile information primarily for public forests, now recognizes a clear need for information on private native forests and is initiating a new process for data collection using a continental sampling framework which will work in parallel with a regional private native forest inventory programme. Community and conservation group interest in forest management practices has in the past focused attention particularly on public forest managed by public forest agencies. More recently, a growing interest in conservation generally, and forest conservation in particular, has expanded this interest to include private forests, particularly issues of land clearing. Moreover, where some conservation groups have achieved big conservation gains on public land they now seek to extend their gains on private land. This brings issues of land ownership rights and responsibilities into sharp focus, with attendant potent political implications. Therefore, the past lack of attention, even indifference, to private land is changing. This change is necessary to encourage sustainable management of

private native forests and meet Australia’s international obligations relating to forest management and statistics. This new focus presents technical as well as social challenges. The technical challenges relate to the vast extent and diversity of Australia’s private native forests which require efficient inventory methods. The social challenges relate to the large number of forest owners and the need to persuade them to place a higher value on good information for land-use planning and management, including potential gains to them individually and collectively. Given the independence of many Australian farmers and their general scepticism of government, it will be no mean task to change their attitudes. However self-interest can be a strong motivating force. For example, lack of market information often puts private growers at a serious disadvantage, through them not realizing how valuable their timber might be. This frequently results in a buyer’s market. Furthermore, even if local timber prices are known, they are commonly based on prices paid for wood from government forests, which may not reflect their true marginal market value. While forest grower groups and farm groups at national and state levels now recognize the requirement for, and value of, better information, this is not always the case with individual landowners. Landowners can bring substantial political pressure to bear to defend what they often perceive as a right to privacy in relation to information about their properties and farming enterprises. Ironically, Australian farmers have been providing agricultural statistics to assist policy makers for many years. Why attitudes to forests appear to be different is hard to understand, but it could be related to different community perceptions about the wider values of forests. Although the Regional Forest Agreement programme provided many lessons on methods for engaging stakeholders, including landholders, many problems still remain. These must be addressed and solutions found if we are to implement sustainable management of this valuable resource. The substantial diversity of landowners and their intentions relating to use of their forests provide significant challenges in land management. Whilst peak stakeholder groups, such as Australian Forest Growers and National Farmers Federation, recognize the requirements for increased

Planning Private Native Forest Use in Australia

information on private forest land, the rights and privacy issues have not been clearly addressed. Lessons can be learned from the methods used to engage stakeholders in the Regional Forest Agreement programme and the methods employed in the National Forest Inventory where growers provide data on their private plantations under ‘commercial in confidence’ rules that protect their privacy by only publishing aggregated data that mask details on individual holdings (Wood et al., 2001).

Conclusions Federal initiatives commencing in 1988 provided a foundation for improved cooperation between the states and Commonwealth for the preparation of a National Forest Inventory. However there has been no mechanism to secure ongoing funding or to target forests where forest inventory has traditionally not occurred (i.e. privately managed native forests). The system to integrate public forest data into the national system is a bottom-up approach that integrates data from state inventory programmes. Over time, improved methods have evolved to integrate state data obtained by a variety of methods and standards to meet each state’s objectives. New requirements for national/international reporting and pressures on regional forests for sustainable forest planning covering all forests require more effective methods for obtaining information. These should combine top-down and bottom-up approaches that complement existing state programmes, utilize combinations of stateof-the-art remote sensing and ground assessment methods, and have sound consultation mechanisms for regional stakeholders, including forest growers. The challenge is to identify and implement ‘best practices’ to efficiently collect consistent, appropriate data for all of Australia’s forests. Two recent government initiatives that will support this aim are a programme to develop a continental sampling framework covering all forests and a complementary regional private native forest inventory programme. Both programmes present considerable technical challenges, including the large area and dispersed nature of private forests and the relatively small number of suitably qualified people to do the work. There are also major social challenges relating to perceptions

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about forestry in general and ownership rights for private forests in particular. Doubtless many factors are involved, but it is essential that we quickly obtain a better understanding of them so that barriers to the collection and dissemination of important information can be dissolved. This is all the more important in today’s world where there is increasing understanding of the fact that many natural resource management problems are not confined to individual properties and that potential solutions can only be addressed effectively at landscape and catchment scales. Other major natural resource management issues in Australia that illustrate the need for catchment and wider scale considerations include land degradation, salinity and river quality. Reafforestation in strategic locations using native species could contribute to long-term solutions to these problems. As for private native forests, this will require better systems for engaging landholders to get their support to undertake assessment and monitoring programmes. Significant progress has recently been made but it is only the start of a long journey.

Acknowledgements The authors thank Agriculture, Fisheries and Forestry Australia for supporting this work, Mr Philip Pritchard for comments on earlier drafts, and participants at the December 2000 Private Native Forest Inventory Workshop for contributing ideas. Mr Philip Norman, Mr Ross Penny, Dr Martin Rayner, Mr Martin Stone, Professor Jerry Vanclay and Dr Cris Brack are also acknowledged for their valuable discussions in the ongoing development of the Continental Forest Sampling Framework.

Endnote 1 The definition of ‘forest’, as used by the NFI and based on the 1992 National Forest Policy Statement is:

‘an area incorporating all living and non-living components, that is dominated by trees having usually a single stem and a mature or potentially mature stand height exceeding 2 metres, and with existing or potential projected crown cover of overstory strata about equal to or greater than 20%’.

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References ABARE (2000) Australian Forest Product Statistics, June Quarter 2000. Australian Bureau of Agricultural and Resource Economics, Canberra, 74 pp. Anon. (1999) A Plot-based National Forest Inventory Design For Canada, 7 February 2001. http://www.pfc.cfs. nrcan.gc.ca/landscape/inventory/canfi/ design2.pdf Barson, M.M., Randall, L.A. and Bordas, V. (2000) Land Cover Change in Australia: Results of the Collaborative Bureau of Rural Sciences – State Agencies’ Project on Remote Sensing of Land Cover Change. Bureau of Rural Sciences, Canberra, 92 pp. Bather, N.J., Williams, C.M. and Sutton, A. (1976) Strategic Choice in Practice: the West Berkshire Structure Plan Experience. Geographical Paper No. 50, Department of Geography, University of Reading, UK, 63 pp. Biggs, P.H. and Spencer, R.D. (1990) New approaches to extensive forest inventory in Western Australia using large-scale aerial photography. Australian Forestry 53(3), 182–193. Bugg, A.L., Spencer, R.D. and Lee, A. (2002) Applying GIS for developing Regional Forest Agreements in Australia. Photogrammetric Engineering and Remote Sensing 68, 241–249. Chikumbo, O., Spencer, R.D., Turner, B.J. and Davey, S.M. (2001) Planning and monitoring of forest sustainability: an Australian perspective. Australian Forestry 64(1), 1–7. Commonwealth of Australia (1992) National Forest Policy Statement: a New Focus for Australia’s Forests. Canberra, 51 pp. Commonwealth of Australia (1995) Regional Forest Agreements: the Commonwealth Position. Canberra, 33 pp. Commonwealth of Australia (1997) Australia’s First Approximation Report for the Montreal Process. Montreal Process Implementation Group, Department of Primary Industries and Energy, Canberra, 104 pp. Faludi, A. (1973a) Planning Theory. Pergamon Press, Oxford, 306 pp. Faludi, A. (1973b) A Reader in Planning Theory. Pergamon Press, Oxford, 399 pp. Ferguson, I.S. (1996) Sustainable Forest Management. Oxford University Press, Melbourne, 162 pp. Hershey, R.R. and Reese, G. (1999) Creating a ‘First-cut’ Species Distribution Map for Large Areas from Forest Inventory Data. General Technical Report NE-256, USDA Forest Service, Washington, DC, 10 pp. Howell, C.I. and Donaldson, J. (1998) The National Forest Inventory – benefits for the forest grower. Proceedings of Australian Forest Growers Conference, ‘Plantation and Regrowth Forestry – A Diversity of Opportunity’. Lismore, New South Wales, pp. 103–111.

Lefsky, M.A., Harding, D., Cohen, W.B., Parker, G. and Shugart, H.H. (1999) Surface lidar remote sensing of basal area and biomass in deciduous forests of eastern Maryland, USA. Remote Sensing of Environment 67, 83–98. Means, J.E., Acker, S.A., Fitt, B.J., Renslow, M., Emerson, L. and Hendrix, C.J. (2000) Predicting forest stand characteristics with airborne scanning lidar. Photogrammetric Engineering and Remote Sensing 66(11), 1367–1371. National Forest Inventory (1998) Australia’s State of the Forests Report, 1998. Bureau of Rural Sciences, Canberra, 189 pp. National Forest Inventory (2001) Terms of Reference for the Development of a Continental Forest Sampling Framework for the National Forest Inventory. The National Forest Inventory, Bureau of Rural Sciences, Canberra, 4 pp. Powell, D.S., Faulkner, J.L., Darr, D.R., Zhu, Z. and MacCleery, D.W. (1993) Forest Resources of the United States, 1992. General Technical Report RM-234, USDA Forest Service, Fort Collins, Colorado, 133 pp. Ryan, M.F., Spencer, R.D. and Keenan, R.S. (2002) Private native forests – what did we learn from the Regional Forest Agreement Program? Australian Forestry 65 (in press). Spencer, R.D. (ed.) (1992) Application of Modern Inventory Techniques in the Forests of Western Australia. Western Australian Department of Conservation and Land Management, Occasional Paper 1/92, 85 pp. Spencer, R.D. and Czaplewski, R.L. (1997) National forest inventory in the USA: an outline of the procedure. Australian Forestry 60(1), 56–66. Tickle, P.K. (1996) Developing a forests database for Australia. In: Morain, S. and Lopez Baros, S. (eds) Raster Imagery in Geographic Information Systems. Word Press, Santa Fe, California, 560 pp. Tickle, P.K., Witte, C., Danaher, T. and Jones, K. (1998) The application of large-scale video and laser altimetry to forest inventory. Proceedings of the 9th Australasian Remote Sensing Conference, Sydney, Australia. CD-ROM. Witte, C., Norman, P., Denham, R., Turton, D., Jonas, D. and Tickle, P.K. (2000) Airborne laser scanning – a tool for monitoring and assessing the forests and woodlands of Australia. Proceedings of the 10th Australasian Remote Sensing Conference, Adelaide, Australia, August 2000. CD-ROM. Wood, M.S., Stephens, N.C., Alison, B.K. and Howell, C.I. (2001) Plantations of Australia – A Report from the National Plantation Inventory and the National Farm Forest Inventory. The National Forest Inventory, Bureau of Rural Sciences, Canberra, 172 pp.

7

The Three Impediments: Time, Fire and Taxes (Keynote Address)

George H. Weyerhaeuser, Jr Weyerhaeuser Company, Federal Way, Tacoma, WA 98063-9777, USA

These are interesting times for the practice of private, commercial forestry in the USA. Like our predecessors, we face ever-present economic hurdles. The science of modern forestry has taught us to deal with these hurdles in the context of biological sustainability. There are regulatory regimes in place to ensure outcomes that are valued locally. While we manage for sustained yield of the timber crop, we also pay attention to other values, such as water quality, through the control of our use of forest chemicals and by the design, construction and maintenance of our road systems. For the most part challenges at the stand level are being met. In the USA, controversy has shifted to the regional level. The industry focus has shifted accordingly. We are now concerned with values managed across watersheds such as the protection of threatened and endangered species through habitat management. We may still be struggling, but our current forest policy framework is forcing the industry to address US society’s concerns for the forest landscape. While we struggle comfortably with our regional trade-offs, the new international challenge of postmodern forestry looms over the horizon. Instead of just economic sustainability and biological concerns, we are now going to be asked to address the problems of managing a global commons. Is our forestry socially sustainable? Have we appropriately addressed the impacts of our activities and policies across national boundaries?

Have we recognized the need for carbon sequestration? It is not clear to me that our current institutions and policy framework are ready to meet complex international challenges like these. Society is going to expect different outcomes from private forest management than those that our policy frameworks were designed to deliver. There have been similar discontinuities in the past. What can we learn from them? I believe that it will be instructive to review forest policy at the turn of the last century. What does the shift from the hunter–gatherer era to sustained-yield forestry tell us about the pending shift to postmodern forestry? I will start by explaining my perspective as an ex-manager of a Canadian industrial forest. Members of my family have been involved in the production of private forest goods in the USA for 150 years. I have always been fascinated by their history and the evolution of their enterprises. But it was only when I moved to Canada and assumed responsibility for our forest management on crown land that I began to focus my thoughts on the public policy framework that had directed Weyerhaeuser’s private land management. In Canada I regularly found myself suggesting to our forestland managers that they should act more like they owned the forest. They should be concerned about its future productivity. At the same time, when I visited the USA I often found myself reflecting that we needed to act more like we were tenants on the land rather than owners. Our private forests

©CAB International 2003. Forest Policy for Private Forestry: Global and Regional Challenges (eds L. Teeter, B. Cashore and D. Zhang)

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were sources of important public goods. We could not leave their provision to chance. Other stakeholders were beginning to get very interested in the certification of our production of those goods. We had to pay attention. I had several opportunities to discuss this interesting dichotomy with a Minister of Forests of a Canadian province. As a Minister he was both our landlord and our regulator. I definitely paid attention to our conversations. The issues of the day gave us ample opportunity to reflect on the differences between Canadian public forest management and the US policy framework. The ongoing softwood lumber disagreement between Canada and the USA forced me to reflect on the comparative histories of development of industrial forestry in the two countries. And the controversy surrounding environmental regulations in western Canadian forestry focused my thinking on the provision of public goods as a by-product of industrial forestry. The Minister was convinced of the superiority of the western Canadian approach. He saw his regulatory power and the public ownership of the forestland as essential to maintaining the provision of public goods. The US approach was hopelessly inflexible. Fragmented land ownership and private property rights made it very difficult to deal with unanticipated, new challenges, such as the spotted owl. With changes in society and with changing scientific knowledge about the forest, there would always be new public expectations about forest management. Under the tenure system, the powers of the Minister could be used to shape the behaviour of private forest products firms. His job was to put the right package of incentives and regulations in front of the profit-maximizing firms to get them to perform in the public interest. My American point of view made me sceptical. Even if the Minister was able to sense the changing expectations and clever enough to get the balance of incentives and regulations right, I doubted that the administrative structure could keep up. But as a visitor to the country, my job was to play by the Minister’s rules. We will have to leave it to the historians to see whether my scepticism was misplaced. On the other hand, the Minister was certainly correct about the changing needs and expectations of society. We have had difficulty adapting. In the USA we are challenged by our historical land-use patterns. As our attention has shifted from the

private harvest value of the stand to the management of a watershed or a landscape, we are hampered by fragmented ownership. The ownership patterns can lead to perverse results. For example, in response to the listing of the spotted owl, circles were established to protect nesting sites. Inside the outer circle, only a certain percentage of forest cover was allowed to be removed. This gave each individual landowner the incentive to get their timber cut first. In the Minister’s ideal world this sort of thing should not happen. So encounters with the Minister have stimulated my thinking. In our market-based system, how do we get private actors to manage for wildlife habitat? How do we lead a landowner to manage habitat for an endangered species, if the end result of attracting the endangered creature is losing the freedom to manage the stand? There are no bad guys in my story. Just soulless private firms. Perhaps you should take what I say with a healthy dose of scepticism. I am going to recount the story of Frederick Weyerhaeuser and his successors from the point of view of my family. I want to examine how policy has changed the provision of public goods from the forest that Frederick and his partners and their successors managed. I will try to think of Frederick as the sort of neutral moral actor that the Minister has imagined. This might be a little bit difficult for me, because in our family we think of Frederick as a shy family man, not a mysterious octopus or robber baron as the contemporary press imagined. We see a selfmade German immigrant embarrassed about his poor ability to speak English, but rising to match his mythical contemporary, Paul Bunyan, in the provision of public good. Instead of Bunyan’s axe, Frederick had his integrity and his ability to win the trust of his partners. Frederick and his partners cut a swathe across North America. These days, commentators picture the devastation in their path. But in my family, we just remember that they were doing the good work of Paul Bunyan, opening our country up for the settlers that followed them. You can see that I might not be the most unbiased of observers. But I have to ask you not to apply today’s sustainability standards to Frederick and his peers’ logging practices. The devastation in his wake was not the result of policy failures. The economy of the day needed the lumber that Frederick and his peers produced. But the policy makers got what they needed also. The forest and the streams of the Mid-west were seen as being so

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abundant that they did not need management. In fact, what was needed was the opening up of the land for settlement. The policy makers of the day manipulated the neutral moral actors to achieve that public good. Like Paul Bunyan, Frederick and his partners provided this land clearing and development service as they harvested the timber for private gain. Even at the turn of the 20th century, when logging practices were beginning to be questioned, the Weyerhaeuser company took its provision of this public service very seriously. For example, George S. Long, the company’s first general manager, insisted on selling the company’s logged lands directly to settlers; that way he could be sure that brokers weren’t confusing property lines or inflating prices. He only sold the land when he could verify that the settlers were well informed and prepared for the hardships of farming. He took on this responsibility ‘not because we think it’s the most economic thing to do, but because we think it is the right thing to do’. Mid 19th-century lumbermen had learned that settlement following the pine harvest in the Lake States was not easy. The soil and climate were not well suited to farming. The pine stumps did not rot. So unlike the US experience in New England, development and settlement in the Mid west was not automatic. Policy makers needed to find further incentives for western development. Capital was needed to develop the railroads of the West. Railroads needed customers and suppliers along their routes. The Congressional response was a series of Railroad Acts in the early 1860s granting alternate sections on each side of the railroad for 10, 20 or 40 miles to the railroad companies. The subsequent sale and harvesting of these lands built the lumber businesses of the West, provided the capital for the railroads and cleared the land for settlement. Frederick, his Lake states peers and their southern competitors responded to the stimuli of the day. Between 1850 and 1900, US softwood lumber production increased an order of magnitude to a level comparable to today. By 1900, timber was no longer perceived to be inexhaustible in North America. Frederick and his partners branched out of their Mid west lumber businesses and invested in the Weyerhaeuser Timber Company, reportedly for the benefit of their grandchildren. Public policy makers also perceived the inflection point. Cleared land was no longer the essential

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public good. Policy makers began to worry about the conservation of natural resources. The legal framework would have to change. A dramatic illustration of the outcome of this shift is the percentage of public timberland ownership in different regions of North America, as a function of when the regions developed. Railroads opened up the timber industry in the southern states before conservation was a concern. Today only 10% of southern timberland is publicly owned. In the Pacific Northwest, 55% of the timberland is publicly owned. The regulatory regime in western Canada was partly a response to the excesses of exploitation in the US West. Today over 90% of British Columbia’s timberland is publicly owned. The sustained yield from private forest management also became a public policy concern. The legal framework of the day did not give regulators many levers with which to influence private forest practices. President Theodore Roosevelt mastered the use of the ‘bully pulpit’ to influence public opinion. His Forest Service Chief, Gifford Pinchot, arranged the American Forest Congress in 1905 to consider the forestry problems of the USA. Pinchot invited Frederick to speak about the industry. Frederick declined because of his health. (In my family, we believe it was really because of his shyness and his embarrassment about his command of the English language.) When Frederick declined to speak, Pinchot suggested to Frederick’s youngest son, F.E. Weyerhaeuser, that he step in and read a speech on his father’s behalf. In his enthusiasm, F.E. not only agreed to do so, he also helped to promote the event by encouraging other important timber owners to attend with him. Pinchot and F.E. believed that the discovery of mutual interest by the federal officials and the industry leaders would lead to better understanding and opportunities for future cooperation. The night before the conference, F.E. stayed with Pinchot. That evening Pinchot read F.E. the draft of Roosevelt’s opening address. F.E. was amazed at its fairness to the lumber industry. Later he would recall that he was very much pleased. Unfortunately the pleasure did not last. The next day when Roosevelt delivered his remarks he departed radically from the prepared text. He attacked the lumbermen as ‘despoilers of the national heritage’. He shook his fist at them violently to reinforce his points. F.E. felt betrayed. Nevertheless, he delivered his speech. He suggested that changes in the

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industry had prepared lumbermen to seriously consider ‘any proposition which may be made by those who have the conservative use of the forests at heart’. He noted, ‘Everywhere throughout our timber regions Nature is struggling to renew her growth, and mere casual observation forces upon us the fact that the forests will reproduce themselves, if given a fair chance. But there are three great obstacles which must be reckoned with in the profitable reproduction of timber: time, fire and taxes’. The American Forest Congress is remembered as an important milestone in the conservation movement. F.E. understandably had a different point of view. He thought that the Congress had set back the cause of sustained yield from private forests by at least a decade. The public need was clearly stated. The impediments to progress were understood. Trust was the missing element. Weyerhaeuser leaders worked on the impediments for the next three decades. Progress was made more easily on cooperative fire control. The story is well known, so I will touch on it only briefly. Fire control clearly had to be a collective effort. As Frederick once observed, it was useless to provide ‘clean ground’ on your property if the adjacent tract remained a litter bed of tinder for any spark to set ablaze. To control fire, new institutions had to be created and new practices had to be perfected. However, the interests of the parties were essentially aligned. When stable settlements dominated the frontier, rural residents brought an end to frontier fire practices. In the forests, fire codes and systematic fire protection gained the upper hand. After 1905 the US Forest Service became the central institution in firefighting. Gradually fire was removed as an impediment to conservation and sustained yield. Taxes and time proved to be more challenging. In the case of taxes, the interests of the various parties were not well aligned. Property taxes were a major source of revenue for local governments. Residents such as farmers did not mind seeing that burden fall disproportionately on forestland owners. But an annual tax based on the value of land and timber would encourage landowners to cut their timber before the taxman got all the value. It was impossible to justify holding cut-over land for a sustained private yield, if the taxes were higher than the purchase price of adjacent timber. The first generation of Weyerhaeuser management did not make much progress in removing

the impediment of taxes on the provision of sustained yield as a public good. George Long and F.E. spent their careers working on the challenge. Over the decades, federal studies examined the problem, but local reform proved difficult. Long tried many clever tactics to build understanding and support. In 1921 he lobbied for a bill in Washington State to authorize a bond issue to purchase and replant private cut-over land to demonstrate how to regrow a forest. When the measure failed he offered to give the state or the federal government half of all the returns of a 50-year rotation if they would be responsible for the taxes. Each year for 20 years, Weyerhaeuser would provide 10,000 acres of cutover land for the scheme. No one took him up on the idea of a 200,000-acre demonstration forest. The next year he was even more direct. Weyerhaeuser made an outright gift of 5000 acres to the state for a reforestation experiment. George Long, one of the neutral moral actors of my story, may have been associated with robber barons, but he was quite eloquent about the need to lobby for a public policy framework to bring out the best efforts of the private forester. First, of course, that the state should cooperate very heartily and earnestly with the federal authorities in this movement. Second, that the state itself, by liberal appropriations should provide funds to protect the standing timber as well as the young growth timber from forest fire destruction. Third, that the state itself should acquire by purchase or by gift or by condemnation, logged off lands suited for timber growth and not for agriculture and adopt the policy of forest growth. Fourth, that as early as the laws of the State of Washington can be revised so as to make it legally possible, that special legislation be passed making it financially possible for individuals to set aside lands suitable for forest growth and under a tax burden that will enable them to keep these lands intact until the timber is of an age and size suitable for use as lumber and I question a little whether we should attempt to define what this legislation should be at the present time, because it is through such details as this that one will stir up a Hornet’s nest, but that we submit to the State the favorable consideration of this programe.’

The appropriate policy framework started to come together federally during Chief Forester

Time, Fire and Taxes

William Greeley’s administration. In 1924 the Clarke-McNary Act addressed not only the impediment of fire; it also encouraged the states to adjust their tax regimes to promote commercial reforestation by private interests. In 1928 the McSweeney-McNary Act established experiment stations and a research programme to provide scientific knowledge and practical studies of reforestation. With these two Acts the conservative federal forestry role was in place. The government did not order the industry to conduct itself in the public interest. Instead it provided knowledge, tax incentives and public timber to elicit the desired public goods from the private actors. It is instructive to the 21st century policy maker that the federal actions in the 1920s did not end this little saga of institutional impediments to sustained-yield forestry. The state and local tax authorities did not respond immediately to the 1924 federal legislation. Oregon led the way 5 years later with a ‘cut-over land’ tax fixed at only 5 cents per acre if the lands were used to grow a new timber crop. A yield tax would be due when the mature crop was harvested. State officials did not adopt the enlightened tax policies on their own. In Oregon, Weyerhaeuser officials had decided on a tax strike to draw attention to their problem. The following year, local Weyerhaeuser managers were instructed to pay some of the Company’s taxes in person in recognition of the change the state had made. But

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they were also instructed to say that paying the taxes was a burden and that if further concessions were not made, they would go back on strike. Similar pressure through land abandonment was applied in Washington, Idaho and Minnesota by Weyerhaeuser and its affiliates. Slowly state tax regimes were changed to encourage reforestation. Even those laws did not end this story. These new tax provisions triggered extensive litigation by county assessors throughout the country. In 1933, test cases in Idaho courts resulted in favourable rulings. However, in Washington the Reforestation Act was ruled unconstitutional in the lower court. The following year the ruling was reversed by the state supreme court. So in 1936, about 30 years after Pinchot’s Forest Congress, my grandfather, J.P., and the third generation of Weyerhaeuser leaders were selecting which of their tax-delinquent cut-over lands Weyerhaeuser should hold for reforestation. The impediment of taxes was tamed, if not solved. It took over a generation but the institutional framework for forest management was finally adapted to the vision of sustained yield. Today Weyerhaeuser is anticipating its third harvest from its Washington lands. The Weyerhaeuser experience in Minnesota provides an interesting counterpoint. Tax relief did not occur in this time frame. The Weyerhaeuser name is not so prevalent in Minnesota today. The neutral moral actors forfeited their lands in response to the incentives of the day.

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Global Initiatives, Public Policies and Private Forestry in Bolivia: Lessons to Date and Remaining Challenges George F. Taylor II,1* John Nittler2* and Ivo Kraljevic2

1International

Resources group, 1211 Connecticut Avenue NW, Suite 700, Washington, DC 20036, USA; 2Chemonics International, 1133 20th St NW, Suite 600, Washington, DC 20036, USA

Setting the Stage Changing the forestry paradigm in Bolivia: a brief synopsis First impressions of Bolivia might be llamas grazing on a rocky hillside high in the Andes. However, the eastern half of Bolivia includes vast expanses, nearly 50 million ha, of tropical forests, representing some of the larger remaining tracts of South American forests outside of the Brazilian Amazon. Up until the mid-1990s, Bolivia’s forestry sector was not unlike that of neighbouring countries (ITTO, 1996). They shared both the wealth of the tropical forest in the Amazon basin, as well as the need for major reforms in how it was to be managed. Highly selective but uncontrolled logging of the most valuable species, especially mahogany (Swietenia macrophylla King), an antiquated and poorly enforced legal framework, increasing land conversion rates for agricultural expansion (Pacheco, 1998), spontaneous colonization; and widespread corruption summarize the quagmire in which Bolivia’s forestry sector found itself. The situation deteriorated until interest groups reached general consensus on the need for

change and the government embarked on a major effort to reform the sector. In 1996, after several years of heated debate by a complex mélange of interested parties, a new forestry law was approved (Pavez and Bojanic, 1998). The law enacted fundamental changes such as tying forest use to land ownership (prior to this, the land could be owned by one party and a second given contracts to harvest timber). It also established the basis for sustainable forest management based on similar principles and criteria as those of the Forest Stewardship Council (FSC) and other certification and forest management schemes (Nittler and Nash, 1999). Major changes included: switching from harvesting contracts to long-term forest concessions (40 years renewable); payment of area-based rather than volume-based stumpage tax; incorporation of systems to guarantee transparency in authorization of forestry rights and participation in changes to the new legal framework; and a complete restructuring of the public sector institutions charged with implementation of the new model. At the same time, there were a number of parallel policy changes ongoing in Bolivia that furthered both the need for and basis on which to

* George F. Taylor II is the former Chair of the Environment Team, USAID, La Paz, Bolivia. John Nittler is the former Chief of Party, BOLFOR, Santa Cruz, Bolivia. ©CAB International 2003. Forest Policy for Private Forestry: Global and Regional Challenges (eds L. Teeter, B. Cashore and D. Zhang)

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structure a new forestry model. The government passed a law to decentralize government in 1994, assigning increased responsibilities to departmental and municipal governments. Through the Popular Participation Law, this vesting of powers in municipal governments was strengthened by allocating 20% of the government’s budget directly to municipal governments for their programming and execution. Land reform was also underway. The Ley INRA (Law establishing the National Agrarian Reform Institute) was passed in late 1996 and consolidated a number of previous decisions to recognize indigenous territories. It also recognized forest management on private properties as a legitimate use of the land, consolidating the possibility to manage forest on private lands rather than the traditional strategy of converting the land as proof of ownership. Another major reform was the creation of a system of ‘Superintendencies’ for the regulation of key services such as banking and telecommunications as well as key resources, such as hydrocarbons, electricity, water, forestry and agriculture. The system, while forming part of the executive branch of government, was to have independent budget authority and to be free from political pressures, thereby providing an important alternative to the widely recognized corruption and ineffectiveness of central government. While the long-term verdict on the overall effectiveness and sustainability of the forestry sector reform remains to be seen, there have been numerous immediate results that merit mention. One of the major impacts has been the devolution of approximately 15 million ha of forest lands. These were previously held by a poorly capitalized and inefficient industry (STCP Engenheria de Projetos Ltda, 2000), which selectively logged vast extensions of forest, extracting an average volume of less than 0.25 m3 ha−1. The industry depended on operating advances from mahogany buyers from the USA in order to harvest mahogany. Little investment was made in secondary processing and none in forest management. Within this context, the industry was faced with the choice of returning lands or paying the new area-based tax over their entire holdings. Their decision to return nearly 75% of the concessions improved the balance between investments, installed production capacity and the forest. It also made forest available to other stakeholders, which was one of the main reasons behind the government’s decision to impose an area-based tax. Of the returned area,

approximately 8 million ha have been recognized as indigenous lands, and an additional 3 million ha have been distributed to local social groups organized and supported by the municipal governments.

Globalization and the new forestry paradigm Thomas Friedman, in his book, The Lexus and the Olive Tree, provides a powerful set of glasses with multiple lenses for understanding the forces behind and the myriad impacts of globalization. This view, and the insights it provides into the economic, political and socio-cultural transformations that are currently sweeping the globe, reveal patterns and currents that are very useful for understanding key elements of the stage upon which Bolivia’s new forestry paradigm is set. Friedman (2000) notes that in order to be able to plug into the new global order, countries must have the appropriate ‘hardware’, ‘operating system’ and ‘software’. Operating systems, defined most readily as broad macroeconomic policies, range from communist state control (‘DOScapital 0.0’) to fully liberalized and open economies (’DOScapital 6.0’). In addition to the hardware enclosing an economy and its basic operating system, software packages are needed to optimize system performance. As Friedman notes, Software is a measure of the quality of a country’s legal and regulatory system, and the degree to which its officials, bureaucrats, and citizens understand its laws, embrace them and know how to make them work. Good software includes banking laws, commercial laws, bankruptcy rules, contracts laws, business codes of conduct, a genuinely independent central bank, property rights that encourage risk-taking, processes for judicial review, international accounting standards, commercial courts, regulatory oversight agencies backed up by an impartial judiciary, laws against conflicts of interest and insider trading by government officials, and officials and citizens ready to implement these rules in a reasonably consistent manner. (Friedman, 2000: 151–152).

Bolivia was a pioneer in introducing the first generation of macroeconomic policy reforms in its successful bid to overcome hyperinflation in the mid-1980s. It continued as a pioneer in the 1990s with a second generation of reforms, including additional work on economic liberalization, the

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large-scale privatization of state enterprises, decentralization of political power, and agrarian land reform (Friedman, 2000). The new Forestry Law was part of this process and was linked inextricably to each of the other pieces of the overall reform package. On the institutional side, the Superintendencies were to be apolitical. They were to have the highest technical standards, be efficient, be transparent and be corruption-free. They were to be fully DOScapital 6.0-compatible. There were other elements of the new forestry paradigm that were DOScapital 6.0-compatible as well (e.g. reforms in the forest concession system, the use of international standards to promote both more rational and more sustainable production systems, and openings for civil society institutions to serve as watchdogs). While much of this new forestry software was DOScapital 6.0-compatible, what remained to be seen was whether:

• • •

the other software of the Bolivian system was being upgraded fast enough to allow the forestry software to function effectively; the second generation reforms would be proactively implemented by the new government that came to power in August 1997; a third generation of reforms necessary to provide Bolivia with additional software to run DOScapital 6.0 (including far-reaching reforms of the judicial system, the customs service, and management and maintenance of the country’s transportation infrastructure) could be successfully launched.

Public Policies, Institutions and Private Forestry Macro policies In Bolivia, policy formulation, discussion and diffusion tend to take place every 5 years during presidential campaigns. Between elections, administrations do not usually engage in public policy debates. Instead, much of the policy formulation takes place piecemeal, either in the inner offices of key officials and their personal advisors, or in private discussions with politically powerful interest groups or powerful and well-connected individuals. Most of the time, the resulting ‘policies’ are more the reflection of the idiosyncrasies of

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the individuals making the decisions rather than the result of any transparent process involving technical analysis, public discussion or broad consensus. When administrations change, it is generally unclear which existing policies will continue to be implemented. One can only wait until action is taken, or not taken, to start to discern which policies are being followed. The forestry law and related legislation described in the previous section were, at first, aggressively implemented and had significant impacts. Following the change of administration in 1997, implementation of several of these laws was either slowed down or stopped. Over the past year, as confrontation has escalated in scope and violence, the government has had to focus its efforts, energies and talents on trying to quell unrest in every region and in virtually every sector across the country. One potential casualty of this state of affairs is the forestry law, which remains dangerously incomplete in its implementation. While still running on the successes of its first several years, inaction on the part of the government to finalize a number of key implementation steps threatens to reverse some of the critical gains made by the sector and block others from taking place.

Sector-specific policy The new forestry law was passed in 1996 amid widespread discontent with the performance of both the timber industry and the Centro de Desarrollo Forestal (CDF), the sole government institution charged with regulating the sector. There was recognition that Bolivia’s forestry resources were neither being efficiently used nor equitably distributed. The new law introduced a comprehensive forestry regime. Its purpose was ‘to regulate the sustainable use and the protection of forest resources and forest lands in order to benefit current and future generations . . .’ (for details on the law see MDSMA (1996) and Pavez and Bojanic (1998)). To put the new forestry regime in place, the law assigned roles and functions to the public and private sectors and to civil society as follows.

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For the public sector, the law proposed a novel institutional framework centred

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around three separate national institutions performing normative, regulatory, and investment functions. These functions were to be facilitated and, in some cases, delegated to the local level by municipal and departmental governments and regional regulatory offices. For the forest users (private sector), the law set technical norms and standards that must be met to obtain and retain forest use rights. It was up to the private sector to find the best way to meet these standards and remain in business. The law assigned the role of overseeing the sector to civil society, providing it with mechanisms to aid in the implementation and enforcement of the new forestry regime.

The forestry law contained provisions that make it compatible with the democratization and decentralization of the country. Departmental and municipal governments play an important role in the implementation of the regime. Consistent with this approach, for the first time in the history of the country the law recognized the legitimate rights of indigenous groups to access and use forests. They were granted the exclusive use of the forests within their territories.

Forestry sector institutions Public sector institutions The forestry law established the institutional framework for the public sector by assigning roles and functions to a number of central, departmental and municipal institutions. The law placed the direction of the sector, including the development of norms and standards, under the Ministry of Sustainable Development and Planning (MDSP), regulation under a newly created Forest Superintendency (FS), and investment under a new National Fund for Forestry Development (FONABOSQUE). In addition, as stipulated in the Popular Participation and Administrative Decentralization laws, a series of implementation functions were assigned to departmental governments (Prefecturas) and municipalities (Municipios) (for additional details, see MDSMA, 1996).

Private sector institutions Since the law was enacted, there has been a resurgence of private sector activity. Some of this activity has become organized; most of it has not. The private sector is made up of forest users and service providers. There are four types of forest users: industrial concessionaires, private landowners, groups of small producers (generally refered to as Agrupaciones Sociales de Lugar (ASLs)) and indigenous groups (collectively referred to as TCOs (Tierras Comunitarias de Origen)). Of these four forest-user categories, only the industrial concessionaires have an organization that represents their collective interests and also provides technical services to its members. This is the National Forestry Chamber (Camara Forestal de Bolivia). This predates the new law and is an effective lobbying organization. In addition it also provides its members with technical services through a technical branch known as PROMABOSQUE. Landowners work independently, as do the TCOs and ASLs, although the latter two may include forest-user units that are composed from a couple of dozen to several hundred members. It can be expected that both ASLs and TCOs will be forming their own associations to represent their collective interest in the near future, especially in view of the fact that the Camara Forestal, which claims to speak for all forest users, has been unable or unwilling to recruit them as members. Civil society institutions One of the most interesting aspects of the law, and one that has not yet been developed, is the role that citizens, as individuals or in associations, can play to ensure that forests are managed sustainably and for the common good. Unfortunately, the one NGO (non-governmental organization) that was formed to promote the role of civil society in the implementation of the law (the Sociedad Boliviana de Derecho Ambiental) has been unable to become the catalyst for widespread civil society interest and participation. Citizen participation and monitoring are ultimately the best guarantees that both the government and the users will live up to their responsibilities and manage the forests sustainably.

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Macro institutional issues Five years after the passage of the new law mandating a complete overhaul of the public sector forestry institutional framework, only two institutions have been deployed and are functioning satisfactorily. These are the Forest Superintendency and the Municipal Forestry Units. All the other proposed institutions are either non-functional or have not yet been established. The National Forestry Directorate, created by the MDSP to direct the sector’s development, has been particularly ineffective. The Directorate has not only not completed the one-time actions needed to implement the provisions of the law, but it has also not yet begun to develop the capacity it needs to carry out its normative and policy functions. Why has so little progress been made? Primarily because the MDSP suffers from the classic problems of public sector institutions in Bolivia: systemic politicization, lack of continuity due to the absence of a civil service, lack of transparency, lack of accountability, and corruption. Departmental governments, which receive a substantial share of the forest user fees, have also accomplished very little to date. They are so politicized that they do little more than use their resources to employ (reward) members of the political parties in the governing coalition. The National Fund for Forestry Development has been set up as an account to receive the user fees assigned to it, as well as all fines and monies generated from confiscation and auctioning of illegal products. However, the Fund has yet to function as an institution. Created shortly after the Law was enacted, the Forestry Superintendency, located not in La Paz but in the lowlands in Santa Cruz, moved quickly to establish itself as a highly capable and respected institution. It has played the central role to date in operationalizing the new forestry regime. In addition to being apolitical, the Forest Superintendency has been very proactive in promoting transparency in its decision making (Superintendencia Forestal, n.d.). This is most unusual for Bolivian public sector institutions and serves as an excellent model for others to follow. The success of the Forest Superintendency clearly demonstrates that creating effective and capable public institutions is not constrained by lack of financial, human or technical resources. The key constraint is lack of political will.

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One of the most important questions about public policy is also one of the most difficult to answer: does the political will exist to take on both the vested interests and institutional inertia that stand in the way of implementing policy change? Thompson and Warburton (1985) identified a critical dimension of this question as follows: Development experts have now learned at their cost that the impressive array of policy levers displayed in the ministries of many of the lessdeveloped countries are, all too often, not connected to anything. This is usually interpreted as a symptom of underdevelopment; the conclusion is that they should be connected and that satisfactory development will become possible once they are connected . . . In a system based upon the management of powerlessness the fact that the policy levers are not connected to anything may demonstrate neither underdevelopment, nor inefficiency, nor oversight; rather, it may confirm that everything is functioning correctly (Thompson and Warburton, 1985: 212).

When dealing with the MDSP this warning rings true. When dealing with the Forest Superintendency, forest concessionaires, local social groups and indigenous groups engaged in forest management, it does not. Implementation of the new forestry paradigm is moving at different speeds with different stakeholders.

Forest Certification: a Key ‘Driver’ of the New Forestry Paradigm Elements of certification Certification has three principal elements that have guided its development: environmental responsibility, social benefits and economic viability. The three serve as the basis for the organizational structure of the Forest Stewardship Council’s (FSC) membership chambers, the development of certification standards and the evaluation process. They strive to guarantee sustainability of the forest management operations, the surrounding and affected communities, and ultimately the forest. The Bolivian forestry paradigm developed in parallel with FSC certification from their common beginnings in 1993. This was a time of

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strong tropical forest protection and anti-logging sentiment (Dickinson et al., 1996). FSC certification, with its strong environmental and social assessment provisions, offered consumers, government and industry itself a system to evaluate and foster good forest management practices.

The debate over certification The Bolivian debate In Bolivia, the concept of certification was first introduced by WWF-Bolivia in 1992 and instantly rejected by the industry as a whole. The Bolivia Sustainable Forest Management Project (BOLFOR), funded by USAID and the Government of Bolivia, renewed this debate in 1994. In a general assembly, organized in October 1994, a large number of stakeholders (industry, conservation community, social groups, professional foresters and NGOs) were brought together to discuss the concept. A decision was made to establish a steering committee, convened by BOLFOR, including representatives from diverse stakeholder groups (Jack, 1998). The debate over certification had just begun. Industry accepted certification as if it were an inevitable bitter pill that would have to be swallowed or, in the best-case scenario, a type of insurance policy that would allow them to continue to operate and sell internationally (Nittler and Nash, 1999). Indigenous leaders scoffed at the possibility of certifying forests given the extreme level of conflict between traditional demands and existing harvesting contracts. Government struggled with the definition of their role, or lack thereof, in the voluntary certification process. Numerous meetings of the steering committee were held, as well as side meetings with the various special interest groups, which were necessary to bring a shared understanding of the certification process to the various stakeholders (BOLFOR, 1996). The steering committee evolved into a local NGO that legally established itself as the Bolivian Council for Voluntary Forestry Certification (CFV). The CFV provides training and promotes and oversees the overall certification movement in Bolivia with support from foundations and bilateral sources. One of its key roles was the development of regional standards for timber products. Through a

very participatory process, experts were brought together and, over a 3-year period, standards were prepared to translate FSC principles and criteria into measurable indicators to enable certifiers to evaluate forest management operations in the tropics of Bolivia. In 1998, these standards were approved by the FSC. At the same time, BOLFOR was promoting the identification and strengthening of local institutions to partner with interested certifiers. A partnership was developed between CIMAR, a local NGO affiliated with a national university, and SmartWood, affiliated with the Rainforest Alliance. The partnering organizations have been key in both promoting and carrying out the vast majority of the certification exercises thus far in Bolivia (CIMAR, 2000). Recently, SmartWood has established an office based in Santa Cruz to provide services throughout the region and SGS has established a strong presence. One of the catalytic events that turned the tide in the direction of certification was a round of business meetings held in Santa Cruz in late 1997. With MacArthur Foundation support, the Forest Management Trust sponsored an Encounter between ten buyers of certified products from Europe and North America and over 20 certified or proto-certified Bolivian companies. The event was organized to provide information to both producers and buyers, allow for individual meetings between these groups and facilitate site visits to production facilities. The results were stimulating. The buyers discovered a country they scarcely knew existed, with the largest area of certified tropical forest in the world; while the producers, still uncertain about the market for certified products, found themselves in negotiation with serious buyers seeking container-loads of certified curtain rods, mouldings, veneer and lumber. Key to the success of the meetings was CADEX, the Chamber of Exporters, whose staff was instrumental in gaining the confidence of industry, setting up business meetings and following through on relationships established. Although the National Forestry Chamber (Cámara Forestal de Bolivia – CFB) chose not to formally participate in the event due to opposition to certification by some of its members at that juncture, 20 affiliates did take an active part. The participation of prominent members of this organization was a key factor in their later endorsement of certification.

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Three years later, one of the companies present at the meeting has established a solid business relationship with the UK market, selling US$6 million worth of outdoor furniture in 2000, doubling their 1999 sales. Awareness of the certified market was greatly increased among the majority of Bolivian companies, contributing to their willingness to seek certification. However, awareness does not equal sales. With the exception of the one clear success, Bolivian companies failed to follow up on initial orders and leads. Rather than becoming the catalyst for accelerated growth in certified forest product sales, the Encounter served as a wake-up call, alerting all concerned that profound changes in business structure and management would be needed before Bolivia could take advantage of its position as the largest potential source of certified tropical hardwoods in the world. There have been two other key factors that have contributed to rapid expansion of the certification movement in Bolivia. First, the government’s strong commitment to sustainable forest management and corresponding regulatory change has placed certified forest management within the grasp of all companies that fully comply with the country’s laws. The second key factor that has influenced acceptance of certification in Bolivia has been the participation of influential industry leaders. Several of the largest companies in the country have led the certification movement, spurred by the potential of entering new markets with lesser known species and diversified product mixes. An example of this is the company CIMAL, which is one of the two or three largest companies in the country and the first to certify two of its four concessions in 1997. Recently, the other two concessions have also been certified, bringing their total land under certified management to nearly 340,000 ha. Cristobal Roda, principal owner of CIMAL and its affiliated company Industrias del Mueble Roda (IMR), has been key to promoting certification in Bolivia. In addition to serving as an example, he has personally played a major role in convincing the Camara Forestal to take a pro-certification stance. Equally important has been the participation of the company La Chonta, under the management of Pablo Antelo. Antelo led La Chonta to certify its two concessions on 220,000 ha of semihumid tropical forest. In one of these, Antelo’s ability to creatively resolve conflicts posed by

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traditional demands on the land by the Guarayo indigenous group was important. He also was instrumental in the creation of the CFV and served as its first president. The fact that the National Forestry Chamber has embraced certification and even created a fund to support it represents a major shift in the industry’s perspective towards sustainable forest management. Prior to 1996, the industry was branded as one of the most corrupt, environmentally damaging and socially insensitive in the country. While there is a still a segment of the population that may argue this, the image of the sector has improved markedly as a result of its gains in certification. The government uses the area certified as an indicator in its sustainable development plan and proudly cites industry’s gains in certification as a landmark achievement for the country. The expatriate debate The debate among the expatriate or international actors did little to foster acceptance of certification in Bolivia, instead it probably had the opposite effect. The continued pressure by US companies to buy exclusively mahogany, the fact that the only international company operating in Bolivia (Berna of US-based SunChase Holdings) spoke out strongly against certification, and the confusion created by the international debates on different certification schemes (FSC vs. ISO, for example) did little to support the movement. At the same time, articles published by Conservation International staff in Scientific American (Rice et al., 1997) and in Science (Bowles et al., 1998) attempted to undermine sustainable forest management in general and were used by those opposed to certification or any type of regulated forest management. While the WWF and the World Bank formed an alliance to promote protected areas and certified forest management, the Bank failed to clarify their policy on interventions in tropical forests. Instead, they continued to fund projects that expanded the agricultural frontier, causing tropical forest to shrink. The same lack of clarity existed within the US Government. While USAID funded the BOLFOR project, which clearly mandated development of certification mechanisms within Bolivia, the State Department argued against certification in international fora such as the ITTO.

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Proof of the pudding: results to date Certification The first certification in Bolivia took place in 1996. It was for Lomerio, a forest managed by an indigenous community. Roda followed with the certification of two concessions in 1997, and the area under certification has continued to increase since then. After robust growth in 1999, forest certification grew at a much slower rate in 2000. Compared with an 86% increase in 1999, in 2000 the total area certified grew by only 3% to a new total of 893,928 ha (SIFOR/BOL, 1998–2001). However, at the end of 2000, SmartWood decided to certify two additional concessions, Lago Verde and Vasber. The process for this certification was expected to be concluded in early 2001, adding an additional 181,750 ha for a new total of 1,075,678 ha. This keeps Bolivia in its position as the worldwide leader of certified natural forest in the tropics. There are 17 companies, two of which are TCOs, with 1,517,127 ha involved in the certification process at present (SIFOR/BOL, 2001). Area under forest management Of equal interest is the number of companies managing their forest under the legally approved standards set forth in the Forestry Law but that are not yet moving towards certification. BOLFOR carries out an annual review of its clients using 12 key indicators to determine their compliance with good forest management practices. This review indicates that an additional 1,074,148 ha are being managed sustainably. Over half of this area is made up of ten municipal producers associations (ASLs) (326,811 ha) and four indigenous community groups (TCOs) (215,205 ha). At the national level, the number of companies and community groups that have presented management plans in accordance with the standards established by the forestry law and regulations surpasses 7 million ha. Certified product development and marketing While the rate of certification slowed in 2000, as did the overall total of forest product exports, the value of certified exports continued to increase. In 1999, a total of US$7.8 million of certified

products were exported. In 2000, this reached an estimated US$12.6 million, representing an increase of 61% (SIFOR/BOL, 2000, 2001). It is worth noting that certified products comprise nearly 20% of total wood product exports, and this is likely to increase rapidly in future years as secondary producers, such as Jolyka, Boholtz and UTD Doors, all of which are chain-of-custody certified, lock in certified raw material sources. Companies with the capacity to add value to their raw material have boosted export values, as well as being able to enter into new markets for an expanding number of products and species.

CADEFOR (Centro Amazonico de Desarrollo Forestal/Amazonian Centre for Sustainable Forest Enterprise) The aftermath of the MacArthur Foundationfunded Encounter in Santa Cruz in late 1997 revealed the challenge to Bolivia’s competitiveness in what has subsequently become a major world market for certified wood products. BOLFOR, with USAID concurrence, chose to join with the Forest Management Trust in addressing alternative approaches to meeting the challenge and created CADEFOR (Centro Amazonico de Desarrollo Forestal/Amazonian Centre for Sustainable Forest Enterprise). CADEFOR became fully operational as a Bolivian non-profit organization in March 2000 with the goal of helping Bolivian certified forest enterprises become successful participants in the export market for products from sustainably managed forests. Clients include private sector concessions and community enterprises with titles to productive forests, as well as private enterprises engaged in value-added processing of products for the export and domestic markets.

Certification: the road ahead The very success of Bolivia in certifying forest management has become the greatest challenge to sustaining this process. Certification is market driven. Certified operations in Bolivia conserve biodiversity, not out of altruism, but in order to gain perceived market advantage. Most operations are not, however, gaining that market

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advantage. Current harvesting results in only a small percentage of the potential volume of certified wood actually reaching the market. There is grave danger that the market incentive to practice sustainable management will be lost. As community producers become certified, the challenge becomes more acute because they lack market links and skills. Bolivia must bring its costs down and secure markets, otherwise the advantage afforded by having a large area of certified forest will evaporate within a few years as Brazil and other tropical countries certify their forests. Consolidation of the certification movement in Bolivia faces numerous challenges and opportunities. Industry and large forest land managers must lock in markets, compete with traditional and non-certified producers, and continue their diversification of species and products. Certification has opened the door to a number of new buyers. Industry must present a new face as responsible and reliable producers in order to fully take advantage of this opportunity. The relationship between the area under management and the companies’ installed capacity remains skewed towards not taking full advantage of the value of the forest resource (or undercutting and incurring high unit costs due to low production volumes). New investment in milling and processing equipment is a must if industry is to compete. Challenges remain in improving silvicultural and forest management practices. While current practices are based on the best conventional wisdom, Bolivia must continue to develop the information base and capabilities on which to project more reliable growth, yield and biological responses to interventions in the forest. For smaller producers and community groups, the challenge is more related to acquiring the capital and technological basis to develop the management of their forest resource. There are a growing number of Bolivian secondary processors seeking chain-of-custody certification that potentially provides a solution. They are interested in locking in certified raw material sources. It is hoped that they will invest with community producers in order to advance certified forest management in municipal forests and on indigenous lands. The fact that the indigenous population is now steward of nearly half of Bolivia’s production forests has created a tremendous challenge for government and the international community. These lands, if not protected and utilized, will be subject

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to spontaneous colonization and illegal logging. In most cases, organizational and management capacity is extremely limited, protection is weak and forest management is unlikely without substantial support from outside. Organizational and technical assistance is being provided by social and technical projects managed by local NGOs and bilateral initiatives such as BOLFOR. The only solution to leveraging sufficient capital, however, is to engage the private sector in the purchasing, harvesting and processing of the timber resource in a way that is conducive to sustainable socio-economic development of the local population. The challenge here is to provide substantial guarantees to the industry to protect their investment, while assuring full participation and transparency at the community level. Initial examples of this model are unfolding in Bolivia and certification has a key role to play in this process.

Shifting the Forestry Paradigm: the Unfinished Agenda Bolivia has set in motion a path-breaking paradigm shift in the management of its forestry resources. Results to date with forest certification have been impressive. While there have been important lessons learned and clear forward movement in implementation of the new paradigm, there are also significant challenges ahead and some storm clouds on the horizon. The Top Ten remaining challenges are:

1. Sector policy framework Getting the sector policy framework right is the key first step. Bolivia did an excellent job of this even though the policy is wrapped within a new law and many challenges remain in its implementation. The central role of private forest industry on public and indigenous lands is an important piece of the overall equation. The key remaining challenge is implementation, linked to each of the issues outlined below. In addition, there is an urgent need to explore harmonization of public policies across the nation and a multi-country region.

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2. Seeing the forest for the trees What is happening outside of the forestry sector (including the macro-political, economic and social influences) is at least as important as what is happening inside the sector, if not more so. Implementation of the new paradigm requires a focus on both the forest and the trees. While the current government has attempted to extend the reform efforts of its predecessor into the much needed areas of judicial, customs and civil service reform, implementation of key elements of the Forestry and Agrarian Reform laws have faltered due to political influences. The recent economic crises of Bolivia’s neighbours (Brazil and Argentina) have had major impacts throughout the Bolivian economy, including the forestry sector. This uncertainty, coupled with signs of wavering political will, lack of forward movement on land reform, and continued corruption, has led to unwillingness to make the investments necessary to strengthen Bolivian competitiveness regarding its forest products industries. Control and use of natural resources has increasingly become a ‘flashpoint’ issue within Bolivian society (e.g. water-use in Cochabamba; Brazil-nut harvesting rights in Pando; slow and bureaucratic implementation of land titling in the lowlands). Bolivia’s political and economic elites need to listen carefully to the concerns being expressed and find solutions that address the needs of the poorer and more marginalized segments of society. The key challenge is to regain forward momentum on implementation of the Forestry Law and the suite of other reforms that need to work synergistically to make implementation a reality. In addition, Hernando de Soto has identified a critical piece of ‘the forest’ that deserves urgent attention. In his seminal book, The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else, he notes: By stabilizing and adjusting “by the book”, the globalizers’ macroeconomic programes have dramatically rationalized the economic management of developing countries. But because their book does not address the fact that most people do not have property rights, they have done only a fraction of the work required to create a comprehensive capitalist system and market economy. (de Soto, 2000: 211).

de Soto demonstrates that the major stumbling block that keeps much of the rest of the world from benefiting from capitalism is its inability to produce capital. The problem is not that the poor do not have assets. Even in the poorest countries, the poor save. The value of savings among the poor is, in fact, immense – forty times all the foreign aid received throughout the world since 1945. In Egypt, for instance, the wealth that the poor have accumulated is worth fifty-five times as much as the sum of all direct foreign investment ever recorded there, including the Suez Canal and the Aswan Dam. (de Soto, 2000: 5).

The problem is that the poor hold these resources in defective forms: houses built on land whose ownership rights are not adequately recorded, unincorporated businesses with undefined liability, industries located where financiers and investors cannot see them. Because the rights to these possessions are not adequately documented, these assets cannot readily be turned into capital, cannot be traded outside of narrow local circles where people know and trust each other, cannot be used as collateral for a loan, and cannot be used as a share against an investment . . . It is the unavailability of these essential representations that explain why people who have adopted every other Western invention, from the paper clip to the nuclear reactor, have not been able to produce sufficient capital to make domestic capitalism work. (de Soto, 2000: 6–7).

3. The ‘soft state’: possibilities and limitations Bolivia is a ‘soft state’, with relatively weak and in many cases ineffective government institutions. At the same time though, the lack of a strong central government allowed Bolivia to adopt a privatesector-led model for forestry development with the government role limited to establishing the rules of the game and to doing what it could to monitor and enforce them. Unlike other parts of the world, with entrenched civil services including forestry extension services, the procedures and habits learned under an earlier forestry regime did not need to be ‘unlearned’. The challenge in Bolivia has been to overcome the problems of the ‘soft state’ by creating a parallel structure at the national level (the Forest Superintendency) while at the

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same time pushing forward on decentralization of authority and responsibility to the municipal level. The remaining challenges are to get the central government to assume its minimalist, but essential, role and to protect the independence and autonomy of the Forest Superintendency so that implementation of the new paradigm can proceed.

4. Resource tenure: a primordial condition The close link between resource tenure and a new way of doing forestry was clearly identified early on in Bolivia (Andaluz, 1998). New Forestry and Agrarian Reform laws were passed in tandem and the institutions set up to implement the laws were established at the same time. Failure to aggressively implement the INRA law has served as a major obstacle to effective implementation of the new forestry paradigm. Without secure tenure, private producers are reluctant to invest in forestry and there is little protection of much of the forest, leading to high levels of illegal logging and encroachment. Finding both the political will and the administrative ability to fully implement land reform and secure resource tenure in the lowlands is key. In addition, de Soto’s challenge to pursue a ‘property revolution’ covering all types of assets needs to be addressed (de Soto, 2000).

5. The sustainability conundrum: biological dimensions BOLFOR has done an excellent job of building on conventional wisdom and learning-by-doing while at the same time supporting carefully focused applied research. As creating a full-blown research infrastructure in Bolivia is both unrealistic and unsustainable, emphasis is now being given to bringing in international research institutions (e.g. CIFOR, University of Florida) to team up with local institutions, NGOs and forest managers to continue the process of learning as much as possible, as quickly as possible, about the biological (and economic and social) dimensions of sustainable forest management in the Bolivian lowlands. Verifying the basic assumptions behind the new model is critical to ensuring biological sustainability of the system.

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6. The sustainability conundrum: economic dimensions The economics of shifting from the old ‘cut and run’ mining approach to forestry to the new paradigm has major cost and financial implications. Sustainable forest management as prescribed in Bolivia is profitable, although probably not as profitable as the previous uncontrolled system. Costs are reduced on a volume basis through better planning and operating on reduced areas, but the introduction of lesser-known species brings lower prices than the much sought-after mahogany and other select woods. Major improvements in entrepreneurial capacity, increased investments in technology, and value-added processing are crucial for most companies to face this new scenario. Joint ventures to facilitate acquisition of capital, technology, managerial know-how, and markets appear to be an increasingly important and viable option. Support such as that offered by CADEFOR is central to the development of responses to these needs, especially as they relate to smaller producers, including municipal producer associations and indigenous communities.

7. The sustainability conundrum: social dimensions The social dimensions of major changes in resource use are complex and constantly evolving. Bolivia chose to focus initially on the large producers/concessionaires and this decision was the correct one. Failure to do so would probably have strained the credibility of the new system to the breaking point. The major focus of implementation has now shifted to social groups with access to large tracts of forest, including municipal producer associations and indigenous communities (Kralijevic, 1999; Stocks, 1999; Williams and Wilson, 1999). Increasing the scope and applicability of applied social science research is key, so that the results can proactively inform implementation of the Forestry Law in this complex and untried endeavour (Pacheco and Kaimowitz, 1998). Civil society watchdog groups are needed to monitor implementation, especially to monitor how industry interacts with these social groups.

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8. The sustainability conundrum: institutional dimensions Bolivia’s chronic problems of politicized government bureaucracy, lack of civil service and lack of transparency in decision making have all contributed to a lack of sufficient progress on the institutional dimensions of the new forestry paradigm. However, the Forest Superintendency demonstrates that effective institutions can be established within the government given effective leadership and the will to do so. It is, however, the exception that proves the rule. Four years into the current government, there have been four National Directors of Forestry, not one of them effective in moving implementation of the new forestry paradigm forward. Institutional sustainability presents a large and important set of interrelated challenges. Decentralization and working with local groups (municipal governments, federations of municipalities, producers associations, indigenous groups, etc.) offer rays of hope. Additional reforms and systemic changes are needed to address the challenges facing central and department-level government institutions.

9. Global initiatives: drivers and others One global initiative, forest certification, has been extremely important in the Bolivian case. It has served as an external ‘driver’ prompting Bolivian producers to adopt the biological, economic and social sustainability elements required for certification in order to plug into the new and rapidly growing market for certified forest products. Many other global initiatives, discussed in the full, original version of the paper on which this chapter is based, have been mostly irrelevant to and unconnected with the Bolivian experience.

10. Globalization: tying it all together? Globalization is a powerful set of forces and relationships that is influencing forestry development in Bolivia in many different, and sometimes contradictory, ways. The first key is to better understand these forces and relationships.

Thomas Friedman’s The Lexus and the Olive Tree is an excellent introduction, complemented by Hernando de Soto’s The Mystery of Capital. In his chapter on ‘Shapers, Adapters and Thinking About Power’, Friedman notes, The groups making the biggest difference today are those that harness the economic self-interest of companies and consumers and make that a force for environmental protection, for upgrading workers’ rights, for promoting human rights – rather than a force working against such values . . . Economic self-interest is the big force at work in the world. It isn’t the only one. Laws and norms still matter. Government still matters. Government still needs to pass laws and regulate in ways that protect society as a whole and not just the interests of a particular group of consumers or activists. But often the best way to win adherence to laws and norms is by trying to channel economic selfinterest – the very metabolism of the globalization system – in a way that makes it restorative rather than destructive. (Friedman, 2000: 209).

This is an excellent description of the drivers behind forest certification within the broader context of the new forestry paradigm in Bolivia. The key question in Bolivia is whether the momentum behind the wide-ranging series of reforms that derive from the process of globalization will be maintained or not; or to use Friedman’s image, whether Bolivia will continue to move both quickly and systematically towards DOScapital 6.0. Bolivia has been ahead of many other countries in its reforms: first in the macroeconomic arena; then in decentralization, privatization, indigenous rights, land reform and the new forestry paradigm; and most recently in starting to seriously tackle corruption and reform of the judiciary. Much progress has been made at the conceptual and policy pronouncement levels. Less progress has been made on the ground. The challenge is to continue moving from ‘talking the talk’ to ‘walking the walk’. Globalization does not mean that everything must change. The olive tree (representing tradition, sense of place, sense of community, etc.) is also important. It is a question of balance, of progressive change and of overall forward movement. In Friedman’s words: How we learn to strike the right balance between globalization’s inherently empowering and humanizing aspects and its inherently

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disempowering and dehumanizing aspects will determine whether it is reversible or irreversible, a passing phase or a fundamental revolution in the evolution of human society. In July 1998, the New Yorker ran a cartoon that showed two long-haired, scraggly bearded Hell’s Angels types . . . each . . . asking the other how his day went. One Hell’s Angel finally says to the other: ‘How was my day? Advancing issues led declines’. And so it is with globalization. Globalization is always in the balance, always tipping this way or that. Our job as citizens of the world is to make certain that a majority of people always feel that advancing issues are leading the declines. Only then will globalization be sustainable. (Friedman, 2000: 433).

The same can be said for the new forestry paradigm in Bolivia: it remains a work in progress, it is always in the balance, tipping this way or that in response to the latest set of economic, political or social events or pressures. The job of those of us who believe that the new paradigm is the way forward is to do our best to make certain that a majority of stakeholders in the ‘new forestry’ always feel that advancing issues are leading the declines.

References Andaluz, A. (1998) Seguridad Jurídica e Incentivos para Promover la Inversión Privada en el Sector Forestal. Sociedad Boliviana de Derecho Ambiental, Serie: Cátedra Paralela, Santa Cruz, Bolivia, 11 pp. BOLFOR (1996) Hacia el Manejo Forestal Sostenible. Proyecto de Manejo Forestal Sostenible (BOLFOR) y Ministerio de Desarrollo Sostenible y Medio Ambiente (MDSMA), Santa Cruz, Bolivia, 205 pp. Bowles, I.A., Rice, R.E., Mittermeier, R.A. and da Fonseca, G.A.B. (1998) Logging and tropical forest conservation. Science 208, 1899–1900. CIMAR (2000) Diagnóstico Forestal 2000. Centro de Investigación y Manejo de Recursos Naturales Renovables, Santa Cruz, Bolivia, 89 pp. de Soto, H. (2000) The Mystery of Capitalism: Why Capitalism Triumphs in the West and Fails Everywhere Else. Basic Books, New York. Dickinson, M.B., Dickinson, J.C. and Putz, F.E. (1996) Natural forest management as a conservation: divergent opinions on constraints, possibilities

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and alternatives. Commonwealth Forestry Review 75, 309–315. Friedman, T.L. (2000) The Lexus and the Olive Tree (updated and expanded edition). Anchor Books, New York. Government of Bolivia (1996) Capitalization: the Bolivian Model of Social and Economic Reform. Ministry of Capitalization, La Paz, Bolivia, 31 pp. ITTO (1996) The Promotion of Sustainable Forest Development in Bolivia. Report submitted to the International Tropical Timber Council (ITTC(XXI)/9), 240 pp. Jack, D. (1998) La certificación y el Manejo Forestal Sostenible en Bolivia. Technical Document No. 79, BOLFOR Project, Santa Cruz, Bolivia. Kraljevic, I. (1999) Proyecto para la implementación de regimen forestal en municipios (IRFOR). Administrative Document No. 43, BOLFOR Project, Santa Cruz, Bolivia. MDSMA (1996) Ley Forestal No. 1700. BOLFOR, Santa Cruz, Bolivia. Nittler, J.B. and Nash, D. (1999) The certification model for forestry in Bolivia. Journal of Forestry 97, 32–36. Pacheco, P. (1998) Estilos de Desarrollo, Deforestación y Degradación de los Bosques en las Tierras Bajas de Bolivia. CIFOR/CEDLA/TIERRA, La Paz, Bolivia. Pacheco, P. and Kaimowitz, D. (eds) (1998) Municipios y Gestión Forestal en el Trópico Boliviano. CIFOR/ CEDLA/TIERRA/BOLFOR, La Paz, Bolivia. Pavez, I. and Bojanic, A. (1998) El Proceso Social de Formulación de la Ley Forestal de Bolivia de 1996. CIFOR/CEDLA/TIERRA/PROMAB, La Paz, Bolivia. Rice, R.E., Gullison, R.E. and Reid, J.W. (1997) Can sustainable management save tropical forests? Scientific American 276(4), 44–49. SIFOR/BOL (1998–2001) Newsletters (December 1998, June 1999, November 1999, February 2000, October 2000, January 2001). MDSP and ITTO, La Paz, Bolivia. SIFOR/BOL (2000) Información forestal: exportación de productos forestales, gestiones 1998–1999. SIFOR/BOL and Cámara Forestal de Bolivia, Santa Cruz, Bolivia, 13 pp. SIFOR/BOL (2001) Documento Informativo No. 13. Certificación Forestal. SIFOR/BOL and Cámara Forestal de Bolivia, Santa Cruz, Bolivia, 13 pp. Stocks, A. (1999) Proyecto de manejo indígena de recursos naturales (MIRNA). Administrative Document No. 41, BOLFOR Project, Santa Cruz, Bolivia. STPC Engenharia de Projetos Ltda (2000) Plan Estratégico para el Desarrollo del Sector Forestal de Bolivia. CFB and CAF, Curitiba, Brazil, 48 pp. Superintendencia Forestal (n.d.) Bolivia país forestal: economía con ecología. Superintendencia Forestal, Santa Cruz, Bolivia, 27 pp.

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Thompson, M. and Warburton, M. (1985) Knowing where to hit: a conceptual framework for the sustainable development of the Himalaya. Mountain Research and Development 5(3), 203–220. Williams, J. and Wilson, D. (1999) Informe sobre el problema de aflatoxinas de la castaña (Bertholletia excelsa) en Bolivia. Technical Document No. 71, BOLFOR Project, Santa Cruz, Bolivia.

Recommended web sites Bolivia Sustainable Forestry project (BOLFOR) http://www.cadex.org/bolfor or http://bolfor.chemonics.net

Bolivian Congress (includes the text of all major laws) http://www.congreso.gov.bo/principal.html CADEFOR (Centro Amazonico de Desarrollo Forestal/Amazonian Center for Susainable Forest Enterprise) http://www.cadex.org/bolfor/PRODMERC/ cadefor.htm Ministry of Sustainable Planning (MDSP) – Bolivia http://www.rds.org.bol/

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National Agrarian Reform Institute (INRA) – Bolivia http://www.inra.gov.bo/

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Today and Tomorrow of Private Forestry in Central and Eastern Europe Jacek P. Siry Department of Forestry, North Carolina State University, 3120 Jordan Hall, 2800 Faucette Drive, Raleigh, NC 27695-8008, USA

Introduction In the 1990s, countries in Central and Eastern Europe (CEE) initiated dramatic reforms in an effort to democratize their political systems and base their economies on free market principles. For the forest sector, these changes meant the privatization of wood-processing industries and the return of private forests that had been nationalized to their former owners following World War II. CEE countries also actively participated in regional and global forest policy processes that recognized sustainable forest management (SFM) principles as the foundation for the management of their forest resources. At the regional level, Ministerial Conferences on the Protection of Forests in Europe, also called the Pan-European Forestry Process, have been essential in the development and implementation of commonly agreed SFM criteria and indicators. This drive to more sustainable and environmentally friendly forest management is further strengthened by the arrival of marketbased initiatives such as forest certification. Rapid changes have made existing forest legislation obsolete and necessitated its profound revision. In recent years, new or revised forest laws have been passed in most CEE countries. While the previous laws and policies focused primarily on securing an adequate timber supply, today’s policies are driven by environmental concerns. A shift towards environmentally oriented forest management and stringent regulations

represent a serious challenge to thousands of new, small-scale forest owners. Many of these owners have very limited forestry expertise and investment capital. Their limited resources and sharp drops in public assistance raise concerns about the longterm sustainability of private forest management. These concerns slow down the restitution process and result in proposals for more stringent controls on private forests. The purpose of this chapter is to evaluate the restitution process and forest policies that are applicable to private forests in order to assess their current situation and prospects for the future. The impact of progressive globalization of timber markets and wood-processing industries and the internationalization of environmental policies is evaluated. Since most countries in the region have applied for European Union (EU) membership, the possible implications of accession are discussed as well. For the purposes of this study, CEE is defined as a 15-state block composed of Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia, the former Yugoslav Republic of Macedonia, and Yugoslavia. These states form a contiguous region stretching from the EU in the west to the former Soviet Union in the east. Although they formed part of the former Soviet Union, the Baltic states are included in the study because they have carried out democratic reforms and are currently returning nationalized forests to their former owners. Other countries of

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the former Soviet Union have not yet reached that stage.

Development of Private Forests Following World War II, communist governments nationalized all large and medium-sized property, including forests. Nationalized forests were either taken over by state forest agencies or became part of collective farms. As a result, more than 90% of forests became publicly owned in most communist countries (Broda, 1988; Deacon, 1996; World Bank, 1999; CRGR, 2000; Daugaviete, 2000; Ionov et al., 2000; Kallas, 2000; Kozma et al., 2000; MASR, 2000; Solymos, 2000). With democratic and economic changes progressing, the restitution of seized private property became a political issue. Some countries, including the Czech Republic and the Baltic states, moved fairly aggressively towards returning private forests to their former owners. Other countries, such as Bulgaria, began to return forests only recently and on a smaller scale. Poland decided against the restitution of private forests in favour of other forms of compensation, such as privatization bonds representing shares in other state-owned property slated for privatization. Nevertheless, private owners in Poland account for 18% of the country’s forestland. These are primarily small forests that escaped the original nationalization and have grown over time as the government instituted large afforestation programmes that also benefited private lands. The restitution process has been undertaken to serve historical justice, but has paid little, if any, attention to effective management of the forests. This approach has created a large number of small forest owners with a very limited capacity for effective forest management. An average private forest holding in CEE is about 5 ha, which is much smaller than the 26 ha in the EU (UNECE, 2000b). It ranges from 0.6 ha in Romania, to 2.8 ha in Slovakia, and rises to 10 ha in Estonia (Ilavsky, 1998; Puustjarvi et al., 1998; Bouriaud, 2001). These small owners have limited forestry training and little available capital to invest into forest management (World Bank, 2001). The very small scale of forest operations makes viable forest management difficult because they generate little income and are harvested at very long intervals; small scale also limits the

application of modern forest technologies. To resolve these problems, forest cooperatives, associations and improved extension programmes are being advocated (Solberg and Rykowski, 2000; Jager and Meszaros, 2001; World Bank, 2001; Zajac, 2001). Efforts to create effective private owner organizations have been unsuccessful so far, even in cases where state financial support was available. Having in mind negative experiences with forced cooperatives of the past era, private forest owners are unwilling to give up their newly acquired property and decision-making rights. These difficulties indicate that a substantial amount of time is required before these efforts will become effective (World Bank, 2001). Out of 42 million ha of CEE forests, nearly 9 million ha were in private hands in 1997 (UNECE, 2000b). Latvia, Yugoslavia and Poland have the largest areas of private forests ranging from 1.2 million ha to 1.5 million ha. In Slovenia, Yugoslavia, Slovakia and Latvia, private owners account for 40–60% of the total forestland. However, taken together, private forests in the region constitute only about 21% of forestland, and the forest sector remains dominated by public forests. The current CEE ownership structure clearly contrasts that of the EU. While 79% of CEE forests are publicly owned, in the EU only 30% of forests fall into public ownership.

Management Regulations Alongside the restitution process, there has been a trend to set up broader and higher forest goals and performance criteria. CEE countries have recently developed new forestry laws in which environmental criteria have received the leading role, which moves away from a commodity-production orientation. In most cases, public and private forests are regulated by the same legislation and in a very similar manner. Recognizing that new regulations were developed primarily for public forests, this approach creates problems in private forestry, where timber income is important. This is especially the case where private goals do not coincide with social goals, which may put more weight on forest protection and conservation functions; and when public support for private forests is reduced. In general private forest owners are required to have an approved 10-year management plan

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that determines all activities in their forests. They have to observe prescribed rotations, obtain a licence to cut their timber, regenerate harvested stands within 2 years of harvest, and protect their forests. Harvests must be approved and trees marked by a licensed forester. The forests have to be protected against fire and diseases. The owners are not allowed to convert their forestland into other, non-forest uses. The enforcement of these regulations, however, is generally weak, due to limited resources of responsible government agencies. While high management standards have some impact on private forest management, the major problems rest in the technical criteria used to determine timber harvest and silvicultural effort, which have been little affected by the forest policy shift. Timber harvest is determined by the annual increment of forest stands and the minimum rotation length established for dominant species. The model that foresters use to set rotations is fundamentally a biological maximization model. In commercial forests, the rotation length is determined by the production of a desired sawtimber volume while minimizing losses on the mean annual increment. In protection forests, the rotation length is determined by the achievement of environmental objectives specified in management plans, which translates into even longer rotations. This approach results in very long rotations which are much longer than those that would prevail under value maximization. In Poland, for example, the minimum rotation length for pine is generally set at 80 years in commercial forests and 100 years in protection forests (MRGZ, 1988; Jaworski, 1990). While natural regeneration is becoming more common, many harvested coniferous stands need to be replanted. Pine planting density on average varies from 4000 to 10,000 seedlings per hectare, but could be even higher (MRGZ, 1988; Jaworski, 1990; Deacon, 1996). Dense planting increases competition among seedlings for light, water and mineral nutrients, and can actually slow timber growth instead of capturing the full growth potential of the site. It also requires multiple tending cuts. Since these cuts target primarily small-sized wood, these operations generate little income. This approach to forest regulation emphasizes even timber harvest flows over time (sustained yield) and is generally unresponsive to prices, factor costs and the discount rate (Hyde, 1980). As applied, this management approach frequently

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leads to uniform management across all sites. As a result, the productivity of both state and private forests is generally low. A productivity comparison carried out in the early 1990s indicates that productivity in Nordic countries is six times higher than in state forests in Estonia (World Bank, 2001). EU timber production is three times higher than in CEE on growing stock that is only twice as large (UNECE, 2000b).

Management Outcomes Private forest management is considered unsatisfactory in many countries. Many of the new private forest owners are poor and have a high time preference. They want to benefit from their forests and harvest timber, trying to take advantage of improving timber markets and rising prices. Timber sale proceeds are used primarily for personal consumption or non-forest management investments, which are less risky and generate higher returns in a shorter time. As a result, investment in forestry suffers. In some cases, harvested stands are not properly regenerated and tending cuts are often neglected, which may result in a lower production of timber. In Poland, for example, private forest owners clearcut 8000 ha between 1992 and 1995, and high-graded another 45,000 ha in violation of state-mandated management rules (DS, 1996). Average yield in private forests equals only 118 m3 ha−1, compared with 201 m3 ha−1 in state forests (GUS, 1995). This difference results from a larger share of younger stands, poorer sites, and less intensive management in private forests. In Romania, up to 30,000 ha were deforested and nearly 50,000 ha damaged (Bouriaud, 2001). In Slovakia, only about 5% of non-state forests, which account for 57% of the country’s forestland, were managed by their owners in accordance with management plans (Ilavsky, 2001). Contrary to a common perception that private owners tend to overexploit their forests in pursuit of short-term gains, the small forest holdings are less intensively utilized, and in many cases timber harvest from private forests is well below the allowable cut envisioned by management plans (Puustjarvi et al., 1998; World Bank, 2001; Zajac, 2001). As a result, private forests supply proportionally less timber than their

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forestland share would indicate. In Poland, for example, harvest from private forests does not exceed 50% of the allowable cut. The low harvest can be attributed to the lack of knowledge, limited access to markets and subsistence needs. The instances of inadequate management in private forests, however, raise concerns about their long-term sustainability and result in calls opposing their restitution and advocating more stringent regulations. Lack of interest, training and expertise, as well as excessive fragmentation, timber production focus, high time preference and insecure property rights are widely recognized as factors contributing to unsatisfactory management outcomes in private forests. Slowly progressing and incomplete forest ownership changes also contribute to the negative perception of private forest management. Forests without a clearly determined ownership status are generally left unmanaged. State agencies are reluctant to manage forests that will be returned to private owners. Since restitution may take years before private owners take over, management of those forests is neglected. Excessive forest fragmentation is frequently identified as the leading cause underlying limited success of private forestry (MEPNRF, 1997; Csoka, 1998; Solberg and Rykowski, 2000; Ilavsky, 2001; World Bank, 2001; Zajac, 2001). In some countries, the average area of private forest holding is less than 1 ha, sometimes split into more than one parcel. Such a small scale of forest operations indicates that many of them may be composed of just a single stand, making profitable management very difficult. In an effort to resolve some of these problems, many countries encourage the creation of forest associations and provide some assistance for private forests. Educational and technical assistance includes management planning, free seedlings, forest protection and afforestation subsidies. These programmes, however, are not well funded because of budgetary shortfalls (Budzynski and Jastrzebski, 1995; Deacon, 1996; DS, 1996; World Bank, 1999, 2001; Kallas, 2000). While forest fragmentation receives much scrutiny, it is surprising that management rules generally are not questioned. Applied in large, well-managed state forest estates, they are less damaging than in small private forests, where they force the owners to make investments into forest management with little or no promise of positive returns in a reasonable amount of time. The major problem with applying these approaches to forest

regulation rests in failing to recognize that private forestry is not simply a smaller version of large-scale forestry. An average size of a state forest district in CEE is nearly 4000 ha (UNECE, 2000b). The larger scale of production allows income generation on a more consistent basis, sufficient to cover regular forest management costs. State forests can also draw on large capital accumulated in their growing stock. And if this does not suffice, they can resort to state budgets for bailout. To make the situation for private forests even worse, private forest owners need to participate in possibly inequitable timber markets (World Bank, 2001). In most CEE countries, timber markets are dominated by state forest agencies, which supply the bulk of wood (Herbohn, 2001). Woodprocessing industries may prefer to buy wood from state forests, which can guarantee the supply of larger volumes on a consistent basis. In fact, because of possibly higher transaction costs and erratic supply, the industries may refuse to buy timber from small forests. Furthermore, state forests trading very large volumes may be able to secure better prices and transaction terms, not even mentioning the advantages associated with much better market information. Also, local markets where private owners sell most of their wood may be poorly developed, with no competitive bidding. This would be the case in rural areas with undeveloped wood-processing industries. Finally, EU accession and progress in forest certification both increase the competitive pressures facing private forests.

Forest Certification Market-based certification is an initiative aiming at improving the quality of forest management and promoting higher prices or better market access for wood products derived from sustainably managed forests. Certification can be defined as the verification that forest management follows certain forest sustainability criteria through an independent assessment (Nilsson, 2001a). Certification usually has two components: forest management auditing and product labelling (Elliot and Schlaepfer, 2001). The EU accounts for most demand for certified wood products. While demand continues to grow, it remains small compared to the size of the market. Globally, certified wood products

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represent less than 1% of forest products sales (UNECE, 2000a). It was estimated that only about 600,000 m3 of certified wood was available on the European markets in mid-1999, with a potential production of 20 million m3 of certified roundwood per year (UNECE, 1999). Today, certified wood products are sold primarily in 15 EU countries. Market share of certified wood products has reportedly reached 25% in the UK, 4% in the Netherlands and about 1% in Germany (UNECE, 2001a). At the same time, certified wood supply in Europe continues to grow as more and more forests are certified, because of the rapid development of new certification programmes. Today about 80 million ha are already certified in the region (UNECE, 2001a; Vilhunen et al., 2001). It appears that only a small fraction of certified wood is labelled and sold as certified because of weak demand and the inability of some certification schemes to label products derived from certified wood. The largest exporters of certified wood in Europe include Finland, Sweden and Poland. With low or no price premiums for certified products, the rationale for certification includes, for example, access to new niche markets, environmental image promotion and increased credibility with consumers (Hansen et al., 2000; UNECE, 2000a, 2001a; Vilhunen et al., 2001). Final consumers are not very active in creating demand for certified wood products and their role is not expected to grow, at least in the short- to medium-term. The primary force behind a drive to certify forest management is the pressure from environmental groups (Hansen et al., 2000; Vilhunen et al., 2001). The strongest demand drivers remain wood product retailers, who are interested in maintaining or increasing their green image. In addition, public procurement plays an increasingly important role in creating a demand for certified products. Public administrations in the UK, Belgium, Scandinavia, the Netherlands, Germany and Austria have taken steps that favour certified wood. Most common market-based certification approaches in Europe are those promoted by the Forest Stewardship Council (FSC) and the PanEuropean Forest Certification Council (PEFCC). FSC promotes itself as an international nongovernmental organization that promotes responsible forestry and fulfils ecological and social goals, while remaining economically viable. FSC

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has certified about 20 million ha of forestland since its inception; it is making substantial gains in CEE, where it is present in Estonia, Latvia, Romania, Hungary, Slovakia and Poland. In the region, FSC certifies primarily large, state-owned forests geared towards industrial roundwood production, but group certification projects for private owners have been initiated in Latvia and Estonia (Rickwood, 2001). Despite this progress, the FSC-certified forest area in many countries is still relatively small. One exception is Poland, which can be called a certification leader not only in the region but also in the world. The total FSC-certified forest area in Poland is 4 million ha, second in the world only to Sweden with 10 million ha. FSC certification gains in Poland are somewhat surprising. There is little, if any, demand for certified wood in the country (Hansen et al., 2000). While Poland exports some wood, the vast majority of the timber harvest is being utilized domestically (Ballaun, 1996). Even wood exports to the UK, Germany and the Netherlands, where markets for certified wood are relatively better developed, do not explain the substantial certification effort in state forests. Unlike Sweden, this effort cannot be explained by pressure from environmental movements either, as they have fought mostly over the enlargement of existing national parks or over the creation of new ones on state-owned lands. The Polish State Forests, a government agency managing 82% of the country’s nearly 9 million ha of forests, came under pressure in the 1990s when the restitution of private property became an issue. Some political forces proposed the return of nationalized forests to their former owners or even privatizing state forests to meet claims for all nationalized property. Estimates indicated that about 2 million ha of state-owned forests were to be returned to their farmer owners (Trzaskowski, 1999). The Polish State Forests, professional associations and some ecological movements staged a campaign protesting against any of the proposed changes, on the grounds that they would be detrimental to the future of the country’s forest resource. Restitution opponents used forest management outcomes in private forests, including less intensive management and unauthorized harvests, to paint a dark picture of widespread forest decline resulting from forest restitution and privatization. The Polish State Forests wanted to demonstrate that they are well enough trained and equipped, and responsible enough to manage state

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forests and retain their dominant position in the country. In these circumstances, FSC proposals to certify state forests were well received. Additional incentives included initial FSC assessments carried out at no cost to the state forests. But, most importantly, FSC certification did not require any forest management changes which could make the process potentially much more expensive. The only required corrective action resulting from FSC assessments was to disseminate information about FSC certification throughout the forest administration (Kiekens, 1998). In this way FSC expanded its market share, while the Polish State Forests improved their image, helping them defeat the attempts to curtail their dominant position. Since the certification is fast, convenient and cheap, it is quite likely that all state forests in Poland will become certified soon. It is clear, however, that FSC certification in Poland did not change or improve state forest management. Current FSC certification schemes appear to hurt private forest owners in Poland. First of all, certification is used to demonstrate the superiority of state forest management, which creates a negative climate for making changes in forestry laws that would actually help to improve private forest management. It is estimated that wood products derived from timber harvested from certified forests have about a 20% market share, although these products are not generally labelled as certified (UNECE, 2001a). State forests produce certified wood in sufficient quantities to meet the supply requirements of many large firms. At least two of them – the Krono Group, a leading producer of wood-based panels, and Ikea, a leading furniture manufacturer – advertise in some manner the use of certified wood in their products. But if most of their production is based on certified wood, then the firms may be less willing to buy uncertified wood from private forests. While FSC claims that these two firms create a demand for certified wood in Poland, the truth is far more trivial. Forest management and timber harvesting were certified for other policy reasons; these firms simply take advantage of it, especially because there is no need to pay a price premium for certified wood. However, unfair markets may decrease the already meagre incomes of private owners and reduce outlays for forest management, limiting both rural employment and the ecological benefits that the FSC wants to promote through

certification. In the end, FSC certification of state forests in Poland discriminates against small-scale private owners and does little to address the underlying causes of negative management outcomes in private forests. This outcome is similar to that observed in Sweden, where private forests have also been disadvantaged by FSC certification (Elliot and Schlaepfer, 2001). While FSC also tries to develop certification schemes for small private forests, these efforts are in their initial stages. First, FSC would have to develop certification standards and effective procedures for groups of very small properties and define the ecological and social standards to be followed. Otherwise, certification will remain a rather expensive, time-consuming and complex undertaking for private forest owners. On the other hand, small production, limited market access and no demand for certified wood generate little interest among private owners in becoming certified. The participation of private forest owners in the development of FSC certification standards to be applied in their forests is currently very limited. FSC certification has favoured large-scale industrial forest holdings, but in the EU more than half of timber harvest comes from small-scale private forests. This situation has led to the development of an alternative certification scheme. The PEFCC Process, which has been focused on developing group certification approaches for small forest owners, was launched in 1999. This is a voluntary, democratic and private initiative that provides assurances to customers that the wood products they buy come from sustainably managed forests according to Pan-European criteria defined in the resolutions of Ministerial Conferences on the Protection of Forests in Europe. Participating countries are able to develop their own certification systems in compliance with the Pan-European criteria. This added flexibility may help in better addressing country-specific needs and conditions for certification. In early 2000, organizations from 17 primarily EU countries participated in the PEFCC Process, while several others expressed an interest. At present, 38 million ha of forestland are certified in Europe (PEFCC, 2001). The process has won support from forest associations, which represent 12 million owners, as well as forest industries and trade organizations. The PEFCC approach may be better suited for private forests in CEE. But first, organizations that can become a part of this process

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need to be established in Poland and other CEE countries. While there is no formal reason why FSC and PEFCC cannot coexist in the same country, the dominance of one system makes it difficult for the other to enter. Mutual recognition of various certification schemes remains elusive despite several attempts to facilitate progress. Despite impressive gains in PEFCC certification, FSC continues to be the dominant system in the marketplace because of strong backing from environmental groups and large retailers and the lack of labelled certified forest products under alternative certification schemes (Hansen et al., 2000; Vilhunen et al., 2001).

Impact of EU Accession on CEE Private Forestry Forest policy and legislation in CEE are little affected by EU accession talks, primarily because the EU has not developed a comprehensive common forest policy. Broad forest policy objectives are quite similar in EU and CEE countries because they follow from the Rio agreements and the Pan-European Forestry Process (Csoka, 1998). As a result, forestry is not even mentioned in pre-accession documents, and it appears that EU membership will bring only small changes in forest policies (Flasche, 1998). While some forestry subsidies are available in the EU, their level is relatively low and regular timber production is subjected to free market rules. Current EU members also use similar policy instruments to support private forests (Kaczmarek et al., 1998). These include state subsidies, low interest loans, favourable taxation, technical assistance and education. It appears that CEE approaches towards private forests will change little, but they may become better funded if part of larger EU packages. The EU supports some forestry programmes in CEE using pre-accession funds, including educational programmes, institutional building, and afforestation with funding from the PHARE and SAPARD programmes (Eisma, 1998). EU member states have not supported the development of a common forest policy because the forestry sector has worked quite well within the market economy, there is a considerable diversity of forest conditions and management approaches that make an agreement difficult, and some

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member states feared that such a policy will result in a situation similar to that in agriculture, where agricultural sector subsidies have increased their contribution to the EU budget (Eisma, 1998; Hyttinen, 2001). In this situation, EU forestry actions are pursued by policies that are applicable to agriculture, competition, harmonization, trade and environment. Most of the existing EU regulations deal primarily with afforestation, forest statistics, biodiversity, and protection against fires and diseases (FAO, 2001). The accession of Austria, Sweden and Finland in 1995 roughly doubled EU forest resources and increased the need to coordinate EU forest actions. In 1997, the European Parliament approved an EU forestry strategy, which envisions common support for forest protection, sustainable forest management and promotion of EU wood-processing industries. The accession of CEE countries and a further enlargement of EU forest resources may provide enough stimuli for another attempt at developing a common forest policy. Since timber markets have been liberalized in CEE and prices have already approached average European levels, the impact of EU membership on prices will initially be quite small. Timber and wood-products trade between EU and CEE applicants is duty-free, and EU accession is not expected to affect price formation significantly. A comparison of timber prices in Austria in the pre- and post-accession periods with prices in Germany (EU member) and the Czech Republic (EU candidate) shows that prices in all three countries moved in a similar manner (Puwein, 1998). EU tariffs for non-member countries do not exceed 10% of wood-products trade value. If CEE countries erected high tariffs for wood imports from non-member countries, then after accession prices may actually fall. In the longer term, one may expect a greater impact from the participation in the single market, which is based on principles of free movement of goods, services, labour and capital. Foreign capital has already played an important role, which is expected to continue into the future, in modernizing wood-processing industries in CEE and providing better access to European wood markets. The single currency will help to eliminate currency risks. In addition, the development of transportation networks is expected to decrease shipping costs. The EU assumes that road transport deregulation will decrease shipping rates by as

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much as 5% (Puwein, 1998). The elimination of border controls among member states will work to lower transport costs even further. While these outcomes will exert additional pressure on CEE wood-processing industries to restructure, they also will create more competition for timber produced in state and private forests.

The Future of Private Forestry CEE forest ownership will remain dominated by public forests in the foreseeable future. As the restitution progresses, private forest area will increase moderately. But once this process is completed, further increases will be limited and private forests can be expected to account for about one-third of the region’s forestland. Any further increases will have to come from afforestation of agricultural land, which becomes increasingly available as market reforms in the agricultural sector result in removing marginal lands from production. Since forest cover in many countries is low, governments would like to increase the area of forestland. Poland alone has plans to afforest 350,000 ha of state-owned land and 700,000 ha of private land (MOSZNL, 1995). The feasibility of these plans, however, rests on the state’s support, which is unlikely to reach sufficient levels. Governments generally do not consider any large-scale privatization of the remaining state forests and it is unlikely that they ever will. A shift towards forest management based on broadly interpreted sustainability criteria makes the privatization of state forests grossly unpopular. State forests are much more responsive to policy changes and administrative actions, which makes the implementation of various environmental initiatives a much easier task. Private forests are not only less responsive to policy actions but also have a bad public image. Private owners are seen as being driven by income objectives, generally disregarding conservation values. Negative management outcomes in private forests support this view. And even if private forest owners were committed to closely following management regulations, they would still fail because their resources are not sufficient to sustain such management. In contrast, state forests are considered to be the examples of good stewardship. Furthermore, most countries have a longstanding tradition of granting open

access to forest resources. Society will be unlikely to support the privatization of state forests, if new private owners were allowed to restrict access to their forests. Excessive fragmentation of private forest holdings will remain a problem. This negative outcome of the restitution programmes could have been to some extent avoided if the need to consolidate forest holdings was factored in. Instead, some programmes imposed explicit limits on the amount of forestland that can be returned. Since the restitution is well advanced, it is unlikely that any changes promoting private forest consolidation will be made in restitution laws. In this situation, governments generally encourage voluntary consolidation processes through the creation of forest cooperatives and owner associations. Private owners, however, are reluctant to create them and forfeit newly acquired property rights. It is obvious that this process will take a substantial amount of time before effective approaches are developed. Forest investment in private forests will continue to lag behind state forests. The shift to ecological principles in forest management implies that private forest owners will have to cope with higher production costs while participating in inequitable markets. As long as cost-efficient management approaches allowing profitable management in private forests are not developed, this situation is likely to continue. If genuinely interested in increasing investment in private forests, governments should remove the many disincentives that are present in current regulatory approaches and help owners to cope with other developments decreasing the competitiveness of private forestry. SFM principles were adopted by forest policies to promote environmental conservation goals. Private forests are often criticized for not following forest regulations, the critics alleging that their management is not sustainable. The consequences of failing to follow forest management regulations on SFM are less clear, and environmental impacts are mixed. A mosaic of small private forests coupled with random decision making may actually provide some benefits and increase landscape diversity, especially in comparison with uniformly managed large state forest estates. These may include more diverse wildlife habitat and increased number of animal and plant species. On the other hand, such a mosaic will be likely to make landscape-level ecological management more difficult.

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Timber supply in both state and private forests in the region will continue to grow. This outcome is implied by the rules used to determine harvest levels and the age structure of forest resources. Many forests, were planted following World War II. These forests will soon be reaching their final production stages. Since final harvest takes place in old forest stands, the harvest will increase with more stands reaching older age classes. Currently, annual removals amount to about 90 million m3 while inventory growth exceeds 180 million m3 (UNECE, 2000b). It follows that timber harvest is less than 50% of forest growth, indicating that there are substantial opportunities for increasing timber harvest without threatening its sustainability. The growth of the timber harvest in private forests will probably be lower than in state forests. Private forests are managed less intensively and their average age and yield are lower than in state forests. As a result, there will be less timber to be harvested. Timber harvest in private forest may further be limited by the location and shape of forest holdings. Finally, private owners will be participating in increasingly inequitable timber markets. Today, timber markets in many countries are dominated by state forests, which possess substantial market power resulting from trading large volumes of timber, long-term supply agreements with wood-processing industries, and much better market intelligence. Forest certification can also discriminate against uncertified forest owners. These factors indicate that private owners may have problems in selling their timber at competitive prices, which in turn may affect their propensity to harvest. At the same time, the regional timber demand is expected to grow. Average wood product consumption in CEE is much lower than in the EU. The annual per capita consumption of paper and paperboard in CEE is about 62 kg, which amounts to only about one-third of the per capita consumption in major EU countries (Valtanen, 1998). Growing regional economies will strengthen consumer demand. Indeed, CEE countries are seen as having a substantial forestproducts market growth potential (Nilsson, 2001b). Progressing economic reforms, freer trade, lower labour costs and foreign investments have helped to modernize wood-processing industries and to increase the production of value-added wood products for domestic and export markets. Strong

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domestic demand and rebounding exports have helped CEE forest product markets to outperform other European regions in 2000 and early 2001 (UNECE, 2001a). It is apparent that forest sectors and policies in CEE countries at present are, and will continue to be, influenced by non-domestic factors such as the Pan-European Forestry Process, forest certification, EU accession and global trade liberalization. Their impact can be attributed either to structural economic forces associated with growing levels of trade, finance and investment (globalization), or to the increased role of international initiatives and organizations that use international rules, agreements and markets to promote their agenda and influence the development of domestic policies (internationalization) (Bernstein and Cashore, 2000). Globalization forces have apparently benefited CEE private forest owners so far by increasing demand for timber. Globalization has promoted trade liberalization, increased forest products exports and modernization of wood processing industries with significant foreign capital involvement. Internationalization, on the other hand, appears to have harmed private forest owners by supporting management rules that are ill-adapted to small private forests and by advancing certification of state forests, which may discriminate against private owners who are unable to certify. While CEE timber markets will continue to benefit from further industry development, growing consumer demand, lower labour costs and sufficient timber supply, some of these advantages will diminish in the future and the roles of globalization and internationalization may change. The reason is that the economic viability of forest management across CEE and the rest of Europe is becoming a major cause for concern (Hyttinen, 2001; Lillandt, 2001; Saastamoinen and Pukkala, 2001; Stampfer et al., 2001; UNECE, 2001b; World Bank, 2001). While CEE forests have some low-cost advantages, management costs will eventually approach European levels. Lower trade barriers, improved transportation logistics and increasing competition from low-cost industrial fibre plantations may further strain the economic viability of forestry in Europe. At the same time, forest industries are consolidating in order to benefit from scale economies and so are forming large buyer groups, exerting substantial market power that may put small producers at a

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disadvantage. With global purchasing, forestproducts industries may move to cost-efficient suppliers such as fast-growing industrial plantations in tropical and sub-tropical regions. Also lower labour costs may encourage them to move some of their manufacturing operations to lowercost regions. In such a situation, forest certification may be used as a non-tariff trade barrier. This is because higher wood production costs in Europe are often justified by higher environmental standards that are not observed in other regions (UNECE, 2001b; World Bank, 2001). In such a situation, certification may be used to create a level playing field by restricting market access for timber that was produced using environmental standards lower than those in Europe.

Discussion and Conclusions The development of private forests in CEE is impeded by their excessive fragmentation, restrictive forest management rules, restricted access to timber markets and limited resources of private owners. Forest restitution was undertaken to serve historic justice by returning forest property to their former owners. This process, however, has been carried out with little concern for sustainability and competitiveness of private forests. Restrictive forest management rules and increasing focus on environmental and social goals mean higher production costs at a time when public support for private forests is reduced. Fair market access also becomes a challenge in regions dominated by large industries on the demand side and state forests on the supply side, or regions with poorly developed markets making timber sales at competitive prices difficult. Finally, market-based initiatives such as certification are becoming increasingly common and may discriminate against small forest owners. Since forest owners are poorly organized, they lose the ability to exert more market power and trade in larger volumes through joint marketing. While excessive fragmentation of private forests justifies government efforts supporting their consolidation, it is apparent that the minimum efficient scale of forest operations is currently unknown. These efforts will become more meaningful after determining how big a forest cooperative has to be in order to benefit from scale

economies. It may be possible that in the current regulatory environment, private forest organizations need to approach the size of large state forest estates or industrial forests in order to reap any significant benefits, although this is unlikely. But on the other hand, even today large state forest estates are experiencing problems in remaining profitable. Forest income is essential for private owners and their ability and willingness to invest into the management of their forests. Yet it is clear that CEE forest management rules have little in common with profitability and economic efficiency. To improve private forest management, these rules must be revised. It is surprising that while entire forest policies have been rewritten to give them environmental focus, technical management rules determining harvest levels and silvicultural treatments were left virtually untouched. These rules make timber growing unprofitable in both private and state forests, putting in serious doubt the long-term competitiveness of the forest sector and the provision of environmental and social benefits, which are frequently financed by timber revenues. Well-targeted government assistance may alleviate some of these problems, but will not suffice without making substantial forest management changes. One approach that may work would be to rely on market forces in forests managed primarily for timber. Market prices can be viewed as tools providing information about resource scarcity that invoke appropriate market and investment responses. For this approach to work, some management regulations need to be relaxed. This requirement applies particularly to rotation length. Allowing for shorter rotations may help to stimulate private investment. In private forests, which fulfil important environmental functions, this approach is less likely to work, especially if forests provide benefits that the owners cannot capture. Such benefits may include wildlife habitat, watershed, soil conservation, and recreational and aesthetic values. These benefits may actually be a good reason for providing subsidies and incentives such as various easement programmes. If owners are not interested in management of forests that yield substantial environmental benefits, then buy-outs may be offered. This approach would result in confining subsidies to forests where they are most needed. The policy process needs to recognize that private forests differ from state forests in many

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aspects, including their size and management objectives. Policy makers need to decide what the role of state forests is and what the role of private forests is. Private owners have to be a part of the process. Policy makers need to determine what is feasible and desirable in private forests. They should clearly recognize that the behaviour of private owners who do not follow current regulations is caused not by their perceived greed or irresponsibility but by the lack of other options. If a firm cannot generate sufficient revenues from its operations, it goes out of business; if a private owner is unable to follow management rules because of insufficient forest income, then that owner stops carrying out those operations. If owners are expected to address environmental goals, then some compensation for them needs to be considered. But then we do not know how real the non-timber benefits from small private forests are. The situation of private forests also needs to be considered in the development of international agreements, standards and policies to make sure that private interests are represented and that private forests can also benefit from them. Reforms of forest policy and ownership structure in CEE represent an enormous task. The range of policy options and tools available is as impressive. Yet very few studies exist which analyse benefits, costs and effectiveness of various policy instruments. We know little about changes that are most appropriate and the extent to which they need to be carried out in order to achieve policy goals. Low profitability of forest production is automatically justified by ecological benefits, whose extent is often unknown. It is yet to be clearly defined what sustainability or biodiversity protection means for a small private forest. New SFM dimensions present new challenges to the management of small private forests and require new regulatory and planning approaches, as well as a much better understanding of economic, social and environmental dimensions of SFM principles. At present, nearly all efforts are devoted to ecological goals of forest management. CEE experiences with private forests indicate that such a focus is probably too narrow and even counterproductive. Competitive pressures will continue to mount and it will be increasingly difficult to sustain viable forest operations. It is time to recognize that economic viability is also a necessary condition for making SFM a true success.

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implementation in Albania. Forest Policy and Economics 1(2), 153–163. Lillandt, M. (2001) Forest Management Association – a major tool to promote economic sustainability of family forestry. In: Niskanen, A. and Vayrynen, J. (eds) Economic Sustainability of Small-Scale Forestry. EFI Proceedings 36, 93–100. MASR (2000) Report on Forestry in the Slovak Republic (Green Report). Ministry of Agriculture of the Slovak Republic, Bratislava, Slovakia. MEPNRF (1997) National Policy on Forests. Ministry of Environmental Protection, Natural Resources and Forestry, Warsaw, Poland. MOSZNL (1995) Krajowy Program Zwiekszenia Lesistosci [National Afforestation Programme]. Ministerstwo Ochrony Srodowiska, Zasobow Naturalnych i Lesnictwa, Warsaw, Poland. MRGZ (1988) Zasady Hodowli Lasu [Silviculture Rules]. Wydanie V znowelizowane. Ministerstwo Rolnictwa i Gospodarki Zywnosciowej. PWRiL, Warsaw, Poland. Nilsson, S. (2001a) Forest Policy, Criteria and Indicators. Interim Report IR-01-024. International Institute for Applied System Analysis, Austria, October. http://www.iiasa.ac.at/docs Nilsson, S. (2001b) The Future of European Solid Wood Industry. Interim Report IR-01-001. International Institute for Applied System Analysis, Austria, October. http://www.iiasa.ac.at/docs PEFCC (2001) PEFCC Newsletter 8 (October). Pan European Forest Certification Council. Luxembourg, October 2001. http://www.pefc.org/News8.htm Puustjarvi, E., Kallas, A., Karpinnen, H. and Onemar, A. (1998) Revitalization of Estonia private forestry. In: Glueck, P., Kupka, I. and Tikkanen, I. (eds) Forest Policy in the Countries with Economies in Transition – Ready for the European Union? EFI Proceedings 21, 131–141. Puwein, W. (1998) Impact of the EU membership on timber prices. In: Glueck, P., Kupka, I. and Tikkanen, I. (eds) Forest Policy in the Countries with Economies in Transition – Ready for the European Union? EFI Proceedings 21, 21–26. Rickwood, P. (2001) Counting on the Forest: FSC in Eastern Europe. World Wildlife Fund, October. http://www.wwf.org Saastamoinen, O. and Pukkala, T. (2001) The challenges of small-scale forestry in Finland: policy and planning perspectives. In: Niskanen, A. and Vayrynen, J. (eds) Economic Sustainability of SmallScale Forestry. EFI Proceedings 36, 107–117. Solberg, B. and Rykowski, K. (2000) Institutional and legal framework for forest policies in ECA region and selected OECD countries-a comparative analysis. Forest Policy Review and Strategy Development: Analytical Studies/Issues Paper. World Bank, October 2001. http://www. worldbank.org

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Solymos, R. (2000) Afforestation programs in Hungary. In: Weber, N. (ed.) Proceedings of NEWFOR – New Forests for Europe: Afforestation at the Turn of Century. EFI Proceedings 35, 167–174. Stampfer, K., Duerrstein, H. and Moser, A. (2001) Smallscale forestry challenges in Austria. In: Niskanen, A. and Vayrynen, J. (eds) Economic Sustainability of Small-Scale Forestry. EFI Proceedings 36, 177–184. Trzaskowski, S. (1999) The Forest in Good Hands. General Directorate of the State Forests, Warsaw, Poland. UNECE (1999) ECE/FAO Forest Products Annual Market Review, 1998–1999. Timber Bulletin, 52, ECE/TIM/ BUL/52/3. United Nations, July 2001. http:// www/enece.org/trade/timber UNECE (2000a) ECE/FAO Forest Products Annual Market Review, 1999–2000. Timber Bulletin, 53, ECE/TIM/ BULL/53/3. United Nations, October 2001. http://www/enece.org/trade/timber UNECE (2000b) Forest Resources of Europe, CIS, North America, Australia, Japan and New Zealand. Geneva Timber and Forest Study Papers ECE/TIM/SP/17. United Nations, October 2001. http://www/ enece.org/trade/timber UNECE (2001a) ECE/FAO Forest Products Annual Market Review, 2000–2001. Timber Bulletin, 54, ECE/TIM/ BULL/54/3. United Nations, October 2001. http://www/enece.org/trade/timber

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UNECE (2001b) Forest Policies and Institutions in Europe 1998–2000. Geneva Timber and Forest Study Papers, ECE/TIM/SP/19. United Nations, October 2001. http://www/enece.org/trade/ timber Valtanen, H. (1998) Impact of membership of the EU on the forest industry sector. In: Glueck, P., Kupka, I. and Tikkanen, I. (eds) Forest Policy in the Countries with Economies in Transition – Ready for the European Union? EFI Proceedings 21, 43–52. Vilhunen, L., Hansen, E., Juslin, H. and Forsyth, K. (2001) Forest certification update for the ECE region, Summer 2001. Geneva Timber and Forest Discussion Papers, ECE/TIM/DP/23. United Nations, October 2001. http://www/enece.org/ trade/timber World Bank (1999) Economic Evaluation and Reform of the Forestry Sector, Romania. World Bank. World Bank (2001) Non-industrial private forests ownership/privatization process. Discussion note. Prepared by Indufor Oy, Draft 2, October 2001. http://www.worldbank.org Zajac, S. (2001) The economic and social role of small-scale (private) forest holdings in Poland. In: Niskanen, A. and Vayrynen, J. (eds) Economic Sustainability of Small-Scale Forestry. EFI Proceedings 36, 71–79.

10

Redesigning Forest Policy Tools Under a Transitional Economy Setting Maksym Polyakov and Lawrence Teeter

Forest Policy Center School of Forestry and Wildlife Sciences, Auburn University, Auburn, AL 36849-5418, USA

Introduction

Ukrainian Forest Policy

Transition to a market economy implies that forest management (even when conducted by state forestry enterprises) must be conducted in a business-like manner, with the goal of maximizing economic efficiency, and should be independent of the direct influence of authorities (Ferenc, 1995). At the same time, governments or forestry regulatory agencies should set up a framework for forest management that will ensure taking into account societal needs for ‘intangibles’ produced by forests, i.e. by compensating for market failures. Development of forest policies in European countries shows a clear tendency toward a unified approach to supervision and control of forest management in corporate, state and private forests. Most European countries use a balanced mix of forest policy tools (Merlo and Paveri, 1997) with regulatory tools playing a significant role. Examples of widely used regulatory forest policy tools are restrictions concerning stocking levels, the timing of final fellings, and allowable cuts (Wernerheim, 1988). In this chapter we discuss the regulation of allowable cut within the system of forest policy tools, analyse the current system of annual allowable cuts in the Ukraine, propose a method which will comply with the goals for transition to a market economy, and present implications of its use for timber resources utilization.

Background Ukraine is one of the largest European countries in area, size, population, natural resources and economic potential. In size and population it is comparable with France. Ukraine boasts an enviable range of natural resources but nevertheless is seriously dependent on imports of products such as timber, wood, paper and oil. The value of Ukrainian forest resources is estimated as 4.2% of the total value of the country’s natural resource potential (Rudenko, 1993). According to the State Forest Cadastre (Ukrderzhlisproekt, 1997) in 1996 the share of forest-covered lands was 15.6% while an optimal figure is estimated as 20–25%. This puts Ukraine in line with those European countries such as Germany, France, Italy and the UK, which are not self-sufficient for forest resources and are net importers of timber and wood products. Forests are unevenly distributed across the country (see Fig. 10.1). The most forested regions of Ukraine are in the north and west, primarily due to climatic conditions. Forests as a source of wood supply play a significant role in the economies of these regions.

©CAB International 2003. Forest Policy for Private Forestry: Global and Regional Challenges (eds L. Teeter, B. Cashore and D. Zhang)

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Fig. 10.1.

Percentage of forest cover in Ukraine.

Goals and tools There is no single document detailing forest policy in Ukraine, although the main principles of forest policy are outlined in the Forest Code of Ukraine (Ministry of Forestry, 1994). In particular, it states that ‘Ukrainian forests are national assets and they fulfil mainly environmental, aesthetic, pedagogical and other functions, have limited exploitational value and are subject to state accounting and protection’. Other goals, mentioned by Samoplavsky (1997), are:

• • • •

an increase of forest-covered area up to an optimal level for every natural zone; conservation of the biodiversity of forest ecosystems; an increase in forest ecosystems’ resistance to negative environmental factors including climate change and increasing anthropogenic load, forest fires, diseases and insect pests; rational, inexhaustible use of forests in order to satisfy wood demands of the internal markets of the country;

•

amelioration and forest cultivation in the steppe.

Thus, policy goals have been expressed, although conflicts between such statements as ‘primary environmental functions of forests’ and ‘need to satisfy local demand for wood products’ are yet to be resolved. Concerning instruments of policy implementation (we will use a classification proposed by Merlo and Paveri (1997)), Ukraine relies mostly on mandatory (regulatory, administrative) and partly complementary (mainly education) tools, almost completely ignoring voluntary (financial-economic and market) tools. This situation is not surprising for an economy in transition. The main regulatory policy tools control harvests in order to achieve a continuous wood supply and provide environmental benefits by zoning, protecting forests in certain areas, and specifying rotation ages, minimal stocking levels and allowable cuts. Because our primary interests are allowable cuts, we will discuss their determination in detail and for analysis purposes will consider other elements as given (i.e. constant).

Redesigning Forest Policy Tools

Current system of allowable cut regulation According to the Forest Code (Ministry of Forestry, 1994), ‘calculated cut’ (later – allowable cut) is the annual rate of final fellings. Allowable cut is calculated in the course of forest management planning which takes place every 10 years. It is determined and approved for each permanent forest holder1 separately within groups of forests and groups of species. It must satisfy requirements of: (i) continuous; (ii) inexhaustible (sustainable); (iii) economically efficient forest-resource utilization; and (iv) maintaining the reproductive capability and high productivity of forest stands and their ecological values (Ukrderzhlisproekt, 1996). In practice, the elementary unit of allowable cuts calculation is the working section2 within the working part3 of an individual forest holding. Cuts are calculated for each individual working section on an area basis using a combination of formula methods and applying the restrictions listed above. Sums of cuts, calculated for the working section and converted to volume units, comprise allowable cuts of each forest holder by forest groups and groups of species, as required by the government regulations. Allowable cuts are subject to approval by the Ministry of Environmental Protection and Nuclear Safety (Ministry of Forestry, 1994; Ministry of Environmental Protection and Nuclear Safety, 1997) and are then aggregated to the level of oblasts4 and finally to the national level. Annually the Cabinet of Ministers issues an order concerning limits of the ‘cutting fund’5 at the national level and by oblasts and groups of forest holders. These limits determine simultaneously both the plan and the maximum level of fellings and are distributed downwards to the level of each individual forest holder.

Regulatory Tools of Forest Policy It is assumed that profit-maximizing rational private forest owners/holders in a market economy require higher rates of return on forest capital than the ‘social’ discount rate and may overexploit forest resources and underproduce amenity services vis-à-vis the socially optimal level. Mitigation of such effects is often one of the main goals of state forest policies. Different countries

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have devised a broad variety of forest policy tools to achieve this goal. Some of these tools, referred to by Merlo and Paveri (1997) as economicfinancial, ‘aim at convincing people to implement certain measures in exchange for various economic advantages’. The examples are various compensations to the forest holders for the cost of achieving desired social goals, or tax concessions/ credits/exemptions, which make certain silvicultural activities (like planting) less economically onerous to the holders. The other class of tools is ‘judicial mandatory’ or regulatory forest policy tools. These tools are environmental standards and licences, codes of practice, mandatory forestry management planning, restrictions such as annual allowable cut, maximum clearcut area, minimum cut age and prohibition of certain silvicultural practices. Consistent with the goals of forest policy mentioned above, periodic allowable cut for final fellings should define an upper limit for fellings from the point of view of society’s needs for the protective, environmental and other social or amenity functions of forests. The level of harvesting planned by a forest holder (management agent), may be slightly higher or lower in any given year, depending on market conditions and his time preferences. However, the maximum allowable cut determined by the regulatory agency for the planning period (e.g. decade) should not be exceeded. As mentioned earlier, forest policy implementation in Ukraine relies mostly on regulatory policy tools, which are too restrictive, with almost no economic-financial tools. For many years forest holders (most of which are forestry enterprises) used to work in conditions where almost every strategic decision was directed from the centre, which is inconsistent with the principles of a market economy. Thus, transition will require shifting the emphasis from regulatory to economic-financial tools in order to achieve a more-or-less balanced mix of forest policy tools. This implies, among other things, relaxing, where possible, the burden of ‘judicial mandatory’ or regulatory forest policy tools, while making sure that the key social objectives of forest policy are not jeopardized. Before proposing changes to the Ukrainian system of allowable cut regulation, we would like to know how these forest policy regulatory instruments work in countries with market economies. First we restricted our attention to European countries, where, despite the dominance of private forest

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ownership, states traditionally impose a number of restrictions on the forestry activities of private forest owners. We found that Swedish forest policy has a similar set of regulations influencing harvests as those found in the Ukrainian system. Namely, Swedish forestry legislation defines restrictions concerning minimum stocking level during the rotation, rotation age and maximum allowable harvest quantities during certain periods (Wernerheim, 1988; Skogsstyrelsen, 1998).

Regulatory forest policy tools in Sweden Since our primary interest is in harvest rationing, we will first describe this aspect of Swedish forest policy. The Swedish Forestry Act states that ‘In order to promote a normal age distribution of forest stands on large forest holdings, the Government, or public authority designated by the Government, may specify the maximum allowable percentage of the forest holding6 to be felled during a given period’ (Skogsstyrelsen, 1994a). First of all, regulation defines the minimum allowed cut age (Skogsstyrelsen, 1994c), and harvested area is limited by availability of stands older than this age. Minimum allowed cut age depends on species, climate zone and site index, and can vary from 45 to 100 years. Additional restrictions concerning allowed cut area apply to forest holdings depending on their size (area of productive forests). For forest holdings exceeding 50 ha, fellings should not result in the area of clearcuts and stands younger than 20 years to become more than 50% of productive forest lands (Skogsstyrelsen, 1994b). For forest holdings larger than 1000 ha, allowable annual felled area (allowable cut) is (i) determined by multiplication of area of productive forests by an area coefficient, which is the reciprocal of rotation age for dominant site index, and (ii) an adjustment coefficient, which reflects the unevenness of the stands’ age structure. This adjustment coefficient varies from 1.4 for forest holdings with less than 25% of the forest older than rotation age to 2.8 for forest holdings where the older stands comprise more than 75% of the productive forest’s area (Skogsstyrelsen, 1994b). Area, felled during any 5 subsequent years, should not exceed five annual allowable felled areas. In addition to all these restrictions, fellings in any year should not exceed 1.5 times annual

allowable cut for forest holdings larger than 5000 ha. The system is fairly simple and easily understood. As a whole forest policy, it applies equally to all types of forest owners, taking into account differences in size. Because it is designed for a market economy, regulatory tools are working together with other forest policy tools to give forest owners more freedom in choosing among management alternatives than in systems designed for a centrally planned economy. A summary of the desirable features of the Swedish system that should be kept in mind while redesigning forest harvesting regulations for an economy in transition include:

• • • • •

the system uses a simple area control method; allowable cuts are calculated on the basis of the whole forest holding; allowable cuts limit the maximum level of wood harvesting; regulation equally applies for all types of ownership; and the sizes of forest holdings are taken into account.

Method Proposed approach to allowable cut regulation Having said that ‘allowable cut’ and ‘planned cut’ should be determined, targeting slightly different goals, we would like to discuss differences in approach to their determination, and propose changes to the currently used system for determining allowable cut in Ukraine. The requirements for continuous and inexhaustible forest utilization defined by the Forest Code (Ministry of Forestry, 1994) are reasonable from both ecological and economic points of view. But their application to determination of allowable cuts for individual working sections of different sizes can be problematic. This is particularly evident for numerous small working sections, which cannot be regarded as the subject of continuous forest management. Consider the requirements for an even-flow wood supply from the point of view of the national and regional economies. Important issues here are providing jobs and sustainable timber flows to the

Redesigning Forest Policy Tools

forest industry. Concerning the issue of providing jobs, it is sufficient to ensure an even flow of wood harvest at the regional level, regardless of harvest fluctuations that may occur within individual working sections and working groups. For the purposes of public forestry regulation, allowable cut levels should be applied regionally to the administrative district or oblast, and not to the working section or working group. The necessity to review the approach to and object of allowable cut calculation was pointed out by Orlov (1928) and Svalov (1969). Recommendations concerning the appropriate unit for calculating allowable cut were given at an FAO seminar devoted to market reforms of the forest sector in Eastern Europe (Ljungman, 1995). In order to be effective, allowable cuts determination must be non-ambiguous. Determination of allowable cuts according to the current methodology in many cases requires a choice between several options using expert judgement. This might be considered quite reasonable if allowable cut is an instrument of an owner’s or holder’s forest management plan because it allows the manager to react to changes in conditions such as changes in demand for certain log grades. But such an approach is inappropriate for determination of allowable cuts as an instrument of public regulation of forest activity and state forest policy. Which dimension could be more appropriately used for determining maximum allowable cut? Or, put another way, how should allowable cuts be measured? Rudzkiy (1906) wrote that when raising a question concerning even-flow timber utilization it is impossible to rely on either volume or on quality of timber, and necessary to look for another dimension, more simply understood and easily determined. He suggested that area of annual fellings is such a measure. Although the forest industry is more concerned with the volume of commercial wood, the precision of volume determination is significantly lower than the precision of area determination. Furthermore, different methods are used for volume determination for forest management planning and logging, which lead to deviations including systematic ones. Finally, area is much simpler and can be more reliably supervised ex post. Consequently, the most reasonable means of regulating maximum allowable cut, especially in locations where clearcut silviculture dominates, is annual or periodic area cut.

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As a final point, we are proposing the following directions of change in the Ukrainian system of regulating allowable cut for final fellings:

• • •

allowable cut should define the maximum area of final fellings; the requirement of non-declining yield should be applied for relatively large regions; determined allowable cut should be distributed among forest holders proportionally to the availability of mature stands.

Next we describe a method of calculating such allowable cuts, based on data available from Ukrainian forest inventory and forest management planning.

Aggregation Consider application of the requirements for inexhaustible and continuous use to an individual working section consisting of N age classes K years long, with areas for age classes si and rotation age K × N. Age classes are indexed backwards so that sN represents the area of the youngest class and s1 the area of ‘mature stands’ equal to the area of the ‘rotation age class’ plus areas of all the older age classes. Then for each of N calculated cutting areas Ln, Ln =

1 K ×n

n

∑s i=1

i

1≤n≤N

(1)

will ensure that even cuts flow during the time period equal to n age classes. Equation (1) is the general form of formulae used in practice by forest management planners to determine planned cut area. Determination of an allowable cut quantity satisfying conditions of continuous non-declining inexhaustible forest utilization can be expressed by: n  1  1≤n≤N (2) L =min si  ∑  n  K ×n i = 1   Felling of an area calculated according to Eqn (2) in each future period will assure annual cut to be non-declining and converging to normal as well as ensuring that only mature forest stands are harvested (Komkov et al., 1980). This formula is an analytical representation of a graphical method offered by Abramovich (1960, 1963).

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j   Now let us consider a system of M working s ij , if i ≤ N    1 M n  j N sections, where s i represents the area of the ith age L =min  1 j j  ∑ ∑ n  K ×n j = 1 i = 1  ∑ s k , if i >N  class of the jth working section. Komkov et al. (1981)  N k=1   have shown that for the system of M working j j: (5) 1≤ n ≤ N max sections with identical rotations K × N j n  1 M n  M   1 This method will allow calculation of the j j min ∑ ∑ s i ≥ ∑ min ∑ s i  non-declining maximum annual felling area for n   K ×n j = 1 i = 1  j = 1 n  K ×n i = 1  the whole administrative region, where the forest 1≤n≤N (3) is held by numerous forest holders, and each holding is divided into several working sections The difference between the left and right sides with different rotation ages. Once calculated for of Eqn (3) was called the system effect (∆), the region, a proportionate distribution of the which could be greater than or equal to zero. allowable cut among forest holders can be done Specifically, ∆ = 0, when the working sections based on the availability of mature stands. composing a system have an even age distribution, or when the age distributions are uneven but identical. Function F (x) is sub-additive when, for Data all x and y, F(x + y) ≤ F(x) + F(y) and the function is called super-additive when F(x + y) ≥ F(x) + F(y). Subsequently, the function of non-declining We examined the influence of the system effect on the calculation of maximum allowable cut for final annual cut is sub-additive. Sinitsyn (1981) and Koryakin (1990) analysed fellings in Vinnyts’ka and Sums’ka administrative the influence of aggregating management units oblasts (see Fig. 10.2). The data used were a subset (covering these on the volume of allowable cut. They discovered oblasts) of the State Forest Inventory (Cadastre) of a positive system effect and concluded that 1996. The State Forest Inventory (Cadastre) covers disaggregation within the region could result in loss of the system effect and significantly decrease the forests of all holders, but data are aggregated and, in particular, contain information on age structure level of forest utilization (Koryakin, 1990). Our method aggregates all the working as age group distributions. Age groups consist of sections within a certain region with the aim of several age classes and the length of an age group determining the maximum allowable cut for the can vary from 10 to 60 years depending on species region as a whole and then divides it between and rotation age. The proposed method requires area distriparticular forest holders. The decision concerning bution by equal age classes for all the working the timing and actual level of final fellings within a defined limit is left to the forest holder, who will sections. Since the most common length of an probably take into account economic conditions, age class is 10 years, we attempted to convert age for example, demand for particular lumber and log group distributions contained in the State Forest inventory to 10-year age classes, assuming equal grades. The cut rotations and minimal felling ages age distribution within age groups. Furthermore, are different for different working sections, which only those stands where final fellings are potentially limits application of calculations shown in Eqn (3) allowed were included in the calculations (66% for aggregation of such working sections. But for Vinnyts’ka and 72% for Sums’ka oblasts, see because Eqn (2) leads each particular working Fig. 10.2). section to even-age class distributions, let us assume that

s kj =

1 N

N

∑s i=1

j i

for

k>N

j

(4)

Now, the maximum area allowed for annual felling for the region may be calculated in the following way:

Results In order to evaluate the influence of the proposed method on future harvests, allowable cuts for the two administrative oblasts were calculated for the first 10-year period according to several methods

Redesigning Forest Policy Tools

(see Table 10.1). Calculations for the first four of the allowable cut determination methods presented in Table 10.1 (a–d) were done for each individual working section and summed to obtain the allowable cut for the oblast. The first three methods are not currently used in the practice of forest management planning; here they were used for historical reasons and to provide insight about the age class structure of the

Fig. 10.2. allowed.

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forests. ‘Even cut’ (Table 10.1a) is calculated by dividing the area of a working section by rotation length. ‘Maturity cut’ (Table 10.1b) is calculated by dividing the area of mature and over-mature stands of a working section by the length of planning period (10 years). Non-declining cut (Table 10.1c) is allowable cut calculated according to Eqn (2), which assumes non-declining yield for each individual working section.

Location of Vinnyts’ka and Sums’ka oblasts; percentage of forests, where final fellings are not

Table 10.1. Calculation of annual allowable cut for 1997–2006 by different methods and with different levels of aggregation (thousand ha). Oblasts No. Parameters 1

2

Vinnyts’ka

Sums’ka

Sum of cuts calculated by individual working sections (a) ‘even cut’ (b) ‘maturity cut’ (c) non-declining cut (2) (d) allowable cut according to the currently used method Non-declining cut for aggregation of working sections to the oblast level (5)

2.27 2.12 0.88 0.90 1.77

3.22 1.62 1.05 1.36 1.62

System effect

97%

19%

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Allowable cut according to the method currently used in forest management planning in Ukraine (Table 10.1d), is calculated similarly to the ‘non-declining cut’, with the exception that it allows final felling of the ripening stands approaching maturity for some species in certain age structures. The last method shown in Table 10.1 is allowable cut calculated according to the proposed method, which assumes non-declining yield for the aggregated working sections within an oblast. The system effect was calculated as the difference between results obtained using the proposed and currently used methods. The sum of ‘even cuts’ and the sum of ‘maturity cuts’ are given to provide information about the harvest potential of forest resources in the regions. They represent long-term sustained yield and availability of mature stands, respectively. It is evident from comparisons of the sum of ‘even cuts’ with the sum of ‘maturity cuts’ that there is a deficit of mature stands. The sum of ‘non-declining cuts’ by the individual working sections is less than the sum of ‘maturity cuts’, which indicates the existence of bottlenecks in the age class structure rather than simply a deficit of mature stands. The unevenness of the age class structure of specific working sections is different and is reflected in the existence of a positive system effect – the aggregated ‘non-declining cut’ is higher than the sum of ‘non-declining cuts’ calculated at the individual working section level.

To test the impact of introducing the proposed method, we projected the dynamics of the forests of two oblasts using both the currently used method and our proposed method. The assumptions used for the projections were that the land base does not change, all allowable cut is felled and immediately regenerated, and regenerated area remains in the current working section. Results are shown in Figs 10.3 (Vinnyts’ka oblast) and 10.4 (Sums’ka oblast). The left and right diagrams show the dynamics of 10-year allowable cuts (assumed to be equal to the harvests) as well as the dynamics of the mature and over-mature inventory under the currently used and proposed methods, respectively. Both figures show that the proposed method allows for achieving a level of sustained yield harvest faster while allowing higher levels of harvesting in the first periods.

Discussion The forest policies of all nations evolve over time in response to socio-economic changes and changes in society’s attitudes about the environment in which they live. Ukraine, like a number of countries in Eastern Europe and Asia, is in the midst of transition to a capitalist economy. With a different incentive structure in place and a

Fig. 10.3. Dynamics of mature and over-mature stands under current (a) and proposed (b) regimes of determination of allowable cuts for Vinnyts’ka oblast.

Redesigning Forest Policy Tools

national focus on socio-economic development, changes in basic forest policy tools can yield a more efficient and sustainable forest industry while providing significant safeguards regarding overexploitation and consequent impacts to ecosystems. The results of implementing the changes recommended here for determining allowable cuts are the potential for more efficient utilization of mature stands and a faster approach to the even-cut or long-term sustained yield level (both of which are good for economic development). A consequent environmental benefit is the resulting even-age structure for the forest, which has always been a goal of traditional forest management and is considered by many to be more environmentally friendly. A tool has been developed which, when applied to the regulation of timber utilization in the region, will satisfy two requirements: (i) continuous and (ii) inexhaustible (sustainable) use of forest resources. The forces driving rational profitmaximizing producers under conditions of a market economy will secure the requirement of efficient utilization of forest resources. The management alternatives, including the composition of stands, thinning regime, cut age and intensity of timber utilization are chosen with a focus on profit maximization. The key factor for decision making concerning management alternatives is the rate of return on capital. The rate required by private individuals, organizations and firms, is generally

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higher than that of society as a whole. In forestry this is reflected in the fact that the socially optimal rotation is, ceteris paribus, longer than the privately optimal one, and that the socially optimal intensity of timber stock exploitation is lower than the privately optimal one. Consequently, conducting forest management under conditions where rotation age is limited from the bottom and intensity of exploitation from the top, according to the socially optimal parameters, rational forest users will approach the allowable cut level defined by Eqn (5). This will satisfy the requirement for rational utilization of the existing stock of mature stands.

Conclusions We proposed enhancement of only one of the tools in the Ukraine’s system of harvest regulation. The method proposed was based on the assumptions of strong requirements for non-declining harvests and an existing system of rotation ages, both of which are based on political decisions. Our method allows for the relaxation of the nondeclining harvest requirement in two ways: by separating rotation age and minimum cut age, and by assigning lower weights to the age classes which will be harvested in the distant future. Rotation ages are a controversial issue of forest policy deserving attention. Many economists agree that in many cases they are too long and this question

Fig. 10.4. Dynamics of mature and over-mature stands under current (a) and proposed (b) regimes of determination of allowable cuts for Sums’ka oblast.

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should be investigated within the context of other forest policy goals using economic techniques. The system of incentives common to most market economies should replace the system of incentives inherited from the previous commandadministrative economy. Our method assumed that forest owners/holders are rational and interested in maximizing profit/return on capital. So far, forests cannot be privately owned in Ukraine, in fact they are not considered financial assets. This is another problem that will require the attention of economists and policy makers in the future as Ukraine progresses in its transition to a market economy.

Endnotes 1 According to the Forest Code, all the Ukrainian forests are property of the State. The Supreme Rada (Parliament) and local Radas have forests at their disposal on behalf of the State. These Radas within their competence can grant forest parcels for permanent use (Article 6). Forest parcels can be granted for permanent use to specialized forestry enterprises or other enterprises having specialized subdivisions. About 66% of Ukrainian forests are in the permanent use of the state forestry enterprises reporting to the State Committee of Forestry (formerly Ministry of Forestry). 2 ‘Working section’ is a spatially distributed set of forest stands of different ages but with similar silvicultural characteristics, e.g. species, rotation age. 3 ‘Working part’ is a spatially delimited area with similar economic conditions and goals of forest management. 4 Ukraine is divided into 24 administrative oblasts and the Crimean Autonomous Republic. Each oblast is divided into 11–37 administrative districts. 5 ‘Cutting fund’ is the amount of standing timber available for final harvesting. 6 Forest holding shall be defined as that forest land which is located within the borders of one municipality, and held by one and the same owner (Skogsstyrelsen, 1994b).

References Abramovich, K.K. (1960) [Use of graphs for determination of the size of final felling.] Lesnoye Khozyaystvo [Forestry] 9, 14–19 [In Russian]. Abramovich, K.K. (1963) [Determination of the Size of Main Forest Use.] Goslesbumizdat, Moscow, USSR [in Russian].

Ferenc, G. (1995) State forest management in the transitional period from planned economy to market directed one. In: Caring for the Forests: Research in a Changing World. IUFRO XX World Congress Report, Vol. II. The Finnish IUFRO World Congress Organizing Committee, Tampere, Finland, pp. 119–125. Komkov, V.V., Denisenko, P.I. and Moiseev, N.A. (1980) [Concerning the theory of forest utilization.] Lesnoye Khozyaystvo [Forestry] 12, 15–19 [In Russian]. Komkov, V.V., Moiseev, N.A. and Denisenko, P.I. (1981) [Optimization of the size of forest utilization for the system of forest management units.] Lesnoye Khozyaystvo [Forestry] 9, 11–17 [In Russian]. Koryakin, V.V. (1990) [Optimization of the size of forest utilization by levels of forest fund organization.] Lesnoye Khozyaystvo [Forestry] 12, 26–28 [in Russian]. Ljungman, L. (1995) Analysis of forest policy and institutional reforms in a forestry sector adjusting to market economic conditions. In: Workshop on Experiences and Constraints in the Evolution of Policies and Institutions Relevant to the Forestry Sector in Eastern Europe, FAO, Rome, pp. 209–221. Merlo, M. and Paveri, M. (1997) Formation and implementation of forest policies: a focus on the policy tools mix. In: Proceedings of the XI World Forestry Congress, Vol. 5. Social Dimensions of Forestry’s Contribution to Sustainable Development. FAO, Antalya, Turkey, pp. 233–254. Ministry of Environmental Protection and Nuclear Safety (1997) [Instruction on the Course of Reconciliation and Approvement of Annual Allowable Cuts] Approved on July 25, 1997 by the Order No. 118 of Ministry of Environmental Protection and Nuclear Safety of Ukraine. Kyiv, Ukraine [in Ukrainian]. Ministry of Forestry (1994) [Forest Code of Ukraine.] Ministry of Forestry of Ukraine, Kyiv, Ukraine [in Ukrainian]. Orlov, M.M. (1928) [Forestry Management Planning, Vol. III.] Lesnoye Khozyaystvo i Lesnaya Promyshlennost’, Leningrad, USSR [In Russian]. Rudenko, V.P. (1993) [Geography of Ukrainian Natural Resources Potential.] Svit, Lviv [in Ukrainian]. Rudzkiy, A.F. (1906) [Guidance to Management of Russian Forests.] Saint-Petersburg [in Russian]. Samoplavsky, V. (1997) Forestry of Ukraine: problems and ways to settle them. In: Proceedings of the XI World Forestry Congress, Vol. 7. Guest Speakers’ Addresses, FAO, Antalya, Turkey, pp. 208–212. http://www. fao.org/montes/foda/wforcong/publi/v7/ie/ default.htm Sinitsyn, S.G. (1981) [The influence of aggregation on calculation of allowable cuts.] Lesnoye Khozyaystvo [Forestry] 12, 35–39 [in Russian]. Skogsstyrelsen (1994a) Skogsvårdslag [Forestry Act]. In: Skogsvårds lagen handbok [Forestry Law Handbook].

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Skogsstyrelsen, Jönköping, Sweden. http://www. notisum.se/rnp/sls/lag/19790429.htm Skogsstyrelsen (1994b) Skogsvårdsförordning [Silvicultural Ordinance]. In: Skogsvårds lagen handbok [Forestry Law Handbook]. Skogsstyrelsen, Jönköping, Sweden. http://www.notisum.se/rnp/sls/lag/19931096. htm Skogsstyrelsen (1994c) Skogsstyrelsens föreskrifter och allmäna råd [Forestry Board’s Directions and General Advice]. In: Skogsvårds lagen handbok [Forestry Law Handbook]. Skogsstyrelsen, Jönköping, Sweden. Skogsstyrelsen (1998) Swedish Forest Policy in an International Perspective. Meddelande Nr 14/98. Skogsstyrelsen, Jönköping, Sweden.

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Svalov, N.N. (1969) [About organizational frameworks of forest utilization.] Lesnoye Khozyaystvo [Forestry] 10, 47–51 [in Russian]. Ukrderzhlisproekt (1996) [Principal Provisions on Determination Annual Allowable Cut on Final Fellings in Ukrainian Forests] Approved on August 12, 1996. Ukrderzhlisproekt, Irpin’, Ukraine [in Ukrainian]. Ukrderzhlisproekt (1997) [State Forest Cadastre of Ukraine on January 1st, 1996.] Ukrderzhlisproekt, Irpin’, Ukraine [in Ukrainian]. Wernerheim, M.C. (1988) The economic control of a renewable resource under sole ownership. Dissertation, Uppsala University, Uppsala, Sweden.

11

Private Land and Public Goods: Process Lessons from Habitat Conservation Planning David Ostermeier and Denise Keele

Department of Forestry, Wildlife and Fisheries, University of Tennessee, PO Box 1017, Knoxville, TN 37901-1071, USA

Introduction In our interconnected, shared-power world, we have the challenge of balancing the rights of using privately held forest resources with publically held rights regarding environmental quality. Private property rights are a fundamental value in the history of our society and are firmly imbedded in both our Constitution and common law (Flick, 1994). More recently, environmental stewardship has grown to also become an important American value and has been incorporated into policy and law through numerous environmental statutes. These private and public rights have not been well integrated but rather have collided, forming deep divisions between people and between and among various institutions including government, the private sector and interest groups within our civic society (Shannon, 1991; Boyte, 1994; Yaffee, 1994; Snow, 2001). These divisions have put in place an adversarial culture and incentives of gridlock common to natural resource policy during the last 30 years (Dukes, 1996; Ostermeier, 1999). The reality of our existence is that we live in a systems world and that we are becoming increasingly more interconnected. Conceptually we recognize this interconnection and the need for cooperation, but our history, culture and incentives in our market-dominated society push us toward competition. This is the paradox of our times, ‘we preach cooperation while we practice competition’ (Yaffee, 1998).

In this chapter, we evaluate the process of Habitat Conservation Planning under the Endangered Species Act (ESA) to better understand how private and public rights regarding privately held forest resources might be integrated and balanced. In the evaluation we focus on how decision making is conducted in Habitat Conservation Planning and do not evaluate the plans themselves. Our interest is in the process of conservation planning and what we can learn from these processes about the challenges of balancing private and public rights regarding private forest lands.

The Endangered Species Act and Habitat Conservation Planning The ESA was signed into law in 1973 to protect endangered species. Referring to the Act’s regulatory teeth, the ESA has been called the ‘pit-bull of environmental legislation’ and is a classical federalist statute with significant control embedded in federal hands (Govindan, 1998). Since the late 1970s and as the implications of the act became better understood, the ESA has grown increasingly controversial. Although lauded for its intent and vigorously defended by environmental interests, the ESA has been heavily criticized for its ineffective track record in meeting its intent, recovery of endangered species (Mann and Plummer, 1995; Cheever, 1996; Wilcove et al.,

©CAB International 2003. Forest Policy for Private Forestry: Global and Regional Challenges (eds L. Teeter, B. Cashore and D. Zhang)

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1996). Associated criticisms include high costs and inefficiency, administrative difficulty and complexity (Clark, 1994; Kellert, 1994), and inappropriate and/or uncertain use of science (Noss et al., 1997). The ESA has also been criticized for its heavy regulatory emphasis, leaving affected stakeholders with the perception, and often the reality, of limited or no possibilities of negotiation relative to land-use rights (Jacobs, 1995; Mann and Plummer, 1995; Lin, 1996). Being locked out of the decision making process that will determine their ability to use natural resources, the regulated community has had little alternative but to accept decisions or to fight them. This had led to considerable conflict between private ‘land use’ rights advocates and the ESA. This conflict between the ESA and private rights is crucial to endangered species management given that 80% of habitat is on non-federal land, most of which is privately owned (Hood, 1998). This has the unfortunate impact of placing much of the burden of endangered species conservation on the backs of those who happen to own land where remaining endangered or threatened species may live (Natural Heritage Institute, 2000). Given this and other factors,1 ‘conservation of habitats subject to private rights requires a degree of cooperation by those property owners, which is uncommon in the field of environmental law’ (Natural Heritage Institute, 2002: 2). With this in mind, Congress amended the ESA in 1982 through Section 10(a)(1)(B). Learning from the relatively flexible and collaborative San Bruno Mountain Plan in California, Congress developed this amendment, which allows for the incidental take of endangered and threatened species by non-federal entities if accompanied by an approved Habitat Conservation Plan (HCP). Congress intended HCPs to be much more than a permitting procedure. Section 10 sought to build ‘creative partnerships between the private sector and all levels of government in the interests of protected species and habitat conservation’ (Lin, 1996). A critical aspect of endangered species management is compliance, and compliance is related to perceived fairness and legitimacy regarding a sanction (Jentoft, 1989). ‘To be legitimate, the content of a regulation, the process by which it is made, the way it is implemented, and the effects of its distribution must be perceived as fair by resources users’ (Jentoft, 1989: 143). Such legitimacy is particularly pertinent to ESA, given the

dispersed nature of habitat across millions of acres of private land. A minimum condition regarding process legitimacy is participation, and in a democracy this suggests that all policy development and implementation must be inherently political, involving all those affected (Kemmis, 1990; Mann and Plummer, 1995; McKinney, 2001). Initial HCP development was modest, given already overburdened administrative agencies, insufficient landowner incentives, and complex and arduous permitting processes (Baur and Donovan, 1997; Thornton, 1997). Reversing this, Secretary of the Interior, Bruce Babbitt, embraced a collaborative approach to endangered species conservation and ecosystem management, and since 1992 over 330 HCPs, covering nearly 400,000 ha, have been developed, with another 200 in preparation (USFWS, 2001). Although the forestry community had little initial interest in HCPs, as Service2 reforms improved process efficiency and especially after assurances were adopted through ‘no surprises and safe-harbour mechanisms’, interest increased significantly (Govindan, 1998). As a more inclusive and goal-oriented policy instrument involving the regulated community and given the high stakes of the ESA, Habitat Conservation Planning has drawn intense interest and scrutiny. Because HCPs involve the regulated community, they have been applauded for their collaborative approach to endangered species management on private land (Reid, 1992; Beatley, 1994). Simultaneously, they have been heavily criticized by the environmental community because of the inclusion of the regulated community and because of their absence of focus on species recovery (Cheever, 1996; Wilcove et al., 1996; Hood, 1998). The inclusion of the regulated community and the assurances of ‘no surprises’3 have led to the criticism that HCPs are ‘negotiated settlements of regulatory liabilities, designed to foster economic development free of the risks associated with the occurrence of endangered species on private lands’ (Natural Heritage Institute, 2000: 2). Additional criticisms of HCPs include inappropriate and inadequate application of science (Noss et al., 1997; Kareiva et al., 1999), and limited stakeholder participation (Kostyack, 1997; Anderson et al., 1998). Although numerous studies have sought to evaluate various aspects of HCPs (often dealing with design, product or performance issues, including those cited above), few have focused on the ‘processes’ that practitioners go through in

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developing HCPs.4 Fifty years of statistical process control, process improvement and total quality management suggest that, in the absence of a good understanding of the issues and processes that practitioners face, meaningful process improvements may be illusive. Given that HCPs include non-federal participants as decision makers5 (landowners, local municipalities, environmental consultants, state wildlife and fish agencies, and the non-profit sector), analysing how these groups participated is important in gaining a better understanding of these more flexible, goal-oriented policy instruments. Through a greater awareness and understanding of HCP processes, policy makers, the Services, other HCP practitioners, stakeholders and researchers can more effectively work together to improve habitat conservation planning.

Methods In January 1998, the National Center for Environmental Decision-Making Research (NCEDR) implemented a research project to provide an objective understanding of how HCPs have been developed through the evaluation of a variety of HCP cases from across the country.6 In this larger study, a broad pool of 50 cases was considered and 31 were chosen for study based on several criteria, including the type of permit applicant (private or public), estimated scope of stakeholder participation, type of land-use involved, scope of species involved (single, multiple), Service region, and status and date of permit. Of the 31 cases, 11 involved private forest lands and are the focus of this chapter on private forestry HCPs. This study is based on qualitative data collected through semi-structured interviews conducted by six trained researchers during the summer of 1998. The pool of interviews for each case was identified by first contacting the Service representative and the permit applicant, and by inquiring about other involved decision makers (snowballing technique (see Patton, 1990)). For each plan, depending on the scope of participation, two to six individuals were selected and asked to participate in the study. However, interviewees always included a representative from the Services and the applicant. All interviews played meaningful roles in the process of developing the HCP.

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A total of 41 interviews were conducted for the 11 cases discussed in this chapter. These confidential telephone interviews took between 45 min and 2 h to complete and followed a set protocol. Interviewers used pre-determined prompts in order to reduce bias stemming from the use of multiple interviewers. The interview protocol was tested through mock interviews with professionals who were knowledgeable about the HCP process but who did not participate as interviewees for this study. Interview responses were entered into a computerized database. The substance of these interview responses was used to write case summaries, which follow the same format as the protocol. Each summary also includes an introductory section containing brief background information specific to the planning process and outlining characteristics of the plan. Draft case summaries were distributed to the respective case participants, who reviewed the text and provided comments and corrections. The complete text of case summaries was entered into a QSR NUD*IST database to facilitate data coding and qualitative analysis.

Results Plan variety Habitat Conservation Planning was developed to help land users become part of the process of endangered species conservation. Although applicant goals vary, all seek some kind of assurances that will enable them to pursue their land management goals while meeting the responsibilities of permit mitigation. These plans are contracts between the Services and the applicant and accordingly address both economic and endangered species conservation interests. Five of the cases in this study were in the southern states, one was in Montana and the remaining five were in the Pacific Northwest (Table 11.1). Nine of the 11 involved species requiring old-growth conditions. Seven of the plans involved single species while the remaining four were multi-species plans. Five of the plans involved industrial timber companies and four were either private landowners or land management companies. The acres covered by the plans varied greatly: the smallest was 1.37 ha; two were between 13 and 30 ha; two others were

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Table 11.1.

HCP location and characteristics.

HCP case

Location

Arcata Redwood Georgia Safe Harbor Pender County Plum Creek Port Blakely Tree Farms Red Oak Timber Co. Ribar Timberlands Swan Valley CCA Texas Safe Harbor Weyerhaeuser Wilmon Timberlands

California Georgia North Carolina Washington Washington Louisiana California Montana Texas Oregon Alabama

Old-growth issues Single species Industrial timber company X X X X X X X X X

between 7 and 11 ha; and three were between 140 and 400 ha. From this information, it seems that Habitat Conservation Planning appeals more to larger land owners. Given the resources required to undertake a plan, this is understandable. In two of the cases, state natural resource and forestry agencies in Georgia and Texas initiated HCPs to help smaller private landowners who may find isolated red cockated woodpecker (RCW) colonies on their land to pursue forest management. In these cases, state agencies are the permit holder and have the ability to extend both assurances and responsibilities to private forest landowners as sub-applicants. In these cases, state agencies play coordinating and facilitating roles to help smaller private landowners pursue their forest management goals while simultaneously trying to meet RCW conservation goals. An important aspect of these plans is that landowners are protected from future ESA restrictions when they cooperate with the services to benefit a listed species. Given these assurances granted to qualifying landowners, these cases are part of a special category of HCPs called ‘Safe Harbor Plans’. A related conservation activity is covered by Candidate Conservation Agreements whereby the landowner and the Service(s) work together on behalf of an imperilled species before it is listed and in ways that address landowner goals. One such plan in the study was the Swan Valley Plan in Montana and thus was unique in that it was an ecosystem or landscape plan involving both private timber company land and Forest Service land regarding grizzly bear conservation. The Plum Creek Plan in Washington also had an ecosystem focus in that it was developed to be compatible with the Pacific Northwest Forest Plan.

X X X

X

X X

X

X X

X X

X

Plan involvement In approving an HCP, the Services must follow public involvement processes required by the National Environmental Policy Act (NEPA). This includes a normal comment period following the listing of a draft plan in the Federal Register. In both of the Safe Harbor plans and in two private timberland cases in the Pacific Northwest, there were considerable efforts to communicate with the public beyond that required by NEPA regulations. In these two timber cases, the outreach was especially notable given the relatively high-profile nature of each case. In addition to this type of communication with the public, there is considerable involvement of specific stakeholders in Habitat Conservation Planning and this is discussed in the following paragraphs. Types of stakeholders involved Habitat Conservation Planning is a contract between an applicant and the Service. Some plans involve only these two parties, including consultants and legal representatives. Other cases involve a variety of individuals and groups (see Table 11.2 for a complete list of stakeholders and their roles for each case). In the forestry cases in this study, three involved only the permit holder, associated legal staff and consultants, and the Fish and Wildlife Service (Pender County, Ribar Timberlands and Wilmon Timberlands). In the remaining eight cases, others were involved in a variety of ways and for various purposes. State natural resource agencies were involved in six of the cases, most often functioning in advisory and

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Table 11.2.

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HCP stakeholder involvement. Involvement role Involvement type

HCP case Arcata Redwood Georgia Safe Harbor Pender County Plum Creek Port Blakely Tree Farms Red Oak Timber Co. Ribar Timberlands Swan Valley CCA Texas Safe Harbor Weyerhaeuser Wilmon Timberlands

Steering or Technical reviewing advisory committee committee

State agencies

Federal agencies

Interest groups

X X

X

X

X

X

X

X X

X

X X

X X

X X

reviewing capacities. In the Georgia and Texas Safe Harbor cases, state agencies are the permit holder, assuming leadership roles in facilitating RCW conservation on private lands. In five of the plans, representatives of non-Service federal agencies were involved and assumed advisory or review roles in three of the cases. In the Red Oak Timber case, Forest Service and military lands were part of a mitigation strategy, and in Swan Valley, the Forest Service worked as a partner with Plum Creek timber company on a landscapelevel ecosystem plan. Interest groups including both environmental and Native-American interests, were also involved in advisory and review activities in four cases. Steering and reviewing roles In three of the cases, non-Service entities played steering and reviewing roles (Table 11.2). In both Safe Harbors (Georgia and Texas), there were formal steering committees established that acted as a senior policy group while various elements of the plan were being developed. These committees included state agencies and a variety of interest groups, including industry and environmental representatives. In both of these cases, these committees no longer functioned once the draft plan was developed, and final negotiations involved the state agency applying for the permit and the Service. In the Plum Creek case, several state agencies and interest groups were asked to review various

X

X

X X X

Plan or mitigation partner

X

X

X X X

X X

parts of the plan and acted as an informal review group. Technical roles An important characteristic of Habitat Conservation Planning is that it tends to be dataand information-intensive. The HCP practitioners interviewed in this study struggled with a need, on the one hand, to use the best available knowledge and science, and on the other hand with the realities of often insufficient or incomplete information. In six of the cases reviewed, either formal or informal technical review committees were established to address data and information management (Table 11.2). In the two Safe Harbor plans, formal technical review committees were formed whose function involved the development, use and review of technical information relative to the case. In both the Plum Creek and Port Blakely cases, various state and non-Service federal agencies and interest groups provided technical review. In the Weyerhaeuser case, there were collaborative efforts in developing a technical base for the case involving company, university and agency scientists. In addition, formal technical review panels were also convened, in this case by the Audubon Society and the Pacific River Council. Collectively, this demonstrates considerable non-Service involvement. In addition, two of these cases (Plum Creek and Weyerhaeuser) resulted in the development of considerable new information relative to endangered species conservation.

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Negotiations Variability also surfaced regarding how different HCPs integrated multiple interests and negotiated final agreements, and three different decision making strategies emerged. In two routine or ‘cookbook’ cases (Red Oak Timer and Wilmon), the Service used previous experiences in other plans to help them outline their expectations, and the permittee simply addressed these expectations. There was little negotiation in these routine cases. A second approach consisted of information and options shuttled back and forth between the Service and the permit applicant. Identified as ‘shuttle negotiations’, this strategy is well described by one service participant as follows: ‘these really aren’t negotiations per se – they (the applicants) present things (information, options or a draft plan) to us and we review it and then give them feedback regarding its acceptability’. All five of these shuttle cases were in the Pacific Northwest and are representative of high-profile, old-growth cases with long histories of adversarial behaviour among participants (Arcata, Plum Creek, Port Blakely, Ribar and Weyerhaeuser). Given the complexity and difficulty of these cases, the Services seemed either unable or unwilling to clearly specify ‘what an acceptable HCP should look like’. Characterized as the ‘bring me a rock’ approach by one company participant, ‘we had to keep going back and forth with a new rock (plan) only to find out that it wasn’t the right rock’. The third approach of ‘face-to-face negotiation’ was found in three cases, two of which were the Safe Harbor Plans in Georgia and Texas. In these latter two cases, the applicant and the Service worked with a steering committee in negotiating elements of the draft plan. Good organizational and facilitation skills were noted to be important, positive factors in the Texas case. The other case employing face-to-face negotiation was Swan Valley. Negotiation here consisted of face-to-face meetings, and small technical groups were used to address difficult issues. These technical groups feed information to a larger policy group that hammered out decisions. A final marathon session was held and, according to participants, was crucial in developing a plan that all parties could accept. An outside neutral facilitator was hired for this session, and participants felt that such facilitation was necessary for them to

successfully work through conflict-ridden parts of the final plan.

Participant views Although all of the interviewees had multiple goals for participating in Habitat Conservation Planning, foremost was working toward better assurances – both economic assurances and conservation assurances. Many of the individuals involved in these cases were pioneers in that HCPs were relatively new and/or that this particular case was the first involving a specific species. Given the voluntary nature of HCPs, all applicants had the choice of not seeking a permit. All cases began with a desire to work within a government programme that sought to integrate economic and conservation goals. Some applicants were primarily interested in clarifying what forest management activities would be allowed and what would be required to mitigate these activities. Simultaneously, at least three permit holders indicated a genuine interest in endangered species conservation. Service employees, and other conservation-oriented participants, indicated that although endangered species conservation was their primary interest, they were also interested in working toward land-user goals. Reducing landowner fears of endangered species and endangered species conservation activities were cited as important participant goals. The attitude and desire to work toward other participant goals was noted to be an important motivating force in these cases, especially during difficult times. This was especially important given the historical adversarial climate associated with some of the cases. In all cases, the participants indicated that the plan did a relatively good job of working toward the joint goals of economic use and endangered species conservation. Although concerns were expressed, it is noteworthy that the participants felt that the process of habitat conservation planning had produced ‘good to very good results’. This seems to be a very supportive statement of habitat conservation planning by these participants, especially given the youth of these mechanisms and the complexity and politically charged nature of some plans. Associated with this, participants uniformly

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felt that during the process they had developed an improved working relationship with other participants. Given the development of this type of ‘civic capital’, future collaborative activities should be more effective. Two very specific participant concerns expressed by applicants were Service bureaucracy and an absence (in some cases) of Service leadership and facilitation. Some of this is related to the fact that HCPs were new mechanisms and Service experience was limited. Given this youthful nature of HCPs, there was both internal and external pressure on service biologists to ‘get it right’. In addition, there seemed to be little attention given to process management, including roles of different process participants and rules of engagement. In the absence of up-front clarification, assumptions about roles and who would play them were made by both Service and non-Service participants, and problems surfaced when these assumptions differed. Linked to this, participants reported that many Service employees seemed to have excessive work demands reducing their ability to focus on process management and leadership. Specific bureaucratic concerns were in cases where it was necessary for applicants to deal with multiple Service layers including legal staff. These cases were most prevalent in the high profile plans of the Pacific Northwest where the Service was under considerable pressure to ‘get it right’. Participants also indicated that the presence or absence of HCP experience was very important. The existence of a template or similar plan provides a ‘conventional wisdom’, especially on the part of the Service to help clarify their expectations. Participants also indicated that the most important training for these processes was past experience. This indicates the importance of institutional learning and a need to pass learning to new participants. Experience seemed to be most important around issues of process management regarding data and technical information and effective means of integrating interests and negotiating critical decisions.

Discussion Balancing public rights regarding endangered species with privately held forest resources is a difficult task and set within an often adversarial climate. Habitat conservation planning is one

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attempt to deal with our ‘shared-power-world’ whereby decision makers are faced with the reality of sharing decision making processes and power (Bryson and Crosby, 1992). As noted earlier in this chapter, Congress intended HCPs to create ‘partnerships between the private sector and all levels of government in the interests of protected species and habitat conservation’. By creating HCP mechanisms, Congress developed a more inclusive policy instrument, one that brings together the regulated community, the Services and, potentially, other stakeholders to address endangered species conservation on private land. By evaluating the participants’ perceptions of the forestry cases they were involved in, what can we say about such partnerships? Four summary points are discussed. (1) Congress initiated HCPs when it amended the ESA in 1982, and the executive branch of government – Interior Secretary Bruce Babbitt and the Fish and Wildlife Service – put significant efforts into developing, refining and improving HCPs in the 1990s. This has resulted in considerable growth of forestry HCPs in the last decade, 11 of which have been evaluated here. The private landowners and timber companies studied here were part of a pioneering group seeking to integrate economic and conservation decision making with the Services through forestry HCPs. Habitat Conservation Planning represents a possible way that forest owners can work together with the Service and other participants to address both economic and endangered species interests. It is noteworthy that the participants in these cases felt that the HCPs had produced ‘good to very good results’ and that during the processes they uniformly developed improved working relationships with other participants. These process perspectives – of those who struggled through these cases – suggest that meaningful and working partnerships have in fact been formed, and that HCPs are addressing Congress’s intent of private–public partnerships. As an important process outcome, good working relationships among HCP participants may provide needed civic capital for post-plan adaptive management changes. (2) The non-Service HCP participants in these forestry cases played various roles, the two most common of which were the development and management of data and technical information, and providing guidance and review services. The development of HCPs is the responsibility of the

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applicant and associated decisions are often information-intensive. In some cases, developing the data and information is done primarily by the applicant and/or a consultant, in consultation with the Service. In other cases, developing, using and reviewing data and technical information has involved input and review by a variety of knowledgeable individuals. In still other plans, developing and managing data and information were collaborative efforts. Although participants in this study noted data problems, including uncertainty regarding key issues, they generally felt that the data and information were appropriate and adequate for the decisions that had to be made. Although these perspectives are in conflict with other evaluations of the scientific merit of HCPs (Kareiva et al., 1999), it is significant that the participants themselves felt that data and information supported the decisions they had to make. (3) The tensions between private and public rights were most difficult to address in cases where the decision environment had been impacted by adversarial politics. In the plans evaluated in this study, this was especially true for those set in the Pacific Northwest involving old-growth histories and politics. In such settings, bureaucracies tend to become bureaucratic as pressures grow to ‘get it right’. One place the ‘get it right’ phenomenon was felt was with data and information. Faced with the complexity and uncertainties involved in these cases, and since the Service was the judge of objectivity, the Service was the locus of pressure to ‘get it right’. This locus can, however, be shifted. In collaborative negotiation and conflict resolution, objective standards are normally defined as ‘a standard all sides can view as fair or objective’ (Fisher and Ury, 1991). Using such objective standards seemed to have worked well in the Weyerhaeuser case where scientific review panels were convened by the Audubon Society and the Pacific Rivers Council. It is important to note that these reviews resulted in significant substantive changes being made to the plan. Objective review has the potential not only to result in better substantive decisions, but can also reduce stresses and pressures on the Services. Given the conflict-ridden environment that the Services often operate within, such a reduction can be significant. The use of objective or scientific peer review has been suggested for HCPs (Kareiva et al., 1999; Natural Heritage Institute, 2000), and this study suggests

that such a review would have important substantive and process benefits. (4) An associated concern of process complexity and leadership arose in several of the cases. In the high profile cases like those in the Pacific Northwest, decision making was reported to be overly time consuming and often involved multiple organizational layers. Shuttle negotiations were found to be problematic and especially frustrating for the applicant. In the Arcata case, participants perceived a vacillating level of Service involvement, producing confusion regarding negotiation authority. The iterative style of negotiation in Port Blakely resulted in multiple decisions going up the Service chain of command. Important decisions will require multiple views in any bureaucracy. However, these views must be effectively coordinated and communicated so that participants are not surprised. Improved process management should provide important benefits to all cases, but especially these more difficult ones. In some plans, Service representatives assumed leadership roles, while in other plans non-Service leaders emerged. Both seemed to produce relatively effective results, suggesting that both Service and non-Service personnel can facilitate good process leadership. In the other cases, however, participants were critical of an absence of guidance and leadership and were frustrated by a dynamic, opaque decision framework that provided too many surprises and time delays. This suggests that early communication and consensus regarding process mechanisms, rules and roles are very important. In addition, given that most HCP are multi-year plans, efforts should be made to periodically revisit these process management issues.

Conclusions Habitat conservation plans are part of a broad category of policy instruments trying to balance private and public rights regarding natural resources. These relatively new policy instruments are normally complex, involve multiple stakeholders and often are several years in development. A central challenge that they collectively face is improving process management so that better decisions are reached (effectiveness) and less time is consumed through using more efficient

Lessons from Habitat Conservation Planning

processes (Yosie and Herbst, 1998; Sexton et al., 1999). Improved process management will necessitate that enacting agencies develop process and facilitation capacities not historically needed. Decision theorists suggest that, especially when dealing with hard choices in difficult environments (often the case in HCPs), effective process management and facilitation are critical (Raiffa, 1982; Bazerman, 1998). The results of this study support this need for improved process management and suggest that significantly more attention and resources should be devoted to process management in at least the following areas. 1. Early and clear articulation of who will be part of the decision making environment. This includes multiple level Service personnel and legal staff, as well as multiple levels of the permitting entity (if applicable) as well as other stakeholders (if involved). 2. Early and clear articulation of what the roles of the different players will be. This is especially important relative to process leadership roles, communication roles, facilitation roles (normally around negotiations), data development and management roles, and negotiation roles. How power, roles, rules for participation, and other elements of process management are designed, controlled and shared is critical for effective and efficient processes. One non-timber HCP example of more intensive process management is Clark County Nevada, where an outside process facilitator worked with the applicant throughout the 6-year history (Ostermeier et al., 2000). 3. Early and clear articulation of how negotiations around key points will be conducted and how conflicts will be resolved. Objective and professional facilitation of key negotiations and conflicts is suggested, especially for more complex and difficult cases (Bazerman, 1998; Ostermeier et al., 2000). 4. Continuous attention should be paid to process monitoring and evaluation to foster process learning, improvement and adaptation. It should be noted that early and clear attention to process management does not mean inflexible process management. As mentioned in point 4, continuous attention to monitoring and adaptation should facilitate cycles of action and reflection so that needed process changes are made. Without such attention, conditions are set that almost ensure dysfunctional processes.

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Endnotes 1 See the Natural Heritage Institute study for a thorough discussion of these factors. 2 ‘Service’ refers to US Fish & Wildlife Service; Services includes the National Marine Fisheries Service. 3 ‘. . . private landowners are assured that if unforseen circumstances arise, the Services will not require the commitment of additional land, water or financial compensation or additional restrictions on the use of land, water or other natural resources beyond the level otherwise agreed to in the HCP . . .’ (USFWS, 2001). 4 An exception to this is Lin’s (1996) study which evaluated participants’ experiences with HCP processes. 5 Decision makers in this study are those who play meaningful roles in HCP decision making processes. Although some HCPs involve a variety of participants, others involve only the permittee and one of the Services (US Fish & Wildlife Service and National Marine Fisheries Service). It is important to note that the issuance of an Incidental Take Permit (ITP) based on an HCP is a decision made solely by one of the Services. 6 For more information on this study including research methods, see Ostermeier et al. (2000) and http://www.ncedr.org/casestudies.hcp.html

References Anderson, J. et al. (1998) Balancing Public Trust and Private Interest. University of Michigan School of Natural Resources and Environment, Ann Arbor, Michigan, 40 pp. Baur, D.C. and Donovan, K.L. (1997) The no surprises policy: Contracts 101 meets the Endangered Species Act. Environmental Law 27(3), 767–790. Bazerman, M. (1998) Judgement in Managerial Decision Making, 4th edn. John Wiley & Sons, New York, 179 pp. Beatley, T. (1994) Habitat Conservation Planning: Endangered Species and Urban Growth. University of Texas Press, Austin, Texas. Boyte, H.C. (1994) Reinventing citizenship. Kettering Review (Winter), 78–87. Bryson, J.M. and Crosby, B.C. (1992) Leadership for the Common Good. Jossey-Bass, San Francisco, California, 380 pp. Cheever, F. (1996) The road to recovery: a new way of thinking about the endangered species act. Ecology Law Quarterly 23(1), 1–78. Clark, J.A. (1994) The endangered species act: its history, provisions, and effectiveness. In: Clarke, T.W. et al. (eds) Endangered Species Recovery: Finding the Lessons, Improving the Process. Island Press, Washington, DC, pp. 19–43.

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Dukes, E.F. (1996) Resolving Public Conflict: Transforming Community and Governance. Manchester University Press, 183 pp. Fisher, R. and Ury, W. (1991) Getting to Yes, 2nd edn. Penguin Books, New York, 187 pp. Flick, W.A. (1994) Changing times: forest owners and the law. Journal of Forestry May, 30–33. Govindan, S.J. (1998) “Taking” steps to protect private property and endangered species: constitutional implications of habitat conservation planning after Dolan v. Tigard. Emory Law Journal 47, 311–340. Hood, L. (1998) Frayed Safety Nets: Conservation Planning under the Endangered Species Act. Defenders of Wildlife, Washington, DC, 115 pp. Jacobs, H.M. (1995) The anti-environmental ‘wise-use’ movement in America. Land Use Law 47(2), 3–8. Jentoft, S. (1989) Fisheries co-management: delegating responsibility to fisherman’s organizations. Marine Policy 13(2), 137–154. Kareiva, P. et al. (1999) Using Science in Habitat Conservation Plans. The National Center for Ecological Analysis and Synthesis, University of California, Santa Barbara, American Institute of Biological Sciences, Washington, DC, 50 pp. + appendices. Kellert, S.R. (1994) A sociological perspective: valuational, socioeconomic, and organizational factors. In: Clarke, T.W. et al. (eds) Endangered Species Recovery: Finding the Lessons, Improving the Process. Island Press, Washington, DC, pp. 371–389. Kemmis, D. (1990) Community and the Politics of Place. University of Oklahoma Press, Norman, Oklahoma, 142 pp. Kostyack, J. (1997) Habitat conservation planning: time to give conservationists and other concerned citizens a seat at the table. Endangered Species UPDATE 14(7&8), 56–59. Lin, A.C. (1996) Participants’ experiences with habitat conservation plans and suggestions for streamlining the process. Ecology Law Quarterly 23, 369–439. Mann, C.C. and Plummer, M. (1995) Noah’s Choice: the Future of Endangered Species. Alfred Knopf, New York, 238 pp. McKinney, M.W. (2001) What do we mean by consensus? Some defining principles. In: Snow, D. (ed.) Across the Great Divide: Explorations in Collaborative Conservation and the American West. Island Press, Washington, DC, pp. 33–40. Natural Heritage Institute (2000) Where Property Rights and Biodiversity Converge: Lessons from Experience in Habitat Conservation Planning. http://www.n-h-i.org Noss, R. et al. (1997) The Science of Conservation Planning. Island Press, Washington, DC.

Ostermeier, D. (1999) The role of institutions in ecosystem management. In: Peine, J. (ed.) Ecosystem Management for Sustainability: Principles and Practices Illustrated by a Regional Biosphere Reserve Cooperative. Lewis, Washington, DC, pp. 457–474. Ostermeier, D., Bidwell, D. and Schexnayder, S. (2000) Habitat Conservation Planning: current processes and tomorrow’s challenges. Environmental Practice 2(2), 166–175. Patton, M.Q. (1990) Qualitative Evaluation and Research Methods. Sage, Newbury Park, California. Raiffa, H. (1982) The Art and Science of Negotiation. Harvard University Press, Cambridge, Massachusetts, 360 pp. Reid, W. (1992) The United States Needs a National Biodiversity Policy. WRI Issues and Ideas Paper, World Resources Institute, Washington, DC. Sexton, K., Marcus, A.A., Easter, W.K. and Burkhardt, T.D. (1999) Better Environmental Decisions. Island Press, Washington, DC, 450 pp. Shannon, M.A. (1991) Is American society organized to sustain forest ecosystems? Paper presented at the Society of American Foresters National Convention in 1991 at Bethesda, Maryland, USA. Snow, D. (2001) Coming home: an introduction to collaborative conservation. In: Snow, D. (ed.) Across the Great Divide: Explorations in Collaborative Conservation and the American West. Island Press, Washington, DC, pp. 1–11. Thornton, R.D. (1997) The no surprises policy is essential to attract private dollars for the protection of biodiversity. Endangered Species UPDATE 14(7&8), 65–66. US Fish & Wildlife Service, Division of Endangered Species (2001) Habitat Conservation Plans and the Incidental Take Permitting Process, February. http:// endangered.fws.gov/hcp/ Wilcove, D.S. et al. (1996) Rebuilding the ark: toward a more effective Endangered Species Act for private land. 5 December. http://www.edf.org/ pubs/Reports/help-esa/index.htm Yaffee, S. (1994) The Wisdom of the Spotted Owl: Policy Lessons for a New Century. Island Press, Washington, DC, 377 pp. Yaffee, S. (1998) Cooperation: a strategy for achieving stewardship across boundaries. In: Knight, R.L. and Landes, P. (eds) Stewardship Across Boundaries. Island Press, Washington, DC, pp. 299–324. Yosie, T.F. and Herbst, T.D. (1998) Using Stakeholder Processes in Environmental Decision Making: an Evaluation of Lessons Learned, Key Issues, and Future Challenges. Ruder Finn Washington, Washington, DC, 72 pp.

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Ensuring the Application of Sound Forest Practices on Private Forests: Challenges Facing the Design and Implementation of State Compliance Monitoring Programmes Michael A. Kilgore,1 Paul V. Ellefson1 and Michael J. Phillips2

1Department

of Forest Resources, University of Minnesota, 1530 North Cleveland Avenue, St Paul, MN 55108-1027, USA; 2Division of Forestry, Minnesota Department of Natural Resources, 500 Lafayette Road, St Paul, MN 55155, USA

Introduction States have invested significantly in the development of programmes that encourage more widespread application of preferred forest management practices. Many such practices have as a primary focus the nation’s non-industrial private forests, comprising 353 million acres owned by more than 9 million landowners (National Research Council, 1998). These practices are often identified as best management practices (BMPs), acceptable management practices, forest practice guidelines or forest practice rules. Developed primarily since the mid-1970s and designed for voluntary or mandatory use primarily by private landowners and timber harvesters, 47 states in 1996 reported having a programme that advances the application of best management practices (National Association of State Foresters, 1996). These programmes were often a response to federal laws (for example, Clean Water Act of 1987, Coastal Zone Management Act Amendments of 1990) which required the development of state plans to control non-point source water pollution and which encouraged proactive approaches to plan implementation. As state best management practices programmes (both voluntary and regulatory in nature) were

developed, attention focused on designing and implementing programmes to evaluate the use of these preferred practices. Developing such programmes requires attention to several key issues (MFRC, 1997). Examples include determining:

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•

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What goals and objectives should guide the programme (e.g. providing information needed to revise and clarify the recommended forest practices or designing programmes needed to deliver information and education on the practices to landowners and timber harvesters)? What types and level of information are expected to be generated from the programme (e.g. compliance rate by ownership, geographical region, site characteristics, type of management activity, source of information about the practices)? What forest sites should be examined (e.g. all harvested sites or a sample of sites, sites meeting certain criteria such as greater than a certain size, near water or having erodible soils)? How should harvest sites actually be selected (e.g. from notifications of intent to harvest, random selection of sites across a landscape, or voluntary reporting of sites by landowners, timber harvesters or others)?

©CAB International 2003. Forest Policy for Private Forestry: Global and Regional Challenges (eds L. Teeter, B. Cashore and D. Zhang)

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When can private property be accessed (e.g. only after landowner permission, establish incentives for granting access, access without permission)? Who should actually visit and record conditions at the site (e.g. single professional resource manager, team of resource professionals from various disciplines, independent contractors, or teams of professionals and lay persons)? When should forest sites be examined (e.g. immediately after completion of the forest management activity, at a specified time following completion of the forest management activity)? How should the forest site be evaluated (e.g. pass/fail, evaluation of individual practices)?

National Review of State Compliance Monitoring Programmes In 1997, we initiated a national review of state BMP monitoring programmes. Our interest was in assessing why states initiate these programmes, how they structure and administer them (e.g. who is responsible, what is being monitored, how monitoring is carried out and its cost), what use is made of the gathered information, what issues challenge programme development and implementation, and what experiences might states share with others contemplating the design of new or revision of existing monitoring programmes. All 50 states responded to a written questionnaire which formed the basis for our assessment. Forest practice monitoring can take many forms and serve many purposes. Our focus was on compliance monitoring, namely the systematic gathering of information to determine whether forest practice guidelines or rules are actually being applied by landowners and timber harvesters. Compliance monitoring addresses questions such as: are reforestation levels being accomplished; is large woody material being placed in streams in amounts and manners specified; are riparian management zone (RMZ) widths being adhered to during harvest operations; and are fuel and lubricants being managed (e.g. spill cleanup, landings used as equipment maintenance areas) in the prescribed manner? Compliance monitoring is also referred to in some states and provinces as implementation

monitoring, silviculture audits, monitoring surveys, site-level audits, and forest practice inspections.

Number of states involved with compliance monitoring The number of states implementing compliance monitoring programmes has risen steadily since the mid-1980s. In both 1983 and 1990, 18 states had compliance monitoring programmes; 22 states indicated so in 1992; and 29 in 1996 (National Association of State Foresters, 1996). Thirty-four states responding to our survey indicated they conducted compliance monitoring in 1997 (Table 12.1). Nearly one-third of the states indicated they have not initiated a formal compliance monitoring programme, though this does not mean forest practices are not monitored in those states. In some states, monitoring activities (inspections) are carried out when landowners benefit from cost-share practices (e.g. federal Forestry Incentives Programme and Stewardship Incentives Programme) or when formally designed Tree Farms are reinspected. In other states, pre- and post-harvest inspections required by forest practice regulatory laws are considered to be compliance monitoring (because a harvest and associated practices are considered incomplete until approved by an inspector). In still other states, compliance inspections occur in response to citizen complaints or other sources alleging inappropriate application of BMPs (e.g. Alabama, Georgia, Maine, Mississippi, North Carolina, West Virginia). The Georgia Forestry Commission, for example, investigated and mediated 575 forest practice complaints from 1981 to 1996; although only one resulted in a penalty (Green, 1996).

Purposes of conducting compliance monitoring Forest BMP programmes initiated by state governments have generally evolved from an iterative process wherein acceptable forest practices are specified, applied, monitored and subsequently changed to be more effective in future applications. Compliance monitoring plays a very important role in this cycle as is reflected by

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Table 12.1. Characteristics of forest practice compliance monitoring programmes of states, by region and number of states, 1997. Existence of state compliance monitoring programme Region

Yes

No

North South West Total

11 13 10 34

9 0 7 16

Compliance monitoring conducted

Training required to All Sample of Certain sites harvested sites more participate in monitoring harvested sites intensely 2 2 4 8

9 12 5 26

4 2 7 13

10 11 7 28

Incentive provided private landowner to access property

Individual landowner compliance information made public

2 0 1 3

5 7 9 21

Note: Compliance monitoring may be focused on forest practice guideline programmes that are voluntarily complied with, mandatorily required of landowners and harvesters, or both. Nationally, 13 states have compliance monitoring programmes as part of a voluntary practice programme (North – 4; South – 8; West – 1), nine as part of a mandatory programme (North – 3; South – 1; West – 5), and 12 involve both voluntary and mandatory programmes (North – 4; South – 4; West – 4). North Region: CT, DL, IA, IL, IN, MA, MD, ME, MI, MN, MO, NH, NJ, NY, OH, PA, RI, VT, WV, WI; South Region: AL, AR, FL, GA, KY, LA, MS, NC, OK, SC, TN, TX, VA; West Region: AK, AZ, CA, CO, HI, ID, KS, MT, NB, ND, NM, NV, OR, SD, UT, WA, WY.

examples of state-specified reasons for undertaking compliance monitoring.

• • • • • •

•

Determine statewide compliance with silvicultural BMPs (Florida). Target future education efforts and technical assistance (Michigan). Provide information on the need to revise, clarify or strengthen BMPs; focus future study on subjects and geographical areas needing further investigation (Montana). Determine major factors which affect BMP compliance for timber harvesting (South Carolina). Determine landowner and timber harvester awareness of forestry BMP requirements and their attitudes towards them (Maryland). Provide baseline information on extent of current BPM implementation; identify BMP specifications requiring technical modification; identify improvements needed in future monitoring efforts (Indiana). Educate participating landowners about the importance and use of BMPs when conducting timber harvesting activities (Michigan).

Considering these and other statements provided by programme administrators suggests that compliance monitoring programmes are undertaken primarily for purposes of securing reliable estimates of forest practice application, refining

recommended or required forest practices where necessary, and targeting educational and technical assistance programmes to landowners and harvesters whose compliance with specified forest practices is considered unacceptable.

Organizations involved with compliance monitoring A state’s lead public forestry agency may not be the only public entity monitoring forest practice compliance. Of the 54 principal organizations involved in compliance monitoring in the 34 states with compliance monitoring programmes, 43% (23 agencies) were entities other than the state’s lead forestry agency. Most commonly, a state’s environmental or pollution control agency was involved. In the North and West regions, other entities actually exceeded the number of lead state forestry agencies engaged in compliance monitoring (see Table 12.1 for definition of regions). Specifically in the North region, nine state forestry agencies, eight environmental or pollution control agencies, and two other jurisdictions (e.g. unit of local government) were involved. In the South region, 13 state forestry agencies, one environmental or pollution control agency, and two other agencies (e.g. federal agency) were involved. In the

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West region, nine state forestry agencies, five environmental or pollution control agencies, and five other agencies (e.g. fish and game agency) were involved. In only 20 states was the state’s lead forestry agency identified as the only agency involved in the monitoring of compliance with recommended forest practices. The involvement in compliance monitoring of entities in addition to a state’s lead forestry agency is often one of providing the forestry agency with specialized knowledge and skills that are available from other sources. To secure these specialized talents and perspectives in 1996, state forestry agencies linked up with nearly 65 different public and private organizations. In order of frequency, these organizations were affiliated with state and local governments, forestry businesses, university extension services, federal agencies, conservation and environmental groups, and landowner organizations (National Association of State Foresters, 1996).

State approaches to compliance monitoring implementation States have developed a wide range of approaches to compliance monitoring, each designed to fit the unique bundle of preferred forest practices that they wish to have applied (voluntarily or mandatorily) by landowners and timber harvesters. Which forest practices a state monitors, how it proceeds to monitor them, and the level of

investments made in doing so are dependent on the complexity of forest practices to be applied, extent and type of forests occurring within a state, financial and professional resources available for monitoring activities, and the pressure exerted by various interests. Conditions monitored Forest practices are most commonly monitored by states for their influence on water quality (33 states), riparian areas (30 states) and forested wetlands (24 states) (Table 12.2). Least mentioned as a focus of monitoring are practices affecting recreational opportunities and cultural-historical resources (four and five states, respectively). Examples of other monitored conditions mentioned include: air quality (Idaho), size and arrangement of clearcuts (Maine), disposal of chemical containers (Arkansas), site preparation (North Carolina), adherence to a timber harvest plan (California), threatened and endangered species (Hawaii), and fish habitat and slope stability (Oregon). Regional differences in monitoring emphasis are also apparent. In the West region, states are more active in monitoring practices involving reforestation, wildlife habitat, and wildfire, insect and disease conditions. The South region leads in the number of states monitoring practices affecting water quality and forested wetlands. These regional differences are explained primarily by differences in the importance of certain forest resources or by regional sensitivity to the application of certain forest practices.

Table 12.2. Forest resource subject area focused on by forest practice compliance monitoring programmes of states, by region and number of states, 1997. Region Subject area Water quality Riparian Wetland Soil productivity Wildfire, insects and diseases Aesthetics Wildlife habitat Reforestation Cultural-historic resources Recreation Other

North

South

West

Total

11 10 9 1 3 4 2 3 2 2 1

13 11 8 5 1 3 1 1 0 0 3

9 9 7 7 9 5 8 6 3 2 5

33 30 24 13 13 12 11 10 5 4 9

State Compliance Monitoring Programmes

Site selection and intensity States employ a variety of procedures to select sites and carry out monitoring activities. Nationally, 13 states have compliance monitoring programmes as part of a voluntary forest practice programme, nine as part of a forest practice regulatory programme, and 12 focus compliance monitoring on both voluntary and mandatory forest practices programmes. Few states monitor all harvested sites (only eight states do so), while 26 of 34 responding states indicated they monitored a sample of sites. On a regional basis, Southern states are more likely to monitor a sample of harvest sites, with 12 of 13 states doing so (Table 12.1). Sample sites are typically stratified by land ownership (state, industry, non-industrial private and, in some cases, federal) and land characteristic, such as soil type and forest type. They will often focus on monitoring practices occurring near water, on steep slopes, or involving highly erodible soils. Thirteen of 34 responding states, particularly Western states, monitored certain sites more intensely. The more sites were sampled, the more likely it was that different people monitored different sites. The number of sites visited in a state during any one monitoring cycle in the early 1990s ranged from fewer than 40 to several thousand (Brown et al., 1993). Examples of site selection procedures include Michigan, which requests voluntary submission of potential sites from consultants, county foresters and state private forest management specialists. A random sample of these sites is drawn that is roughly proportional to the average amount of timber removed during a specified period (e.g. an 8–10-year period) in a region of the state. Sites must be 2 ha or more in size, within 1 mile of a road, and a proportion must be within 61 m of a stream or other water body. Florida’s sites are selected by Division of Forestry personnel from a fixed-wing aircraft flying randomly selected township or range lines until a statewide goal of approximately 200 sites are selected. Sample sites must have been harvested within the past 2 years and some part of the site must occur within 91 m of a stream, lake or wetland. West Virginia, which has a notification regulatory system, selects every fifth harvest notification, while Idaho, which also has a notification regulatory system, inspects roughly half of all harvested sites. Idaho’s 13 forest practice inspectors focus on sites near certain types of streams and

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on those with steep slopes, erodible soils and highhazard land types. Participants in site visits The credentials of persons conducting compliance monitoring activities in a field setting vary enormously among states. However, in most cases state forestry agency personnel make the required field measurements. Most states recognize the importance of having knowledgeable people performing on-site monitoring activities, and the importance of consistency in making field measurements and discretionary judgements about the appropriateness of certain practices. One means of accomplishing this is via some form of special education or training for those participating in monitoring activities; 28 of 32 responding states indicated they required compliance monitors to take some form of training, often referred to as ‘calibration workshops’ (Table 12.1).

Access to private property Measurement of forest practice applications on harvested sites often requires access to private property. Most states with voluntary forest practice guideline programmes implement a policy of accessing private property only with the permission of the landowner (e.g. Arkansas, Georgia, Indiana, Louisiana, Michigan, Minnesota, Oklahoma, Texas and Wisconsin). A few among the responding states (three out of 34) provide private landowners with incentives to allow access to their land. Such incentives can take the form of free forestry advice and educational materials (Indiana) or material rewards such as free pictures of forest scenes and free baseball caps personalized with forestry logos (Michigan). Landowners freely grant access to private property in some states, such as South Carolina, where individual site information is kept anonymous, while in other states good agency relations with landowners limit refusals for access (Florida). Landowner participation in compliance monitoring evaluations (Indiana), and open and honest communication and including landowners in the review process (Oregon) facilitates private land access. Entry to private property was reported by some states simply not to be an issue (Idaho, Washington).

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Access to private property for compliance survey purposes is authorized by state law in some states, but this is mostly under the rubric of a regulatory programme (Ellefson et al., 1995). Respondents to this survey indicated the following perspectives on legal authority to access to private property.

• • • • • • • • •

‘Entry authorized if conducting official duties’ (Delaware). ‘Right of entry is specified in statutes’ (Maine). ‘Entry as a condition of Sediment Control Plan approval’ (Maryland). ‘Entry when in performance of official duties’ (New Hampshire). ‘Entry when looking for water pollution problems’ (Kentucky). ‘Agency trespass immunity when dealing with noncompliance’ (North Carolina). ‘Entry to private property authorized’ (Virginia). ‘Inspectors have full peace officer status to enter property’ (California). ‘Authorized access to administer state code’ (Idaho).

Other states with legal authority to enter private property for monitoring purposes are Alaska, Washington and West Virginia. On-site monitoring can lead to discovery of resource or environmental activities that are in direct violation of safety, public health or pollution control laws beyond laws involving forests or closely related natural resources. Of the 28 states responding to this specific part of our survey, the person(s) responsible for on-site monitoring in 17 states refers the violation to the state or federal agency having jurisdiction over the matter. In seven states a responsible authority is not notified, and in four states the response takes various forms, including recommending corrective action to a landowner. Survey intervals and reports The time interval between compliance monitoring surveys is highly variable, often driven by the availability of financial and professional resources or by a regulatory programme requirement for inspection after each or most operations. In some cases, the interval is shortened by pressure from interest groups, suggesting that best management

practices are not being applied at acceptable rates. States that have conducted compliance surveys on a frequent and regular interval include Florida (eight surveys since 1981), Georgia (two surveys since 1991), Minnesota (five surveys since 1991), Montana (five surveys since 1990), North Carolina (three surveys since 1992) and Texas (two surveys since 1992). The other 28 responding states with a compliance monitoring programme have conducted at least one survey. States typically publish reports presenting aggregate information describing the results of their compliance monitoring. We found that 20 of 29 states engaged in compliance monitoring in 1996 did so, although the detail presented in the reports differed markedly from state to state (from very detailed to very cursory) (National Association of State Foresters, 1996). In some states, compliance information for individual sites and landowners is made public. In 21 of the 34 states responding to our survey, individual landowner’s results were made available to the public. States in the North and South regions (12 of 12 responding) were more inclined not to report individual results, while only one of ten responding Western states withheld individual survey results from the public.

Uses of compliance monitoring data collected Information gained from compliance monitoring activities is used in a variety of ways. However, obtaining reliable information on whether forest practices are being used is of paramount importance to nearly all states responding to our survey. When asked to specifically identify the use(s) of information obtained from compliance monitoring activities, the response among states was farranging. Within these extremes, however, some distinct patterns emerge. Twenty-three states indicated that they use compliance information to refocus, and in many cases intensify, educational programmes (usually in workshops or seminars). Specific activities include tailoring workshops about the appropriateness of a specific forest practice and application of that practice to the field. Audiences targeted most frequently for educational programmes were loggers, landowners, consultants and environmental organizations. Modifying forest practice rules or guidelines was

State Compliance Monitoring Programmes

the second most common use of compliance information (reported by 14 states). This occurred when practices were found to be technically inappropriate, impractical to apply or confusing in their presentation. States also use compliance information to modify technical assistance programmes, which usually involve one-on-one consultations with landowners and timber harvesters (reported by seven states). On-site monitoring results can be used to focus technical assistance toward individuals who do not understand how to correctly apply a forest practice. States also reported using compliance information to evaluate and plan programmes (reported by six states), including the preparation of budget requests and the design of new programmes such as cost share programmes. Five states reported that compliance information was useful for informing broader communities about forest practices via distribution of reports to community organizations and briefing the public and media at various forums. Four states reported using compliance information to intensify enforcement activities where compliance levels were found to be unacceptable, while three states reported it was used to better understanding of the effectiveness of specific guidelines or rules. Other reported uses of compliance information included to meet legal requirements (two states) and to provide evidence needed to avoid regulatory programmes (two states). One state respondent reported quite simply and straightforwardly ‘. . . little is done with compliance information’.

Cost of monitoring Monitoring compliance with BMPs and forest practice guidelines by the 34 states studied required an estimated nationwide total investment of nearly $940,000 in 1997 (note that this excludes states with compliance checks required by regulatory initiatives). This cost is an increase of more than 2.5 times the $365,000 expended for 1996 compliance monitoring when 29 states checked more than 11,500 harvest sites for voluntary application of forest practice guidelines (National Association of State Foresters, 1996). Compliance monitoring costs (direct and indirect, in the form of services) for voluntary forest practice guideline programmes ranged from $20,000 to $150,000

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per state, averaging $60,000 per programme. States with regulatory programmes invested $500,000–750,000 per state in compliance checks. Staffing allocated for monitoring compliance with voluntary programmes was typically two tothree full-time equivalent (FTE) employees per state. This figure expanded to 40–50 FTEs where teams were used, and as high as 135 FTEs in California, where regulatory inspectors were used for compliance checks.

Compliance monitoring programme strengths and weaknesses We asked managers of compliance monitoring programmes to specify the strengths and weaknesses of their programmes. Strengths include process, focus and consistency of their monitoring efforts, cost effectiveness, integration with other programmes, and a positive working relationship between agencies and landowners and harvesters. Conversely, site selection and location, access to private property, and consistency among individuals performing site reviews were cited as weaknesses. Frustration at monitoring responsibility being assigned to many agencies, ambiguous forest practice rules and guidelines, and limited funding and staffing were also mentioned. Monitoring programmes are viewed as a divisive rather than a cooperative exercise in some states.

Minnesota’s Guideline Implementation Monitoring Programme: a Case Study With the national review as a backdrop, focus on one state’s compliance monitoring programme can provide significant insight into specific programme design and implementation issues. What follows is a discussion of Minnesota’s recently developed guideline compliance (implementation) monitoring programme.

Background The Minnesota Forest Resources Council (MFRC) recently developed voluntary timber harvesting and forest management guidelines. Initiated in

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1996, representatives from a broad range of forestry interests from within the state were engaged in a process to develop guidelines in four topical areas: riparian zone management, site-level wildlife habitat, forest soil productivity and historical/cultural resources. Once developed, these new suites of guidelines were integrated with existing water quality, wetland and visual quality BMPs to produce a single, comprehensive guidebook (MFRC, 1998). The MFRC published its new comprehensive guidelines, Sustaining Minnesota Forest Resources: Voluntary Site-Level Forest Management Guidelines, in early 1999.

obtained from the landowner/resource manager and during the on-site field evaluations. Designing a site selection process The MFRC’s interest was to design a site selection process that would be cost and time effective and provide for:

• • • •

Implementation monitoring programme design Shortly after the guidelines became available, the MFRC initiated development of a guideline implementation monitoring programme. Designing the implementation monitoring programme was divided into five components: (i) developing field monitoring protocols; (ii) designing a site selection process; (iii) gathering information on the sites to be monitored; (iv) conducting on-site reviews; and (v) analysing field monitoring data.

Developing field monitoring protocols Considerable effort was placed on identifying field monitoring protocol issues. These included determining: (i) which guidelines can and should be monitored; (ii) when monitoring should take place; (iii) how monitoring should be carried out; and (iv) who should conduct the monitoring. For purposes of monitoring, a site was defined as the area where harvesting activities were conducted (harvest area) and adjacent areas that were taken into consideration when determining the actual harvest unit. Collection of field monitoring data on guideline application was restricted to those guidelines that were measurable and quantifiable. This was done to minimize subjective judgements made during implementation monitoring. Once measurable guidelines were identified, the appropriate measures were developed to quantify their application in the field. The guideline implementation data collected also included background information

•

Statistically credible estimates of implementation rates statewide. Statistically useful comparisons among land owner categories. Trends in implementation over time by major ecoregion, watershed or landscape. Trends in implementation over time by landowner categories. Flexibility with respect to available data, current and future technologies for data capture including remote sensing, and to facilitate modelling.

A multi-stage sampling method was adopted. This method used primary sampling units (PSUs) (i.e. half-townships) and then sampled harvesting sites within those PSUs. The advantages of this approach are feasibility in creating a list of harvesting sites within PSUs, and savings in travel time since a number of sites were visited in each selected half-township rather than travelling to individual harvesting sites located at random around the state. The approach also provides for essentially unbiased estimates of guideline implementation rates. Forty-one townships were selected statewide for the PSUs for the 2000 field reviews. Once sample half-townships had been selected, colour or colour-infrared aerial photographs were taken of the PSU. The timing of the flights occurred when most deciduous leaves were off but before snow cover (i.e. late autumn) to maximize the ability to see harvesting site detail. An aerial photograph interpreter subsequently identified (December 1997–October 1999) harvested sites and categorized them by size and other characteristics. The process was designed to identify approximately 0–15 harvesting sites per township for any one year. To facilitate the identification of potential sampling sites within the half-townships, public agency and industrial forest landowners were asked to identify all harvests on their land within the half-township that met the specifications for monitoring. These landowners were also asked to

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identify any harvest activity on non-industrial private forest land they were aware of. This request was to assist in the identification of potential harvest sites that were either too small in size or selectively harvested – a common feature of many non-industrial private harvests. Timber harvests with such features were found to be difficult to identify using aerial photographs. Gathering site profile information Sites selected for monitoring had been harvested within 2 years of when the aerial photography was done. Potential harvesting sites were identified, and the boundaries of the harvest area were delineated. Once ownership information was collected, landowners were contacted to confirm when harvesting for the specific site was completed, and request permission to monitor the harvesting site. If the landowner agreed, the site was added to the statewide pool of potential harvesting sites. Information on the harvest sites collected through remote sensing or querying databases included:

• • • • • • • •

Harvest site boundaries. The occurrence and location of any open water wetlands, lakes or streams. Actual riparian management zones (RMZs) (what exists on-site) and theoretical RMZs (as recommended in the guidebook) for each open water body. The presence of trout lakes or streams. All roads and landings within the harvest unit. The apparent method(s) of ‘leave tree’ management used (e.g. scattered individual trees versus clumps, strips and islands). The presence of known natural heritage features and/or endangered, threatened or special concern species. The visual sensitivity of the site based on county visual sensitivity maps.

measures identified in the on-site worksheet. The contractor was required to attend a 3-day calibration workshop to discuss and review the guidelines and implementation monitoring protocols. Workshop instruction employed both classroom discussions and field exercises designed to provide an understanding of the guidelines and their measures, and to demonstrate the proper collection of field data and use of the field monitoring forms. Upon completion of the calibration workshop, the guideline monitoring instruction manual was refined to reflect the discussions and changes agreed to during the workshop. Quality control reviews were employed through random comparisons of contractor monitoring results with those derived from project staff for 5–10% of completed sites.

First year monitoring findings A total of 108 harvest sites were monitored in 2000. Initial site-level implementation monitoring represents a baseline evaluation of the application of timber harvesting and forest management practices (i.e. a description of various timber harvest practices being applied in Minnesota immediately prior to availability of the guidelines, and how those practices compare to recommendations contained in the guidebook). Specific conditions and practices assessed include riparian management, water and wetland approaches and crossings, preharvest planning, compliance with visual quality recommendations, slash disposal and distribution, extent of rutting, ‘leave tree’ distribution, preharvest review for cultural resources, and endangered, threatened and special concern (ETS) species, site infrastructure percentage, skid trail distribution, and water diversion device use for roads and skid trails. Some of the important findings collected from the first year of implementation monitoring were (Phillips, 2001):

•

Conducting on-site reviews Field monitoring of timber harvesting sites was conducted between April and August 2000 by an independent contractor hired by the MFRC. A guideline monitoring instruction manual was developed to facilitate the contractor’s proper and consistent application of the guideline monitoring

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•

Around 26% of the monitored sites were visually sensitive. Landowners and loggers were aware of the visual sensitivity classification on 36% and 29% of these sites, respectively. Landowners and/or resource managers checked cultural/historic resource inventories on 50% of the sites monitored prior to timber harvesting. Inventories for ETS

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•

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species were checked on 69% of the sites monitored prior to timber harvesting. Filter strip compliance with the guideline recommendation (< 5% mineral soil exposure, dispersed over the filter strip) was 70%. For lakes, perennial streams and open water wetlands, one-half of the observed RMZs met the guideline recommendations for width and residual basal area. A higher proportion of RMZs that met the guideline recommendations were adjacent to the harvest area compared to those for water bodies that were within (i.e. open water wetlands, lakes) or traversed (i.e. streams) the harvest area. A high percentage of skid trail and road approaches to wetlands and streams did not have the appropriate devices installed to divert surface water runoff from directly entering these water bodies. Infrastructure (i.e. roads, landings) was found to occur at the guideline-recommended level of 3% of total harvest area. Landings were located outside of filter strips and RMZs 95% and 99% of the time, respectively. Slash was retained at the stump or redistributed back on the site for 73% of the sites monitored. Rutting was found on one-third of the sites monitored and was most prominent on skid trails, wetland inclusions and roads. Harvesting with reserve trees met the guideline recommendations approximately 60% of the time. As an ownership class, non-industrial forests were found to be applying the practices recommended in the guidelines at a level generally consistent with other forest ownerships (i.e. county, state, federal, industry), although this varied extensively according to the type of practice monitored.

Using the monitoring results The inaugural guideline implementation monitoring programme identified a number of changes that need to be employed in future guideline implementation monitoring efforts. Examples include modifications to criteria for identifying

primary sampling units used in identifying harvest sites for review, pre-site visit landowner/resource manager/logger interview questions, and parameters evaluated during the site visit. The MFRC and Minnesota Department of Natural Resources plan to monitor guideline implementation on an annual basis. The initial results point to areas where continuing education and training efforts for loggers, resource managers and landowners need to be emphasized. Examples include installing appropriate protection measures for water and wetland approaches and crossings and the use of temporary structures. The MFRC will be working with organizations responsible for delivering logger and resource professional education to develop education and training programmes that address the areas identified through monitoring as being in need of greater emphasis. The monitoring results will be informative to the MFRC in evaluating the extent to which its guideline implementation goals are being met. These include assessing awareness and understanding of the guidelines (as measured through logger/resource manager attendance in introductory guideline training and field demonstrations), demonstrated commitment to using the guidelines, and rates of guideline application. By law, the MFRC is to recommend to the Governor and Minnesota Legislature additional ways of seeking greater guideline use when information generated through implementation monitoring suggests the goals are not being achieved.

Conclusions Looking forward, public support for timber harvesting and forest management will depend, in part, on whether the practices applied are consistent with broadly accepted guidelines and standards that promote sustainable forestry. State compliance monitoring programmes can play a critically-important role in this regard. As a systematic way of gathering information, these programmes can accurately and credibly describe the extent to which preferred harvesting and management practices are being used. This information will be especially helpful in shaping public sentiment and policy about the management and

State Compliance Monitoring Programmes

use of these forests. Among the attributes that can make for a successful state guideline compliance monitoring programme are:

• • • • • •

Providing sufficient resources needed to fully implement the monitoring programme on a regular basis. Engaging knowledgeable people who understand the practices being monitored. Establishing credible processes for selecting the sites and conducting the monitoring. Providing accurate analysis and timely reporting of monitoring results. Creating a favourable climate towards monitoring. Fostering good relationships with private forest landowners.

The latter two attributes are particularly noteworthy. With the nation’s non-industrial private forests increasingly looked to for the production of economic and amenity goods and services, information on the management and use of these lands needs to be an important part of any state compliance monitoring programme. Consequently, states need to build understanding of and support for the use of guidelines and monitoring programmes among their private landowners. Doing so requires careful attention to their needs and concerns in such areas as: increasing landowner awareness of state forest management guidelines and compliance monitoring programmes; providing sufficient technical resources to assist them in conducting forest management activities that are consistent with forest management guidelines; and providing incentives

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to encourage their participation in compliance monitoring programmes.

References Brown, T.C., Brown, D. and Binkley, D. (1993) Laws and programs for controlling nonpoint source pollution in forested areas. Water Resources Bulletin 29(1), 1–13. Ellefson, P.V., Cheng, A.S. and Moulton, R.J. (1995) Regulation of Private Forestry Practices by State Governments. Station Bulletin 605-1995. Minnesota Agricultural Experiment Station, St Paul, Minnesota. Green, F. (1996) Forest Water Quality Program. Georgia Forestry Commission. Augusta, Georgia. Minnesota Forest Resources Council (1997) Options for forest practice implementation monitoring in Minnesota: background report to the Minnesota Forest Resources Council. MFRC-B-2. St Paul, Minnesota. Minnesota Forest Resources Council (1998) Sustaining Minnesota’s forest resources: voluntary site-level forest management guidelines forest landowners, loggers, and resource managers. SI-0998-1. St Paul, Minnesota. National Association of State Foresters (1996) State Nonpoint Source Pollution Control Programs for Silviculture: 1996 Progress Report. Washington, DC. National Research Council (1998) Forested Landscapes in Perspective: Prospects and Opportunities for Sustainable Management of America’s Nonfederal Forests. National Academy Press, Washington, DC. Phillips, M.J. (2001) Monitoring the implementation of the timber harvesting and forest management guidelines on public and private forest land in Minnesota: Report 2000. A report to the Minnesota Forest Resources Council. MP-0201. St Paul, Minnesota.

13

Spatial Assessment of a Voluntary Forest Conservation Programme in North Carolina Kirsten Cassingham,1 Erin Sills,2 Subhrendu Pattanayak3 and Carol Mansfield3

1US

Geological Survey, 3916 Sunset Ridge Road, Raleigh, NC 27607, USA; of Forestry, North Carolina State University, Raleigh, NC 27695-8008, USA; 3Research Triangle Institute, Research Triangle Park, NC 27709, USA

2Department

North Carolina’s Natural Heritage Program (NHP) identifies priority areas for biodiversity conservation and encourages landholders to participate in biodiversity conservation. While there are many other programmes promoting stewardship and conservation of forests and other natural resources, this chapter focuses on participation in the two voluntary programmes offered by the NHP. The chapter also focuses on private lands, which present a greater challenge for biodiversity conservation than public lands. Understanding how private landholders respond to conservation policies is important because they own a significant proportion of forest and other natural areas in North Carolina. Voluntary programmes are increasingly important in US environmental policy, and this study contributes to the literature by evaluating their effectiveness in the private land conservation arena. The North Carolina NHP is part of the Division of Parks and Recreation within the Department of Environment and Natural Resources. The NHP inventories, catalogues and facilitates protection of the most rare and the most outstanding elements of natural diversity. The elements include plants and animal species that are rare and/or natural communities that are so significant that they merit special consideration. Based on these elements and the feasibility of protection, the NHP has designated approximately

7% of the state as significant areas. The NHP’s purpose in designating areas is to allow the public to weigh the significance of various sites and evaluate the likelihood and nature of ecological impacts; to encourage informed evaluations of the trade-offs between biodiversity and development; and to establish priorities for protection of the state’s most significant natural areas (North Carolina Natural Heritage Program, 2000). Landowners can participate in the NHP by registering or designating their land under the programme (considered ‘protection’). This chapter considers whether forested lands and lands designated as relatively more important by the NHP are more likely to be protected. Next, this chapter seeks to identify factors correlated with protection, using spatial and logistic regression analysis. The potential determinants of protection are derived from a GIS database, including physical, biological, socio-economic and historical features (Western North Carolina Data System, 2000). This analysis builds on the findings of Mansfield et al. (2000) about protection activities (including registration with NHP) in all significant natural heritage areas (including public and private) in the state. We focus in particular on registration and dedication of natural heritage areas by private landowners in western North Carolina. Our analysis suggests how the state or a non-profit agency could encourage landowners to

©CAB International 2003. Forest Policy for Private Forestry: Global and Regional Challenges (eds L. Teeter, B. Cashore and D. Zhang)

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conserve more land and indicates whether state programmes for identifying significant natural heritage areas can impact conservation by private landholders.

Natural Heritage Program The NHP was established in North Carolina in 1975. In conjunction with the Nature Conservancy, the NHP maintains a database of Significant Natural Heritage Areas (SNHA) in the state. The database includes both protected and unprotected sites. They are defined along ecological boundaries and may contain multiple tracts of land under different ownership. According to the NHP (North Carolina Natural Heritage Program, 2000), ‘the sites included on this list are the best known representatives of the natural diversity of the state and therefore have priority for protection’. SNHAs are identified partly based on the NHP’s inventory of significant elements. The elements (plants, animals and communities) are ranked according to their rareness on a national, statewide or regional scale. The NHP also ranks each SNHA by ecological significance into categories based on its national, statewide and regional significance. In ranking the sites, the NHP focuses on the rareness of entire natural communities in addition to individual elements. The NHP database includes both the number of element occurrences and the ranking of each site. The primary boundaries around sites enclose the actual element occurrences and any additional space that needs similar direct protection. Plant species boundaries are the extent of observed and probable occurrence. For animals, the sizes of sites are determined based on known home ranges and appropriate habitat surrounding the area where the animal has been sighted. The size of a site does not depend on the rank of its elements, because the rarity of a species does not determine the area of habitat it requires. In general, however, the site size is determined by the amount of undisturbed community or species habitat, rather than by the theoretical optimal size. Information for the inventories comes primarily from two sources. First, a network of academicians and private and agency biologists share information collected through their personal

work and research. Second, inventories are funded through contracts or grants and carried out as cooperative efforts of the NHP and a variety of other agencies. City and county planning offices, local conservation groups and state conservation agencies help with these inventories. These cooperating organizations often contribute funds to comb the county (or other region) to identify significant elements and areas. Although many agencies contribute to the inventory, only trained community ecologists and biologists may declare a SNHA (L. Pearsall, Natural Heritage Program, 2001, personal communication).

Mechanisms of protection The NHP offers two types of voluntary agreements to protect SNHAs. The most frequently used is the Registered Heritage Area (RHA), which offers the lowest level of protection for a site. Established in 1985, RHAs are voluntary management agreements that are not legally binding and provide no monetary incentives (such as reduced taxes). Under a RHA, the landowner agrees not to take any action that will harm the species or other ecologically significant features of the land. A RHA may even specify a management plan for the SNHA. In theory the site can be removed from the registry if the landowner allows activities that are harmful to the significant natural resource. The second type of agreement is a Dedicated Nature Preserve (DNP), which offers property, income and estate tax benefits (similar to conservation easements). In 1985, the Nature Preserves Act authorized the use of conservation easements to create DNPs. The conservation easements programme was established as part of the Historic Preservation and Conservation Agreements Act of 1979 (North Carolina General Statute 121-34 to 42). To receive the income and estate tax benefits, a DNP must be protected in perpetuity. After SNHAs have been identified, the NHP sends letters to the owners inviting them to participate in either of the two aforementioned protection mechanisms. Depending on the NHP’s assessment of the significance of a site, staff may follow up by visiting the landowners. Many private landowners prefer the non-binding, flexible management agreement of a RHA. Sites often include both

Assessment of a Voluntary Forest Conservation Programme

public and private lands, both of which are eligible to participate in either of the protection mechanisms. Thus, a SNHA that includes some private lands may be partially protected only by the public landowners, by some combination of private and public landowners, or only by private landowners. This chapter considers the latter two cases.

Other Conservation Options Landowners in North Carolina have several options for proactively managing their land for biodiversity (Blank, 1999). Many different policies and programmes have been developed to encourage conservation and preservation (which may entail no management) of natural areas. While this is a positive indicator of public demand for preservation of natural resources, the myriad of options may also have slowed participation rates in the NHP. Public and private landholders must decide which programme(s) best meets their needs. These programmes may or may not require a perpetual easement on the property (e.g. conservation easements). Some provide technical assistance and incentive payments for required management practices (e.g. Forest Stewardship Program) while others assist landowners with either technical support or financial assistance for restoration of the habitat or preservation (e.g. North Carolina’s Wetlands Restoration Program). Land trusts are created and administered by non-profit groups to preserve the natural heritage of the countryside through direct land protection, such as conservation easements, voluntary protection agreements, estate planning, donations and bargain sales. Connected as a statewide system, the Conservation Trust for North Carolina has more than 20,408 ha of woodlands, farmlands, greenways and waterways across the state (Blank, 1999). Land trusts may elect to register or dedicate land under the NHP, but they also may pursue a variety of other options for protecting land.

Previous studies Previous research has considered the conservation motives of landowners, and in particular the motives and objectives of non-industrial private forest (NIPF) owners. One type of landowner

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important in the US Southeast is the ‘absentee landowner’ (Amacher et al., 1998). According to this study, more people are investing in land that is distant from their residence. Compared to resident owners, these absentee landowners are less likely to hunt on their land, are generally wealthier but more in debt, and are less likely to harvest, more likely to reforest, and more likely to perceive high risk to forestry investments. Amacher et al. (1998) conclude that these ‘absentee landholders’ are also more likely to participate in conservation programmes. Another study in Michigan identified differences in landholder habitat management between income-farmers versus non-income farmers as well as new residents versus long-time residents (Ryan, 1998). One of the major differences is that income-farmers and long-time residents prefer more domesticated farm and developed areas while new residents and non-income farmers are attracted to the more natural landscapes of the river and woods. This study also finds that concern for natural features does not appear to be affected by distance, so support for preserving areas and improving water quality could be cultivated throughout a large area (Ryan, 1998). Megalos’ (1999) study in North Carolina found regional differences in landowner willingness to participate in forestry incentive programmes.1 The study showed that landowners in the coastal plain and rural counties were more likely to participate in programmes with financial incentives than were owners in the piedmont, mountains and urban counties. In terms of education and technical assistance incentive programmes, Megalos again found that coastal plain landowners were more in favour of technical assistance and educational incentives than owners in the piedmont and mountain regions were. Landowners generally preferred private rather than publicly provided technical assistance (Megalos, 1999). Only about four out of ten landowners were aware of financial assistance or cost-share opportunities, suggesting that these incentive programmes designed to shape landowner behaviour may have limited impact due to lack of awareness of them (Megalos, 1999). Fraser and Magill (2001) found that West Virginia landowners receiving forest management assistance generally proceed to prepare forest management plans, while those not receiving assistance generally do not prepare plans. The size of

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ownership is also correlated with the development of management plans. Furthermore, landowners who used services of public agencies typically owned less than 40 ha of land, while landowners who preferred to use consultants or other land management professionals averaged over 122 ha. The number of uses and activities increase in proportion to the level of assistance landowners received. The authors conclude that if a property owner is receiving assistance then the owner is more likely to continue current management and pursue additional management measures on their properties, including conservation measures.

Study Area Of the 14 million ha in North Carolina, an area of 7,755,102 ha (58%) is forested. The majority of the forestland is classified as timberland, while the remainder is classified as forested parks, wilderness areas, scenic areas and historic sites (Blank, 1999). In North Carolina, the 1990 Forest Inventory Analysis reports that approximately 76% of the forest area is owned by individuals, corporations, farmers, and institutions such as land trusts – collectively known as non-industrial private forestland owners. Forest industry owns about 13% and the remainder is in public (state and federal) holdings. Western North Carolina is defined to include 24 counties, encompassing the Blue Ridge Mountains and the Great Smoky Mountains National Park. The region has abundant caverns, streams and mountain peaks that draw both tourists and development. In the face of recreational, second home and urban sprawl development pressures, protection of habitats and wildlife today is essential for the future of the region. A detailed database has been developed for this region (Western North Carolina Data System, 2000). Thus, this region makes an excellent case study of the role of the NHP in biodiversity conservation.

Methods and Data To evaluate what has been protected under the NHP, we use Student’s t-tests to compare the mean number of elements, ecological rank, size and percentage forest cover of protected and

unprotected sites. To evaluate who has protected and possible motivations for participation in the programme, we consider patterns of correlation between protection and characteristics of the site and owner, using spatial portrayals and logistic regression. The Appendix lists the variables considered in the analysis. The key variable is a binary indicator of whether or not a site has been protected as a RHA or DNP. This is obtained from the NHP database, along with the geographical location of each SNHA, its size, ecological rank, number of element occurrences, and number and type of owners. Most explanatory variables were defined by extracted spatial data from the North Carolina Data system (GIS data for Decision in Regional Development) and the North Carolina Center for Geographic Information and Analysis. Through several spatial procedures, specific attributes were overlaid and compiled into a single database for statistical analysis. All spatial data were manipulated to merge with the existing GIS data set from the NHP, which included a spatial characterization of all SNHAs and a separate dataset of protected SNHA.2 Ecological number and rank were taken directly from the NHP dataset. Distances were calculated in metres, using the centroid or label point of the SNHA polygons. Distances were found from NHP sites to interstate highways, major cities, registered pig farms, chip mills, scenic rivers, wilderness areas, distinctive landscapes and designated trout waters. Land cover variables were constructed using 1999 Multi-resolution Land Characterization (MRLC) data.3 The initial 23 classes from the National Land Cover Data Classification System were condensed to nine categories: Water, Developed, Barren, Forest (including wetlands), Shrubland, Herbaceous (grasslands), Cultivated, Sediment and No data. We focus on the percentage of a site that is classified as forest. NHP sites that overlap with land in the Conservation Tax programme, land trust priority areas, land trust properties, Federal-owned land, Wildlife Resources Commission gamelands and State-owned land were identified by intersecting the two features. Variables were coded as one for NHP sites that share location with any of the above categories. County-level demographic variables serve as proxies for socio-economic drivers of land-use

Assessment of a Voluntary Forest Conservation Programme

change. Using the label points of the counties, one is able to symbolize polygons (counties) and find in which county a SNHA lies.4 The specific countylevel demographic variables to measure growth include the change in median income between 1979 and 1995, the change in agricultural land prices between 1992 and 1995, and the change in population density between 1985 and 1995. Two additional variables were created to measure political influences. At the county level, the North Carolina State Board of Elections provides the percentage of votes for the Democratic and Republican candidates for President and Governor. Percentage of Democratic votes per county was used. The change between 1981 and 1991 in the sum of natural resources and parks budgets as a percentage of general county revenue was also calculated.

NHP in Western North Carolina Western North Carolina has 504 SNHAs, or 28% of the state total. Of these, 161 (32%) are registered (134) or dedicated (27), covering 155,214 ha (72%) in 2000. Figure 13.1 shows the distribution of SNHAs, distinguishing those with some private ownership from those solely on public lands. The majority of SNHAs (53%) were established in the late 1980s, as shown in Fig. 13.2. According to NHP staff, the Pisgah National Forest

Fig. 13.1.

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and the Great Smokey National Park were undergoing management transitions at that time, which resulted in registration or dedication of many SNHAs in these federal areas.

Private SNHAs In the 24 counties of western North Carolina, 60% (305) of the SNHAs have some private ownership. Of these, 31 (10%) sites are protected by private landowners as either registered (26) or dedicated (7), covering 4088 ha (see Fig. 13.3).

What has been protected? Our first step is to evaluate what has been protected under the NHP, in terms of ecological significance and land cover. Table 13.1 summarizes the number and extent of SNHAs in western North Carolina. On average, the SNHAs are 91% forested, 6% herbaceous groundcover, and 2% shrubland. More than half of the SNHAs (51%) have at least some herbaceous area, and 27% have at least some shrubland, but the areas covered by these vegetation types are in general much smaller than the area covered by forest. Protected SNHAs have a slightly greater proportion of forest (92%) than unprotected SNHAs on average, but in

Significant Natural Heritage Areas (SNHAs) in western North Carolina.

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Fig. 13.2.

Dedicated Nature Preserve (DNP) and Registered Heritage Area (RHA) establishment.

Fig. 13.3.

Privately owned Significant Natural Heritage Areas (SNHAs) in western North Carolina.

general, land cover patterns do not differ significantly between protected and unprotected SNHAs. Turning to private SNHAs, forest cover again dominates, and there are no significant differences in land cover between protected and unprotected private sites. In contrast to land cover, ecological significance does differ between unprotected and protected SNHAs. Following the same pattern as for all SNHAs, the privately protected SNHAs have equal ecological rank (average = 3) and a greater number of elements (average = 12) than all privately owned SNHAs (rank = 3 and number of elements = 9). A t-test indicates that the number of

elements found on protected SNHAs is significantly higher (at the 10% level) than the number found on unprotected sites. This indicates that the conservation outcome of the voluntary protection mechanisms of the NHP has been to protect sites considered more important for biodiversity by the programme, at least by the criterion of number of elements. Nevertheless, the percentage of sites registered or dedicated is fairly small. In the next section, we consider what may have motivated these few private landowners to register or dedicate their land with the NHP by analysing characteristics of the property and the owner(s).

Assessment of a Voluntary Forest Conservation Programme

Table 13.1.

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Descriptive statistics for SNHAs in western North Carolina.

All SNHA Protected SNHA All SNHA with private ownership All private protected SNHA

Number of SNHA

Total area (ha)

Percentage forested†

Ecological rank*

Number of elements*

504 161 305 31

245,647 177,817 70,455 7,375

91% 92% 91% 91%

3 (0.808) 3 (0.790) 3 (0.815) 3 (0.675)

10 (11.4)‡ 14 (13.9)‡ 9 (11.9)‡ 12 (13.3)‡

*Mean (standard deviation). † Average percentage of SNHA that is classified as forest. ‡ Mean of protected SNHA significantly different at 10% confidence level from mean of non-protected SNHA, according to t-test.

Who has protected?: Model Private owners of parcels in SNHAs have revenuegenerating options ranging from harvest of timber and other forest products to conversion to agriculture or residential plots. They are assumed to compare these to the benefits of preservation in making a decision about whether to participate in one of the NHPs (Mansfield et al., 2000). Private landowners provide the state with ecological goods and services such as biodiversity, species habitat and ecosystem functions. Participation in the Heritage Program is an indicator that they intend to continue providing these goods and services and is thus critical for the future of the state’s natural resources. Landowner participation depends on their desired levels of ecological goods and services, the ability of their land to provide these, perceptions of availability of and threats to these goods and services in the neighbourhood, opportunity costs of forgoing use of the land, preferences and income constraints, and knowledge about the programme. These factors are reflected in owner type, socioeconomic characteristics of the county or tract, and ecological characteristics of the site and of the county or region. Our strategy is to identify patterns of association and specifically correlation between the probability of private protection and these factors, rather than generating a predictive or forecasting model. To model these patterns, the following logistic regression is estimated: Prob.{protection} = α + β1(ecological significance) + β2(ownership) + β3 (socio-economic) + β4(political) + β5 (land cover) + β6(natural resources) where α and βi are coefficients to be estimated.

The dependent variable, whether or not a site is protected, is provided by the NHP. Potential explanatory variables in each category are listed in the Appendix and are first tested for association with the dependent variable through bivariate logistic regressions, with results also indicated in the Appendix. Ecological rank or number of elements measure ecological significance of a site. These variables are expected to be positively correlated with the probability of preservation because the landowner of more ecologically sensitive land will be subject to more external public and internal personal pressure to preserve. Turning to the ownership category, SNHAs are defined along ecological boundaries and may contain multiple tracts of land under different ownership. Thus one ownership variable is the number of owners of land in a SNHA. Multiple owners might present a coordination problem and therefore hinder participation. For example, multiple owners might not be able to organize and agree on participation in the programme. Types of owners may also be significant, in particular universities, land trusts and non-governmental organizations may be motivated more by public biodiversity benefits. This may create neighbourhood effects, with private landholders more likely to protect SNHA that share boundaries with government and land trust property, because of increased value placed on open space. Private owners may have chosen to live close to these areas because they enjoy natural areas, or they may have developed an appreciation through the close association. Therefore the intersection of Federal and State lands is expected to be correlated with the protection of private lands in the same SNHAs as the NHP. Socio-economic variables are expected to have mixed signs. For example, change in land

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value might be negatively associated with protection due to the increasing cost of protection, while high tourism sales might encourage participation in order to attract nature tourists.5 Distances to cities and major highways are expected to be positively related to the probability of protection, as areas close to cities and highways are more likely to be highly valued for other uses. On the other hand, tourism revenues are expected to be positively associated with protection, because much of the tourism in western North Carolina is associated with appreciation of natural areas. One difficulty with these variables is that they are county-level proxies for landowner characteristics (Mansfield et al., 2000). Rapid development and growth in income, population and land value mean more competition for undeveloped land and a greater opportunity cost for preservation. However, development also puts unprotected natural communities at greater risk than similar communities in counties that are not developing. Faced with greater threats, pressure to preserve may increase. Growth in income and development may also provide more resources for preservation activities at the local level, and potentially may proxy for changing preference for open space and environmental protection as development changes the landscape. Voting patterns (percentage voting Democrat) and changes in the parks and natural resource budgets represent political determinants.6 These variables should reflect landholder preferences regarding land preservation and the availability of public support for conservation management and protection options. The ‘Park&Rec Budget’ as Table 13.2.

defined in 1990 includes monies for conservation, promotion and development of natural resources, such as soil, water, forests, minerals and wildlife. Thus a positive correlation would indicate that public interest has a relationship with land management. Percentage of land in forest is expected to be positively associated with the probability of protection because of the public perception that forests are a rich source of biodiversity and an important ecosystem. Studies of NIPF also indicate that many of these landowners have some conservation motives. Natural resources determinants are expected to positively influence protection. Designated trout waters, wilderness areas and scenic rivers indicate similar management objectives as the NHP (preserving the natural habitat). Therefore it is expected that SNHAs in close proximity to these natural resources are more likely to be protected.

Who has conserved?: Results Table 13.2 presents a logit model of the probability of protecting land in the NHP in the mountain province. While several specifications were tested, the requirement for the model was that at least one variable (e.g. distance to city) from each category of determinants (e.g. socioeconomic) was included in the equation. The results of bivariate regressions (see Appendix) informed the final specification. Full descriptive statistics, results of the bivariate regressions,

Logit model of SNHA protection.

Variables Constant Ecological rank Number of owners PC Federal/land trusts PC City/road Tourism ‘Parks&Rec Budget’ Percentage forest PC Natural resources Number of observations Log likelihood Pseudo R2

Estimated coefficient

P value

−5.33 −0.91 −1.17 −0.54 −0.36 −1.80 −0.20 −0.24 −0.10 305 (all SNHAs that include private lands) −172.2449 −0.2449

< 0.0001< < 0.0001< < 0.0001< 0.0009 0.0047 0.0691 0.1964 0.7773 0.3229

Dependent variable = protected (whether or not RHA/DNP).

Assessment of a Voluntary Forest Conservation Programme

and alternative specification are presented in Cassingham (2001). In categories with highly collinear variables, principal component analysis was used to create a new variable that captures the highest variance of the group of variables. As expected, the ecological rank of the site is positively and significantly related to the probability of protection. A higher ecological ranking is more apt to interest the landowner in protection. The number of owners also has a strong correlation with protection. In this data set, the number of owners is collinear with the number of owner categories (non-governmental organizations, land trusts, universities, and state, local and federal agencies). The strong correlation with protection therefore may be due to a positive effect of joint ownership with public and non-profit owners. Government agencies, universities and land trusts may have similar management objectives as the NHP and be more inclined to participate in its protection programmes, thereby raising the awareness and interest of neighbouring private landowners. Federal/land trust property is a principal component of dummy variables for intersection with state lands, land trust property and federal land. Consistently across specifications the coefficient is positive and significant. The open natural habitat of these areas may encourage the private owner to maintain open space contiguous with the already protected habitat of the federal, state and land trust property. Socio-economic characteristics of the region were expected to affect private landholders’ decisions to participate, either because they represent characteristics of the landholder or because they indicate external pressures. County level administration and characteristics are likely to both influence and reflect local private landowner perceptions because protection takes place at a local level and often in small communities (i.e. 95% of counties in North Carolina are non-urban). However, the change in the budget for natural resources and parks in the counties is not significant. A principal component of distance to cities and distance to highway was used due to the high correlation between them. The coefficient is negative and significant at the 1% level. Thus, SNHAs closer to cities and highways have a higher probability of protection, perhaps due to greater perceived threats to their biodiversity. Tourism in this regression is negative and significant at the 10% level. This could reflect higher revenues from

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commercial tourism rather than tourism derived from ecological bearings. This model, as well as other specifications tested, suggests that land cover is not an important factor: owners are as likely to protect forestland as any other land cover. Likewise, distances to other natural resources, and a principal component of such distances, showed no significance.

Discussion The percentage of SNHAs that have been registered or dedicated by private landowners is fairly small. In western North Carolina, the NHP database lists 305 sites with partial ownership as private. Out of these, only 31 private owners (10%) have opted for one of the protection mechanisms offered by the NHP. Perhaps because of this limited private participation, NHP staff have started to place more emphasis on encouraging private landholders to sell SNHAs to land trusts, rather than just registering them with the NHP. For example, corporate landholders who have consolidated many smaller parcels are often reluctant to register the land but may be interested in selling it to a land trust for tax benefits. NHP can then convert the land to a Dedicated Nature Preserve. While the percentage is small, however, we argue that it is worthwhile considering what factors are correlated with private participation in the NHP, as an example of a voluntary conservation programme. Next, we summarize the factors that may have motivated private landholders to register or dedicate their land with the NHP. The summary statistics show that sites with a higher number of ‘elements’ are more likely to be protected by private owners. Ecological rank or number of elements is significant even when other variables reflecting ecological characteristics (percentage forest, distance to roads and other designated natural resources) are included in a multivariate logistic regression. This provides some evidence that the NHP is accomplishing its objective of protecting the most ecologically significant sites. The NHP currently does target owners of more highly rated lands, and these appear to be more likely to participate in the programme. If the NHP wants to encourage broader participation, it may need to modify its programme of information dissemination or offer other incentives.

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Other factors associated with private protection of SNHAs were related to land ownership and socio-economic characteristics of the region. The more owners of a site, the more likely it is to be protected. Evidently, multiple ownership does not create a coordination or free-rider problem. The presence of federal or land trust lands also increases the probability of protection by private owners, suggesting that there is not a ‘crowding out’ effect in voluntary land conservation. Contrary to expectations, we find that SNHAs closer to roads and urban areas, but in counties with lower tourism revenues, are more likely to be protected. Areas closer to roads or urban areas may be perceived as more threatened. Overall tourism revenues may not accurately reflect the degree of dependence on nature-oriented tourism, or private landholders may not recognize their role in providing a landscape conducive to tourism. Some variables expected to play an important role in conservation decisions, such as land values, are not statistically significant. This may be because of the use of county-level variables. Clearly, information on characteristics of the individual landholders would be most useful, but future research should also consider the use of tract-level variables. Discussions with NHP staff and the regression results suggest that there may be many idiosyncratic factors that affect protection. Examining the NHP in a smaller area, for example one or two counties with tract level and other more detailed data, could perhaps identify some of the key factors which could then be tested at the regional or state level. Another approach for the NHP would be to focus only on the inventory, identifying the SNHAs and elements. Other programmes with greater public awareness would then concentrate on land acquisition and protection. This study suggests that the information provided by the NHP inventory about the significance of a site may be an important tool for encouraging private landowner cooperation with conservation programmes, such as the Million Acre Initiative with its goal of preserving 1 million additional acres of open space in North Carolina by 2010. Federal and state regulations and incentive programmes have recognized the importance of private lands to the sustainability and conservation of rare ecological habitat. Even with public support and effort, conservation programmes leave much

land exposed to subdivision and development pressure. The resulting loss of natural habitat inhibits ecological and economic values including biological diversity for public benefit. Currently landowners, resource managers, and community leaders struggle to find solutions to fragmented ecosystems and community development pressures. Voluntary programmes such as the NHP are one solution. Our analysis suggests that fragmented (multiple) ownership and proximity to roads and urban areas need not be barriers to private conservation of areas identified as ecologically significant. Programmes such as the NHP can play an important role in raising awareness about the conservation values of lands, allowing landowners to weigh these against the more obvious returns from development, and thus opening the door to voluntary conservation.

Endnotes 1 Megalos (1999) also characterizes NIPF landowners in North Carolina as predominantly male, an average of 62 years old, with some college education and a 1995 income of US$30,000–50,000. The typical NIPF owner has more than 36 ha of land and has owned it on average for more than 20 years. Further, the majority of landowners reside on their tract, and nearly half of respondents describe themselves as retirees. 2 The two sets were joined by the intersect process of Arc View Geoprocessing, by which polygons sharing a common boundary are joined. 3 This land cover data set was produced as part of a cooperative project between federal agencies to produce a consistent, land cover data layer for the USA based on 30-m Landsat Thematic Mapper. 4 An alternative approach to assigning SNHA characteristics across county lines would be to assign the characteristics of the county with the majority of hectares or an average of the characteristics weighted by SNHA area in each county. 5 Contrary to expectations, we find that neither the change nor the current level of land value is significantly related to the probability of protection, and these variables are therefore omitted from the final model. 6 The variable ‘Parks&Rec Budget’ was taken from Mansfield et al. (2000) and is defined as the change in the natural resources and parks and recreation budgets from 1981 to 1991 as a percentage of total general revenue. The sum of the budgets for the Parks and Recreation Department and the Natural Resources were then added together and divided by the total general revenue for

Assessment of a Voluntary Forest Conservation Programme

both 1981 and 1991. The data for the parks and natural resource budget were drawn from Census of Governments (Mansfield et al., 2000).

References Amacher, G., Conway, C., Sullivan, J. and Hensyl, C. (1998) Effects of Shifting Populations and Preferences on the Behavior of Nonindustrial Landowners and Forest Industry. The Southern Forest Resource Assessment Consortium, Blacksburg, Virginia. Blank, G. (1999) Conserving North Carolina’s Forests: Assessment of Need for the Forest Legacy Program. North Carolina Division of Forest Resources, Raleigh, North Carolina. Cassingham, K. (2001) Voluntary conservation: private landowner participation in North Carolina’s Natural Heritage Program. MS thesis, North Carolina State University, Raleigh, North Carolina.

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Fraser, R. and Magill, D. (2001) Forest management assistance and non-industrial private forestland owners in West Virginia. In: Pelkki, M.H. (ed.) Proceedings of 2000 Southern Forest Economics Workshop. Arkansas Forest Resources Center, Monticello, Arkansas, pp. 20–26. Mansfield, C., Pattanayak, S. and McDow, W. (2000) Significant Natural Heritage Areas Preservation: Economics or Ecology. Working Paper. Research Triangle Institute, Research Triangle Park, North Carolina. Megalos, M. (1999) North Carolina landowner responsiveness to forestry incentives. Dissertation, North Carolina State University, Raleigh, North Carolina. North Carolina Natural Heritage Program (2000) http://ils.unc.edu/parkproject/nhp/index.html Ryan, R. (1998) Local perceptions and values for a Midwestern river corridor. Landscape and Urban Planning 42, 225–237. Western North Carolina Data System (2000) http://www.lib.ncsu.edu/stacks/gis/regional/wes tnc/westernc.html

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Appendix Variable ✓ ✓

✓ ✓

✓ ✓ ✓

✓

✓

Dependent variable Protected = 1 if site is either DNP or RHA Ecological significance Ecological ranking (4 = highest, 1 = lowest) Number of elements (plants or animals) Distance to Clean Water Management Trust Fund Sites* Distance to Land Trust Priority Lands* Distance to Conservation Tax Credit Programme* Ownership Size (ha) Number of owners Owner college Owner corporate First Principal Component of intersections of SNHAs with land trusts, priority federal land trust areas, federal lands, state lands and conservation tax programme

Mean (SD)

Significance

0.319 (0.446) 2.88 (0.816) 9.30 (11.9) 12,790 (7,984) 1,534 (12,792) 22,648 (14,966)

< 0.0001 < 0.0001 < 0.6530 < 0.1634 < 0.1489

231 (691) 4 (1.37) 0.010 (0.009) 1 (0.052) −4.26 (1.15)

< 0.0052 < 0.0001 < 0.2556 < 0.1297 < 0.0001

Socio-economic 94,606 (78,938) Distance to interstate highway* 161,615 (114,682) Distance to nearest city of population > 50,000* 74,938 (49,976) Distance to registered pig farms* 45,072 (27,940) Distance to chip mills* 644 (482) Change in agricultural land values in county between 1991 and 1992 Estimated market value of land and buildings: average per acre 3,153 (926) (dollars) from 1997 Census of Agriculture Change in population density of county between 1985 and 1995 812 (9.50) Change in median income of county between 1979 and 1995 $15,533 ($4,291) Gross sales of Cottages, Motels, Hotels of county between 1996 $14 million ($23) and 1997 First Principal Component of distance to major highways and cities −1.12 (1.37) with population > 50,000

< 0.6672 < 0.5031 < 0.4088 < 0.9566 < 0.2500 < 0.1822 < 0.5426 < 0.6197 < 0.0678 < 0.9030

Political Change in Parks and Natural Resource Budget of the county County percentage of votes for Democratic governor County percentage of votes for Democratic president

0.272 (1) −2.26 (1.15) −1.12 (1.37)

< 1.701 < 0.110 < 0.103

Land cover Percentage of forest cover in site Percentage of shrubland cover in site Percentage of herbaceous cover in site

0.910 (0.196) 0.015 (0.054) 0.079 (0.185)

< 0.4606 < 0.5802 < 0.0686

4,520 (3,166) 37,137 (25,488) 8,174 (6,448) 20,298 (22,120) 14,477 (16,157) 0.537 (0.499) 2.04 (1.38)

< 0.7649 < 0.0711 < 0.7962 < 0.5441 < 0.2313 < 0.0264 < 0.3382

Natural resources Distance to designated trout waters* Distance to wilderness areas* Distance to scenic rivers* Distance to distinctive landscapes* Distance to critical habitat* County designated as a priority wetland sub-basin First Principal Component of distance to scenic rivers, distinctive landscapes, critical habitat and designated trout waters

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Notes: Sample = 305 SNHAs with private ownership in Western North Carolina. Variables used in logistic model are indicated with a tick in the first column. Significance is the probability value from a bivariate logistic regression on the probability of protection; values < 0.01 indicate a statistically significant association of the variable with the probability of protection. *Distances are measured as minimum distance from centroid of site to edge of specified site.

14

Policy Developments Affecting Demand, Supply and International Trade of Forest Products: a European Perspective (Keynote Address)

Birger Solberg Department of Forest Sciences, Section for Resource Economics and Planning, Agricultural University of Norway, N-1432 Ås, Norway

Introduction The topic of forest policy related to private forests is of high importance in most countries today. This paper aims at presenting a European perspective on policy developments affecting demand, supply and international trade of forest products, and is divided into three sections. The first gives an overview of main findings from a recent study ‘Institutional and legal framework for forest policies in the East European and Central Asia region and selected OECD countries – a comparative analysis’. The second section presents results from two empirical studies from Europe on the impacts of environmental regulations in forestry, and the third section discusses some of the main factors influencing forest policy developments in Europe. Finally, some concluding remarks are given on future research needs. I would like to emphasize that demand, supply and trade of forest products are a result of the interplay between at least the following four main factors: 1. The present setting of the forest sector (forests, forestry, forest industries). 2. Population and economic growth. 3. Technological change. 4. Policies and institutional aspects.

Thus, when we focus on the fourth of these factors, we should bear in mind that both demand, supply and trade of forest products are heavily influenced by all of these factors and that they interact both in space and time in rather complicated ways.

Main Findings from a Recent Study This section outlines some of the important results from the study ‘Institutional and legal framework for forest policies in the ECA region and selected OECD countries – a comparative analysis’. The study is presented in Solberg and Rykowski (2000) and is a report prepared for the World Bank’s Group on Forest Policy Review and Strategy Development. The main purpose of the study was to draw out possible lessons of OECD (Organisation for Economic Cooperation and Development) and ECA (East European and Central Asia) country experiences regarding forest regulations, institutions, concessions policy, financing and resource pricing. I will briefly report seven major findings from the study which are of relevance here: 1. A broad range of literature exists which gives only a description of various forest policy instruments in use. However, very few studies exist which analyse the effectiveness and cost efficiency,

©CAB International 2003. Forest Policy for Private Forestry: Global and Regional Challenges (eds L. Teeter, B. Cashore and D. Zhang)

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not to say the costs and benefits, of various policy instruments. And even fewer studies exist which evaluate alternative policy instruments as applied in two or more countries. Statistical testing of hypotheses about the impacts of forest policy instruments hardly exist. One must therefore, to a large degree, rely on piecemeal or anecdotal information. 2. The impacts of one single policy instrument usually depend upon which other policy instruments it operates within. Of the three main types of policy instruments (laws and institutional incentives, information, and economic incentives), combinations of appropriate law/institutional instruments and economic ones, have proved to be effective in several Western European countries and have provided the most flexibility. The impacts of the informational policy instruments (extension service, education and research) are more long term, but also important when properly done. 3. Policies in other sectors than forestry are of great importance for forestry. In particular, policies related to agriculture and land-use, energy, transport, environment, trade and the general economy, such as general fiscal and monetary policy, are important because they may affect forestry. When considering forest policy changes, it is vital to include analyses of policies in these other sectors, as those policies might be significantly more important than those planned to be introduced in the forest sector. The concept of National Forestry Programmes (NFP) now being discussed a lot in Europe, is of great interest in this context. 4. Clearly defined property rights and transparent and fair legal arrangements are a prerequisite for good resource management, and for the other policy instruments to have any effect. 5. When public goods, often having no fair market prices, are involved, one should be extra careful when designing policies based purely on market incentives, particularly if irreversible impacts may occur. In the new ownership situation in several of the Eastern European and Central Asian countries, one main challenge is to create an appropriate legal framework (including sufficient sanction mechanisms) that encourage private forest management to secure vital public environmental services from forestry. 6. Forestry is characterized by many stakeholders and complicated ecological, economic, institutional and social relationships which often are dynamic and stochastic by nature. It is,

therefore, particularly important to avoid situations where one (or just a few) stakeholder(s) becomes too dominant in the markets for economic goods as monopolists or monopsonists, or in the institutional/organizational ‘market’. 7. Comparing OECD and ECA countries on forest policy issues, it seems that they differ particularly on the following points. • Ownership and land tenure systems are in general more settled and thus less up for discussion in OECD countries. • The legal framework in most of the ECA countries needs change, in particular regarding how to combine environmental and market issues. • In several of the OECD countries, the legal restrictions on private forest owners are relatively flexible, but the forest authority is in a relatively strong position to guarantee their implementation. In several of the ECA countries, it is the opposite: legal restrictions are very high, but the forest authority is rather weak regarding implementation and sanction possibilities. • Forest owner cooperation and arenas for public participation and conflict resolution are less developed in the ECA region. • Corruption seems to be a greater problem in some of the ECA countries. • Economic incentives are used more in OECD countries, although to varying degrees. • Extension service for private forest owners is inadequate in most ECA countries, particularly for new private forest owners having very limited forest management experience.

Two Examples from Europe Example 1: Economic costs of environmental regulations The first example deals with economic costs of environmental regulations in Norway. The regulations analysed could hypothetically be brought about by a certification scheme or by law enforcement. The analysis was done by three department colleagues of mine and reported in Hoen et al. (1998) and Eid et al. (2001), and is based

Policy Developments and Forest Products in Europe

on a dynamic optimization forest model for the whole of Norway and for the country divided into ten regions. The objective function of the model is to maximize discounted net present value under various environmental constraints (see Hoen et al., 1998; Eid et al., 2001, for more details). The environmental constraints are: 1. Minimum area ‘set-aside’ of existing old forests (5% is chosen). 2. Maintaining a minimum area covered by old forests through time (10% in the base scenario). 3. Retention of trees at final harvest (10 trees ha−1). 4. Restricted treatment (i.e. here, 20% of the non-restricted potential revenue from treatment) is assumed within border zones areas surrounding water, streams, agricultural lands, hiking trails and woods (a border zone of 15 m is assumed in the results shown here). Figure 14.1 shows the harvest quantity decline if all four of these constraints are imposed for the whole country.

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Table 14.1 shows the reduction in net present value resulting from imposing all four constraints simultaneously; 19.6% reduction at 1.5% p.a. real interest rate of return, and 23% p.a. at 3.5% p.a. real interest rate. Table 14.2 shows the regional differences and the effects of each of the four types of constraints. It can be seen that reducing treatments in the border zones and preserving 5% of the old forest are the most costly constraints. It can also be seen that to impose all constraints simultaneously is less costly than summing up the costs of each constraint evaluated independently, because some treatments contribute to meeting more than one constraint.

Example 2: The relative importance of market and environmental factors The second example deals with the relative importance of environmental and market factors at the European level. It is a preliminary result from a

Fig. 14.1. Potential annual harvest level with no constraints (—, reference) and with all constraints implemented simultaneously (- - - -). Source: Eid et al. (2001). Table 14.1. Net present value (NPV) for the reference alternative, and reduced value with all constraints implemented simultaneously. All constraints simultaneously Interest rate (% p.a.)

Reference NPV (mill. NOK)

NPV-reduction (mill. NOK)

NPV-reduction (%)

1.5 2.5 3.5

185,590 106,800 78,820

36,400 22,910 18,130

19.6 21.5 23.0

$1 = approximately 9 NOK. Source: Eid et al. (2001), Hoen et al. (1998).

Renounced capital yield of the first year (mill. NOK) (NOK ha−1) 546 573 634

85 89 99

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Table 14.2.

Region

B. Solberg

Economic impacts – constraints simultaneously and individually.* Individual constraints Reference All NPV constraints Preserve Old forest Retention Border (mill. NOK) simultaneously 5% 10% of trees zones Summarized

5,740 Østfold 8,960 Oslo and Akershus 23,900 Hedmark Buskerud and Vcstfold 13,670 13,090 Oppland 8,080 Telemark 8,540 Aust- and Vest-Agder 4,880 Rogaland and Hordaland 6,390 Sogn & F. and Møre &R 13,540 Mid-Norway 106,800 Norway

78.5 77.5 78.1 79.2 79.2 80.1 79.5 81.2

91.8 90.8 90.3 91.7 90.0 92.4 91.6 93.0

95.8 96.0 95.4 97.6 97.8 99.5 99.2 100.0

99.0 99.1 99.1 99.0 99.0 98.9 98.9 99.1

86.7 86.4 87.9 87.3 99.2 87.6 87.8 88.2

73.3 72.3 72.7 75.6 75.9 78.4 77.5 80.3

81.4

92.9

100.0

99.0

88.5

80.4

74.9 78.5

89.8 91.1

99.0 97.6

99.0 99.0

84.3 87.2

72.1 74.9

*At real term interest rate 2.5% p.a. Source: Eid et al. (2000), Hoen et al. (1998).

forest sector project at the European Forest Institute conducted by Dr Alex Moiseyev and myself, using a global partial equilibrium approach where forest supply, forest industry, production, transport, import and export are integrated in one global model. The model is detailed for Europe (each country in Europe is included as a region, whereas North America is included as five regions, South America as two regions, and Asia as four regions). The following scenarios are analysed: 0. Base scenario (most likely scenario). 1. 25% increase in annual forest growth (only in Europe). 2. 25% increase in annual forest growth (for the whole world). 3. 20% reduction in the standing stock of available timber in Europe due to increased protection of forests for environmental reasons. 4. Inelastic roundwood supply (reduced from 0.7 in base scenario to 0.5). 5. Elastic roundwood supply (increase from 0.7 in base scenario to 0.9). 6. High GDP growth (3.5% p.a. instead of 2.5% in base scenario). 7. Low GDP growth (1.5% p.a. growth instead of 2.5% p.a. in base scenario). What are the impacts of these scenarios relative to the base scenario? Several impact results are

interesting, but as an example, I will just focus here on the impacts on the sawlog harvest in Europe and on sawlog prices in one particular European country – Finland. The annual sawlog harvest in Europe would increase most under scenario 1 (after 15 years the difference between this scenario and the base scenario is about 23 million m3 or about 6%). Under the other scenarios the corresponding estimate is less than 15 million m3 – or less than 4%. The impacts on sawlog prices in Finland would be considerably higher:

• • •

Compared to the base scenario the sawlog price in scenario 3 after 15 years is increased by 13% (from 57 to 64 US$ m−3). Compared to the base scenario, sawlog prices in scenarios 1 and 2 after 15 years are reduced by 25% (from 57 to 43 US$ m−3). The corresponding sawlog price impacts of the other scenarios are less than ± 4% after 15 years.

I must emphasize that these results are rather preliminary, and should be interpreted with care. However, they illustrate the importance of the uncertainty regarding environmental regulations and biological growth development as compared to the uncertainty in some vital economic factors.

Policy Developments and Forest Products in Europe

Main Factors Influencing Forest Policy Development in Europe If I should be pressed to answer the question: ‘What are the main factors influencing forest policy development in Europe?’ I would respond by emphasizing the following four factors: 1. Forest certification and forest environmental issues. These issues are, and will most likely remain, important. Vital here is the interrelationship between what the market can do through certification and what additional governmental regulations are necessary. The status of research in Europe on willingness to pay for forest products coming from certified forestry, indicates that consumers are not very willing to pay. Thus to produce a common good, such as biodiversity, governmental regulations may be warranted. 2. International agreements. We have in Europe two types: legally binding and non-legally binding (Gluck, 2000). Among the legally binding ones of potential importance for forestry in Europe, I would like to mention the Convention on Biological Diversity (from 1999); the UN Convention on Climate Change; and the Flora and Fauna Habitats Directive 92/43 of the EU, better known as Natura 2000, which forms the legal framework for the establishment of a coherent ecological network of special protection areas in all of Europe. In particular, the Convention on Climate Change has such a huge scope and potential that it may totally dominate a relatively small sector like forestry. The possible impacts on forestry and forest industries are uncertain, but might be positive both on the supply and demand side. On the other hand, the impacts of the Convention on Biological Diversity and Natura 2000 will most likely be negative for forest industries in Europe, although the magnitude of the impacts are unknown. Regarding the non-legally binding initiatives (or so-called ‘soft laws’), the most important one for European forestry is, in my opinion, the PanEuropean Principles Criteria and Indication for Sustainable Forest Management signed in 1993 in Helsinki by 34 European countries. This was followed up in the Third Ministerial Conference on the Protection of Forests in Europe held in Lisbon in 1998 defining criteria, indicators and operational guidelines for sustainable forest management. The voluntary guidelines form the basis for

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the ‘Pan-European Forest Certification’ (PEFC) scheme. 3. Policies in other sectors. Particularly important here are the agriculture, energy and rural development policies. There is much uncertainty about the future of agriculture policies – especially with regard to the recent discussion related to foot and mouth disease, and the huge amount of agricultural subsidies going to EU states. The expansion of the number of EU members, with the addition of Poland, the Czech Republic and Hungary makes the CAP (the common agricultural policy) even more essential in this respect. In addition there is the fact that the energy sector in Europe is rather inefficient. Already proposed deregulations of the energy markets indicate that energy prices in the EU are not likely to increase over the next 10–15 years. This will influence the demand for bioenergy. On the other hand, there is a so-called ‘white paper’ proposing that the EU should have 10% of the total energy consumption in each country coming from bioenergy. This would, if accepted, increase the demand for wood and chippings as energy sources. 4. Last, but not least, I would like to mention two factors which are not directly policy issues, but are factors which most probably will influence forestry in Europe and then, also possibly, the US forest sector. That is, first, the development of the Russian forest sector, which is very much linked to the general development of Russia. The second factor is the possibility of accelerated timber growth in Europe, the possible price consequences of which are illustrated in Example 2 above.

Some Concluding Remarks This leads me to my final points, which are concerned with the role of research. Research has a vital role to play in all the matters previously described. As mentioned, most of the literature on forest policy instruments is of a descriptive nature, focusing on describing the various instruments used, but very little exists on their impacts. More research is urgently needed – in particular studies on the effectiveness, the cost efficiency and the distributional impacts of various policy tools. This should be done in several ways; for example by analysing the impacts of single policy instruments, and by comparing the impacts of alternative sets of

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policy instruments in one country or as applied in two or more countries. This research should preferably concentrate on policy instruments which seem to have given extreme results – either very good or very bad – and the main reasons for these results. Examples of important questions to address are: Must certain necessary conditions be fulfilled to provide successful policy reforms? Are certain combinations of policy instruments preferable/not preferable? What are the transaction costs of various sets of policy investments? Forest economics has an important role to play here (Solberg, 1997). In my opinion, forest policy research in Europe has been dominated too much by non-economists (see, for example, Gluck, 1995; Tikkanen and Solberg, 1995). Sociology, political science and social anthropology are of course important, but policy analyses call for interdisciplinary research where sociology, political science, social anthropology and economics are combined, with varying degrees of intensity according to the problem being investigated. It is time that forest economists got more involved in policy analysis.

References Eid, T., Hoen, H.F. and Økseter, P. (2001) Economic consequences of sustainable forest management regimes at non-industrial forest owner level in Norway. Forest Policy and Economics 2, 213–228.

Hoen, H.F., Eid, T. and Økseter, P. (1998) Økonomiske konsekvenser av tiltak for et bærekraftig skogbruk. [Economic consequences of measures for sustainable forestry]. Rapport 8/98, NISK/NLH. Ås Norway, 72 pp. [In Norwegian only.] Hoen, H.F., Eid, T. and Økseter, P. (2001) Timber production possibilities and capital yields from the Norwegian forest area. Silva Fennica 5, 249–264. Gluck, P. (1995) Evolution of forest policy science in Austria. In: Solberg, B. (ed.) Forest Policy Analysis – Methodological and Empirical Aspects. EFI Proceedings No 2/1995:51–62. European Forest Institute, Joensuu, Finland. Gluck, P. (2000) Theoretical perspectives for enhancing biological diversity in forest ecosystems in Norway. Forest Policy and Economics 1(3–4), 195–208. Solberg, B. (1997) The role of economics in forest policy analysis. In: Saastamoinen, O., Harju, A., Lipitsainen, S. and Rytkonen, V.M. (eds) Economic and Legal Aspects of Forest Policy in the Scandinavian Countries and Russia. University of Joensuu Research Notes No. 52, Joensuu, Finland, pp. 59–66. Solberg, B. and Rykowski, K. (2000) Institutional and legal framework for forest policies in ECA region and selected OECD countries – a comparative analysis. Background document for the World Bank Group on Forest Policy Review and Strategy Development: Analytical Studies/Issues Paper, 58 pp. http://wbln00l 8.worlclhank.org/essd/ forestpol-e.nsf/Main View Tikkanen, I. and Solberg, B. (1995) Evolution of forest policy science in Finland and Norway. In: Solberg, B. (ed.) Forest Policy Analysis – Methodological and Empirical Aspects. EFI Proceedings No 2/1995:69–90. European Forest Institute, Joensuu, Finland.

15

Private Forest Management and Investment in the US South: Alternative Future Scenarios Ralph J. Alig,1 Darius M. Adams,2 John R. Mills,3 Brett J. Butler4 and Robert J. Moulton5

1USDA

Forest Service, Pacific Northwest Research Station, Corvallis, OR 97331, USA; of Forest Resources, College of Forestry, Oregon State University, Corvallis, OR 97331, USA; 3USDA Forest Service, Pacific Northwest Research Station, Portland, OR 97205, USA; 4USDA Forest Service, Northeast Research Station, Newton Square, PA 19073, USA; 5USDA Forest Service, State and Private Forestry, NC 27709, USA (retired) 2Department

Introduction During the 20th century, private forest lands provided the bulk of the output of forest products in the USA. The share of US softwood timber harvests from public forests dropped by more than half, from 26 to 12%, between 1986 and 1996. With increasing demands for wood products in the future a high likelihood, and a smaller share coming from public lands, private timberlands will need to provide larger volumes of profitable timber production in an environmentally responsible manner.1 Part of this growth in wood volume will come from yield-enhancing investments induced by attractive financial returns, primarily through the use of planting stock and site preparation. This paper examines the impact of changes in private management investment on future harvest and price levels in the US forest sector, emphasizing the South of the USA because of its importance in US wood supply. We employ modelling systems developed as part of the USDA Forest Service’s Resources Planning Act (RPA) Timber Assessment to simulate a series of scenarios on future private

investment and timber management.2 Understanding the timber supply prospects from private lands in the near term turns heavily on knowledge of the owners’ responses to prices. In the long term, however, forest management and associated investment in silvicultural practices are the key concerns, including consideration of different trends by owner and forest cover types. We use computer simulations to project a base case, and then consider two variations due to changes in decisions to hold higher levels of inventories (reduced hardwood harvest) and in direct investment in softwood plantations. These specific scenarios were chosen because of their pertinence to some of the key issues in prospective future timber supply: changing ownership objectives on the non-industrial private forest (NIPF) lands and the importance of plantations in the provision of future supply. The following section outlines the base case projection, which serves as our starting point. We then give a brief overview of the computer simulation model and a detailed description of the elements of the two scenarios. Final sections present simulation results and discuss their implications.

©CAB International 2003. Forest Policy for Private Forestry: Global and Regional Challenges (eds L. Teeter, B. Cashore and D. Zhang)

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Projected Demands for Wood Products and the Role of US Private Lands Timber demand The primary drivers of long-term wood products consumption and timber harvest in the USA are changes in population and income. In the draft 2000 RPA Timber Assessment, the ‘base case’ projection envisions slower growth and a marked ageing of the US population over the next five decades. While the total population will rise by 123.3 million people between 1998 and 2050, the number of people aged 65 and older will increase by 44 million, more than one-third of the total increase. Population ageing will have effects on the rate of output growth in the US economy and on types of goods and services demanded. Income growth will also be slower than in the past at about 2% per year, compared to growth in excess of 3% since World War II. Despite this slowing growth trend, there will be ample pressure on demand, and wood products consumption will probably rise to record levels. The USA currently relies on imports for about 20% of wood consumption; at the same time, exports account for about 12% of US production (Haynes, 2001). In recent years, US consumption of roundwood3 in all timber products was 561 million m3 (20 billion ft3), of which 515 million m3 came from domestic forests. Private forests provided 89.3% of this domestic harvest, up from 75.9% in 1970. By 2050 roundwood consumption is projected to increase some 34% to 750 million m3 (26.5 billion ft3) in the ‘base case’ projection, of which 665 million m3 comes from US forests. The share from private forests in this projection rises to 91.0%.4

Land-use changes In meeting the rising demand and harvests projected in the draft Timber Assessment’s ‘base case’, private timberlands will undergo significant changes in area, inventory, growth and management intensity. The US population is projected to increase by more than 120 million people by 2050, with above average increases in the southern and western regions. Increases in population and income will increase consumption of timber products but will also increase demands for land

for residential and infrastructure uses, further shrinking the timberland base. Rising population, expansion of urban and suburban areas, and construction of new housing will continue to erode the timberland base (see e.g. Mauldin et al., 1999). From 144.7 million ha (357.7 million acres) in 1997, the US private timberland base is projected to drop by 4.1%, or approximately 6.0 million ha, by 2050, with timberland per capita projected to decline from about 0.73 ha per person in 1997 to 0.49 ha in 2050. Most of the projected US timberland area reduction is on NIPF ownerships.5 Area change projections vary by region however and, for example, total private timberland area in the South Central region is projected to increase slightly by 2050 (Ahn et al., 2001) based on assumed future increases in forestry land rents relative to agriculture.

Forest cover changes Over the last 50 years, the largest timberland area changes in the USA have involved forest cover changes in the South, with a decrease in the area of natural pine and a substantial increase in planted pine area. Planted pine area increased by more than 10 million ha between 1952 and 1997, more than a tenfold increase. Plantations occupy only about 16 million ha, 5% of US forest land area and 8% of the timberland area, while naturally regenerated stands occur on the remainder (Smith et al., 2001). Even in the South, which has the largest share of plantations, they still represent only 15% of the total private timberland. Private area of pine plantations in the South is projected to increase 62% by 2050 (Alig et al., 2002). Tree planting has increased quite steadily from 40,000 ha in 1930 to the planting of 1 million ha in 1997 (Moulton and Hernandez, 1999). Three major federal programmes have created large peaks in tree planting activity: the Civilian Conservation Corps programme caused total planting to approach 200,000 ha per year during the late 1930s; the Soil Bank Programme propelled annual tree planting over the 400,000 ha mark in the late 1950s; and the Conservation Reserve Programme contributed largely to setting an all-time record high of 1.4 million ha planted in 1988 (see Fig. 15.1 for trends since 1950) (Alig et al., 1999).

Private Forest Management in the US South

151

0.7

Tree planting (million ha)

0.6

0.5 NFS

0.4

Other Pub. For. Ind.

0.3

NIPF

0.2

0.1

0 1950

1960

1970

1980

1990

2000

Year

Fig. 15.1. Tree planting in the USA by forest ownership, 1950–1998. NFS, National Forest; Other Pub., other public; For. Ind., forest industry; NIPF, non-industrial private forest.

Projected future shifts in areas of natural pine and upland hardwoods in the South differ from long-term historical trends. Between 1952 and 1997, natural pine area declined by about 58%, due in part to conversion of some areas after harvest to pine plantations and other harvested stands reverting to hardwood types. Total private area in natural pine is projected to decline at a slower rate, with only a slight (1%) further reduction by 2050. The case of uplands hardwoods is somewhat the reverse. Between 1952 and 1997, upland hardwood area in the South increased by about 27%. Future area is projected to decline by 26%, due to conversion to residential and urban/developed uses such as around the Atlanta area, conversion to pine plantations, and some transitions to other forest types (e.g. oak–pine). These projections are based on forest type transition rates computed from recent FIA plot re-measurement data and use of surveys of private forest owner intentions from Moffat et al. (1998) for NIPF timberlands and from the American Forest and Paper Association for industrial timberlands (Butler and Alig, 2001). Another key input is harvest projections from the RPA modelling system (see endnote 2). The amount of hardwood harvest in the South has been increasing in recent decades, and that trend is projected to continue. At the same time, aggregate investment in hardwood silviculture and management in the South has not kept pace with that for softwoods. The forest type projections are based on the assumption that

such behaviour will largely continue. However, the use of short-rotation woody crops (SRWC) (e.g. hybrid poplar) is projected to increase, with most in latter decades of the projection and represent about 6% of total hardwood roundwood harvest in 2050. The outlook for a limited harvest trend for hardwoods represents a marked change from the outlook in the 1970s and 1980s of a relative abundance of commercial hardwoods. For example, earlier observers such as Knight (1973) pointed to the pine regeneration problem in the South, with concern for hardwoods limited to the difficulty of finding markets for lower quality hardwoods. Since the early 1970s, the addition of more than 6 million ha of pine plantations in the South has contributed to a significant increase in pine plantations as a source of harvested timber in the USA. The potential also exists for emergence of hardwood SRWCs to supplement hardwoods from forests (e.g. Alig et al., 2000a), but at present the volumes anticipated are relatively small.

Timber harvests and inventories At the same time, the inventories of private forests will continue to evolve. Although changes will occur in all regions, the key areas for future private supply are the South and the Douglas-fir region of the Pacific Northwest.

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The South will experience some limitations in softwood harvest over the next decade, but in the long term should see significant expansion in both softwood harvest and inventory. The source of near-term restrictions lies in the inventory structures of two groups: South Central (SC) NIPF and Southeast (SE) industry. In both ownerships, volumes will be stable to declining in the age classes where harvest is primarily concentrated and volumes available for harvest (unreserved and above minimum harvest age) will decline. After 2010, however, maturation of large areas of immature timber (the legacy of regeneration activities in the 1980s and early 1990s) will produce large shifts in the age structures of these timberlands, increase growth, and allow major expansion in harvest. For the companion private groups in the South, SC industry and SE NIPF, volumes in merchantable ages have already begun to rise and no near-term limitations are foreseen. Softwood harvest and inventory projections for the South are

summarized in Table 15.1. Aggregate industrial harvest is expected to roughly double by 2050. Harvest will exceed growth after 2030, but by 2050 inventory is still 64% higher than 1997 levels. NIPF ownerships will realize a nearly 40% increase in harvest and inventory will rise steadily (growth exceeds harvest) to 50% above current levels. The limitations in near-term harvest on NIPF lands are also clearly shown in Table 15.1.

Management intensities Changes in management practices and rising management investment have contributed to growth in Southern harvests and inventories in the past and will continue to do so in the future. As illustrated in Table 15.2, industrial owners will increase their plantation area to more than three-quarters of their timberland base, and

Table 15.1. Timber harvest and inventory for private ownerships in key US supply regions, with projections to 2050. 1997

2010

2030

2050

3

(Million m ) Softwoods Southern Industry Harvest Inventory Southern NIPF Harvest Inventory Douglas-fir Harvest Inventory Hardwoods Southern Industry Harvest Inventory Southern NIPF Harvest Inventory Northern Industry Harvest Inventory Northern NIPF Harvest Inventory

63 693

77 984

117 1293

122 1135

110 1829

88 2180

110 2641

153 2742

19 500

28 512

28 507

26 579

21 463

21 387

17 340

15 279

78 3260

114 3453

117 3135

116 2702

7 339

5 368

5 428

5 493

42 3436

53 4115

65 4701

78 4962

Source: Historical data and projections, USDA, Forest Service, RPA Timber Assessment. Projections were made using the Assessment models (see note 2 for source of model documentation).

Table 15.2.

Indicators of management intensity on private lands in key supply regions, with projections to 2050.

Region

Southern NIPF

Measured

1995 (%)

2010 (%)

2030 (%)

2050 (%)

Plantations High intensity plantations Low–medium intensity natural and oak–pine Plantations High intensity plantations Low–medium intensity natural and oak–pine Unavailable (for harvest) lands

as % of all softwood area as % of plantations as % of natural and oak–pine as % of all softwood area as % of plantations as % of natural and oak–pine as % of all softwood area

Plantations High intensity plantations

as % of all softwood area as % of plantations

58.6 21.5 76.9 23.8 26.5 48.9 4.8 1990 (%) 56.6 49.4

68.9 49.3 80.0 26.0 30.2 36.6 6.7 2010 (%) 75.9 53.2

75.4 52.7 82.4 29.7 30.2 27.8 8.4 2030 (%) 82.0 53.1

77.6 52.1 86.5 31.3 27.7 21.8 10.9 2050 (%) 87.6 52.9

Low intensity, including partial cutting Unavailable (for harvest) lands Low intensity, including partial cutting Unavailable (for harvest) lands

as % of all hardwood areaa as % of all hardwood areaa as % of all hardwood areaa as % of all hardwood areaa

87.1 7.5 81.1 9.5

81.6 11.6 75.0 12.6

74.4 16.9 63.1 18.0

69.4 21.4 55.9 21.0

Douglas-fir Industry

Hardwoods Southern Industry Southern NIPF

Private Forest Management in the US South

Softwoods Southern Industry

Management class

Source: Historical data and projections, USDA, Forest Service, RPA Timber Assessment. a Excludes non-stocked areas.

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employ more intensive regimes (e.g. substitution of capital for land) on more than half of the plantation area by 2050. In natural pine and oak–pine areas, however, management will remain largely of the least intensive forms (including partial cutting). NIPF owners will also add more plantations, but to a much smaller relative extent than industrial owners (plantations rise from 24 to 31% of the NIPF total softwood area between 1997 and 2050). There will be little change in the application by NIPF owners of more intensive regimes within plantations and a significant number are not planted back to pine after harvest (Fig. 15.2), but management intensity will increase in natural pine and oak–pine types. In addition, NIPF owners are projected to increase the areas unavailable for timber harvesting and management (Moffat et al., 1998), with the fraction of unavailable softwood area alone rising from an estimated 5% at present to 11% by 2050 (Table 15.2). In the Douglas-fir region, industrial owners also face near-term harvest limitations for the same reasons as SC NIPF and SE industrial owners. After nearly five decades of gradual reduction in inventory and harvest as old-growth stands were converted to managed young-growth, there are large areas of timberland just below the minimum merchantability threshold. As this timber begins to mature over the next few decades, harvest and inventory will stabilize at levels near those in the late 1980s (see Table 15.1). Unlike the South, however, there does not appear to be much opportunity for harvest expansion. Increasing management

intensity will act to sustain growth and harvests in the future. Plantations are expected to move from roughly 57% of the industrial timberland base to nearly 88% by 2050. The proportion of plantations in more intensive management forms (fertilization, genetically improved stock and/or enhanced site preparation, and commercial thinning) is expected to rise only slightly above the current level of 49%. Hardwoods are often overlooked in discussions of wood consumption, but they remain a critical part of US timber supply. In 1996, hardwoods accounted for 37% of total roundwood consumption and are expected to remain at that share in the ‘base case’ projection through to 2050. Hardwood consumption is projected to rise from 207 million m3 in recent years to 276 million m3 by 2050. Harvests from domestic hardwood forests slightly exceed US consumption, due to a small volume of exports, and this condition, too, is expected to continue through to 2050. Private forests, mostly in the eastern states, provide 90% of the hardwood harvest currently, and this fraction is projected to rise to 92% by 2050. Hardwood inventory exceeds softwood on private lands in the USA. At present this volume is split roughly evenly between northern and southern regions (see Table 15.1). In the ‘base case’ projection, harvests on private lands in the South expand more rapidly than those in the North, exceeding growth in all years on Southern industrial ownerships and after 2010 on Southern NIPF lands. Inventories by 2050 in these cases fall below current levels. In the North, in contrast, growth

70% 60% Retenion rate

50% 40% 30% 20% 10% 0% Forest Industry

Misc. Corp. Southeast

Other Private

Forest Industry

Misc. Corp.

Other Private

South Central

Fig. 15.2. Retention or replanting of pine plantations after final harvest on private ownerships by subregion in the US South, for the most recent forest survey period.

Private Forest Management in the US South

exceeds harvest on both private ownerships, and inventories rise sharply over the projection. The marked difference between regions reflects the current and expected future concentration of processing industry in the South. Although there is not a full set of reliable statistics, management investment on private hardwood timberlands is certainly far lower than for softwood types. As indicated in Table 15.2 for private timberlands in the South, most hardwood timberland has not been planted and is managed with the least intensive methods (partial cutting, natural regeneration). A substantial amount of the hardwood timberland is in older age classes (45 years and older) (Haynes, 2001). A sizeable area on both industrial and NIPF ownerships is not available for harvest according to regional surveys (e.g. Moffat et al., 1998). In the ‘base case’ projection, both private owner groups are projected to shift a large fraction of their remaining hardwood hectares into unavailable status over time. For both owner groups, this class holds roughly 20% of their hardwood timberland by 2050. Meanwhile, industrial owners will shift a small portion into more intensive modes of management, while NIPF owners are projected to shift a larger area into more intensive forms of hardwood silviculture. For perspective, the shift of NIPF hardwood hectares to more intensive management is comparable to the amount that industry is assumed to put into the unavailable reserves.

Simulation Methods The TNAA system of models6 was developed to support the RPA Timber Assessments and Assessment Updates conducted every 5 years by the USDA Forest Service. TNAA is a price endogenous, spatial equilibrium system (Adams and Haynes, 1996). Market solutions for both solid wood and fibre products are obtained one period at a time using direct optimization of market surplus objective functions. TNAA projects prices, consumption, and production of softwood and hardwood solid wood and fibre products, and harvest of timber from private lands and associated timber prices using an annual time step. Exogenous projections of land allocation and forest cover changes are provided by regional area change models (e.g. Alig et al., 2001; Butler and Alig, 2001), and timber growth and yield

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projections by the area-based Aggregate TimberLand Assessment System (ATLAS) (Mills and Kincaid, 1992). Exogenous projections of forest management investment have been based on single-hectare analyses and expert opinion. On the resource side, the TNAA system uses parameters for most behavioural equations (e.g. timber harvest by private owners) that are estimated from historical data. Private timber supply functions are derived from explicit hypotheses of intertemporal harvest behaviour for industrial and nonindustrial owner classes. The resulting relations link harvest to prices, inventory levels, interest rates and, for non-industrial owners, income from non-forest sources. Total timber harvest in TNAA is divided between ‘sawtimber’ and ‘non-sawtimber’ classes based on the product for which the harvested timber is used. Sawtimber includes timber harvested for lumber, plywood, miscellaneous products and saw/veneer log trade; nonsawtimber includes fibre for reconstituted panels, pulpwood and fuelwood. TNAA includes models of public and private sawtimber stumpage supply in the USA and delivered sawlog costs in Canada. Pulpwood supply equations for the USA and Canada and behavioural relations for fuelwood harvest from standing timber are included in the pulpwood and fuelwood models. The supply relations are linked to the sawtimber relations in TNAA by means of timber inventories and prices. Trade-related assumptions include the continuation of the importance of Canada as a source of some softwood lumber and a gradual increase in the importance of non-Canadian sources of forest products, an increasing importance of hardwood product exports, and a continuing shift in the composition of trade toward value-added products (Haynes, 2001). Timber inventories on private ownerships only are projected in TNAA using a modified version of the ATLAS model. Basic inventory data are derived from the Forest Service’s periodic forest surveys. Because dates of these inventories differ by region, the simulation structure allows staggered ‘starting’ times in the projection process. Lands include only those classed as ‘timberland’, meeting a minimum standard of productivity and not reserved from timber harvesting. Timberland is stratified by region, owner, (representative) age class, site productivity group, management intensity class and forest cover type.

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A management intensity class is defined by a combination of silvicultural activities including, but not limited to, regeneration, pre-commercial and commercial thinning, and fertilization. These actions are depicted in ATLAS through the use of a specific age-dependent yield function for evenaged strata (or yield process for partial cutting) that reflects the growth and yield impacts of the regime. Lands classified under even-aged management can shift among management intensity classes over time to reflect changes in timber management investment. At present the extent and timing of these shifts are determined outside of the TNAA system and occur only after a hectare has been harvested. Over time the timberland base is adjusted in ATLAS for the movement of land between forest (timber production) and non-forest (including, agricultural, urban and reserved) uses. Projections of these shifts are developed outside of the model, based on regional models of area changes (e.g. Alig and Wear, 1992). When land shifts to a non-forest use, a portion of its volume at the time of shifting is assumed to be harvested and is counted in the current aggregate cut from its stratum. This reflects the process of land clearing or volume reduction associated with most land-use changes in the private sector.

Scenarios

ha of southern pine plantations; however, hardwood forest types cover a large majority of its regional landscape. To investigate the impacts of variation in future forest investment in the South, we simulate two alternative scenarios – one examines maintenance of higher hardwood inventory levels and a second involves a lower investment in pine plantations – and a base case (BASE) developed as a baseline for comparison. The BASE assumptions were taken in early 2001 from the USDA Forest Service’s 2000 draft Timber Assessment for the Resources Planning Act (Haynes, 2001). The BASE assumptions, including supply side aspects such as timberland area projections (e.g. Alig et al., 2001), were reviewed in a series of meetings around the USA. In the future, trends in the demand for forest products will continue to be determined largely by growth in US population, income and economic activity. Projections of future levels for these key demand determinants were taken from government projections, including some by USDA (Haynes, 2001). For example, the macroeconomic outlook underlying these projections is based in part on the US Bureau of Census 1996 middle series projection of the US population, with demographic changes resulting in an ageing population and a slowing of labour force growth. The alternative scenarios pertain to the dynamics of private forest investment and associated uncertainties, suggested by recent trends and developments as described below.

Overview The major US forest regions have widely different potentials to attract private investments in forest production. Rapid tree growth generally translates into higher potential economic returns to investors, and tree growth is fastest in the South and the wetter areas of the Pacific Northwest. In this chapter we focus on the South because it accounts for about 80% of US tree planting, has large areas of marginal agricultural land that could be planted to trees, and is proximate to major woodprocessing facilities and the large concentration of the consumers in the East. The South contains more than ten times as much private timberland as the Pacific Northwest. The South is a key supplier of fibre for papermaking and contains about two-thirds of the fast-growing coniferous plantations in the world, equal to about 12 million

Description of scenarios Maintaining hardwood inventories (LOHARD) A key forest investment decision is the volume of growing stock allowed to accumulate in the stand under management. This, in turn, is regulated by the harvest decision: the rotation age in the case of even-aged management and the removal volume in the selection case. Where management is guided by a consideration of the present value of future net returns, higher stocking levels can be induced by lower discount rates and by the realization of returns (either monetary or intellective) derived directly from the standing inventory (e.g. non-timber products such as hunting leases or the owner’s enjoyment of larger trees). Recent surveys

Private Forest Management in the US South

(see, for example, Moffat et al., 1998) suggest that the recognition of such benefits may be on the rise for some Southern NIPF ownerships. This scenario considers a case where NIPF owners opt to maintain inventories in their hardwood stands at near current levels by reducing harvest over the next five decades, avoiding the decline projected in the BASE case. Total hardwood inventory volumes in the South decline by nearly 17% by 2050 in the BASE case, even though hardwood harvest shows little growth after 2005. In this scenario we restrict harvests on Southern NIPF lands so as to maintain hardwood inventory volumes at or above levels in the late 1990s. This scenario would be consistent with a trend towards greater emphasis on nontimber forest values on the part of NIPF owners and a concomitant disinclination to harvest timber. This scenario will have its greatest impacts in the large SC NIPF ownership. Less investment in pine plantations (LOSOFT) As described above, growth in the area of pine plantations has been a major feature of Southern forest practice over the past two decades. However, the longer-term history suggests that some volatility in plantation levels is possible. This scenario explores a case where the rate of plantation establishment falls below the level projected in the BASE case. This provides an opportunity to gauge how important Southern pine plantations are in the future supply projection. The area of private pine plantations is projected to increase by 62% in the BASE, with about 7 million ha of plantations added between 1997 and 2050. The projected increase is in line with historical trends, where more than 10 million ha of plantations were added between 1952 and 1997. In this scenario, we reduce projected Southern pine plantation area by about 2.7 million ha compared with the BASE projection.

Results For each scenario, we report projections of Southern plantation area for forest industry and non-industrial private owners, timber management intensity, timber inventory levels, timber harvest levels and prices.

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Base projection The BASE case projects, over the next 50 years, the likelihood of increasing abundance of softwoods and decreasing abundance of hardwoods in the South. These trends in supply, along with contributions from the North and West, will adequately meet US consumption needs in the longer term without significant increases in most softwood product prices over the next 50 years. However, the adequacy of timber supplies is dependent on continued expansion of softwood plantations with increased management intensity in the South, moderation of hardwood use in the South, and continued improvement in technology to grow trees and to obtain more wood and paper product output per unit of timber input. Total roundwood harvest in the USA is projected to be 0.68 billion m3 in 2050. Comparing 1996 and 2050, softwood harvest is projected to increase 38% to 0.40 billion m3 and hardwoods 37%, to 0.25 billion m3. In addition, the consumption of hardwood short-rotation woody crops (e.g. hybrid poplar) for pulpwood grows to about 0.02 billion m3 by 2050. While softwood timber harvest increases 38%, US softwood inventories are projected to increase by 58%. While US hardwood harvest increases 37%, hardwood inventories are projected to increase by 25%. Although the increases are similar for softwoods across regions, hardwood inventories decline moderately in the South but rise in the North. The proportion of the roundwood harvest consumed in the USA and used to manufacture wood pulp is expected to remain relatively constant at 30%. However, the use of short-rotation woody crop fibre and recycled fibre is expected to increase. The bulk of the nation’s timber harvest will occur in the East (79% in 1996 and 83% in 2050) and in the South (55% in 1996 and 60% in 2050). Most of the projected short-rotation woody crop fibre supply is in the East. By 2050, roughly two-thirds of the softwood timber harvest comes from plantations that will occupy less than 20% of the timberland base. Sawtimber prices are expected to stabilize somewhat after increasing in the 1990s. Marketbased adjustments mostly on private timberlands are able to meet expected increases in US consumption. Stumpage markets in the West will continue to be weak for small diameter logs. Pulpwood prices rise as a result of limitations in

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harvestable hardwoods on non-industrial private timberlands in the South. Product prices are expected to be stable at roughly current levels.

Outcomes under scenarios Reduced rates of pine plantation establishment in the LOSOFT scenario lower growth on Southern timberlands and ultimately lead to lower softwood inventories and lower softwood timber harvest. The softwood inventory impacts are clearly shown in Fig. 15.3 and are particularly large on NIPF lands because the largest plantation reductions occur on this ownership in the scenario. By 2050, LOSOFT NIPF inventories are some 0.28 billion m3, about 10%, lower than in the BASE, but they are still 0.42 billion m3 higher than the levels of the late 1990s. Industrial inventories are also modestly lower, but this reflects increased harvest in response to the higher prices stimulated by the NIPF harvest reduction. The LOHARD scenario has limited impacts on the softwood inventory and continues to show a considerable gain in inventory on both owner groups by the end of the projection. Hardwood inventories, in contrast, are largely unaffected by all but the LOHARD scenario (see Fig. 15.4). NIPF inventories rise at first in the LOHARD case but eventually return to late 1990s levels. This is a gain of nearly 0.57 billion m3 relative to the BASE. Forest industry hardwood inventories in the LOHARD case fall more rapidly

than the BASE, again because of higher cut in response to higher prices. The decline is small in absolute terms relative to the NIPF gain, but in percentage terms is nearly equivalent. Unlike Southern private softwood inventories, hardwood stocks on both ownerships are projected to be stable to declining over the projections. The drop in industrial inventories is largely a reflection of conversions to softwood plantations. Type conversions are also important in holding down NIPF inventories and these losses are augmented by land-use changes into urban/suburban and agricultural uses. Impacts of the scenarios are visible at the national level in terms of growing stock removals (see Figs 15.5 and 15.6). The reduction in softwood volume of 11 million m3 (Fig. 15.5) in the LOSOFT case is 3% of BASE removals by 2050. The LOHARD scenario also affects softwood removals. Restricting hardwood harvests on Southern NIPF lands to maintain hardwood inventory volumes raises softwood removals at first, due to substitution of softwoods for hardwoods in Southern pulping. Later the impact due to hardwood harvest restrictions is reduced as SRWC fibre is introduced in sizeable quantities, replacing both hardwoods and softwoods. Peak changes for this scenario in the 2030s amount to 1–1.5% of US total softwood removals. US hardwood growing stock removals rise modestly for the LOSOFT scenario (Fig. 15.6), reflecting substitution responses in Southern pulping. Hardwood removals fall sharply in the LOHARD case after 2020, dropping some

3500

Growing stock (million m3)

3000

Base Lohard Losoft

2500 2000

Non-industrial private

1500 1000

Forest industry

500 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 Year

Fig. 15.3.

Southern private softwood growing stock inventories, BASE and two scenarios.

159

3500

550 Non-industrial private

3400 500

3300 3200

450

3100 400

3000 2900

Forest industry

350

2800

Base Lohard Losoft

300

2700

Million m3 forest industry

Non-industrial private growing stock (million m3)

Private Forest Management in the US South

2600 250 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 Year

Fig. 15.4.

Southern private hardwood growing stock inventories, BASE and two scenarios.

Difference in removals (million m3)

10 5

Lohard Losoft

0 −5 −10 −15 2000

2010

2020

2030

2040

2050

2060

Year

Fig. 15.5.

US softwood growing stock removals, differences from the BASE case, for two scenarios.

Difference in removals (million m3)

5

0

−5

Lohard losoft

−10

−15 1990

2000

2010

2020

2030

2040

2050

2060

Year

Fig. 15.6.

US hardwood growing stock removals, differences from the BASE case, for two scenarios.

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11 million m3 by the late 2020s, about 5.5% below the BASE. Market responses to these several shifts are reflected as well in the prices of sawtimber. Figures 15.7 and 15.8 show Southern sawtimber stumpage prices in deflated (1982) dollars. The harvest restrictions in the LOSOFT scenario push softwood sawtimber prices above the BASE, but at their largest departure they are only some 3–4% higher. Hardwood sawtimber prices (Fig. 15.8) respond sharply to the LOHARD case, rising nearly $6 m−3 above the BASE by 2050 (an increase of more than 25%), while the LOSOFT scenario has little impact.

Summary and Discussion Simulation results for the alternative future scenarios pertaining to investment in forestry have Difference in Stumpage price (1982 US$ m−3)

2.0 1.5

Lohard Losoft

1.0 0.5 0

−0.5 1990

Fig. 15.7. scenarios

several policy implications, especially given the outlook for softwood versus hardwood markets. First, the majority of forest investment in the South has been directed at establishment and management of softwood plantations, in contrast to hardwood management intensification. In effect these more productive softwood plantations act to take pressure off the remainder of the land base. So it may be reasonable public policy to allow or even promote some expansion in these areas, recognizing that if we do not there will be still more extensive harvesting in other areas and associated loss of non-timber goods and services. In the longer term, more timberland area is projected to shift to higher softwood management intensity classes in regions and ownerships where such opportunities are abundant, especially in the South (see, for example, USDA Forest Service, 1988, 1990: Chapter 9). For example, planted pine area in the South is projected to increase by 62% by 2050. At the same time, the investment projections

2000

2010

2020 2030 Year

2040

2050

2060

Southern softwood sawtimber stumpage prices, differences from the BASE case, for two

Difference in Stumpage price (1982 US$ m−3)

7 6 5

Lohard Losoft

4 3 2 1 0

−1 1990

2000

2010

2020 2030 Year

2040

2050

2060

Fig. 15.8. Southern hardwood sawtimber stumpage prices, differences from the BASE case, for two scenarios.

Private Forest Management in the US South

do not necessarily portend a future forest comprised solely of planted stands and unidirectional transitions to plantations. Projected increases in plantation area would concentrate timber production on fewer hectares, with more timberland passively managed and with less harvest pressure on naturally regenerated forests. Naturally regenerated forests would cover three-quarters of the future private timberland base, with hardwoods continuing to dominate. Dynamics of forest cover changes include some pine plantations that are lost to other land-uses and a significant number of plantations not planted back to pine after harvest. A sizeable number of such harvested plantations revert to hardwood stands, especially on NIPF lands. Only a small fraction of the private land base is projected to end up in ‘intensive’ management – and the largest part of intensification is just insuring adequate regeneration after harvesting, not adoption of high-tech/high-cost practices. Intensification on that relatively small part of the timberland base may allow more of an emphasis on non-timber goods and services on other portions of the timberland base. At the same time, plantations have come under increasing scrutiny in the South and other regions in recent years. Owing to their simplified species and size composition, they provide a different (less complex) wildlife habitat, supporting for the most part early successional wildlife species. Plantation management also involves more frequent harvesting disturbances due to generally shorter rotations and, some argue, plantations that are more susceptible to disease and insect losses. The LOSOFT simulation involves a reduction of just 14% in the 2050 level of softwood plantations in the South, representing a change of 4% in total Southern private timberland, yet total US softwood removals fall by 3% by 2050. So, a very small change in the management of a special portion of the land base leads to a quite noticeable shift in overall harvest. This suggests that plantations do matter in the bigger picture, and past research (see Alig et al., 1990, for a summary) shows that policy instruments such as cost-sharing programmes do matter when it comes to bolstering plantation area. Moulton and Hernandez describe marked reductions in federal funding for private forestry programmes – and therefore in tree planting and forest management by NIPF owners (Moulton and Hernandez, 1999). Some policies concerned with reducing atmospheric CO2 also include expanded tree plantation area as one

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management option, given joint production opportunities for timber and non-timber services. In the shorter term (next 5–15 years), the projected rise in growth and harvest in the South is not so much a function of intensifying management as it is an age class phenomenon on both industry and NIPF timberlands. US private harvest over the next two decades will be strongly influenced by current timber inventory characteristics, particularly the limited areas and timber volumes in older merchantable age classes in virtually all regions. Outside the South, all regions are quickly moving to a cut less than or equal to growth condition with rising inventories. Even with notable variation across owners and subregions in the South, this region too is moving toward a cut equal growth condition under our MIC shift assumptions, though at a much higher level of harvest than at present. Second, policy implications of the smaller amount of past investment in hardwood timber management are notably different than for the softwood case. In the past 30 years hardwoods have become a critical part of the overall wood supply picture of the USA, particularly for pulpwood in the South. A trend toward reduced NIPF harvest would have a major impact on markets. At the same time this is very likely the path of the future, given parcelization of ownerships (Sampson and DeCoster, 2000), changing demographics and owner objectives, and generally reduced interest in timber management. This suggests that future supplies might be augmented by less informal treatment of hardwoods on all private lands. Modest management inputs, or changes in methods, might increase yields to help offset areas shifted out of timber production. Limited hardwood supplies may also justify public and private programmes to raise awareness of options in hardwood silviculture, expand research on more intensive hardwood forest practices, and find silvicultural methods that might achieve both higher amenity outputs with less reduction in timber production. Tracking of hardwood investment behaviour could augment regional forest surveys of standing timber inventories, along with a more focused examination of fragmentation and parcelization issues (Alig et al., 2000b). In conclusion, model simulations indicate the consequences of changing assumptions regarding future forest investment in the South, a longstanding discussion topic among policy analysts. Historically, the USA has relied primarily upon its

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natural endowment of forests to supply its evergrowing demands for wood and wood products. Planting of trees has emerged as a major activity in recent decades, and private forest investment is a critical variable in understanding the long-term prospects for US timber supply. Private timberlands are likely to become increasingly important in the nation’s timber supply. Substitution of capital for land on these ownerships will lead to expanding long-term growth and harvest. However, some policy makers are interested in boosting tree planting above likely levels in order to further augment timber supplies and jointly sequester more carbon. This leads to questions about how best to structure incentives to accomplish such targets.

Acknowledgements Adrienne Van Nalts, Oregon State University, assisted in the preparation of TNAA projections. Peter Ince, USDA Forest Service, provided advice and inputs related to the NAPAP model and Richard Haynes, USDA Forest Service, provided useful suggestions.

Endnotes 1 Timberland is forestland that is not reserved for other uses and is capable of producing 1.40 m3 ha−1 per year of industrial wood. 2 The most recent long-term projections developed by the USDA, Forest Service as part of its Timber Assessment programme can be viewed in draft at http://www.fs.fed.us/pnw/sev/rpa/index.htm. An earlier study completed in 1993 is available in Haynes et al. (1995). 3 Roundwood is logs, bolts or other round sections cut from growing stock and non-growing stock sources (e.g. dead trees); roundwood supplies is the volume of roundwood harvested or available for harvest in the future. Timber supplies is synonymous with roundwood supplies in this chapter. 4 See note 2 for sources of these projections. 5 At the same time, forest fragmentation and parcelization are likely to occur, especially for smaller parcels (Alig et al., 2000b; Sampson and DeCoster, 2000). Impacts on aggregate timber supply can include increased costs of production and some management tools (e.g. prescribed burning) may become more difficult to use on small parcels.

6 A detailed discussion of the TNAA (TAMM/ NAPAP/ATLAS/AREACHANGE) system can be found at the website noted in note 2.

References Adams, D. and Haynes, R. (1996) The 1993 Timber Assessment Market Model: Structure, Projections, and Policy Simulations. USDA Forest Service, Pacific Northwest Research Station, General Technical Report, GTR-PNW-504, Portland, Oregon. Ahn, S., Plantinga, A. and Alig, R. (2001) Historical Trends and Projections of Land Use for the South Central United States. USDA Forest Service Research Paper PNW-RP-530. Pacific Northwest Research Station, Portland, Oregon, 20 pp. Alig, R. and Wear, D. (1992) Changes in private timberlands: statistics and projections for 1952 to 2040. Journal of Forestry 90(5), 31–37. Alig, R., Lee, K. and Moulton, R. (1990) Likelihood of Timber Management on Nonindustrial Private Forests: Evidence from Research Studies. USDA Forest Service General Technical Report SE-60, Southeastern Forest Experiment Station, Asheville, North Carolina, 17 pp. Alig, R., Adams, D., Chmelik, J. and Bettinger, P. (1999) Private forest investment and long run sustainable harvest volumes. New Forests 17, 307–327. Alig, R., Adams, D., McCarl, B. and Ince. P. (2000a) Economic potential of short-rotation woody crops on agricultural land for pulp fiber production in the United States. Forest Products Journal 50(5), 67–74. Alig, R., Butler, B. and Swenson, J. (2000b) Fragmentation and national trends in private forest lands: preliminary findings from the 2000 RPA Assessment. In: Decoster, L. (ed.) Proceedings ‘Forest Fragmentation 2000: Sustaining private forests in the 21st century’, 17–20 September 2000, Annapolis, Maryland, pp. 34–45. Conference information also available at: www.sampsongroup.com Alig, R., Kline, J., Plantinga, A. and Sohngen, B. (2001) Historical Trends and Projections of Land Use for the United States: a Supporting Technical Document for the 2000 RPA Assessment. USDA Forest Service General Technical Report PNW-GTR. Pacific Northwest Research Station, Portland, Oregon. Alig, R., Mills, J. and Bulter, B. (2002) Private timberlands: growing demands, shrinking land base. Journal of Forestry 100(2), 32–37. Butler, B. and Alig, R. (2001) Dynamics of Forest Cover Changes in the South: Historical Overview and Projections. USDA Forest Service General Technical Report. Pacific Northwest Research Station, Portland, Oregon.

Private Forest Management in the US South

Haynes, R. (ed.) (2001) The 2000 RPA Timber Assessment: an Analysis of the Timber Situation in the United States, 1996 to 2050. Draft Report. USDA Forest Service, Pacific Northwest Research Station, Portland, Oregon. Haynes, R., Adams, D. and Mills, J. (1995) The 1993 RPA Timber Assessment Update. USDA Forest Service General Technical Report RM-GTR-259. Ft Collins, Colorado, Rocky Mountain Forest and Range Experiment Station, 66 pp. Knight, H. (1973) The pine decline. Journal of Forestry 71(1), 25–28. Mauldin, T., Plantinga, A. and Alig, R. (1999) Land use in Maine: determinants of land use in Maine with projections to 2050. Northern Journal of Applied Forestry 16(2), 82–88. Mills, J. and Kincaid, J. (1992) The Aggregate Timberland Assessment System, ATLAS: a Comprehensive Timber Resource Projection Model. General Technical Report PNW-281. Pacific Northwest Research Station, USDA Forest Service, Portland, Oregon. Moffat, S., Cubbage, F., Cascio, A. and Sheffield, R. (1998) The future of forest management on NIPF lands in the South: results of an expert opinion

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survey. In: Abt, K. and Abt, R. (eds) Proceedings of SOFEW Conference. Research Triangle Park, North Carolina. Moulton, R. and Hernandez, G. (1999) Tree planting in the United States, 1997. Tree Planter’s Notes 49(1), 5–15. Sampson, R.N. and DeCoster, L. (2000) Forest fragmentation: implications for sustainable private forests. Journal of Forestry 98(3), 4–8. Smith, W., Vissage, J., Sheffield, R. and Darr, D. (2001) Forest Resources of the United States, 1997. General Technical Report NC-219. St Paul, Minnesota: USDA Forest Service, North Central Research Station. USDA Forest Service (1988) The South’s Fourth Forest: Alternatives for the Future. USDA Forest Service Resource Report 24. Washington, DC: US Department of Agriculture Forest Service, 512 pp. USDA Forest Service (1990) An Analysis of the Timber Situation in the United States: 1989–2040. USDA Forest Service General Technical Report RM-199. Ft Collins, Colorado. Rocky Mountain Forest and Range Experiment Station, 286 pp.

16

An Economy-wide Assessment of a Forest Carbon Policy in the USA*

Grace Y. Wong,1 Janaki R.R. Alavalapati1 and Robert J. Moulton2

1School

of Forest Resources and Conservation, PO Box 110410, University of Florida, Gainesville, FL 32611–0410, USA; 2USDA Forest Service, Washington Office Staff, Southern Research Station, PO Box 12254, 3041 Cornwallis Road, Research Triangle Park, NC 27709, USA (retired)

Introduction There is now a general consensus that the Earth’s climate is changing as a result of the rising concentration of greenhouse gases in the atmosphere. Using the range of emission scenarios determined by the Intergovernmental Panel for Climate Change (IPCC), General Circulation Models (GCMs) have projected global warming of between 1 and 5°C by 2100 (IPPC, 2000). The United Nations Framework Convention for Climate Change (UNFCCC) was established to express this concern, and under the 1997 Kyoto Protocol, set forth binding targets for developed countries to reduce their emissions of greenhouse gases to an average of 5.2% below the amount they emitted in 1990 by 2012. Forests play a prominent role in the global carbon cycle by absorbing atmospheric CO2 (carbon dioxide), a greenhouse gas, through photosynthesis and storing carbon in the form of biomass and soils. Land-use change accounts for about one-third of total anthropogenic CO2 emissions through forest clearing and timber harvesting activities, and fossil fuel consumption

accounts for the remaining two-thirds (IPPC, 2000). The Kyoto Protocol specifically recognizes that terrestrial sources and sinks of carbon attributable to afforestation, reforestation and deforestation activities are to be counted in achieving these emission reductions. This recognition has come under considerable criticism (see Schlamadinger and Marland (2000) for a review of the critical issues and country positions), and is a key divisive issue throughout the negotiating process towards implementing the Protocol. It is perhaps not surprising that nations with large forest areas (and significant forest carbon opportunities), such as the USA and Canada, strongly support the inclusion of forestry activities as a means to achieve their Kyoto Protocol emission reduction targets (Moulton, 1998). In contrast, nations in the tropics who are drawing down their forests due to social and economic pressures, and nations with limited land areas available for forestry, such as Japan and most European Union (EU) nations, tend to oppose the inclusion and/or would limit the extent to which forestry activities can be used to offset fossil fuel emissions.

* Funding for this study was provided by the USDA Forest Service Southern Research Station under Project UPN 99051401. ©CAB International 2003. Forest Policy for Private Forestry: Global and Regional Challenges (eds L. Teeter, B. Cashore and D. Zhang)

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Objective Given the number of contentious issues surrounding the use of forests as a strategy to mitigate CO2 emissions, a consequence of interest to policy makers is the potential distributional and economy-wide impacts. Tree plantations to sequester carbon could be established by direct government intervention, through the use of a forest subsidy paid to the landowner to grow trees, or by providing credits based on the amount of carbon sequestered by a forest. Both approaches have the potential to dramatically change the current land-use base in the forest sector. Forest subsidies are likely to affect industrial forest planting decisions, and credit payments for carbon sequestered could influence investment, forest management decisions, rotation lengths (van Kooten et al., 1995; Solberg, 1997; Stainback and Alavalapati, 1999) and land prices. This study does not examine the exact incentive system used to establish the carbon plantations. It is assumed that carbon plantations would be established in accordance with their financial potential as industrial timber enterprises. An example would be if the government simply used tax monies to undertake forest plantation projects, or subsidized private entities to establish carbon forests on lands not already established in commercial forests. Given that land is a fixed resource, such a policy could induce significant changes in land-use, land cover and intensity of land management. Of particular interest are the impacts of such a policy on the forestry and agriculture sectors. Both sectors generally compete for the same fixed land base, which in addition, is also increasingly pressured by demands such as urban sprawl and other development uses. The USDA’s Natural Resource Inventory estimated that 0.89 million ha of rural land were developed each year between 1992 and 1997, with forestland being the largest source (USDA PNW, 2001). This chapter’s primary objective is to examine the economy-wide implications of a forest carbon policy, focusing on trade-offs between the forestry and agriculture sectors, and examining the effects on land-use reallocation, commodity prices and output. Recent research in the area of climate change and forestry has largely focused on assessing the economic impacts to the forest sector and timber

markets. Several of the methodologies include the Forest and Agricultural Sector Optimization Model (FASOM) (Adams et al., 1996), the Cintrafor Global Trade Model (CGTM) (Perez-Garcia et al., 1997) and the Dynamic Timber Supply Model (DTSM) (Sohngen and Mendelsohn, 1998). FASOM examines the interactions between the forest and agriculture sectors but is limited in that it only covers the USA. Both CGTM and DTSM are single-sector analyses with global coverage, and DTSM has the added advantage for monitoring timber inventories by virtue of its optimal control framework. Here, we use a dynamic version of Darwin et al.’s (1996) Future Agricultural Resources Model (FARM) to examine the interactions between newly created carbon plantations and other land uses in the USA. The impacts of a forest carbon policy are not limited to the forest sector. In a national economy, the producing sectors are linked through markets in their purchase of production factors (capital, labour and inputs) and sale of finished goods to households. The major advantage of FARM’s computable general equilibrium (CGE) framework is that it accounts for linkages between different sectors within an economy, and trade linkages between countries. Hence, the CGE framework is ideal for examining economy-wide impacts as changes in prices (or other market conditions) can be translated into changes in aggregate well-being of consumers and producers in order to understand distributional consequences. There is one major limitation of the current model, however. In its current state, FARM’s CGE framework does not contain forest growth dynamics. As such, timber supply is interpreted as a steady-state output period by period, and details on carbon stored in forest stocks are unavailable. This is the major effort to be undertaken in the next step towards an integrated model (elaborated in the Conclusions).

Modelling Framework The Future Agricultural Resources Model (FARM) was originally developed at the USDA’s Economic Research Service (ERS) to evaluate the impacts of global climate change on the world’s agricultural system (Darwin et al., 1996). FARM

Assessment of a Forest Carbon Policy in the USA

links a computable general equilibrium (CGE) model with a geographical information system (GIS) to allow one to study the impact of various phenomena on natural resource factors and sectors within a dynamic global framework, taking into account the interaction between economic activities and ecological effects (illustrated in

Fig. 16.1). In this chapter, we use a dynamic version of FARM, developed by Ianchovichina (2000). Dynamic FARM1 retains the environmental and climate characteristics of the original model, but is enriched with asset ownership and investment theory to enable longer-term projections (Ianchovichina and McDougall, 2000).

Climate Temperature, Rainfall

Length of growing season

Runoff

Distribution of land by classes

Water supply

Skilled and unskilled labour, capital and natural resources

Technology

World trade/ investment

Domestic ownership of primary factors to household income

Region 1 Region 12

Savings

Consumer demands

Population Consumer preferences

Investment

Fig. 16.1.

FARM Framework.

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Environmental framework Climate is the dominant factor in FARM’s environmental framework. The GIS component links climate with production possibilities in each region (Darwin et al., 1996), featuring water supply and heterogenous land endowments as production inputs, and capturing productivity differences among land resources. These broad differences in land productivity are obtained by differentiating each region’s land into six classes based on climate characteristics and length of growing seasons.2 Table 16.1 presents some features of the land classes and the percentage distribution of the six land classes in the USA. Land class differences in primary productivity are also revealed by the distribution of Olson’s world ecosystem complexes across the six land classes, as shown in Table 16.2. In general, ecosystem productivity is correlated with the length of the growing season. Land Class (LC) 1 occurs where cold temperatures limit growing seasons – mainly polar and alpine areas such as the Arctic Circle, and is composed of polar deserts, semi-desert tundra, northern taiga and conifer forest. LC 2 has a similar growing season to LC 1 but is limited by low rainfall rather than low temperatures, and consists of mostly grass–shrub–herb complexes and desert. Conifer forests, crops and settlements, and mixed forests are prevalent in LC 3, which comprises 13% of the global land area. LC 4 has a growing season of between 166 and 250 days and is composed of Table 16.1. Land class

crops and settlements, savannas, broad-leaved forests and mangroves. LC 5 is only 7.7% of global land area, and is largely broad-leaved forests and savannas. LC 6 accounts for 20% of all land and has a year round growing season. It is predominantly tropical forests, crops and settlements, and mangroves. LC 5 and 6 are mostly located in Africa, Latin America and Asia. This structure can also be used to capture climate change effects by allowing land to shift from one land class productivity to another based on changes in length of growing season at that locale (primarily determined by regional rainfall, water runoff and soil temperatures).

Economic framework The economic framework in FARM is a CGE model that simulates interactions between producers and consumers (both domestic and foreign) and thus accounts for all responses by economic agents under various scenarios. This model retains all the features of the Global Trade Analysis Project (GTAP) model (Hertel, 1997) and dynamic GTAP (Ianchovichina and McDougall, 2000). These include a perfectly competitive market structure, a constant returns to scale technology, the Armington international trade flow determination, a constant difference of elasticities (CDE) consumer demand representation, and the

Land class boundaries in the FARM model.

Length of growing Principal crops and cropping season (days) patterns

1

0–100a

Sparse forage for rough grazing

2

0–100b

3

101–165a

4

166–250a

5

251–300a

6

301–365a

Millets, pulses, sparse forage for rough grazing Short season grains, forage, one crop per year Maize, some double cropping possible Cotton, rice, double cropping common Rubber, sugar cane, double cropping common

Sample regions

% of USA total land area (sample area)

13.14 (Northern Alaska) 32.83 Sahara Desert (Mojave Desert) 12.68 Southern Manitoba (Western Nebraska) 21.69 Northern European (Corn belt) community 7.52 Zambia, Northern (Tennessee) Thailand 12.14 Indonesia, much of (Florida) the tropics Greenland

Source: Darwin et al. (1996). a 125 days or less where soil temperatures are above 5°C; bmore than 125 days where soil temperatures are above 5°C.

Assessment of a Forest Carbon Policy in the USA

investment theory. Producer behaviour in the model is driven by profit maximization, assuming competitive markets. The CGE framework consists of 12 regions, 18 commodities and 11 sectors (see Table 16.3 for the regional and commodity aggregation). All sectors, except for the crop sector, produce one commodity. The crop sector is multi-output, producing eight different agricultural commodities. All regions produce, consume and trade the 18 commodities. The primary factor endowments of land, water, labour and capital are determined exogenously and are region-specific; that is, one region’s primary factors cannot be used in another region. Water, labour and capital are homogeneous and perfectly mobile across all economic sectors within a region. Each factor has a regional price. Regional supplies of the factors are perfectly inelastic. Water is supplied to the crops, livestock, forestry and services sectors. Land, labour and capital are supplied to all sectors. Regional demands for the primary factor endowments are sums of sectoral demands for the produced goods, and are downward-sloping. Land productivity differences are generated in two ways: (i) based on length of growing season (as elaborated in the previous section), and (ii) by Table 16.2.

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assuming that land supplies are derived from constant elasticity of transformation (CET) functions.3 The latter captures competition for land among sectors in the economy, by allowing for a structure of differing land rents based on its use, and allowing land to shift between sectors in response to changing economic conditions while still maintaining the productivity differences inherent in the land class. Figure 16.2 illustrates the supply of land in the model. Each land class supplies to the 11 commodity producing sectors. Eight of these sectors are in manufacturing and services. The crop, livestock and forestry sectors are segregated into sub-sectors which use only its specific land type. For example, land class (LC) 1 supplies to the crop sector 1, livestock sector 1 and forestry sector 1, and to the other eight sectors. This way, the manufacturing and services sectors use all six land classes but the crop, livestock and forestry sub-sectors use only the one corresponding land class. Just as the land classes are associated with distinct ecosystem mixes, they are similarly associated with distinct land-use and product mixes. For example, cropland is relatively rare on LC 1 (northern Alaska), but relatively common on LC 4 (the USA Corn Belt). LCs 1 and 3 (high latitude areas) and LC 6 (tropics) contain the

Olson’s world ecosystem complexes, by land class. % dominant cover by land class

Ecosystem Polar desert Ice Northern taiga Wooded tundra – heath Semi-desert – tundra Deserts Scrub – woods Shrub – tree Grass – shrub – herb Conifer forest Conifer rainforest Mixed forest Wetlands Crop – settlement Forest/field Field/woods – savanna Broad-leaved forest Mangrove Tropical forest

1

2

3

4

5

6

100.0 99.8 88.8 82.6 44.3 5.0 0.5 1.3 8.5 42.4 22.6 15.6 11.8 1.3 0.9 0.7 1.1 0.0 0.3

0.0 0.0 0.6 2.0 51.4 91.8 66.5 48.3 54.1 8.2 3.2 8.9 16.9 20.7 12.4 14.9 9.2 0.0 0.7

0.0 0.2 10.4 8.6 3.1 2.0 12.7 13.5 9.2 43.1 52.7 39.6 26.8 15.9 26.2 11.8 14.9 9.5 1.0

0.0 0.0 0.3 4.2 0.6 0.8 10.1 17.5 7.3 4.0 21.5 13.6 7.5 25.4 20.5 22.0 24.2 35.3 4.0

0.0 0.0 0.0 1.3 0.1 0.2 8.0 11.4 5.7 0.2 0.0 8.6 5.9 14.6 11.1 15.1 28.8 12.9 9.2

0.0 0.0 0.0 1.2 0.5 0.2 2.2 8.0 15.3 2.2 0.0 13.7 31.0 22.1 28.8 35.5 21.7 42.4 84.8

Source: Darwin et al. (1995), Olson (1989–1991).

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Table 16.3.

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Regions, sectors and commodities in dynamic FARM.

Regional aggregation

Commodity aggregation

1. USA 2. CAN – Canada 3. ANZ – Australia and New Zealand 4. JPN – Japan 5. OEA – Other East Asia: Korea, China, Hong Kong, Taiwan 6. SEA – Southeast Asia: Indonesia, Malaysia, Philippines, Thailand, Singapore 7. EU – European Union 8. FSU – Former Soviet Union 9. OEU – Other Europe 10. LAM – Latin America 11. AFR – Africa 12. ROW – Rest of World Endowments 1 – 6. Land (six classes) 7. Water 8. Skilled labour 9. Unskilled labour 10. Capital 11. Natural resource factor

1. PDR – Paddy rice 2. WHT – Wheat 3. GRO – Other grains 4. VF – Vegetables, fruits, nuts 5. OSD – Oilseeds 6. CB – Sugar cane and sugar beet 7. PFB – Plant-based fibres 8. OCR – Other crops 9. LIV – Livestock 10. FOR – Forestry 11. COG – Coal, oil and gas 12. MIN – Other minerals 13. FMM – Fish, meat and milk 14. OPF – Other processed foods 15. TCF – Textiles, clothing and footwear 16. NMM – Other non-metallic manufacturing 17. OMN – Other metallic manufacturing 18. SRV – Services and utilities (electricity, gas, water, construction, trade and transport, other services)

Note: Commodities 1–8 are collectively known as the crop sector. Crops sub-sector associated with land class i

Livestock subsector associated with land class i

Forestry subsector associated with land class i

Manufacturing and services sectors

QENDF(i,j,r): Supply of land class i to sector j in region r

σ (Allen partial elasticities)

QENDF(i,j,r): Land endowment of type i in region r

Fig. 16.2.

Supply of land in dynamic FARM.

largest proportions of forest land. The mix of possible agricultural commodities in a land class is limited by its growing season and water availability. A commodity is produced from a composite input obtained by combining primary factors with composite intermediary inputs in fixed proportions (the Leontief technology). The composite primary factor is derived from a constant elasticity of substitution (CES) cost function with Allen partial elasticities. The composite intermediate input consists of

18 possible commodity inputs, either domestic or imported. Each of the 18 composite commodity inputs are derived from nested CES cost functions – one for determining the amount to be imported from each region and another for choosing the import–domestic mix in the composite intermediate product. The Allen partial elasticities of substitution used for these CES functions are obtained from the GTAP version 4E database (McDougall et al., 1998).

Assessment of a Forest Carbon Policy in the USA

The data The economic data are from the GTAP version 4E database (McDougall et al., 1998) and are aggregated into 12 regions, 18 tradeable commodities and 11 sectors (as indicated in Table 16.3). Allen partial elasticities for primary factors, imported intermediates and the price and income elasticities for private consumption in dynamic FARM are also inherited from GTAP (Hertel, 1997; Ianchochivina, 2000). Since there are few estimates of Allen partial elasticities of substitution for crop supplies, their values are set to −1. This reduces the CET functions to Cobb-Douglas, meaning that the revenue shares received for wheat, other grains, and non-grains by crop producers within a region are constant, but not equal, across all levels of revenue (Darwin et al., 1996).

The Base Case and Policy Scenario The first step is to develop and run the base case for 20 years into the future. A calibrated equilibrium database for the year 2000 (Ianchochivina, 2000) serves as a starting point for base case projections to the future. In order to capture the

effects of a carbon policy on land-use reallocation, a base case scenario is developed to trace the growth of the world economy till 2020. The baseline utilizes estimates of annual growth rates in regional population, skilled and unskilled labour, gross domestic product (GDP), and gross domestic investment (GDI). These estimates (listed in Table 16.4) are based on a review of the literature and include most recent estimates of population growth (UN Population Division, 2001) and GDP projections (World Bank, 2001). It should be noted that the base case scenario developed here is very general; it only considers standard macroaggregates and does not provide alternative optimistic or pessimistic growth scenarios. The alternate policy scenario involves endogenous creation of 50 million ha of carbon plantations in North America and Europe.4 The simulation assumes that plantations are created at an even rate throughout the first 10 years. Following Dixon et al. (1994a,b), these scenarios are well within the estimates of land considered to be technically suitable for establishing forest systems (see Table 16.5). Timber is expected to be harvested from the carbon plantations on a financially optimal rotation and sold on the global timber market, but these impacts are not adequately captured by this model. Since there are no forest growth dynamics

Base case macroeconomic scenario, 2000–2020 (average annual percentages).

Table 16.4. Region

171

Population growtha

Labour forceb

Unskilledc

Skilledc

GDPb

GDIc

−0.87 −0.66 −0.66 −0.02 −0.78 −0.78 −0.37 −1.03 −0.37 −1.03 −0.88 −1.85

−0.8 −0.6 −0.9 −0.3 −1.1 −1.1 −0.0 −0.5 −0.5 −2.1 −2.0 −2.5

−1.10 −0.97 −0.97 −0.12 −0.58 −1.44 −0.24 −0.74 −0.09 −2.44 −1.33 −2.77

−0.93 −0.98 −0.98 −0.62 −3.25 −6.21 −0.04 −0.89 −0.25 −5.12 −5.54 −3.20

2.9 2.9 3.3 2.2 6.3 5.9 3.0 4.2 3.2 3.6 4.3 3.6

4.5 3.3 1.7 2.0 7.3 6.6 3.2 7.0 4.9 5.0 5.4 6.1

ANZ CAN USA JPN OEA SEA EU FSU OEU OAS LAM AFR a

UN Population Division (2001), bWorld Bank (2001), cWalmsley et al. (2000).

Table 16.5. Estimate of land technically suitable for establishing forest systems, when considering edaphic and climatic factors (106 ha). Africa

S. Asia

S. America

N. America

Former Soviet Union

Global

300–440

130–225

65–380

90–140

>100

1600

Source: Dixon et al. (1993, 1994b).

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in the model, we assume the policy shocks to take effect immediately and timber harvests are interpreted as steady-state output in each period.

Model run descriptions Baseline scenario No carbon plantations. Refer to Table 16.4 for details on the baseline projections. Policy shock The establishment of carbon plantations in temperate regions over first 10 years, 2000–2010 (50 million ha total) USA Pacific Northwest: 1 million ha USA South: 30 million ha Canada Temperate: 5 million ha EU Nordic: 2 million ha Former USSR: 6 million ha Other Europe: 6 million ha

Results Given our assumptions of the global economic and population growth, as reflected in the macroeconomic projections in the base case, the base case scenario predicts a small decrease in all croplands (−0.13%) and an increase (+2.75%) in grazeland or livestock pastures in the USA by the year 2020.5,6 Forestland decreases slightly over all

land classes, with the largest decline in LC 5 (−7.97%) and LC 6 (−7.86%).7 Figure 16.3 illustrates this trend for the farm (crops and livestock) and forest sectors. Land-use trends are mixed in the non-farm sectors. Land shrunk in the food processing, textile and non-metallic manufacturing sectors, but expanded in the mineral and metallic manufacturing sectors. The largest land-use expansion is projected for the coal, oil and gas industry, from 9.62% in LC 2 to 24.32% in LC 4. In addition, there does not appear to be any shortage of food crops over the next two decades. The aggregate price of food crops is expected to decline about 10% relative to savings,8 the numeraire in the model, while aggregate crop output increases by almost 23% over the next 20 years (Table 16.6). In a similar trend, forest products are estimated to increase by 24% in output, while prices decline by 11%. The results also suggest an intensified use of capital in the farm sectors (Table 16.7). The demand for capital increases by almost 68% in the base case, while demand for other primary factors (land, water and labour) only increases by approximately 3%. The one commodity that appears likely to experience shortage is fossil fuels. The price for coal, oil and gas is estimated to shoot 87% beyond its current price by 2020, while total output is only expected to increase by 18%. The model does not have a structure for fuel or energy substitution and, hence, projects a future economy whose growth is primarily dependent on the continued use of fossil fuels.

Fig. 16.3. Quantity of land demanded by the Crops, Livestock and Forest sectors in USA, cumulative % changes in base case scenario, 2020.

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Table 16.6.

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USA prices and production by commodity, cumulative % changes in 2020.

Base case scenario Commodity Pdr – Paddy rice Wht – Wheat Gro – Other grains v_f – Vegetables, fruits, nuts Osd – Oilseeds c_b – Sugar cane and beet Pfb – Plant-based fibres Ocr – Other crops Liv – Livestock For – Forestry Cog – Coal, oil and gas Min – Other minerals Fmm – Fish, meat and milk Opf – Other processed foods Tcf – Textiles and clothing Nmm – Other non-metallic mnf Omn – Other manufacture Srv – Services

Price

Output

Price

Output

−10.23 −7.06 −12.65 −11.04 −10.03 −13.02 −4.30 −7.85 −11.27 −11.25 −87.42 −3.53 −10.91 −9.22 −9.14 −4.44 −10.58 −11.88

23.10 27.16 17.65 21.11 22.68 18.58 35.35 26.71 14.64 24.33 18.26 30.74 9.58 7.43 18.67 13.68 51.48 8.66

−0.87 −0.08 −0.25 −0.33 −0.40 −0.62 −0.29 −0.45 −0.18 −3.14 −0.26 −0.00 −0.11 −0.06 −0.04 −0.00 −0.02 −0.02

−0.23 −0.31 −0.22 −0.22 −0.29 −0.38 −0.27 −0.58 −0.10 −1.77 −0.01 −0.02 −0.06 −0.04 −0.02 −0.02 −0.01 −0.01

Table 16.7. Use of primary factors by the farm sectorsa in the USA, cumulative % changes in 2020. Change from base case Base case due to carbon scenario plantations Land Water Unskilled labour Skilled labour Capital Crop output (sum of all eight crop commodities)

0.49 3.47 2.85 2.87 67.63 22.61

Change from base case due to policy shock

−0.49 −0.41 −0.01 −0.01 −0.02 −0.29

a The farm sector comprises both the crops and livestock sectors.

Carbon policy impacts To assess the impacts of establishing 31 million ha of carbon plantations in the USA, we exogenously increased the supply of land in LCs 3, 5 and 6 to the forest sector at a constant annual rate over the first 10 years of the model horizon. Thus, a comparison of the base case results with the policy simulation reveals the possible effects of the forest carbon policy.

As expected, the policy shock induces some small shifts in land re-allocation among the crop, livestock and forest sectors from the base case due to the fixed land base (see Fig. 16.4). Given that our base case had predicted rather sizeable decreases in forestland over all land classes (see Fig. 16.3), the policy to establish carbon plantations merely reclaims some of these areas back to forests. A leakage effect is observed; although the total area of forests increased, forestland shrinks in the other land classes by approximately 2.15 million ha where no policy shock was imposed. This is considered as a trade-off effect from the policy shock, as the expected influx in supply of timber from carbon plantations drives down prices and forestland rents, leading to a shift to other land uses. In aggregate, crop and grazelands increase by less than 0.5%, and the prices for farmland decline slightly (−1.90%). The policy scenario has a mixed impact on commodity prices and outputs. As expected, the expansion of forests induces a small increase (+1.77%) in output and a decline in price (−3.14%) for forest products relative to the base case. A similar trend of higher output and lower prices is also projected for all the crop commodities (columns 3 and 4, Table 16.6). In general, crop output expands slightly (+0.29% overall) as crop

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Fig. 16.4. Land use in the Crops, Livestock and Forest Sectors in USA, cumulative % changes from base case as a result of carbon plantations, 2020. The peaks for the forest sector in land classes 3, 5 and 6 are a result of an exogenous increase of 31 million ha of carbon plantations. Table 16.8. Select welfare variables for the USA, cumulative % changes as a result of carbon plantations, 2020.

Variables Farmland income (land rent) Primary factor income from farm and forest sectors Household income Average wages Per capita household utility GNP Trade balance (US$ millions) Aggregate welfare effect (US$ millions)

Cumulative % change from base case −1.41 −0.91 −0.03 −0.04 −0.01 −0.01 −1807.50 −518.94

production continues to intensify, as suggested by the increased use of primary factors by the farm sectors (Table 16.7). Land base for the farm sectors increases slightly relative to the base case (but is allocated across different land classes), and more labour (both skilled and unskilled) and capital were employed in farm production. Use of water resources declines slightly (−0.41%), but that is probably a feature of the different mix of land class acreage from the base case. The manufacturing and services sector continue to expand as well, possibly fuelled by the increased supply of food crops and forest products. Output from the food processing sectors increased between 0.04–0.06%, while their prices decreased between 0.06–0.11% (columns 3 and 4, Table

16.6). Land-use in these sectors increases between 0.20–1.70% from the base case scenario. A modest increase in output from the energy sectors (coal, oil and gas, and other minerals) is observed, and the price for coal, oil and gas continues its upward trend by 0.26%. In general the policy shock has a small but negative effect on the national economy (Table 16.8) relative to the base case. Household income decreased by 0.03%, average wages by 0.04%, and the aggregate welfare effect was estimated to be US$518.94 million lower. The forest and farm owners are made worse off as farmland income (farmland rents) and primary factor income for the farm and forest sectors decline by 1.41 and 0.91%, respectively.

Conclusions and Directions for Future Research This study uses a dynamic computable general equilibrium model to examine the trade-offs between the forestry and agricultural sectors in the USA with the scenario of establishing carbon plantations as a CO2 mitigation strategy. Results of our policy scenario indicate that carbon plantations will lead to a slight redistribution of land to the agricultural and livestock sectors in different areas of the USA, but these effects are not expected to have a significant impact on output from these sectors within the 20 year projection period. Food security remains stable, and the manufacturing and services sectors maintain a

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positive growth. The policy scenario is likely to have a small adverse impact on both consumer and national economic welfare in the USA, with the latter largely driven by changes in terms of trade. Thus, the question that could be posed is this: Is this loss of welfare an acceptable price to pay for averting or delaying the global impacts of climate change? In order to be able to discern the true impacts of carbon plantations on the forest sector and on terrestrial carbon storage, the current modelling framework will have to improve on both its economic and ecological elements. In particular, our immediate research plan is to enhance the forest sector in the CGE framework with details on forest growth dynamics so that we can estimate future timber supply and prices more accurately. Such a structure would allow us to determine the direct implication of an economic incentive on changes in harvests, management and trade, and the fluxes of carbon arising from such changes. This is crucial information for estimating cumulative gains (or losses) in forest carbon storage over the long term, and for comparing the efficiency of various carbon policies in sequestering CO2. In addition, economic details in the extended framework will link CO2 emissions to economic activities based on the amounts and types of energy consumed by an industry, and incorporate a substitution structure for energy use so that alternative energy resources (such as biomass) can be used to substitute for the expensive and higher CO2emitting fossil fuels. Coupling the energy details with those in the forest sector will provide a more complete picture of CO2 fluxes in the economy, and allow for more flexible policy scenarios using either price incentives or regulations on CO2 limits. The ecological aspect in the model could also be expanded to simulate climate change effects on changes in growing seasons and land class distribution. Incorporation of these capabilities and details will lead to more fully integrated economic–ecological analyses.

Endnotes See Ianchovichina et al. (2001) for a recent application with dynamic FARM. 2 Growing season length is the primary constraint to crop choice and crop productivity within a region, and is defined as the longest continuous period of time in a year 1

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that soil temperature and moisture conditions support plant growth (Darwin et al., 1996). 3 A Cobb-Douglas revenue function is a constant elasticity of transformation (CET) function with Allen partial elasticities equal to −1.0. 4 This is to maintain consistency with the Kyoto Protocol, where commitments to reduce CO2 emissions are currently required of the OECD countries only. Sedjo and Sohngen (2000) used a similar scenario in their study of long-term economic impacts in the global timber markets. 5 The total land area in each land class is fixed. This implies that neither the composition nor availability of total land in the model will change. 6 Although the base case and policy simulations are on a global scale, results reported in this chapter are those for the USA only. 7 The percentage changes must be interpreted with care. Readers should keep in mind that the percentages reported for the different sectors are not equal, that is, they are relative to the size of the sector’s land base in the economy. 8 All results depict changes in real, not nominal, prices. All prices in the CGE model are normalized relative to the price of a global savings commodity, the numeraire.

References Adams, D.M., Alig, R.J., Callaway, J.M., McCarl, B.A. and Winnett, S.M. (1996) The Forest and Agricultural Sector Optimization Model (FASOM): Model Structure and Policy Applications. PNW-RP-495. USDA Forest Service, Pacific Northwest Research Station, Portland, Oregon. Darwin, R., Tsigas, M., Lewandrowski, J. and Raneses, A. (1996) Land use and cover in ecological economics. Ecological Economics 17, 157–181. Dixon, R.K., Brown, S., Houghton, R.A., Solomon, A.M., Trexler, M.C. and Wisniewski, J. (1993) Carbon pools and flux of global forest ecosystems. Science 263, 185–190. Dixon, R.K., Brown, S., Houghton, R.A., Solomon, A.M., Trexler, M.C. and Wisniewski, J. (1994a) Carbon pools and flux of global forest ecosystems. Science 263, 185–190. Dixon, R.K., Winjum, J.K., Andrasko, K.J., Lee, J.J. and Schroeder, P.E. (1994b) Integrated land-use systems: assessment of promising agroforest and alternative land-use practices to enhance carbon conservation and sequestration. Climatic Change 27, 71–92. Hertel, T.W. (ed.) (1997) General Trade Analysis Modeling and Applications. Cambridge University Press, New York.

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Ianchovichina, E. (2000) Introducing Natural Resource Detail into Dynamic GTAP. GTAP Technical Paper. Center for Global Trade Analysis Project, Purdue University, West Lafayette, Indiana. Ianchovichina, E. and McDougall, R. (2000) Theoretical Structure of Dynamic GTAP. GTAP Technical Paper No. 17. Center for Global Trade Analysis Project, Purdue University, West Lafayette, Indiana. Ianchovichina, E., Darwin, R. and Shoemaker, R. (2001) Resource use and technological progress in agriculture: a dynamic general equilibrium analysis. Ecological Economics 38, 275–291. IPPC (2000) Watson, R., Noble, I.R., Berlin, B., Ravindranath, N.H., Verardo, D.J. and Dokken, D.J. (eds) Land Use, Land-Use Change, and Forestry. Special Report of the Intergovernmental Panel on Climate Change. Cambridge University Press, Cambridge. McDougall, R.A., Elbehri, A. and Truong, T.P. (1998) Global Trade, Assistance and Protection: The GTAP 4 Data Base. Center for Global Trade Analysis Project, Purdue University, West Lafayette, Indiana. Moulton, R.J. (1998) Forestry in U.S. climate change action plans: From the Arch to Kyoto. In: Abt, K.L. and Abt, R.C. (eds) Proceedings of the 1998 Forest Economics Workshop. Williamsburg, Virginia, pp. 204–207. Olson, J.S. (1989–1991) World Ecosystems (WE1.3) Digital Raster Data on Global Geographic (lat/long) 360 × 720 grid. NOAA National Geophysical Data Center, Boulder, Colorado. Perez-Garcia, J., Joyce, L.A., Binkley, C.S. and McGuire, A.D. (1997) Economic impacts of climate change on the global forest sector: an integrated ecological/ economic assessment. Critical Review in Environmental Science and Technology 27, s123–s138. Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat

(1999) World Population Prospects: the 2000 Revision. http://www.un.org/esa/population/wpp2000. htm Schlamadinger, B. and Marland, G. (2000) Land Use and Global Climate Change: Forests, Land Management, and the Kyoto Protocol. Pew Center on Global Climate Change, Arlington, Virginia, 54 pp. Sohngen, B. and Mendelsohn, R. (1998) Valuing the impact of large scale ecological change in a market: the effect of climate change on US timber. American Economic Review 88, 686–710. Sedjo, R. and Sohngen, B. (2000) Forestry Sequestration of CO2 and Markets for Timber. Discussion Paper 00-35. Resources for the Future, Washington, DC, 83 pp. Solberg, B. (1997) Forest biomass as carbon sink – economic value and forest management/policy implications. Critical Reviews in Environmental Science and Technology 27, s323–s333. Stainback, G.A. and Alavalapati, J.R.R. (1999) The economics of Florida slash pine and carbon sequestration. Southern Forest Economics Workers Annual Conference, April 19–20, 1999, Biloxi, Mississippi. USDA PNW (2001) Finite land, infinite futures? Sustainable options on a fixed land base. Science Findings 31, 1–5. van Kooten, G.C., Binkley, C.S. and Delcourt, G. (1995) Effect of carbon taxes and subsidies on optimal forest rotation age and supply of carbon services. American Journal of Agricultural Economics 77, 365–374. Walmsley, T.L., Dimaranan, D.V. and McDougall, R.A. (2000) A Base Case Scenario for the Dynamic GTAP Model. Paper developed for the 2000 Short Course on Dynamic Model, Center for Global Trade Analysis Project, Purdue University, West Lafayette, Indiana. World Bank (2001) Global Economic Prospects and the Developing Countries 2001. World Bank, Washington, DC.

17

Forestry Implications of Agricultural Short-rotation Woody Crops in the USA

1Timber

Peter J. Ince1 and Alexander N. Moiseyev2

Demand and Technology Assessment, USDA Forest Service, Forest Products Laboratory,* Madison, WI 53711, USA; 2European Forest Institute, Torikatu 34, Joensuu, FIN-80100, Finland

Introduction In considering forestry issues at the national or regional level, it is appropriate to pay attention to major developments that have the potential to change forest resource conditions and shape future options. One recent historical example was the landfill crisis from the early 1980s to the mid-1990s. As recently as 1988, a major study of forest resource conditions in the US South projected real prices for southern pine pulpwood to increase 130–150% by the year 2030 (USDA Forest Service, 1988). The study projected annual use of recycled paper in the USA to rise by only about 20% from the 1980s to 2030. The report barely mentioned emerging solid waste problems and potential implications for pulpwood markets. In reality, from the 1980s to the mid-1990s, government regulation of landfills and declining numbers of operational landfills precipitated unprecedented increases in waste disposal fees in the USA (several hundred per cent or more, according to periodic surveys of the National Solid Waste Management Association). The so-called landfill crisis and higher waste disposal fees prompted thousands of businesses and local communities to massively increase recovery of recyclable materials

(Environmental Defense Fund, 1995). The popularity of recycling and a subsequent glut in recovered paper supply in the early 1990s stimulated significant industrial expansion in paper recycling, with annual use of recycled paper increasing in the USA by around 130% since the mid-1980s (AF&PA, 2000). This formerly unexpected development dampened growth in pulpwood demand throughout the 1990s and contributed to the decade ending with flat to declining real pulpwood prices in the US South (University of Georgia, 2001). By the early 1990s, an updated Forest Service timber study had analysed market impacts of paper recycling and projected relatively stable southern pine pulpwood prices (Ince, 1994). Another potentially significant development that is not closely connected to forest policy in the USA is agricultural short-rotation woody crops (SRWC), which are tree crops that can be grown for wood fibre on cropland more rapidly than trees in a natural forest environment. The purpose of this chapter is to discuss forestry implications of SRWC based on an economic analysis. As with the development of paper recycling, anticipating forestry implications of agricultural SRWC will depend in part on anticipating market conditions and economic impacts of technological

* The Forest Products Laboratory is maintained in cooperation with the University of Wisconsin. This article was written and prepared by US Government employees on official time, and it is therefore in the public domain and not subject to copyright. Forest Policy for Private Forestry: Global and Regional Challenges (eds L. Teeter, B. Cashore and D. Zhang)

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developments. This chapter presents an analytic framework and market outlook for agricultural SRWC as wood fibre crops in the USA and considers some potential implications for forestry.1

Methods We projected long-range market equilibria for agricultural SRWC in this study by linking two large-scale regional market models, the Forest Service North American Pulp and Paper model (NAPAP) and the USDA POLYSYS model of the agricultural sector. The market analysis stems from a base case outlook with alternative scenarios derived by varying base case assumptions. Methods in this study were similar to methods used in a previous analysis of the economic potential of agricultural SRWC for pulp fibre production in the USA (Alig et al., 2000). In both the current and previous studies, nationwide projections of wood fibre demands were linked to large-scale economic models of the agricultural sector. The previous study used the Forest and Agricultural Sector Optimization Model (FASOM), an intertemporal optimization model. A primary function of FASOM is to derive the economic equilibrium in conversion of agricultural land to wood fibre production and other shifts in land use between forestry and agriculture with time. FASOM solves for a singular spatial land-use equilibrium across decade intervals. FASOM projected a fairly significant conversion of agricultural land to SRWC for pulp production in the next few decades (from 0.6 to 1.0 million ha of SRWC plantations nationwide). In the FASOM results, projected SRWC plantations were concentrated in the Lake States of the upper Midwest and in the Pacific Northwest (unlike the current study, where projected SRWC plantations are concentrated in the South). The FASOM study assumed that SRWC yields would improve with time and technological improvements. FASOM used exogenous projections of pulpwood demands derived earlier from the NAPAP model. However, in this study, NAPAP was linked to POLYSYS to solve for SRWC market equilibria each year (simulating adjustments to annual market equilibria with time rather than deriving a singular equilibrium across the span of decades). In terms

of projected agricultural land use, both studies evaluated long-run shifts between conventional cropland use and SRWC, and FASOM also provided an analysis of the long-run potential for converting forestland into agricultural land-use. In POLYSYS, the projection of total agricultural land area remains fixed, but land use may shift within that area from conventional uses to SRWC depending on projected market conditions. The NAPAP–POLYSYS system also simulates evolution of pulp and paper production technology in response to projected market conditions (in FASOM, pulp and paper technology assumptions did not shift in response to market conditions but remained fixed). The NAPAP model is a partial equilibrium model of the North American pulp and paper sector. The model solves for annual market equilibria by optimizing consumer and producer surplus of the pulp and paper sector each year, subject to evolving constraints of production capacity and technology (Zhang et al., 1996; Ince, 1999). The NAPAP model projects technological changes and market conditions, including markets for wood fibre inputs, given basic assumptions about economic growth and population. The NAPAP model incorporates the timber supply analysis of the 2000 Forest Service draft RPA timber assessment. POLYSYS is also a partial equilibrium model of the US agricultural sector that solves for annual market equilibria among agricultural crops. POLYSYS is maintained by the Agricultural Policy Analysis Center (APAC) at the University of Tennessee and is used by USDA and other agencies. POLYSYS computes an economically optimal allocation of agricultural land-use among various crops each year. POLYSYS derives equilibrium levels of planting for agricultural crops by optimizing net present values of agricultural crops in relation to costs and projected equilibrium prices (Ray et al., 1998). POLYSYS simulates the decisions of farmers to plant crops based on their projected prices and relative profitability. It finds the optimal mix of crops to be planted each year among all crop options (including crops such as maize, soybeans, etc.). In POLYSYS, the cropland allocation influences equilibrium crop prices, reflecting the interaction of supply and demand. However, the model starts with a baseline crop price forecast that corresponds to the official USDA 10-year crop

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price forecast (revised annually by USDA; in this study, we used the 1999 price forecast). Variation in soil productivity and crop productivity by region are also taken into account by POLYSYS. In recent years, POLYSYS was programmed at APAC to include SRWC as well as other major agricultural food and fibre crops and livestock. POLYSYS includes all US cropland currently in major crop production or that is idled, in pasture, or in the Conservation Reserve Program (CRP). CRP is a Federal programme that pays farmers to take cropland out of crop production for fixed contract periods, promoting the objectives of soil conservation and market stabilization. However, the CRP land was not available for SRWC in this analysis, although it might be considered in future studies.

Iterative solution technique In this study, we linked NAPAP and POLYSYS solutions by exchanging equilibrium supply quantities and prices for SRWC and running the models toward a convergent equilibrium solution. The POLYSYS solution for SRWC is based on estimates of prices, production costs, rotation lengths and biomass yields, which vary among POLYSYS regions (the 305 agricultural statistical districts (ASD) of the USA). Planting and growth of agricultural SRWC occurs in POLYSYS only if the model has determined that SRWC are competitive compared with other agricultural crops or land uses in terms of net present values. Given a set of price projections for SRWC, POLYSYS derives annual cropland allocation to SRWC and provides projections of annual SRWC supply (projected crop yield and cost by ASD). For the NAPAP model, we adjusted the SRWC yields and costs to include added costs and material losses in debarking, chipping and delivery of clean pulpwood chips. Approximately 71% of SRWC biomass can be converted into debarked or clean pulpwood chips, based on field trials in hybrid poplar plantations using conventional harvesting equipment with mobile chain-flail delimbing and debarking equipment and on-site chipping (B.R. Hartsough et al., unpublished report, Biological and Agricultural Engineering Department, University of California-Davis).

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We pooled annual supply and cost estimates from each ASD into larger NAPAP model regions to create annual stepwise supply curves for pulpwood from SRWC in each NAPAP region (the stepwise supply curves are composed of pulpwood supply quantities and costs from all ASD within each NAPAP region). We used the regional supply curves in NAPAP to solve for annual SRWC market equilibria in the pulp and paper sector. The NAPAP model determines supply and demand equilibria for all types of wood pulp fibre, including pulpwood from forests, wood residues and recycled paper, as well as from SRWC. Production capacities of different pulp, paper, and paperboard processes evolve gradually in the model across a multi-decade projection period, with annual changes in capacity favouring the more efficient processes in continuous response to evolving market conditions. In the NAPAP model, clean chips from SRWC are substitutes for hardwood pulpwood, although we also adjusted supply quantities and costs in NAPAP for the weight discrepancy between hybrid poplars and natural hardwoods. Utilization of chips from SRWC occurs in the NAPAP model only if it is competitive in cost compared with other fibre supply options. As part of the equilibrium solution, NAPAP computes equilibrium (shadow) prices for hardwood pulpwood (and SRWC) each year. We obtained consistent projections of annual market equilibria for SRWC from the models by sequentially solving POLYSYS and NAPAP in an iterative fashion, sharing SRWC supply and price projections between the models until we derived stable projections of market equilibria. We ran POLYSYS first to derive regional supply curves for pulpwood from SRWC based on initial price assumptions. We then ran NAPAP using the supply curves to compute equilibrium prices for SRWC. We then converted pulpwood price projections to equivalent biomass prices and passed them back to POLYSYS, where the projected prices determined SRWC planting in the next iteration. The combined NAPAP–POLYSYS system generally converged upon a stable projection of SRWC supply, demand and prices within a limited number of iterations (for example, five to seven model iterations) with SRWC yields in POLYSYS matching SRWC consumption in NAPAP and with planted cropland area ultimately matching harvested area in POLYSYS.

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Additional technical assumptions The US Department of Energy, Bioenergy Feedstock Development Program provided regional biomass productivity and cost data for short-rotation hybrid poplars and cottonwoods. Professor Daniel G. de la Torre Ugarte at the University of Tennessee (APAC) programmed the SRWC cost and productivity data into POLYSYS. The regions in POLYSYS that can produce SRWC include the majority of the ASDs, including most districts in the eastern USA plus those western districts deemed to have climate and soil conditions suitable for such crops. SRWC productivity and cost data in POLYSYS vary by ASD, with estimated SRWC rotation lengths varying from 6 to 12 years depending on geographical location. The rate of adoption for SRWC by farmers is also controlled in POLYSYS by a fixed constraint on the percentage of available cropland area that may be planted to SRWC each year within each ASD. This so-called adoption factor was set at 2% in our baseline analysis, reflecting a realistic assumption that just a small fraction of farmers would entertain risks of planting SRWC in any given year. There are no historical data on this factor per se, but we believe it is realistic to assume that the adoption of SRWC by farmers will be inhibited to some extent by inherent perceptions of risk (SRWC for example require a much longer time interval between planting and maturity relative to conventional annual crops or livestock). Nevertheless, we varied the adoption factor assumption among different scenarios. The SRWC productivity and cost data developed by Oak Ridge National Laboratory were based on field experience with short-rotation poplar plantations since the 1970s and on expert opinion. Data represent productivity levels that are known to be achievable based on conventional technology. The productivity and cost data assume that SRWC are fertilized periodically and treated chemically to suppress weed competition early in the rotation. This is common practice in conventional poplar plantations, although chemical applications are much lower than for most other agricultural crops. The productivity and cost data do not assume that the woody crops will be irrigated. Irrigation is used in a few highly productive plantations in the West and South, affording higher

productivity and shorter rotations, but higher costs, per hectare. The productivity and cost data provide a basis for developing alternative scenarios – specifically scenarios based on potential gains in production costs or yields with agricultural SRWC – but to do so would require quantitative estimates of future productivity gains for SRWC by ASD. Such scenarios were not developed in this study, but analysis of such scenarios is recommended as a potential topic for further research. The NAPAP model incorporates an assumption that hardwood chips from SRWC such as hybrid poplars or cottonwoods (Populus spp.) can be substituted on an equal weight basis for hardwood from natural forests (after adjusting for the typically lower density of poplars). Thus, the analysis does not assume any cost advantages for pulping associated with use of hybrid poplars. This assumption may be regarded as conservative, given that recent biotechnology research indicates that genetically modified strains of poplars with lower or modified lignin content can be developed, and this might substantially reduce costs of chemical pulping or pulp bleaching. Production cost assumptions for pulping in the NAPAP model may be modified to assess market impacts of cost savings associated with the use of modified hybrid poplar crops, provided that such estimates of production cost savings become available or can be developed in the future. The NAPAP model also operates with assumptions about future US population and economic growth that drive economic projections of trends in pulp, paper, paperboard, and wood product consumption and production. The population and economic growth assumptions were derived from US Census Bureau and Economics Research Service projections. In general, although demand projections vary substantially among individual products (and projections are derived through equilibrium analysis rather than trend extrapolation), the projections indicate a continuation of aggregate historical trends in paper and paperboard consumption. Thus, the NAPAP model projects a gradually decelerating trend in US per capita consumption of paper and paperboard products and a gradually declining trend in consumption per unit of real gross domestic product (GDP) (Fig. 17.1). In addition, the NAPAP model incorporates projected roundwood demands for composite wood panel products such as oriented strandboard (OSB), the production of which is projected to grow

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Fig. 17.1. Historical and projected trends in equilibrium annual US paper and paperboard consumption per capita and per unit of real GDP (1992 US$).

substantially in the future. Thus, projected pulpwood demands in this analysis include pulpwood demands for wood pulp production and roundwood demand for composite wood panel products. Roundwood demands for composite wood panel products (such as OSB) are projected to more than double in the next 50 years but nevertheless remain less than 20% of total projected pulpwood demand (roundwood and residues). On a total tonnage basis, US paper and paperboard consumption is projected to increase from 93 million t in 1999 to 114 million t in 2010 and upwards of 168 million t in 2050. The projected annual rate of growth in paper and paperboard decelerates during the next 50 years and averages just 1.1%, which is less than half the average rate of the past 50 years. Population, economic growth, and end-use assumptions primarily drive the projected demands. Projected shifts in fibre supply exert only a modest influence on equilibrium demand levels, as indicated by a relatively flat projected trajectory for long-run product prices despite increased consumption. Conventional sources of pulpwood supply in the USA include harvest from forestland and wood residues (chips, slabs, and other wood residues from sawmills and plywood mills). In the early 1950s, softwoods (coniferous tree species) accounted for nearly 90% of pulpwood supply. Today, hardwoods (broad-leaved deciduous tree species) account for nearly 40%. Although hardwood pulpwood consumption has increased, softwoods

such as the southern pines still remain dominant in total US pulpwood supply. Softwoods have been intensively managed in the USA, with pulpwood supplied increasingly from pine plantations in the South. Pine plantations in the South typically have productivity that ranges several times higher than natural forest stands (in average volume growth per hectare). Hardwoods are generally not managed as intensively as softwoods in plantations and, therefore, hardwoods on forestland have generally lower productivity than do softwoods. Hardwood pulpwood supply has been relatively abundant mainly because of large natural hardwood inventories on forestland. Hardwood plantations, such as hybrid poplars on agricultural land, offer much higher productivity than natural hardwoods in forest stands, up to five or six times higher, but such gains in productivity come at the expense of higher costs. An important ongoing shift in US timber supply and demand is a projected increase in pulpwood supply from softwood plantations (coniferous tree species) particularly loblolly pine in the South, with a shift toward higher management intensity for softwoods. Between 1952 and 1997, pine plantations on private lands in the South increased by approximately 10 million ha, more than a tenfold increase, displacing hardwoods in some cases. The area of pine plantations in the South is projected to increase by more than 5 million additional hectares in the decades ahead. Southern pine pulpwood supply is projected to become more abundant after 2010 as a result of the ongoing expansion in

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southern pine forest plantations and shifts to higher intensity timber management regimes. After continuing to increase during the next decade, hardwood pulpwood supply from private forestland in the South is projected to level out after the year 2010. This assumption may be varied in the NAPAP model, with an alternative scenario reflecting the possibility that hardwood pulpwood supply from forestland may gradually recede after reaching projected peak levels in the South around 2010. In general, demand for pulpwood from agricultural SRWC will tend to increase if more restrictive constraints are placed on hardwood supply from forestland. Projected trends in paper recycling also have an influence on projected pulpwood markets. The tonnage of paper and paperboard recovered for recycling has doubled since the mid-1980s, but growth in recycling is slowing down and is projected by the NAPAP model to follow a decelerating trend in the future. The rate of paper recovery for recycling rose dramatically from around 25% in the late 1970s to around 45% in the late 1990s, but the recovery rate appears to be reaching a plateau. The recovery rate in the base outlook is projected to climb gradually to 50% by 2010 and to around 55% toward the end of the projection period. By adjusting maximum feasible recovery rate assumptions in the NAPAP model, it is possible to construct an alternative future scenario for paper recycling, with lower projected recycling rates. In general, lower projected recycling rates tend to increase projected demand for fibre from agricultural SRWC.

Alternative scenarios We explored two types of alternative market scenarios in this study within the context of the assumptions outlined above. One alternative scenario reflects a possibility that hardwood pulpwood supply from private forestland in the South may recede after 2010 (instead of levelling out, as in the base scenario). This alternative scenario was called the low hardwood (LHW) scenario, referring to lower or reduced hardwood pulpwood supply relative to the base case. The base scenario was called the hardwood medium supply (HWM) scenario, in which hardwood supply reaches a plateau after 2010 but does not

decline. The LHW scenario reflects a possibility that urbanization, changing forest management practices, and shifting forest landowner preferences (voluntary or otherwise) might result in declining Southern hardwood pulpwood harvest after 2010. The LHW scenario was obtained by simply imposing more restrictive constraints in the NAPAP model on projected harvest of hardwood pulpwood from the forest industry and nonindustrial private forestlands in the South. In the LHW scenario, hardwood pulpwood harvest on private forestland in the South increases up to the year 2010, as in the base case, but then recedes to levels just below current harvest levels by 2030. The second alternative scenario was based on an assumption that future paper recycling rates may be lower than projected in the base case outlook. In this alternative scenario, the rate of paper recovery for recycling gradually increases, but it does not reach 50% by 2010 as projected in the base case outlook. Instead, the recovery rate climbs more slowly and remains just below 50% during the projection period. This alternative scenario was called the low recycling (LR) scenario, referring to a lower projected trend in recycling relative to the base outlook (the recovery rate is still projected to increase but much more modestly in the decades ahead). The LR scenario was obtained by imposing more restrictive constraints on maximum feasible recovery rates for various commodity categories of recovered paper supply in the NAPAP model. We also identified other types of alternative scenarios but did not explore those because of insufficient technical data. We recommend, however, that other scenarios be explored in future research. One alternative scenario is based on the idea that genetic engineering could provide more highly productive or useful commercial clones of certain tree species suitable for agricultural SRWC, including trees such as short-rotation loblolly pine as well as hybrid poplars. In addition to analysing the two alternative scenarios, we also adjusted real discount rate and adoption factor assumptions for SRWC in POLYSYS to create variations of the base case outlook and alternative scenarios. In the base case, the real discount rate for SRWC was set at 6% per year (the same as for other agricultural crops), while the adoption factor was set at 2% (not more than 2% of cropland area available for crop transfer in any ASD would be planted to SRWC). In general, lowering the discount rate or raising the adoption

Agricultural Short-rotation Woody Crops

factor tended to increase projected supply of SRWC, as expected. However, raising the adoption factor above 5% or so also tended to introduce market volatility by making the SRWC planting and harvest levels more highly variable with time. The base case and the LHW and LR scenarios, coupled with variations in discount rate and adoption factor assumptions, illustrate a spectrum of results and a range of future market possibilities for SRWC.

Results – Market Outlook for SRWC The base case market outlook derived from the NAPAP and POLYSYS models indicates that hardwood pulpwood supply from agricultural SRWC such as hybrid poplars and cottonwoods will become marginally economical in the decades ahead, particularly in the South, as hardwood pulpwood prices gradually increase. The analysis projects that hardwood pulpwood supply from forestland in the South will reach a peak by around 2010 and then plateau, as hardwood pulpwood harvest on forest industry land recedes during the next decade. However, sustained real price increases for hardwood pulpwood are not projected to occur until approximately 2015, when hardwood pulpwood harvest on nonindustrial forestland is expected to decline in the South. After 2020, projected real prices for

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hardwood pulpwood reach levels sufficient to induce commercial expansion in planting and supply of SRWC in the agricultural sector, although the projected quantity of supply remains modest in the base scenario during the decade after 2020. This outlook is similar to the outlook developed recently for the draft Forest Service RPA timber assessment (based on a more simplified analysis of SRWC supply than the POLYSYS model). Figure 17.2 illustrates the projected cumulative sum of agricultural SRWC harvests for pulpwood under different scenarios during the projection period (from the year 2000 to 2036). The projected sum of SRWC harvest for the base scenario at 6% discount rate (HWM_DR6) is only about 15 million m3 during the entire projection period, a quantity equivalent to less than 0.5% of cumulative pulpwood consumption in the USA during the projection period. However, when the discount rate assumption for SRWC in POLYSYS was reduced to 3% (leaving the discount rate at 6% for all other agricultural crops), the projected sum of SRWC harvest exceeded 50 million m3 during the projection period (HWM_DR3). This observed effect of lowering the discount rate may be viewed as a rough approximation of the effect of providing farmers with investment incentives to plant SRWC, through low-interest loans for example. Significantly greater supply and harvest of SRWC for pulpwood occurs under the LHW scenarios, with a cumulative SRWC harvest during the projection period

Fig. 17.2. Cumulative projected harvest of agricultural short-rotation woody crops (SRWC) from 2000 to 2036 (HWM, hardwood medium supply; LHW, hardwood low supply; LR, low recycling scenario; DR6 and DR3, 6 and 3% discount rates, respectively; AF5, adoption factor raised from 2 to 5%).

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of around 100 million m3 under the conventional 6% discount rate assumption (LHW_DR6). A cumulative SRWC harvest of around 200 million m3 occurred with low hardwood supply and a 3% discount rate for farmers growing SRWC (LHW_DR3). A cumulative SRWC harvest of 300 million m3 occurred with a 3% discount rate and the adoption factor raised from 2 to 5% (LHW_DR3_AF5). This observed effect of raising the adoption factor simulates a reduced perception of risk associated with SRWC, enabling more farmers to accept risks of investment in SRWC each year. Finally, with a combination of low hardwood supply and low paper recycling at the standard 6% discount rate (LHW_DR6_LR), the projected cumulative harvest of SRWC exceeded 800 million m3 during the projection period. Projected annual equilibrium harvest levels for SRWC fluctuated from year to year but generally increased with time under all scenarios. Figure 17.3 illustrates projected annual harvest levels for various scenarios, ranging from the base scenario (HWM_DR6) to the scenario with low hardwood supply and low recycling (LHW_DR6_LR). At the highest extreme, the projected annual harvest of SRWC for pulpwood approaches 50–60 million m3 per year beyond the year 2020, or upwards of 15% of projected annual US pulpwood consumption, a fairly significant market share. In addition to projected nationwide trends for agricultural SRWC, the NAPAP–POLYSYS system also projected SRWC planting and harvest area by ASD. For example, Figs 17.4 and 17.5

illustrate projected SRWC harvest areas for pulpwood by ASD in the year 2025 for the low hardwood scenario (LHW_DR6) and the low hardwood scenario with low recycling (LHW_DR6_LR), respectively. In general, in all scenarios, projected SRWC planting and harvest volumes were the greatest in the South, particularly in the south-central region (where there is the largest concentration of pulp and paper industry capacity in the USA). In those scenarios where higher levels of SRWC supply and harvest were projected (for example, the LHW_DR6_LR scenario), a considerable volume was also projected in the North (particularly in the north-central region). In some years, there was also some projected supply in the West (exclusively in Oregon and Washington), but projected supply in the West was not as large or consistent as in the eastern regions. The projected maximum nationwide SRWC plantation area varied from less than 0.1 million ha to around 1.8 million ha, depending on the scenario, a range that brackets results obtained in the earlier FASOM-based analysis of 0.6–1.0 million ha (Alig et al., 2000). However, this study projected significantly greater potential for development of agricultural SRWC in the South than projected in the earlier FASOM study.

Some Forestry Implications Results suggest that hardwood pulpwood supply from fast-growing hybrid poplars and

Fig. 17.3. Projected annual harvest of agricultural short-rotation woody crops (SRWC) under four different scenarios (HWM, hardwood medium supply; LHW, hardwood low supply; LR, low recycling scenario; DR6 and DR2, 6 and 2% discount rates, respectively).

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Fig. 17.4. Projected short-rotation woody crop (SRWC) harvest by agricultural statistical district in 2025 for low hardwood 6% discount rate scenario (LHW_DR6).

Fig. 17.5. Projected short-rotation woody crop (SRWC) harvest by agricultural statistical district in 2025 for low hardwood 6% discount rate scenario with low recycling (LHW_DR6_LR).

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cottonwoods on agricultural land could become marginally economical in the decades ahead, although supply is projected to remain fairly limited in the base scenario. However, the market potential expands significantly under alternative scenarios, such as reduced hardwood pulpwood supply from natural forests or limited future expansion in paper recycling. The market outlook is also enhanced by reducing discount rates for SRWC in agriculture (such as by providing farmers with low-interest loans for SRWC) or by offsetting perceptions of risk in SRWC investments (increasing the maximum rate of adoption). National attention has focused lately on the development of woody crops as biomass fuels or chemical feedstock to offset dependence on fossil fuels and non-renewable resources. In fact, APAC originally programmed the SRWC option into POLYSYS for the purpose of projecting the supply potential for biomass fuel or chemical feedstock. Currently, however, the value of whole-tree wood chip fuel in the USA is only about half the market value of pulpwood chips (University of Georgia, 2001). Based on POLYSYS cost data, the economic development of hybrid poplars as dedicated fuel or chemical feedstock crops would require biomass prices two to three times higher than current prices for wood biomass fuel, an outcome that seems unlikely unless there was a big increase in demand for biomass. In this study, it was tacitly assumed that a fraction of the SRWC biomass would be used for fuel as wood and bark residues, since only about 71% of the biomass can be recovered as clean pulp chips. Also, in conventional pulp mills, energy is recovered from combustion of wood residues and spent pulping liquors. Thus, the use of wood and bark residues and pulp by-products for fuel is a common practice in the US pulp and paper sector, and this practice was assumed to apply likewise to SRWC. However, growing hybrid poplars on agricultural land strictly for fuel is not very economical at present. In a previous study using POLYSYS to analyse the biomass market potential for switch-grass, willows and poplars, Walsh et al. (1998) found that future biomass prices had to be considerably higher than current whole-tree chip prices before POLYSYS projected significant planting of poplar crops for biomass markets. Also, other biomass crops such as switch-grass or coppice willow appear to be recognized as more economical alternatives than hybrid poplars for chemical feedstock or

biomass energy crops. Therefore, it appears somewhat unlikely that hybrid poplars or cottonwoods will be developed competitively in the near future as dedicated chemical feedstock or biomass energy crops, unless there is a significant upturn in demand or prices for biomass or if subsidies were provided to switch from fossil to renewable resources. Such subsidies might be justified economically if the use of biomass resources were to reduce the environmental costs associated with use of fossil fuels, but an assessment of such costs or benefits is beyond the scope of this study. This study does suggest, however, that there is potential for development of hybrid poplars or cottonwoods as agricultural wood fibre crops in the near future (with use of wood and bark residues for fuel), and the potential expands significantly under some fairly plausible alternative scenarios (more restricted hardwood pulpwood harvest on forestland or slower growth in paper recycling). Given the historical background of shifting forest management concerns, some potential forestry implications might exist for development of agricultural SRWC. Perhaps the most obvious implication for forestry is that the advent of agricultural SRWC will make it even less plausible to base priorities in forestry on a premise of future timber scarcity or ‘timber famine’ (at least in terms of pulpwood resources in the USA). Results of this study indicate that agricultural SRWC exists as a plausible wood resource alternative in the event that forest resources become somewhat scarcer in the future. However, the extent to which agricultural SRWC may be developed as an alternative resource supply will depend also on whether intensive cultivation and genetic improvement of SRWC will be supported by public policy. In that regard, there are likely to be at least two major hurdles for agricultural SRWC, one being its association with the legacy of intensive forest management and the other being a possible future association with genetic engineering. At first sight, development of SRWC might appear to be just another stage in the historical progression of intensification in forest management. As such, it may appear that agricultural SRWC will engender the same harsh mistrust of intensive industrial forestry that has been voiced by some segments of the public in the past. However, according to this study, agricultural SRWC can be grown on available agricultural cropland and would not necessarily displace native forest stands.

Agricultural Short-rotation Woody Crops

Indeed, SRWC may displace other agricultural crops or land-uses that have more intensive application of tillage, fertilizers, or pesticides. SRWC will typically require some chemicals for fertilizer or weed suppression early in the rotation, but generally, applications are much lower than applications for many other leading agricultural crops. Also, SRWC generally involve no land tillage during the length of the rotation (typically 6–10 years), reducing the potential for soil erosion (Shepard and Tolbert, 1996). Poplar plantations are also starting to receive attention as a method to absorb and store carbon, in both the woody biomass and in the soil (Johnson, 2001). Poplar plantations interspersed with conventional cropland can also help maintain water quality by providing vegetative buffers between cultivated farm fields and nearby lakes or streams. In other words, future expansion of agricultural SRWC could possibly contribute to a de-intensification of land-use in agriculture, helping promote soil conservation and helping achieve an array of other environmental benefits. Furthermore, expansion of highly productive agricultural SRWC would also tend to offset demand pressures on native forest resources. Each hectare of intensively managed agricultural SRWC can potentially supply the pulpwood output equivalent of roughly 5–6 ha of natural hardwood forests in the USA, and agricultural SRWC may offer other benefits such as better fibre uniformity or modified lignin content. Thus, similar to the establishment of pine plantations on agricultural land in recent decades, development of agricultural SRWC may actually contribute to less-intensive management of native forests than would occur otherwise (offsetting demand pressures on native forest resources). Thus, there may be at least a logical argument that development of agricultural SRWC would be a departure from the pattern of increasing pressure on native forest ecosystems that has often been associated with more intensive forest management. A somewhat more intractable issue is presented by public perceptions of genetic engineering. Although new research on genetic modification of tree crops may offer potential for significant cost savings in pulping or papermaking, exploitation of that potential may be limited by caution or concern about biological risks of genetically modified trees in the forest environment. However, techniques developed in this study show that it is

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possible to at least assess the future market potential and future economic benefits to weigh those benefits against possible biological risks. Also relevant in conservation policy are potential environmental benefits of less intensive land-use in agriculture and potential for conservation of forest resources, issues beyond the scope of this analysis but which should be explored in future research.

Summary In summary, economic development of agricultural SRWC for pulpwood supply in the USA appears likely in the decades ahead based on economic analysis of the forest and agriculture sectors, and this development could have some interesting implications for forestry (as well as agriculture). The market outlook improves if future growth in paper recycling slows or if hardwood forest harvests are diminished. Although cultivation of SRWC is generally more intensive than conventional forestry practices, development of agricultural SRWC may be viewed potentially as a means to de-intensify land management in agriculture and reduce pressures for intensification of management and timber harvest in natural forests. As with developments such as paper recycling, this study suggests that foresters need to carefully consider implications of developments in other sectors remotely connected to forest policy, such as the agriculture sector, for example. This study has provided an analytic tool (linkage of NAPAP and POLYSYS models) that could be extended in future research to examine potential market impacts of developments such as genetic modification of lignin structure or higher yield through bioengineering of SRWC. Some members of the public will probably view agricultural SRWC with suspicion, because it may be associated with the image of intensive industrial forestry and also with genetic engineering. At the margin of technological possibilities, however, with the advent of genetic engineering, it is possible to envision a future in which agricultural SRWC could potentially make significant inroads upon future timber markets. Results of this study suggest that foresters should consider these and other economic implications of SRWC in forestry and agriculture.

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Acknowledgements This study was supported in part by funding from the US Department of Energy (DOE) Interagency Agreement DE-A105-98OR22677 and also by the USDA Forest Service. The study was conceived in collaboration with Dr Marie Walsh of the DOE Bioenergy Feedstock Development Program at Oak Ridge National Laboratory. The DOE Bioenergy Feedstock Development Program provided regional SRWC productivity and cost data for the USA based on extensive field data and expert judgement. Professor Daniel G. de la Torre Ugarte of the University of Tennessee Agricultural Policy Analysis Center provided valuable in-kind contributions by programming SRWC productivity and cost data into the USDA POLYSYS model and by making POLYSYS available for use in this analysis. Professor Darius Adams of Oregon State University (OSU) and John Mills of the Forest Service Pacific Northwest Forest Experiment Station maintain the Forest Service TAMM and ATLAS models. TAMM and ATLAS analyse lumber and wood panel markets, timber growth, and forest productivity in the USA. TAMM and ATLAS are linked with NAPAP to provide long-range projections of timber supply and demand in the USA for Forest Service RPA timber assessments. More recently, the TAMM–NAPAP–ATLAS system was also linked to POLYSYS through development at OSU, and results of that application will be discussed in a subsequent final report.

Endnote 1 This study focuses on hybrids of cottonwoods and other poplars (so-called hybrid poplars). We use the term ‘hybrid poplars’ to include cottonwoods in general regardless of intra- or inter-specific genetic origin.

References AF&PA (2000) Statistics of Paper, Paperboard and Wood Pulp. American Forest and Paper Association, Washington, DC, 86 pp.

Alig, R.J., Adams, D.M., McCarl, B.A. and Ince, P.J. (2000) Economic potential of short-rotation woody crops on agricultural land for pulp fiber production in the United States. Forest Products Journal 50(5), 67–74. Environmental Defense Fund (1995) Paper Task Force Recommendations for Purchasing and Using Environmentally Preferable Paper. Environmental Defense Fund, New York, 245 pp. Ince, P.J. (1994) Recycling and Long-range Timber Outlook. General Technical Report RM-242. USDA Forest Service, Rocky Mountain Forest and Range Experiment Station, Fort Collins, Colorado, 23 pp. Ince, P.J. (1999) Long-range outlook for U.S. paper and paperboard demand, technology, and fiber supply–demand equilibria. In: Proceedings of the Society of American Foresters 1998 National Convention, Traverse City, Michigan. Society of American Foresters, Bethesda, Maryland, pp. 330–343. Johnson, J.D. (2001) Emerging hybrid poplar technologies. Inside Agroforestry Fall/Winter 2000/2001, 5–11. Ray, D.E., de la Torre Ugarte, D.G., Dicks, M.R. and Tiller, K.H. (1998) The POLYSYS Modeling Framework (Draft). Agricultural Policy Analysis Center, University of Tennessee, Knoxville, Tennessee, 175 pp. Shepard, J. and Tolbert, V. (1996) The role of shortrotation woody crops in sustainable development. In: Proceedings of the First Conference of the Short Rotation Woody Crops Operations Working Group, Paducah, Kentucky. Short Rotation Woody Crops Operations Working Group (http://www. woodycrops.org/paducah/shepard.html). University of Georgia (2001) Timber Mart–South Market Newsletter 6(1). USDA Forest Service (1988) The South’s Fourth Forest: Alternatives for the Future. Forest Resource Report No. 24. USDA Forest Service, Washington, DC, 512 pp. Walsh, M.E., Graham, R.L., de la Torre Ugarte, D., Slinsky, S., Ray, D. and Shapouri, H. (1998) Economic analysis of energy crop production in the U.S. – location, quantities, price and impacts on traditional agricultural crops. In: Proceedings of BioEnergy ’98: Expanding Bioenergy Partnerships, Madison, Wisconsin, 4–8 October 1998. US Department of Energy (http://bioenergy.ornl.gov/papers/ bioen98/walsh.html). Zhang, D., Buongiorno, J. and Ince, P.J. (1996) A recursive linear programming analysis of the future of the pulp and paper industry in the United States: changes in supplies and demands, and the effects of recycling. Annals of Operations Research 68, 109–139.

18

Management of the Forest Biodiversity: Feasibility, Efficiency and Limits of a Contractual Regulation Anne Stenger* and Dominique Normandin

Laboratoire d’Economie Forestière (LEF), UMR ENGREF/INRA, 14 rue Girardet, CS 4216, F-54042, Nancy cedex, France

Forest resources possess a unique multifunctional character. Forests offer a great variety of goods and services on a less artificial level than many other land-uses: for instance, wood, other products (e.g. berries, mushrooms and foliage), soil protection against erosion, regulation of hydraulic regimes and water quality, fixation of carbon dioxide, and making the area favourable for recreational activities. They represent potentially one of the most important terrestrial reservoirs for biological diversity. Even in regions where forests have been transformed by human activity for many decades, they still retain high levels of genetic variation (differentiation within species), in the plant and animal species which make up their ecosystems (systematic organizations of life-forms) and their ecocomplexes (interactions between ecosystems). However, most of the functions assumed by the forest, apart from wood production and some leisure activities (e.g. hunting) are not commercial transactions. Because of a lack of direction from society and lack of payment for their production, the managers of forest resources do not take these into account in their management practices. As the standardization of numerous production activities and the artificialization of natural areas have

caused declines in biodiversity, society is becoming more and more interested in creating facilities for the conservation of biodiversity. This chapter aims to examine – in the case of French forest resources – how such facilities can be implemented. In the first section we briefly describe the economic, social and political context in which the conservation of the forest biodiversity is to take place. We focus on the objectives and the terms of a new form of regulation of forest resources management which has the goal of maintaining or improving biological diversity: namely, the use of contracts within a European network (‘Natura 2000’). We then present the terms and conditions of contracts aiming at defining forest management practices favourable to biodiversity. Next, we analyse their implications for the development both of the methodologies of management and of the extra costs that forest owners and managers may have to bear. In the second section we analyse in a theoretical way the conditions of the contract implementation. We base our study on the principle of joint production. When examining different initial situations we deduce the main types of contracts that it could be necessary to implement. We then concentrate on the possible application of a

* I deeply regret the sudden death of my colleague and co-author, Dominique Normandin, who contributed significantly to this research. ©CAB International 2003. Forest Policy for Private Forestry: Global and Regional Challenges (eds L. Teeter, B. Cashore and D. Zhang)

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Principal–Agent model with adverse selection and moral hazard.1 We have to note that in France this type of tool has not been implemented yet. Furthermore, as the contract procedure within the ‘Natura 2000’ network is not yet operational, this chapter can only be a preliminary analysis.

The Need for Contractual Agreements on Biodiversity Protection and Enhancement Economic, social and political context Aware of the importance of conserving biological diversity, the European Union has adopted directives with the objectives of protecting faunal and floral diversity.2 The implementation of these Directives results in the inventory and the designation of several zones offering interesting characteristics concerning the species to be found there and the ecosystems concerned. The creation of a network of sites (‘Natura 2000’), within which management practices favourable for biodiversity will be conducted, has to be completed by 2004. This does not exclude human intervention; rather it means a reconciliation between ecological demands and economic and social requirements. In France, if we consider the 2.6 million ha involved in Natura 2000 (apart from marine zones), about 40% of this is in forested areas whereas forests cover 26% of the country. Among the forested areas concerned, about one-quarter are in state forests, one-quarter in other public forests and one-half in private forests (respectively comprising 10, 15 and 75% of the French forested areas). In order to regulate the management activities of private forest owners and to assure an increased protection of forest biodiversity, it is essential to know what the objectives of forest owners are. These objectives determine the efficiency of the regulation tools of the implemented forest management. However, there is a great diversity of agents as far as their legal status, available means and constraints are concerned, and obviously their plans for the forest property will vary widely. Globally, one can consider that the objectives underlying forest management belong to five main types of motives: (i) more or less regular or valuable income; (ii) the building up of capital in the form of growing

stock; (iii) the opportunity of deriving products or services for personal use from the forest (firewood, hunting); (iv) the concern about leaving one’s children a capital asset with interesting tax features (reduced succession rights); and (v) the wish to preserve the environmental functions of the forest. Without generalizing, the protection of the environment seems to be more the concern of public agents who by definition are interested in public welfare. The production of revenue can only be considered in the case of properties of a substantial size, whereas the saving function and personal consumption seem to be most important in small properties. We will concentrate mainly on private forest owners, the extent that these new measures are planned for them and that their aim is not necessarily to maintain the biological diversity; we assume that, despite their possible diversity of situations and objectives, all these agents mainly aim at obtaining the best possible wood production. One of the main points of interest of the analysis concerning the implementation of the Natura 2000 network in the French forests lies in the fact that the authorities have chosen to use contracts as incentives (National Rural Development Scheme). Until now, only regulatory tools have been used in forest resources management to preserve the biological diversity: the classification in Natural Reserve (law of 1976); state order for Biotope (1960); the classification of protected forest (Forest Code); and the creation of biological reserves (mainly in state forests).3 In all those cases, the management regulation is a public decision with no countermeasure available to the forest manager. The recourse to an economic tool, the contractual regulation, as it is considered within the Natura 2000 network, constitutes a real novelty in the context of French forest policy. Furthermore, here we have a resource offering quite a few interesting details (very long-term production, complexity of the managed ecosystems) and economic agents whose objectives are different and for whom the forest activity is rarely their main activity. The role of the forest in their incomes, their activities and their patrimonies is even often residual. Finally, it is useful to indicate that this decision to use contracts for the protection of biodiversity is within the general context of a changing forest policy.

Management of the Forest Biodiversity

Issues and problems within the Natura 2000 network The first step of the Natura 2000 network implementation consists in compiling inventories intended to identify ecologically interesting areas. Then, for each chosen site, the protection of natural habitats will be achieved according to some ‘objectives documents’, giving recommendations in forest management. These ‘objectives documents’ are not yet available for most of the 1000 sites which at present constitute the state of the French propositions for the Natura 2000 network. However, based on various examples and because of the general philosophy of biodiversity conservation guiding management recommendations, one can consider the main types of measures which will constitute the conditions of the contract to be honoured. These can be classified in three major categories. The most important recommendations are based on forest planning itself (i.e. the basic objectives of forest production): choice of species and silvicultural regimes (even-aged stands, uneven-aged stands, mixed stands). Globally, it is obviously advisable to use only the species that are found naturally on the site and to exclude the use of artificially introduced species (especially conifers). Accordingly, the recourse to natural regeneration is usually advised. It is also often recommended to work on small areas for even-aged stands or to choose unevenaged stands. Finally, the management of stands with mixed species is often desirable. A second major category of management recommendations comes from the harvesting and road access system. The general orientation often consists in limiting the access to the plots to skidders and to recommend the use of less mechanized methods. It is also often advised to avoid certain routes during harvesting operations, which can lead to longer distances for transport. Finally, a last category of recommendations deals with silvicultural techniques to limit methods causing disturbance to the environment (like ploughing and fertilization). The implementation of the Natura 2000 specification rules will result – according to the initial situation of the plots – in distinguishing, both on an ecological and economic level, three main types of objectives:

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Restoration objective This prevails when the state of the stands is very far from the objective set by Natura 2000, i.e. when it deals with naturally regenerated species. In practice it will deal with plots composed of pure and monospecific coniferous stands on sites where the natural state corresponds to various mixed broad-leaved species. In that case, the terms of the contract imply that the forest owner must radically change his silvicultural system of production as far as the objectives are concerned (quantity, value and age of the produced wood). The object of this first type of contract would be to make the Agent change his objectives and management practices. Conservation with operations objective This is when the initial state of the stands conforms quite well to the objectives set by Natura 2000 (broad-leaved stands more or less mixed, for instance). However, there are a certain number of practices which do not fit in with the contract applied to the site. The aim is then to modify some special operations to reach an equivalent technical result with the same production objective. We see here a second type of contract with the objective of making the Agent conserve his objectives of production and soften some of his management practices. Pure conservation objective This happens when all the production objectives – as far as we can judge them from observation of the stands – on the one hand, and the usual management practices on the other, appear to comply with Natura 2000 conditions of contract. In this case the object of the contract is to have the forest owner maintain the present management and to avoid the use of practices which do not comply with the objectives of biodiversity preservation. The analysis of both feasibility and efficiency of these three types of contracts requires the knowledge of possible options offered to the forest producer as well as the information that the Authorities can have to orient these practices. This analysis enables to identify two main categories of consequences on the cost savings of wood production and, as such, on extra expenses borne by the forest owner in adopting those management recommendations.

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A first category of new expenses consists in an increase in the cost linked to a given technical operation. We will call this type of costs, direct costs. They are incurred each time the technical operation mentioned takes place. This includes measures called ‘ecological engineering’ for which the forest owner is asked to initiate operations (e.g. river bank maintenance) that his usual method of forest production does not lead him to perform. The compensation will be given according to the total expenses corresponding to the operations to be performed. Direct costs also come into account when particular constraints lie on the realization of the operations (silviculture or harvesting) being in the normal technical process of production. Thus the requirement for manual techniques compared with mechanized or chemical operations, or also an increase in the harvesting distances, will generally result in higher cost for the operations performed. In that case, the compensation will be based on the discrepancy between the cost of the cheapest method and the cost of the method authorized by the condition of the contract for the same technical result. This type of cost could appear especially in contracts of the ‘conservation with operations’ type, where some management techniques are modified slightly so as not to affect the final objective of production. The second main category of costs is related to the fundamental changes that may be made in systems of production. Here it is the producer’s income which is affected. This category recovers the ‘opportunity costs’. We assess the forest producer’s loss (‘loss of earnings’) on the basis of simplified systems of production characterized by: an initial investment (D0) representing the cost of the land and the regeneration (natural or artificial) and maintenance of young stands; the rotation age (n); and a final income in year n (Rn). Comparing the results obtained (in terms of net present value or yearly land rent) for the most efficient system of production with respect to natural conditions and using the system of production specified in the condition of contract, we can estimate the loss undergone by the forest owner. This type of cost is mainly in ‘restoration’ contracts where the Agent is asked to transform his production process. It can also be the case when the purpose of the contract is to prevent the owner from producing more wood, and thus would be less in line with the objectives of Natura 2000 (the conservation cases). However, the methodology of making contracts is different

in the conservation case, where the incentive is ‘not to do’.

A Theoretical Implementation of Contracts For the reasons given above, the implementation of contracts for Natura 2000 is only considered in a theoretical way. Indeed, an exchange of products and services is planned between some forest owners and the State. To characterize – in a theoretical way – potential types of contracts, one relies on the limits of production possible in forestry. We then come back to the idea of multifunctional forests conceptualized by the notion of joint production and delimited by the constraints on the forest owner. We then analyse in a graphical way the possibilities of making contracts for each type of forest owner. This analysis put the actors in the context of informational asymmetry which differs according to the forest owner’s initial situation.

Identification of contract incentives on a boundary of production For each of the three scenarios (restoration, pure or conditional conservation) we characterize the type of the potential forest owner on a production boundary. We presume that the forest offers two types of products: wood and biodiversity (Bowes and Krutilla, 1982). The forest owner can produce one and/or the other of these two products according to his objectives and his technical constraints. Hence, the forest owner is a multiproduct producer. This juncture within production can be summed up in a joint production boundary of the possibilities. We will place ourselves in a context where a decreasing wood production is accompanied by an increasing production of biodiversity. This is the link described for the forest where wood products and non-wood products are more substitutable than complementary, as in agriculture (Gatto and Merlo, 1999; Bonnieux and Rainelli, 2000). The multifunctionality and the analysis of links between market production and non-market production centres on external factors such as landscape, recreational services, erosion, animal welfare,

Management of the Forest Biodiversity

biodiversity, and so on (OCDE, 1992, 2000; Bennett, 1995; Bonnieux and Dupraz, 2001). The analysis shows that these goods coming from a production process can convey costs or profits according to the link between outputs. The curve in Fig. 18.1 describes the frontier of the joint production which includes two products, wood and biodiversity. There is vagueness in the relationship described in Fig. 18.1, particularly to the left of R and beyond Ca because relationships between wood and biodiversity could be complementary in a positive or negative way, weakly or strongly. We will not take into account these possibilities but we will remember a relation of substitution which is more frequent in reality and which shows a real ability to modify the production of wood and biodiversity (from R to Ca). On this figure, the Natura 2000 objective is localized at D* which is an extreme point where biodiversity is maximal according to the production possibility of the forest owner (see below for the possible trajectories and their significance). The use of contracts is both a means of internalizing biodiversity and of recognizing the notion of joint production in a forest. It is a policy which regulates both biodiversity and environmental services in a more general way (Russel, 1993; Romstad, 1999). The efficiency policy is conditioned by the type of functional relation that can exist between the market goods and the non-

Fig. 18.1.

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market goods. A price support on the market goods can be efficient if the relation between the two goods is known to be of a complementary type, for example. To be efficient, a direct help to nonmarket goods involves the knowledge and the power of observing these non-market goods. The policy of implementation within Natura 2000 consists in financing the production for the public good, i.e. biodiversity. The financing is considered throughout the creation of contract policies by means of incentives. This financing will be applied to producers already involved in the production for public good and encouraged to maintain it as well as those less involved in that activity but advised to do so. The first objective of the majority of the contracts in Natura 2000 will consist in maintaining biodiversity as it has been defined. However, to be viable, this environmental objective must be accompanied by the economic constraints of the main actors. Monetary incentives must fit budgetary criteria on the one hand, but must convince the owners to find the optimal effort level in favour of biodiversity on the other hand. Globally, two types of contracts are to be considered, the conservation or the restoration of the biodiversity on a given plot. In the case of conservation, biodiversity is analysed like a positive external factor that forest owners must continue to preserve, avoiding the implementation of irreversible actions. The restoration of

Hypothesis of joint production of wood and biodiversity.

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biodiversity is more complex and arises beyond the problem of a reference point. The point is no longer to refer to a group of visible indicators; however, it is possible that the restoration of biodiversity implies the installation of a species poorly or not represented on the plot. This schematic division of the possible contracts (conservation and restoration) is based on a conflict between wood production and the conservation of biodiversity. Indeed, an owner who would be asked to reduce his wood production so as to favour a faunistic or floristic species would be classified in a production system where market and non-market services of the forest are substitutes. However this situation only represents one case among many and describes the situation where opportunity costs are potentially important. Concretely, it would be convenient to refer to the types of costs imposed on each forest owner within the implementation of a contract and/or his total production possibilities from the different possible links that exist between wood production and Table 18.1.

biodiversity production. According to the link between the two types of production, the costs borne by the owner will be neither be of the same type (direct costs or opportunity costs) nor on the same scale. The contract will vary according to the initial situation of the forest owner within the boundary production. The forest owner can find himself in one of three situations (Table 18.1, Fig. 18.2). When positioning the three forest owners on the same boundary of production we make the implicit assumption that the plot allows adjustments without technical or geographical obstacles. Conservation can be considered in two ways (a and b in Table 18.1). In the simplest case, the floristic and faunistic richness must be conserved as they are without any extra effort (a). However, the conservation of biodiversity can require a particular effort of maintenance and, as such, extra costs as direct costs (b). However, in these two cases of conservation, the forest owners also bear opportunity costs bound to their obligation not to divert

Types of contracts and costs borne by the forest owner. Types of contracts

Types of costs

Conservation a

Conservation b

Restoration

Direct costs Opportunity costs

Loss of option operations Loss of option on land rent

Effective extra costs Loss of option on land rent

Effective extra costs Loss of land rent

Fig. 18.2. Identification of the three typical forest owners on a boundary of production (R = biodiversity restorator; Ca = conserver of biodiversity; Cb = conserver with operations), Natura 2000 objective = D*.

Management of the Forest Biodiversity

from this production level even if there are more profitable options available. The presence of opportunity costs is important for the determination of both the effort made by the owner and the amount of compensation given. The presence of opportunity costs certainly contribute to increasing that of moral hazard. In that case, the owner undergoes a loss of options linked to his own commitment of refusal to produce wood. The direct costs incurred in the pure conservation case are recovering extra expenses due to a loss of less expensive options on operations. The restoration of biodiversity means a hope for an increase or the reintroduction of one or several species thanks to the implementation of a programme of actions elaborated in agreement with the forest owner. The actions considered imply a more or less drastic reorganization of the production system. For instance, the replacing of one species by another implies changes in the production system which are more important than the reinforcement of a species already existing there. To these more or less important opportunity costs according to the imposed change of production system, direct costs are added which will be effective if the contract is accepted. We suppose that all producers have – before making a contract – different levels of wood production.4 The introduction of biodiversity will have two possible effects: either the owner stays at his level of initial production or the owner accepts a change in his way of working, recognizing the production of a new output. First case: the forest owner is an intensive wood producer (position R on Fig. 18.2). The forest owner has an objective of maximizing profit based on the only possible valuation of forest, i.e. wood production. In that case he is described as an intensive wood producer since on the same site the presence of other types of owners (Cb and Ca) reveals a less intensive production. However, we can note that, at that maximum level of production, the level of biodiversity is not null but remains insufficient to satisfy Natura 2000. Thanks to the contracts, the owner will have the choice between at least two solutions to reach D* (Natura 2000 objective): either he decides to reduce his level of production along the possibilities of the boundary till he reaches D*, or he decides to reach D* while maintaining his initial wood production and using higher cost levels on a higher boundary of production. He can also choose

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an intermediate level of production using a lower production of boundary with the same environmental constraint, so producing in the interval Ca – R. In this case, the owner bears direct costs and a loss of land rent. Second case: the forest owner is a biodiversity conserver (Ca). This situation, which will by definition be that of the majority because Natura 2000 sites have been designed according to their correspondence to natural habitats, reflects the case of an owner who does not produce as much wood as the previous one. The implementation of contracts must encourage the owner to maintain his initial level of biodiversity. If it is possible to produce wood, he has to forfeit the support of his lost options. Knowing that we deal with a homogeneous area for the three possible cases of owners, the use of contract may be difficult in a context of information asymmetry made complex by a previous behaviour ‘out of economic norms’. The incentive must be such that the owner must not be willing to use his initial resources to aid wood production (R). However, he can consider producing more if he wishes to do so, moving along the environmental boundary described by Natura 2000 (vertical) but bearing increasing production costs. Third case: the forest owner is a wood and biodiversity producer (Cb). The owner tends to gain both wood production and biodiversity preservation by adopting a more extensive production mode. The level of biodiversity is nearly that hoped for by the Principal. His profit level is less important than in position R. The objective of the contract is to encourage him to go on with biodiversity production. The efforts required are less important than those of owner R, nevertheless owner Cb has the same constraints as owner R: incentives must be such that they reach D* either in decreasing his level of wood production or in maintaining it. These incentives must prevent him from reaching position R. He then undergoes direct costs and an option loss. The implementation of contracts will aim at encouraging all the owners, either to reach the defined level of biodiversity (R and Cb), or to maintain it (Ca). Consequently, contracts are not in the same context of information according to the initial position of the owner, the solutions possible to reach biodiversity level D*, the costs borne by the owner and his objectives – displayed or not.

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Theoretical feasibility of contracts: a simple static model Each of the three listed situations offer possible contracts if we consider the incentive theory. We consider that the Principal (State services) acts in a context of asymmetry of information concerning – according to the situation – the effort, the action and the objective of the Agent (the forest owner). The contract signed between the Principal and the Agent will be made in a context of moral hazard and/or adverse selection. According to the initial situation, the Principal’s objective will be to encourage the Agent, either to maintain his level of effort in favour of the conservation of biodiversity, as it will have been referenced, or to help him restore a targeted level of biodiversity. The analysis of the feasibility of the contract is first based on the knowledge of the origin of the information asymmetry, the nature of incentives begun by the owners (known or not) and the owners’ objectives (see Slangen, 1997). The asymmetry of information is always at the expense of the State, forest owners being in all cases better informed. However, according to the type of owner, this asymmetry of information will lie on Agent’s actions (moral hazard) or on Agent’s objectives (adverse selection). Finally, the proposal of a contract is only done in the case when the owner has different possible forest management options: a potential change of species, the recourse to particular silvicultural or harvesting methods, etc. In the case of moral hazard, we presume that the Agent has a better knowledge than the Principal on how to reach objective Natura 2000. To introduce moral hazard we could distinguish two possible types of contracts. In the first type, the Principal specifies only the objective of biodiversity D* to be fulfilled and the level of subsidies. In the second type, the Principal specifies that it would be advisable to make an extra effort in decreasing wood production, adding that the production of wood should be in parallel with the production of biodiversity. In the case of adverse selection, the Agent knows his objectives better than the Principal does: the conservation case could be an inheritance and the owner could have an objective of intensive production. A greater precision in the contracts reduces the possibility of behaviour in moral hazard.

The restoration contract In this case the initial and final objectives as well as actions which could be implemented by the Agent are known by the Principal. Only the less expensive solution for society has to be found by the Principal. We are then in a context of moral hazard which is of first order. To simplify the analysis we will suppose that the proposal of a restoration contract will be made at the time of a critical decision, that is to say, during a stand renewal. We have seen that to reach the environmental objective the owner could employ several routes and could consequently bear the costs of reorientation composed of opportunity and direct costs. We will exclude the extreme cases R′ and Ca for which the owner could bear either direct costs for R′ or opportunity costs for Ca. The opportunity cost increases when the direct costs decreases. Let us recall that the presence of a direct cost implies the examining of an action whereas the presence of opportunity costs reduces the examining of the Agent’s actions except when the levels of joint production are planned. THE PRINCIPAL’S OBJECTIVES. We know that the Principal knows that the Agent maximizes profit. However, the Principal does not necessarily know precisely the boundary of what the Agent can do and estimates the amount of incentives with a margin of error. A priori, the Principal has an objective D* without specifying the level of wood production. The Principal can have reasons to want a decrease in wood: forecasting the level of social utility of wood and biodiversity or budgetary reasons. However, the specifications of the contract dealing with wood production and estimation of the boundary of production condition the presence of moral hazard. THE AGENT’S OBJECTIVES. The Agent wishes to maintain his initial level of income. To encourage him to produce biodiversity the level of incentives must be similar to the initial one (constraint of participation). According to the modalities of the contract, the Agent is able or not to make a comparison between the different alternatives offered to him as well as respecting the constraints. Indeed, a contract on which he is told to reach D* without constraint on the level of production will be more flexible than a contract in which D* and B* would

Management of the Forest Biodiversity

be specified. According to his boundary of production and the constraints imposed by the contract, the moral hazard is more or less important. THE POSSIBLE CASES. It seems important to say that the Principal and the Agent share the same information on the initial situation of the latter and the knowledge of the category to which he belongs: R, Cb or Ca. However, the Principal estimates, a priori, the Agent’s boundary of production and estimates the amount of subsidies. It is obvious that, according to the boundary of production, he estimates – taking into account budgetary constraints and integrating for the moment only objective D* with two wood production extremes (Bmax and Bmin)5 – the Principal acts as a referee between the costs of the different solutions. The restoration cases in Figs 18.3, 18.4, 18.5, 18.6 and 18.7 show that the frontier of production is important both in its curvature aspects (Figs 18.3, 18.4, 18.5) and in its relative position (Figs 18.6, 18.7). In the three figures (18.3, 18.4, 18.5) the Principal can be either indifferent between two extreme solutions or can prefer one solution to another because it costs less6. Hence, in Fig. 18.3 the Agent remains indifferent to receive either subsidies that would cover direct costs or subsidies that would only cover opportunity costs7. In Figs 18.4 and 18.5 the Principal prefers to give compensation for direct costs (R–R′), (opportunity costs (Bmax − Bmin)). These three simple cases show that the boundary

Fig. 18.3.

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of production estimated by the Principal determines the most efficient trajectory according to the Principal. In reality, the Principal determines the subsidies which correspond to an intermediate wood production (for instance Cb Fig. 18.1). The Agent is forced to reduce his wood production as

Fig. 18.4. A restoration case: preference (for the Principal) for direct costs subsidies.

A restoration case: indifference between direct costs and opportunity costs

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direct costs R − R′ are always superior to the incentives whatever the boundary of production. If the Principal does not say precisely in the contract that he wishes a decrease in wood production, the moral hazard depends on his estimation of the amount of incentives planned and implicitly on

Fig. 18.5.

the shape of the boundary of production on which it is based. The moral hazard also depends on the shape of the boundary of production and on the estimation error made by the Principal. Finally, the moral hazard is different according to the meaning of the error made by the Principal, i.e. whether the

A restoration case: preference (for the Principal) for opportunity costs subsidies.

Fig. 18.6. Introduction of moral hazard: the boundary of production observed is superior to the boundary of production estimated.

Management of the Forest Biodiversity

curve observed by the Agent is, in the end, superior or inferior to the curve estimated by the Principal. To counteract this situation of moral hazard, the Principal must specify the terms of contract. To do so he can indicate that a reduction in wood production would be preferable, or he can impose both the levels of wood production and biodiversity. In the first case, according to the estimation of the boundary of production that he makes, a situation of moral hazard may occur. If the boundary of production observed is superior to the boundary of production estimated by the Principal (Fig. 18.6), the moral hazard is linked to the Agent’s likelihood of respecting contract D* when producing more than the Principal would want. Without constraint on the wood production but with D*, the Agent compares the amount of incentives to the cost he would bear when producing more wood than he is allowed to produce according to the Principal’s estimation. He accepts contract D* and the amount Bmax − B* + D − D* but will produce B**. The rational Agent continues to produce wood and undergoes costs which to some extent remain inferior to the amount of incentives. If the contract specifies D* and B*, the moral hazard is reduced but remains. In this case, this Agent accepts the contract but is able either to reduce his possibilities of production until D* or maintain and produce

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D** superior to D*. Whatever his decisions, the amount of incentives Bmax − B* + D − D* remains superior to the costs observed by the Agent (R′ − D* or R′′ − D**). If the production boundary observed is inferior to the boundary of production estimated by the Principal (Fig. 18.7), the Agent refuses the contract because he knows that the costs he bears are superior to subsidies corresponding to (B*, D*). If he wanted to respect contract D* he would undergo losses equivalent either to ED or to DF according to the sacrifice he would be ready to make (in terms of direct costs or loss of earnings). The conservation contract (Ca)8 Conservation Agents have management practices which already fulfil the environmental criteria of Natura 2000 (Fig. 18.8). A contract is proposed to conservation Agents liable to make changes in terms of a more intensive silviculture or in terms of operations less favourable to biodiversity. If, as in the case of an intensive owner, there is a symmetrical information in the Agent’s initial position, then an information asymmetry appears here as far as the Agent’s objectives (in terms of wood production and/or management) are concerned. This asymmetry can lead to an anti-selection situation. The Principal wishes that the Agent maintain his

Fig. 18.7. Introduction of moral hazard: the boundary of production observed is inferior to the boundary of production estimated.

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Fig. 18.8. The conservation case: identification of direct costs and opportunity costs according to the Principal’s estimation.

level D*. But he does not know either the objectives or the reasons for which the Agent is in Ca though he should be producing Bmax. However, he must encourage him to stay at D*, distinguishing between the Agents who are there voluntarily, and those who are there involuntarily. The observation of the plot only reveals a few pieces of information: indeed it only gives an indication of how to make a contract with an Agent capable of changing his initial position. To get rid of adverse selection, a solution would be to confirm the reasons for the Agent’s position and the motivations for his future operations. However, this solution may increase the costs of making the contract (information and transaction). Also, another solution calls for the Principal to create categories of conservation based on subjective probabilities. These concern the probabilities of producing wood for some of them on the one hand and /or the possibility of reducing his maintenance operation costs on the other hand. From these subjective probabilities, the Principal is able to make different contracts according to the category of producers (Fig. 18.9). For instance the Principal creates two categories of

Agents according to their probability of wood production and gives different subsidies to each of them. The acceptance of a typical contract by a producer of a category defined by the Principal reveals the Principal’s capacity to anticipate potential behaviours: indeed if the producer accepts the contract, it is because he implicitly recognizes the category in which the Principal has placed him. However, on the other hand, the producer who does not accept the contract reveals the Principal’s misjudgement. Beside this first information asymmetry there is a second one identical to the previous case and linked to the boundary of possibilities estimated on the one hand by the Principal and known on the other hand by the Agent. A specific contract is proposed to each conservationist according to his possibilities of wood production and of maintenance determined from the subjective probabilities established by the Principal. Conservationist A, who has a priori a higher probability of producing wood (or to use products less favourable to biodiversity) than conservationist B, will have higher subsidies.

Management of the Forest Biodiversity

Probability P1 (D,B min)

State

Probability P2 (D*,[B min,Bmax]) (D*,B*) (agent a)

(agent B)

Agent

Reasons

Fig. 18.9.

(D*, s2) with s2 = (B*−Bmin)

(D*, s1) with s1 = s*

Subsidies

Yes

S1 underestimated

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Yes

No

P1 poorly estimated. The agent estimates what he is going to produce

S2 underestimated

No

B* underestimated. The agent is going to produce more

Some strategies for a conservation contract (cf. Fig. 18.8).

Conclusions These are some preliminary thoughts on the applicability of Natura 2000 in private forests in France. Three types of contracts have been identified on the basis of a joint production that takes into account wood and biodiversity. The implementation of contracts will raise some difficulties for the decider, notably in estimating the frontier of production for each Agent on each site. These difficulties are linked to a context of asymmetrical information concerning the owners’ actions and/or objectives. The estimation of the frontier must take into account the link between wood and biodiversity, the curvature, the actions and the objectives of the owners.

This idea has several limitations: first, we have not mentioned the temporal aspect that is, however, fundamental in forestry but the reasons come from the fact that contracts will only be made for the next 10 years. Apart from possible maintenance actions which can appear in contracts relative to the preservation of biodiversity, such a period of time seems both long and short: long when the owner is doing maintenance operations in his forest, short when we take into account the production delays. Some other limits are on the potential risks aspects that could exist in forest management (windstorm, fires, etc.). The effectiveness of a policy (restoration or conservation) of a non-market good involves knowing of the boundary of production and the

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process of the producer’s production on the one hand (type of juncture) and the initial position on the boundary on the other hand. Here we have considered that productions of wood and biodiversity were substitutable but this relation does not necessarily prevail in all cases in forests. It would be interesting to analyse a functional relation which would show that wood production and production of biodiversity are strongly complementary. It would be interesting to test this Natura 2000 implementation on a European level to get some idea of the various definitions and difficulties in biodiversity management.

Acknowledgements We wish to acknowledge J.M Rousselle for his technical collaboration. We also acknowledge the two anonymous referees for their judicious and precious comments.

Endnotes Adverse selection: in general the uninformed party does not know all the characteristics of the Agent (‘hidden information’). Moral hazard: the uninformed party is partially aware of the actions of the Agent (‘hidden actions’). The uninformed party observes only the results of the actions. 2 The ‘Birds’ Directive (1979), aiming at protecting the habitats necessary to the survival of both rare and endangered species; the ‘Habitats’ Directive (1992), aiming at protecting species and wild areas. 3 Around 54,000 ha are concerned, to which we can add some forest areas within National Parks. 4 If on the same area, with homogeneous natural characteristics, one has the case of an owner restoring and the case of a conservation owner, one can wonder about the rationality of the second who – without contract – should find himself in the situation of the first, i.e. at a level of maximal production. This second owner is not a maximizer of profit. However this situation is linked to the specific circumstances of the forest or to other reasons: formation, information, inertia of forest production, transaction costs, and so on. 5 One supposes that the demand of the society is either in (Bmax, D*) or in (Bmin, D*). 6 One supposes that the amount of subsidies is proportional to the length of segments. 1

7 This case is made only to judge solutions and their costs but we will expect that the Principal considers that a very intensive wood production might be detrimental to the increasing of biodiversity on the one hand and does not favour of production at Bmax when it is at its smallest level. 8 The conservation contract b is in between the two that are described here, the restoration case and the pure conservation one.

References Bennett, R. (1995) The value of farm animal welfare. Journal of Agricultural Economics 46(1), 46–60. Bonnieux, F. and Dupraz, P. (2001) Farmer’s supply of environmental benefits. Colloque ‘Seminar on the Multifunctionality of Agriculture’. Bergen, 16–18 February. Bonnieux, F. and Rainelli, P. (2000) Amenités agricoles et tourisme rural. Revue d’Economie Regionale et Urbeine 5, 803–820. Bowes, M.D. and Krutilla, J.V. (1982) Multiple-use forestry and the economics of the multiproduct enterprise. In: Kerry Smith, V. (ed.) Advances in Applied Micro-economics, Vol. 2. JAI Press, London, pp. 157–190. Gatto, P. and Merlo, M. (1999) The economic nature of stewardship: complementarity and trade-offs with food and fibre production. In: Van Huylenbroeck G. and Whitby L. (eds) Countryside Stewardship: Farmers, Policies and Markets. Elsevier Science, Amsterdam, pp. 21–46. OCDE (1992) Défaillances du marché et des gouvernements dans la gestion de l’environnement (Les). Les zones humides. La forêt. Paris, 1992, 88 pp. OCDE (2000) Production, externality and public good aspects of multifunctionality. Directorate for food, agriculture and fisheries trade directorate. In: Working Party of Agricultural Policies and Markets of the Committee for Agriculture Joint Working Party of the Committee for Agriculture and the Trade Committee. Romstad, E. (1999) Policies for Promoting Public Goods in Agriculture. Department of Economics and Social Sciences. Agricultural University of Norway. Discussion paper D-20/1999, 24 pp. Russel, N.P. (1993) Efficiency of rural conservation and supply control policies. European Review of Agricultural Economics 20, 315–326. Slangen, L.H.G. (1997) How to organise nature production by farmers. European Review of Agricultural Economics 24, 508–529.

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Case Studies Examining the Economic Impacts of New Forest Practices Regulations on NIPF Landowners Kevin Zobrist and Bruce R. Lippke

Rural Technology Initiative, College of Forest Resources, University of Washington, Seattle, WA 98188, USA

Introduction Regulation of private forestland has been a growing issue in the USA, and concern has increased over the economic impacts of these regulations on rural communities and landowners. This is particularly true in the state of Washington, which has recently strengthened its forest practices laws in response to the listing of salmon under the Endangered Species Act (ESA). Washington’s new rules, known as the ‘Forests and Fish’ rules, include significant new restrictions on timber harvest in riparian areas. These new rules appear to be the most restrictive in the nation. There is concern that they will be an economic burden to private landowners, especially small, non-industrial private forest (NIPF) landowners. There is also concern over the potential disparity of impacts between different landowners in the state. Other states considering similar rule changes may benefit from Washington’s experience. The purpose of this study is to use a series of case studies to examine the economic impacts of Washington’s new forest practices regulations on small, NIPF landowners. A Small Business Economic Impact Statement (SBEIS) has already been completed to assess the overall economic impacts of the rules on small landowners and to compare these impacts with those of large, industrial landowners (Perez-Garcia et al., 2001). A county level analysis of impacts has also been done (Lippke et al., 2000),

but these studies do not consider site-specific differences. By using a case study approach, this study focuses on the potential range and disparity of impacts between individual landowners with more specificity on cost and management treatments. In addition, this study seeks to reveal best management strategies for small landowners in light of the new rules, and it also assesses the effectiveness of impact mitigation programmes.

Background The new Forests and Fish rules are based on the recommendations of the Forests and Fish Report (Forests and Fish Report, 1999), which was put together by a caucus of federal and state agencies, industry, NIPF landowners, and Native American tribes, and was designed to meet the requirements of the ESA and the Clean Water Act. For western Washington, the Forests and Fish rules require a riparian buffer on either side of any potentially fish-bearing stream that extends to one site-potential tree height (SPTH). The SPTH varies from 27 to 61 m, depending on the quality of the site. The riparian buffer is divided into three zones: 1. The core zone extends 15 m (50 ft) from the stream, and no harvest is allowed in this zone. 2. The inner zone extends from the outer edge of the core zone to 67% of the SPTH for streams less

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than 3 m (10 ft) wide or 75% of the SPTH for streams greater than 3 m (10 ft) wide. Limited harvest is allowed in this zone only if the remaining number of trees, basal area, and proportion of conifer are sufficient to meet Desired Future Conditions (DFC) when the stand is 140 years old. DFC are based on the averaging of tree record data collected and modelled from older riparian stands in Washington State. Whether a stand meets these requirements is determined by growth modelling using the Stand Management Cooperative (SMC) variant of ORGANON (ORGANON Growth and Yield Project, 1995). Harvesting that meets these requirements may be done using one of the following options.

• •

Option 1: Thinning from below Option 2: Leave trees closest to the stream

3. The outer zone extends from the outer edge of the inner zone out to the SPTH. Harvest is allowed in this zone as long as 49 conifer ha−1 (20 per acre) over 30 cm (12 in) in diameter are retained as ‘leave trees’. In addition to the three-zone buffer for fishbearing streams, 15 m (50 ft) no-harvest buffers are required around certain portions of perennial, non-fish-bearing streams, and around sensitive sites such as seeps or springs (Emergency Rules: Forest Practices Board, 2000). The Forests and Fish rules also contain new requirements for forest roads, stream crossings, equipment use and other aspects of forest management, as well as harvesting restrictions on unstable slopes and wetlands. Additional economic impacts that may result from these management constraints are beyond the scope of this initial study. The caucus that drafted the recommendations in the Forests and Fish Report recognized that the new regulations would have a significant economic impact, especially on small landowners. Thus they also recommended several mitigation programmes to lessen the economic burden on small landowners. In response to these recommendations, the Small Forest Landowner Office (SFLO) was established within the Department of Natural Resources (DNR) to help assist small landowners with issues arising from the new regulations. In addition, the Forest Riparian Easement (FRE) programme was established to compensate small landowners for part of the value of their

timber that cannot be harvested under the Forests and Fish rules. Eligible small landowners who choose to participate in this programme are paid by the state,1 at the time of upland harvest, for half of the fair market value of qualifying timber left unharvested in riparian buffers. If the value of the timber required to be left under the rules exceeds 26% of the total value of the timber covered under the forest practices application (FPA), the value in excess of 26% is compensated in full. Only timber left pursuant to the Forests and Fish rules qualifies for easement compensation; additional timber that is left voluntarily by the landowner does not qualify (Proposed Rules: Forest Practices Board, 2000).

Methodology Participation in this study was voluntary. Small NIPF landowners with riparian holdings were approached and asked to participate in the study. Accordingly, these participants do not represent a statistical sample of the NIPF ownership base in western Washington, nor was that the goal of this project. Of the landowners who volunteered to participate, the first three case studies are presented in this paper. All three are from Lewis County, Washington, which is located along Interstate 5 in southwest Washington between Seattle, Washington and Portland, Oregon. For each case study, GIS data were obtained or created, including property boundaries, a stand map and stream locations. For each stream, GIS was used to overlay the appropriate riparian buffers on to the stand map. For fish-bearing streams (as classed by the DNR), the buffers were divided into the three zones (core, inner and outer). The inner zone was further divided to represent management Option 2, in which the part of the zone furthest from the stream is harvested, while the remaining part is not. This created a new set of unique polygons that were identified by stand and buffer type. The GIS was then used to calculate the area of each of these polygons, including the upland (non-buffered) areas. Where recent timber inventory data were not available, sample plots were established in each stand. Data from these sample plots (or from existing inventory where available) were used to create tree lists for each stand that could be used in a growth model. For stands in which the riparian

Economic Impacts of New Forest Practices Regulations

areas were not consistent with the upland areas, a separate inventory was created for each. For each stand, a growth model was used to simulate management to the end of the current rotation, when the existing timber would be liquidated. Management was then further simulated for one more full rotation to model how the stands would be managed when starting from bare land. The growth model chosen for use in this study was the SMC variant of ORGANON, in order to be consistent with the model used by the state to predict desired future conditions (DFC). For each case study, five different scenarios were modelled. The first scenario was the baseline scenario, which represented the riparian harvest restrictions under the previous forest practices regulations. The previous rules specified a range of widths for riparian buffers and the number of leave trees required within those buffers. For modelling purposes this was simplified to an 8 m (25 ft) no-harvest buffer on all fish-bearing streams. This is a good proxy for the economic impact of the previous rules, and it is also consistent with common practice under the previous rules. The other four scenarios represent four possible management options under the Forests and Fish rules. Each involves a different level of complexity and planning cost, posing potential obstacles for small owners. The second scenario assumes that no harvesting is done in any part of the riparian zone, including the inner and outer zones. The third scenario assumes that harvesting is done in the outer zone, as allowed under the rules, but not in the inner zone. The fourth and fifth scenarios assume that harvesting is done in the outer zone and in the inner zone under Option 1 and Option 2, respectively. These four scenarios were then compared to the baseline scenario to assess the impact of the Forests and Fish rules under different possible management options. The basic management strategy underlying each of these five scenarios was based on information gathered about the typical management practices and goals of small landowners in the area. This included discussions with the participating landowners. For the three case studies presented here, a 50-year rotation of Douglas-fir was assumed with a single commercial thin and a clearcut harvest. Most of the existing timber inventory was consistent with this management strategy.

205

For each scenario, three economic values were calculated based on the Faustmann economic model: timber value (TV), bare land or soil expectation value (SEV) and total forest value (FV). Timber value is the net present value (NPV) of all costs and revenues associated with harvesting the existing timber according to Eqn 1. Bare land value is the NPV of all costs and revenues associated with producing the subsequent rotation (starting with bare land) an infinite number of times according to Eqn 2. For both timber value and bare land value, a 5% discount rate was used. Forest value is simply the composite of timber value and bare land value as shown in Eqn 3 (Faustmann, 1849). All values are quoted pre-tax (timber and capital gains) to maintain consistent treatment for comparison across owners. To calculate harvest revenues, average 1999 log prices for the region (Arbor-Pacific Forestry Services and Resource Information Systems, 2000) were applied to the harvest volumes given by the growth model. The harvest volumes were divided into sorts based on the age of the stand (Stinson, 2000a). Logging and haul costs, planting costs, and annual administrative costs were also based on Stinson (2000a). TV 0 =

CT n

(1+i )

(

n r

Hr

+

r

(1+i )

)

−

(

r

)

a (1+i ) −1 −i ( SEV ) (1+i ) −1

(1) i (1+i ) where: CTn = net commercial thin revenue at year n (where applicable), Hr = net harvest revenue at year r (end of current rotation), a = annual administrative cost, and i = discount rate. Note that the first term represents discounted net commercial thin revenue, the second term represents discounted net harvest revenue, and the last term represents discounted annual costs and annual land rent until the end of the current rotation. R

r

(R −N )

P (1+i ) +CT N (1+i ) SEV = R (1+i ) −1

+H R

a − (2) i

where: P = planting cost, CTN = net commercial thin revenue at year N, HR = net harvest revenue at year R, a = annual cost, and i = discount rate. FV = TV + SEV

(3)

206

K. Zobrist and B.R. Lippke

Results Case Study A Case Study A comprises 13.2 ha (32.7 acres). Of the total property, 64% (8.5 ha) is contained in riparian buffers under the Forests and Fish rules, compared with 12% under the baseline. The timber value, bare land value and total forest value for each scenario are displayed in Table 19.1. If no harvest is done in the riparian zone, the forest value declines from $91,156 to $15,534 (83%). The forest value only declines to $58,175 (36%) if harvest is done in both the outer and inner zone under Option 1. Bare land value becomes negative for all four scenarios under the Forests and Fish rules.

Case Study B Case Study B comprises 62.2 ha (153.8 acres). Of the total property for this case study, 50% (31.0 ha) is contained in riparian buffers under the Forests and Fish rules, compared with 7% under the baseline. The values for each scenario

are displayed in Table 19.2. With no harvest in the riparian zone, forest value declines by 45% from $1,259,036 to $692,469. The forest value declines to $917,707 (27% below the baseline value) if harvest is done in both the outer and inner zone under Option 2. Bare land value is positive for all scenarios, although it is significantly reduced under the Forests and Fish rules.

Case Study C Case Study C comprises 27.2 ha (67.1 acres). 51% (13.9 ha) of the property is contained in riparian buffers under the Forests and Fish rules, compared with 11% under the baseline. The values for each scenario are displayed in Table 19.3. Like cases A and B, the forest value declines significantly (57%) if no riparian harvest is done, but the drop is much less (34%) if harvesting is done in the outer and inner zones under Option 2. Bare land value is negative under the first three Forests and Fish scenarios, but it becomes positive again under Option 2. The loss in forest value for each landowner under the Forests and Fish scenarios as a

Table 19.1. Timber value, bare land value (SEV) and total forest value by scenario for Case Study A. All values are significantly lower under the Forests and Fish rules compared to the baseline scenario. SEV is particularly sensitive to the new rules.

Scenario Baseline Forests/Fish with no riparian harvest Forests/Fish with harvest in outer zone Forests/Fish with inner/outer zone harvest Option 1 Forests/Fish with inner/outer zone harvest Option 2

Timber value (TV) $76,883 $25,579 $47,454 $63,706 $58,909

Bare land value Total forest value (SEV) (FV) $14,274 ($10,045) ($5,531) ($5,531) ($3,306)

$91,157 $15,534 $41,923 $58,175 $55,603

Table 19.2. Timber value, bare land value (SEV) and total forest value by scenario for Case Study B. All values are significantly lower under the Forests and Fish rules compared to the basline scenario. SEV is particularly sensitive to the new rules.

Scenario Baseline Forests/Fish with no riparian harvest Forests/Fish with harvest in outer zone Forests/Fish with inner/outer zone harvest Option 1 Forests/Fish with inner/outer zone harvest Option 2

Timber value (TV) $1,129,652 1,$677,567 1,$838,785 1,$863,682 1,$870,863

Bare land value Total forest value (SEV) (FV) $129,384 $14,902 $37,852 $37,852 $46,845

$1,259,036 1,$692,469 1,$876,638 1,$901,534 1,$917,707

Economic Impacts of New Forest Practices Regulations

percentage of the baseline is shown in Fig. 19.1. If none of the landowners chose to manage in the riparian zone, the economic losses as a percentage of the baseline would range from 83% (Case Study A) to 45% (Case Study B). If management is done to the full extent allowed under the new rules (Option 1 or Option 2), the minimum range of economic losses is 36% (Case Study A) to 27% (Case Study B). Both the magnitude of losses and the disparity of losses between cases studies can be reduced by managing in the riparian zone. For all three case studies, the landowners would be eligible to receive compensation under the FRE programme. Figure 19.2 shows the percentage loss in forest value under each scenario if the NPV of cash payments for Forest Riparian Easements is considered. The FRE programme potentially reduces the minimum range of economic losses from 27% (Case Study A) to 15% (Case Study B).

207

Discussion These case studies illustrate several important things about the economic impacts of Washington’s new forest practices rules. First of all, the case studies show that small, NIPF landowners face potentially large economic impacts and a potentially large disparity of impacts from the new rules, depending on how they choose to manage their property. The results indicate, however, that both the magnitude and the disparity of losses can be reduced substantially by managing in both the inner and outer portions of the riparian zone to the full extent allowed by the rules. Interestingly, according to the Small Forest Landowner Office (SFLO), most of the NIPF landowners who have submitted Forest Practices Applications under the new rules have chosen to not do any management in the riparian zone (S.D. Stinson, Olympia, Washington, 2000, personal communication). It is

Table 19.3. Timber value, bare land value (SEV) and total forest value by scenario for Case Study C. All values are significantly lower under the Forests and Fish rules compared to the baseline scenario. SEV is particularly sensitive to the new rules. Timber value (TV)

Scenario Baseline Forests/Fish with no riparian harvest Forests/Fish with harvest in outer zone Forests/Fish with inner/outer zone harvest Option 1 Forests/Fish with inner/outer zone harvest Option 2

$59,774 $39,362 $46,235 $48,022 $49,889

Bare land value Total forest value (SEV) (FV) $78,729 $33,966 $45,085 $46,872 $52,105

$18,955 ($5,395) ($1,150) ($1,150) $2,216

90% 80%

Landowner A

70% Landowner B 60% Landowner C

50% 40% 30% 20% 10% 0% Baseline

Forests/Fish with no Forests/Fish with riparian harvest harvest in outer zone

Forests/Fish with innner/outer zone harvest option 1

Scenario

Fig. 19.1.

Percentage loss in forest value (FV) by landowner and scenario.

Forests/Fish with innner/outer zone harvest option 2

208

K. Zobrist and B.R. Lippke

90% 80%

Landowner A

70%

Landowner B

60%

Landowner C

50% 40% 30% 20% 10% 0% Baseline

Forests/Fish with no Forests/Fish with riparian harvest harvest in outer zone

Forests/Fish with innner/outer zone harvest option 1

Forests/Fish with innner/outer zone harvest option 2

Scenario

Fig. 19.2.

Percentage loss in forest value (FV) with Forest Riparian Easement (FRE).

uncertain why small landowners are tending to choose the management option under which they experience the highest economic impacts. It may be an indication that harvesting in the riparian zone is more cost-prohibitive than our results imply. If the extra costs of entering the riparian zone outweigh the benefits, not harvesting at all in the riparian zone may indeed be the best option economically. Another hypothesis is that some landowners are willing to offer more resource protection than the minimum requirements under the new rules. It may also be simply some initial uncertainty about the new rules and that riparian harvests will increase over time as harvesters and landowners become more familiar with the rules. These are all merely hypotheses though, and more study will be needed for any definitive answers A point that should also be considered regarding riparian management is that these three case studies are all on very productive sites. Thus, a lot of value can be removed from the inner zone, and it will still be able to meet DFC. For other parts of the state that are not as productive or for properties in which the riparian zone is not well-stocked with conifers, landowners may not be able to do much or any harvesting in the inner zone. For such cases there would not be the same potential to mitigate losses by managing in the riparian zone as there is for these three case studies. The results of these case studies show that the losses in forest value are due not only to the reduced

value of the standing timber that can be harvested but also to reduced bare land values. With Case Study A, for instance, the bare land value drops below zero for all four scenarios under the Forests and Fish rules using a 5% discount rate. This indicates that growing timber on this property cannot achieve a 5% rate of return under the Forests and Fish rules. Land values may stay positive if a lower discount rate is assumed, though the percentage decline would still be substantial. For landowners who have a minimum acceptable rate of return, however, negative SEV values could indicate that timber production is no longer the best use for their land given the new rules. Depending on what other values they associate with their property besides timber revenue, this could motivate land-use conversion for some landowners. NIPF lands in western Washington tend to interface with urbanizing areas, and NIPF land-use conversion to development use is a growing concern (Stinson, 2000b). These case studies also illustrate the effectiveness of the FRE programme for mitigating economic losses. For all three case studies, an FRE reduced the overall economic impact by 9–12%. It is important to note, though, that landowners are only compensated for the minimum timber required to be left standing under the rules. Thus landowners who choose not to harvest at all in the riparian zone are compensated as if they harvested in both the outer and inner zone. It is also important to note that the easement represents

Economic Impacts of New Forest Practices Regulations

a one-time cash payment at the time of harvest, so it does nothing to improve bare land values. It is too early to determine what percentage of NIPF landowners will take advantage of this programme. The results of these case studies show the economic impacts of Washington’s new forest practices regulations to be not only more severe than the previous regulations, but also more severe than regulations in other regions. Lickwar et al. (1992), for instance, found that implementing Best Management Practices (BMP) in the Southeast to protect water quality only reduced gross harvest revenue by 2.9%. Another study in the Lower Wisconsin State Riverway found that new requirements did not significantly decrease and may even increase (depending on the baseline used) net present values for landowners (Stier and Martin, 1997). Similarly, Kittredge et al. (1999) found little impact from forest practices regulations when they compared regulations in two states in the Northeast. Of these three studies from other regions, only Lickwar et al. (1992) involved riparian buffers, and the restrictions were much less stringent than with the Forests and Fish rules. Thus the restrictive buffer requirements of the Forests and Fish rules may set Washington apart from other states and regions in terms of the economic impacts of forest practices regulations. This is consistent with a study done on national forests in the Midwest, which found leaving buffer strips to be the most expensive practice to protect water quality, resulting in a net revenue reduction of over 26% (Ellefson and Miles, 1985). While these rules and their impacts are unique to the state of Washington, other states are facing similar issues. Forest practices regulations have become increasingly stricter in the West over the past few decades (Cubbage, 1995). The East has also seen trends towards increasing state and local regulation of private forestry, and those trends are predicted to continue (Cubbage and Siegel, 1988). If regulations do indeed continue to increase, especially if they involve riparian buffers, landowners in other states can expect to be faced with larger economic impacts. Washington’s rules represent an important starting point for understanding the ability to reduce impacts through public costsharing programmes like the FRE. It is important to note that the economic losses illustrated in these case studies represent only the losses that are directly attributed to harvest restrictions in riparian buffers. Other aspects of the

209

Forests and Fish rules, such as increased harvesting costs, increased road building and maintenance costs, and unstable slopes, are not covered in these case studies. There is also the issue of areas that are fragmented by the buffers and made economically unviable to harvest. In light of this, the economic impacts described in this chapter should be looked at as only a part of the overall impact of the Forests and Fish rules on small, NIPF landowners. In the future, we hope to add more case studies that include other regions of the state as well as other factors that might impact the results. Additional case studies should help give a better idea of the range and disparity of economic impacts that small, NIPF landowners are experiencing throughout the state and how to mitigate those impacts. We will also examine the option for landowners to develop alternative plans that might provide equivalent habitat protection at a lower cost.

Conclusions The three case studies presented in this chapter indicate that there is a significant potential for economic losses for small, NIPF landowners under the Forests and Fish rules. The case studies also indicate that there is a substantial disparity of losses between individual landowners. The magnitude and disparity of these losses may be reduced by managing in the riparian zone to the full extent allowed under the rules, though most NIPF landowners so far have chosen not to. Bare land values appear to be particularly sensitive to the rules. With acceptable rates of return, negative land values may support increased rates of land-use conversion by NIPF landowners. Finally, the economic losses described in this chapter represent only a proportion of the total economic losses from the new rules. More case studies, which include other parts of the state and other potential contributing factors, need to be done in order to gain a more complete understanding of impacts and landowner best practices.

Endnote 1 The adequacy and permanence of state funding for this programme is uncertain.

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K. Zobrist and B.R. Lippke

References Arbor-Pacific Forestry Services and Resource Information Systems (2000) Log Lines 2000 Statistical Yearbook. Arbor-Pacific Forestry Services and Resource Information Systems, Mount Vernon, Washington, pp. 106–108. Cubbage, F.W. (1995) Regulation of private forest practices: what rights, which policies? Journal of Forestry 93(6), 14–20. Cubbage, F.W. and Siegel, W.C. (1988) State and local regulation of private forestry in the East. Northern Journal of Applied Forestry 5(2), 103–108. Ellefson, P.V. and Miles, P.D. (1985) Protecting water quality in the midwest: impact on timber harvesting costs. Northern Journal of Applied Forestry 2(2), 57–61. Emergency Rules: Forest Practices Board, 00 Wash. St. Reg. 06,6, 06,49 (15 March 2000). Faustmann, M. (1849) Calculation of the value which forest land and immature stands possess for forestry. Trans. in Gane, M. (ed.) (1968) Martin Faustmann and the Evolution of Discounted Cash Flow. Institute paper 42, Commonwealth Forestry Institute, University of Oxford. Forests and Fish Report (1999) Unpublished manuscript, on file with Washington State Forest Practices Board, Olympia, Washington. Kittredge, D.B., Rickenbach, M.G. and Broderick, S.H. (1999) Regulation and stumpage prices: a tale of two states. Journal of Forestry 7, 12–16. Lickwar, P., Hickman, C. and Cubbage, F.W. (1992) Costs of protecting water quality during harvesting

on private forestlands in the Southeast. Southern Journal of Applied Forestry 16(1), 13–20. Lippke, B., Marshall, S., Ludwig, M., Moffett, J., Fitzpatrick, D. and Bare, B.B. (2000) Lewis County Economic Assessment. CINTRAFOR SP 35, College of Forest Resources, University of Washington, Seattle, Washington, 157 pp. ORGANON Growth and Yield Project (1995) Welcome to ORGANON on the Web [online]. http://www.cof.orst.edu/cof/fr/research/ organon/index.htm Perez-Garcia, J.M., Edelson, J. and Zobrist, K. (2001) Small Business Economic Impact Statement. Washington State Department of Natural Resources, Olympia, Washington. Proposed Rules: Forest Practices Board, 00 Wash. St. Reg. 08,57 (19 April 2000). Stier, J.C. and Martin, A.J. (1997) Economic impacts of timber harvest regulations in the Lower Wisconsin State Riverway. Northern Journal of Applied Forestry 14(3), 126–134. Stinson, S.D. (2000a) Silvicultural options for nonindustrial forests: a landscape approach for creating adaptable, habitat based management plans. MSc thesis, University of Washington, College of Forest Resources, Seattle, Washington. Stinson, S.D. (2000b) Family Forest Conservation Project: Lewis County Washington pilot project for non-industrial private forests. In: Proceedings of Summit 2000: Washington Private Forests Forum. University of Washington, College of Forest Resources, Seattle, Washington, pp. 127–129.

20

Effect of the Federal Estate Tax on Rural Landholdings in the USA

John L. Greene,1 Tamara Cushing,2 Steve Bullard3 and Ted Beauvais4 1USDA

Forest Service, Southern Research Station, New Orleans, LA 70113, USA; Forestry Services, Canton, GA 30114, USA; 3Mississippi State University, Forest and Wildlife Research Center, MS 39762, USA; 4USDA Forest Service, Cooperative Forestry, Washington, DC 20090-6090, USA

2F&W

Introduction There is considerable evidence to indicate that the effect of the federal estate tax on transfers of rural landholdings is increasing (see the box below for a description of the tax). The number and percentage of estates in general that owe federal estate tax is increasing year by year (Internal Revenue Service, 1996; Herman, 2001). Urban expansion (US Department of Commerce, 1992; Harris and DeForest, 1994) and gentrification of the areas surrounding cities have driven up the value of much of the nation’s rural land. Sharply increased stumpage prices (Morrow and Fritschi, 1997) have also driven up the timber component of forestland value. And the stringent requirements for ‘special use’ valuation – which permits working land to be appraised for estate tax purposes at its value in use rather than its highest and best use – make it difficult for managed forestland to qualify for and remain under the provision. Particularly for forest estates, little information is available on the actual magnitude of the effect. A handful of case studies used hypothetical families and forest holdings to investigate aspects of the transfer of forestland from one generation to another: the size of a forest that can be transferred without incurring the estate tax (Sutherland, 1978), the effect of the estate tax on returns to forest management (Sutherland and Tedder, 1979), the

effect of using ‘special use’ valuation on the net value of a forest estate (Gardner et al., 1984), the effect of form of forest ownership and assets used to pay the estate tax on returns from the forest (Howard, 1985) and the interaction between federal and state death taxes (Walden et al., 1987; Peters et al., 1998). Additionally, there have been two empirical studies of large forest estates in the USA: one in the South, to determine whether estates over 1400 ha (3500 acres) had to liquidate forest assets pay the federal estate tax (Lucas, 1963), and one in the Northeast, to determine whether the estate tax figured in landowners’ decisions to sell parcels over 200 ha (500 acres; Northern Forest Lands Council, 1994). The Forest and Wildlife Research Center of Mississippi State University and the Forest Law and Economics Research Unit of the USDA Forest Service Southern Research Station, have cooperated in a study to gauge the effect of the federal estate tax on non-industrial private forests and other rural landholdings. This research represents the first effort of its kind to quantify the effect of the federal estate tax on landholdings.

Methods Data for the study were collected by means of a mailed questionnaire, using the Dillman (1978)

©CAB International 2003. Forest Policy for Private Forestry: Global and Regional Challenges (eds L. Teeter, B. Cashore and D. Zhang)

211

212

J.L. Greene et al.

Box 20.1.

The Federal Estate Tax.

Until enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), the federal estate and gift taxes were combined into a single, unified tax on transfers of wealth. Gifts up to $10,000 per recipient per year were excluded from the tax. During the years surveyed in this study, the ‘unified credit’ also shielded larger lifetime gifts and estate values up to a total of $600,000 in value from tax. Large gifts and estates over $600,000 in value were taxed at rates that increased from 37% on amounts up to $750,000 to 55% on amounts over $3 million. The Taxpayer Relief Act of 1997 scheduled a gradual increase in the amount shielded by the unified credit, to a target of $1 million in 2006. EGTRRA, however, divided the gift and estate taxes and established separate effective exemption amounts for each. The effective exemption amount for gifts shields lifetime gifts up to a total of $1 million, beginning in 2002. The effective exemption amount for estates increases in steps from $1 million beginning in 2002 to $3.5 million beginning in 2009. EGTRRA also gradually reduces the top rate for federal estate and gift taxes from 55 to 45% by 2009. It eliminates the estate tax entirely and sets the top tax rate for gifts equal to the top individual income tax rate beginning in 2010. However, EGTRRA itself is scheduled to retire at the end of 2010, returning estate and gift taxes to prior law.

•

Rural landowners nationwide, from a database developed by J.D. Esseks, Northern Illinois University.

Questionnaire recipients were asked to respond for transfers of estates that occurred between 1987 and 1997. Usable responses were received from 758 of the 1273 National Woodland Owner Association members surveyed, 466 of the 1380 Tree Farm System members, and 672 of the 3077 other rural landowners, giving an overall response rate of 33%. χ2 tests at the α = 0.05 level of significance were used to test for differences between the responses from members of the two forest owner associations. No differences were found except for the responses regarding location of the land and value of the gross taxable estate. Stratifying the results by region (North, South and West) accounted for the differences. Accordingly, the responses for the two forest owner associations were combined, with the results for the questions on location of the land and value of the gross taxable estate cast by region. χ2 tests also were used to test for differences between the responses for forest owners and other rural landowners. This report summarizes the results of those tests. In addition, it provides initial estimates of the total forest area affected by the key findings.

Results Total Design Method. Questionnaire recipients received a first mailing with a covering letter from the cooperating organization encouraging them to respond. Recipients who had not responded within 2 weeks of the initial mailing received a postcard reminder; those who had not responded within 4 weeks of the initial mailing received another reminder with a second copy of the questionnaire. The questionnaire was pre-tested using a 100% survey of individual members of the Mississippi Forestry Association. Following the pre-test, random samples were surveyed from three national groups of landowners:

• •

Members of the American Tree Farm System; Members of the National Woodland Owners Association;

Descriptive statistics During the survey period, 9% of forest owner respondents and 14% of other rural landowners were involved in the transfer of an estate. These results differ statistically (Table 20.1a), which may indicate that other rural landowners – primarily farmers and ranchers – tend to be older, on average, than forest owners. Applying the estimated number of private forest ownership units from Birch (1996) to the survey findings, an estimated 84,000 transfers of forest estates occur each year, nationwide. Among the respondents who had been involved in the transfer of an estate, 83% of those in the forest owner sample and 94% of those in the other rural landowner sample were family members of the decedent. These results also differ

Federal Estate Tax and Rural Landholdings in the USA

Table 20.1.

213

Summary of survey results. Forest owners

a. Involved in the transfer of an estatea n No Yes b. Relationship to the deceaseda n Family member Friend or business associate Professional (deceased a client) c. Location of the landb n North South West d. Form of ownership in which land was heldb n Individual Joint Partnership Corporation Other (e.g. FLP, LLC) e. Value of the gross taxable estate – Northb n LT $600,000 GE $600,000, but LT $1,000,000 GE $1,000,000, but LT $2,000,000 GE $2,000,000, but LT $3,000,000 GE $3,000,000 f. Value of the gross taxable estate – Southb,c n LT $600,000 GE $600,000, but LT $1,000,000 GE $1,000,000, but LT $2,000,000 GE $2,000,000, but LT $3,000,000 GE $3,000,000 g. Value of the gross taxable estate – Westb,c n LT $600,000 GE $600,000, but LT $1,000,000 GE $1,000,000, but LT $2,000,000 GE $2,000,000, but LT $3,000,000 GE $3,000,000 h. Total areab n LT 40 ha (100 acres) GE 40 ha (100 acres), but LT 200 ha (500 acres) GE 200 ha (500 acres)

Other rural landowners

Number

Percentage

Number

Percentage

1224 1110 114

– 90.7 9.3

672 578 94

– 86.0 14.0

109 90 11 8

– 82.6 10.1 7.3

90 85 4 1

– 94.4 4.4 1.1

111 50 38 23

– 45.0 34.2 20.7

87 48 27 12

– 55.2 31.0 13.8

113 57 30 11 8 7

– 50.4 26.5 9.7 7.1 6.2

94 55 26 1 4 8

– 58.5 27.7 1.1 4.3 8.5

49 26 12 4 3 4

– 53.1 24.5 8.2 6.1 8.2

47 34 7 4 1 1

– 72.3 14.9 8.5 2.1 2.1

36 22 4 5 1 4

– 61.1 11.1 13.9 2.8 11.1

24 17 4 1 0 2

– 70.8 16.7 4.2 0.0 8.3

22 4 6 5 4 3

– 18.2 27.3 22.7 18.2 13.6

12 6 1 3 0 2

– 50.0 8.3 25.0 0.0 16.7

111 27 53 31

– 24.3 47.7 27.9

82 23 35 24

– 28.0 42.7 29.3

continued

214

Table 20.1.

J.L. Greene et al.

Continued. Forest owners

i. Forest areaa n LT 40 ha (100 acres) GE 40 ha (100 acres), but LT 200 ha (500 acres) GE 200 ha (500 acres) j. Cropland areaa n LT 40 ha (100 acres) GE 40 ha (100 acres), but LT 200 ha (500 acres) GE 200 ha (500 acres) k. Grazing area (pasture and range)a n LT 40 ha (100 acres) GE 40 ha (100 acres), but LT 200 ha (500 acres) GE 200 ha (500 acres) l. Professional helped in estate planningb n Yes No Don’t know m. Professional help reduced the tax duea n Yes No Don’t know n. Qualified for ‘special use’ valuationb n Yes No Don’t know o. Used ‘special use’ valuationb,c n Yes No Don’t know p. Asset(s) valued using ‘special use’ valuationa,c n Land only Timber only Both land and timber q. Federal estate tax paidb n None Tax on $600,000 to $1 million gross estate value Tax on $1 million to $2 million gross estate value Tax on $2 million to $3 million gross estate value Tax on more than $3 million gross estate value r. Assets used to pay the federal estate taxa,c n Insurance or other assets Sold timber to pay part or all of the tax Sold land to pay part or all of the tax

Other rural landowners

Number

Percentage

Number

Percentage

103 38 38 27

– 36.9 36.9 26.2

23 16 7 0

– 69.6 30.4 0.0

40 27 11 2

– 67.5 27.5 5.0

60 26 24 10

– 43.3 40.0 16.7

43 29 10 4

– 67.4 23.3 9.3

50 21 13 16

– 42.0 26.0 32.0

111 72 36 3

– 64.9 32.4 2.7

91 65 26 0

– 71.4 28.6 0.0

72 44 22 6

– 61.1 30.6 8.3

65 49 8 8

– 75.4 12.3 12.3

112 36 58 18

– 32.1 51.8 16.1

88 21 52 15

– 23.9 59.1 17.0

36 28 7 1

– 77.8 19.4 2.8

21 16 5 0

– 76.2 23.8 0.0

28 8 0 20

– 28.6 0.0 71.4

16 12 0 4

– 75.0 0.0 25.0

102 65 16 12 3 6

– 63.7 15.7 11.8 2.9 5.9

78 56 14 4 2 2

– 71.8 17.9 5.1 2.6 2.6

37 22 9 6

– 59.5 24.3 16.2

20 17 0 3

– 85.0 0.0 15.0

Federal Estate Tax and Rural Landholdings in the USA

Table 20.1

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Continued. Forest owners Number

s. Reason(s) sold timberd n Had to – no other assets were available High market value Management plan called for a harvest t. Reason(s) sold landb,c n Had to – no other assets were available Was the least profitable asset Heirs not interested in continuing use Other u. Current use of land that was soldb,c n Still in original use Partially or fully developed Other Don’t know

Percentage

Other rural landowners Number

Percentage

9 6 1 2

– 66.7 11.1 22.2

0 0 0 0

– – – –

7 4 1 1 1

– 57.1 14.3 14.3 14.3

2 2 0 0 0

– 100.0 0.0 0.0 0.0

7 5 1 1 0

– 71.4 14.3 14.3 0.0

3 3 0 0 0

– 100.0 0.0 0.0 0.0

The samples differ statistically at the α = 0.05 level of significance. The samples do not differ statistically. c Test results are based on a small sample. d No test: no ‘Other Rural Landowners’ observations. a b

statistically (Table 20.1b), with respondents for forest estates more likely to be a friend, business associate, or professional who served the decedent and those for other rural estates more likely to be a family member. Other descriptive information – location of the land, form of ownership in which it was held, value of the gross taxable estate, and total area – did not differ between the groups (Table 20.1c–h). They did differ, however, on use of the land, with forest owners more likely to own substantial forestland (Table 20.1i), and other rural landowners more likely to own substantial crop- and grazing land (Table 20.1j,k). Forest owners’ forest holdings ranged in size from 3 to 8100 ha (8–20,000 acres), with a mean of 414 ha (1024 acres) and a median of 63 ha (156 acres). Expanding this finding, an estimated 34.8 million ha (85.9 million acres) of forestland are transferred each year at the death of their owners. Some 68% of the decedent landowners had used the services of a financial or legal professional to plan their estate, a finding that did not differ statistically between the groups (Table 20.1l). Their heirs differed, however, on whether they believed professional help reduced the amount of estate tax

due, with 75% of other rural landowners but only 65% of forest owners responding ‘yes’ (Table 20.1m).

‘Special use’ valuation ‘Special use’ valuation reduces the gross value of an estate by permitting the executor to appraise assets used for farming or in a trade or business – including timber production – according to their value in use rather than their highest and best use. For both forest owners and other rural landowners, about 28% of the estates qualified for and 22% elected to use ‘special use’ valuation (Table 20.1n,o). With a forest holding, ‘special use’ valuation can be applied to the land only, the timber only, or both. The groups differed in this regard, with forest owners much more likely to apply ‘special use’ valuation to both land and timber, and other rural landowners much more likely to apply it to the land only. No respondents in either group applied ‘special use’ valuation to timber only (Table 20.1p).

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During the survey period, the maximum reduction in gross estate value from using ‘special use’ valuation was capped at $750,000. The actual reductions reported were similar between the two groups and averaged well below the maximum. For forest owners they ranged from $0 to $750,000, with a mean of $279,583 and a median of $200,000; for other rural landowners they ranged from $0 to $625,600, with a mean of $322,225 and a median of $300,000. Expanding this finding, an estimated 21,000 forest estates elect to use ‘special use’ valuation each year, resulting in a combined total reduction in their gross estate value of $7.0 billion.1

Assets used to pay the federal estate tax About 33% of the estates in both groups paid federal estate tax (Table 20.1q). The assets used, however, differed. Nearly identical proportions – 16% of forest owners and 15% of other rural landowners – sold land to pay part or all of the estate tax. Of the remaining owners, a large fraction of forest owners sold timber to pay part or all of the tax, but all other rural landowners used only insurance or other assets (Table 20.1r). In 33% of the cases where forest owners sold timber to pay part or all of the estate tax, the primary reason for the sale was that their management plan called for a harvest or that timber prices were favourable. In 67% of the cases, however, timber had to be sold because other assets were not adequate to pay the tax (Table 20.1s). The need to sell timber was not a characteristic of small holdings, nor was the area harvested inconsequential. The forest size of ownerships that needed to sell timber to pay part or all of the estate tax ranged from 40 to 800 ha (100–2000 acres), with a mean of 312 ha (770 acres) and a median of 198 ha (490 acres). The area harvested ranged from 2 to 445 ha (5–1100 acres), with a mean of 201 ha (498 acres) and a median of 174 ha (430 acres). Expanding these findings, an estimated 4900 forest estates need to sell timber each year to pay part or all of their federal estate tax, and the forest area harvested is 1.0 million ha (2.5 million acres).1 For most of the forest owners and all of the other rural landowners who sold land to pay part or

all of the estate tax, the sale was necessary because other assets were not adequate to pay the tax (Table 20.1t). The forest size of ownerships that needed to sell land was larger than those that needed to sell timber, with a range of 32 to 4047 ha (79–10,000 acres), a mean of 1228 ha (3034 acres) and a median of 271 ha (670 acres). The amount of land sold, however, was somewhat smaller, with a range of 65–316 ha (160–780 acres), a mean of 157 ha (387 acres) and a median of 89 ha (220 acres). Expanding these findings, an estimated 3300 forest estates need to sell land each year to pay part or all of their federal estate tax, and the amount of land sold is 0.5 million ha (1.3 million acres).1 In about 80% of the cases where land was sold to pay part or all of the estate tax, the land sold was still in its original use. But in the remaining 20% of cases, the land had been developed or converted to another use (Table 20.1u). Expanding this finding, an estimated 0.2 million ha (0.4 million acres) of forestland are developed or otherwise converted each year because other assets are not adequate to pay the federal estate tax.1

Discussion and Conclusions Drawing conclusions from this analysis requires two caveats. First, the forest owner results are from surveys of two forest owner associations, so the results may not be entirely representative of non-industrial forest owners in general. Second, many of the estimates calculated from the survey results are based on small samples and should be considered indicators of order of magnitude rather than scientific estimates. An estimated 84,000 forest estates, with an estimated 34.8 million ha (85.9 million acres) of forestland, are transferred each year at the death of their owners. About 50% of the estates were held in fee simple by the decedent and an additional 27% were held jointly with other persons. The average forest area is 414 ha (1024 acres). In 40% of the cases the value of the gross taxable estate exceeds $600,000 and in 23% of the cases it exceeds $1 million. Only 32% of forest estates qualify for and 25% make use of ‘special use’ valuation to reduce the gross value of the estate for tax purposes. In 71% of the cases when forest owners use ‘special use’

Federal Estate Tax and Rural Landholdings in the USA

valuation, they apply it to both the land and the timber. This strategy may be necessary to meet the percentage tests to qualify for ‘special use’ valuation, but it precludes harvesting timber for 10 years. The reduction in gross estate value from applying ‘special use’ valuation to forest estates averages approximately $280,000, well under the maximum for the provision. From these results, it appears that the number of forest estates that make use of ‘special use’ valuation is of the order of 21,000 per year, and the combined total reduction in gross estate value is of the order of $7.0 billion. We found that 36% of forest estates owe the federal estate tax, compared with roughly 2% for estates in general during the survey period. It appears that in 40% of the cases where federal estate tax is due, timber or land is sold to pay part or all of the tax. It further appears that 67% of the timber sales and 57% of the land sales occur because other assets are not adequate to pay the tax. The need to sell timber or land to pay part or all of the estate tax is not a characteristic of small holdings, nor are the areas affected inconsequential. The mean forest size of ownerships that need to sell timber is 312 ha (770 acres) and the mean area harvested is 201 ha (498 acres); the mean forest size of ownerships that need to sell land is 1288 ha (3034 acres) and the mean area sold is 157 ha (387 acres). From these results it appears that the amount of forestland that must be harvested to pay the federal estate tax is of the order of 1.0 million ha (2.5 million acres) per year and the amount of forestland that must be sold is of the order of 0.5 million ha (1.3 million acres) per year. Of the forestland sold, it appears that 29% – 0.2 million ha (0.4 million acres) per year – are developed or converted to other uses. The responses from forest owners and other rural landowners were more remarkable for their similarities than for their differences. The groups differed statistically on nine characteristics. Most of the differences resulted from the different uses members in the two groups make of their land: whether the holding includes substantial forestland, cropland, or grazing land; whether the estate applied ‘special use’ valuation to both land and timber; and whether timber was sold to pay part or all of the federal estate tax. The remaining points of difference have few clear policy implications: whether the respondent was involved in the transfer of an estate during the survey period,

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whether the respondent is a member of the decedent’s family, and whether the respondent believes that use of an estate planning professional reduced the amount of estate tax due. For all other characteristics tested, there was no statistical difference in the responses from the two groups: location of the land, form of ownership in which it is held, value of the gross taxable estate, total size of the ownership, whether the decedent had used a professional estate planner, whether the holding qualified for ‘special use’ valuation, whether ‘special use’ valuation was used, amount of federal estate tax paid, reasons land was sold, and current use of land that was sold. Efforts are underway to address the shortcomings of this survey by obtaining a larger and broader sample of non-industrial private forest owners. In the interim, the results of this study provide an insight into the effect of the federal estate tax on forest and other rural estates. They show that forest and other rural landowners are many times more likely than the US population in general to incur the federal estate tax. And they indicate the magnitude of the effect the federal estate tax has in precipitating unplanned timber harvests and fragmentation and conversion of forest holdings. In addition, the results present several avenues for development of an estate tax relief policy for rural landowners in general. Some elements of such a policy might include:

• •

•

A targeted increase in the effective exemption amount for estates that consist largely of land or other working assets; Revision of the requirements for ‘special use’ valuation, to permit timber harvests made in accordance with a management plan developed in consultation with a professional forester; Recognition of a form of business for family farms and forests, to ensure that they qualify for business-oriented provisions in the tax code or to facilitate the transfer of working lands.

Endnote 1 Note that the indicated estimates are calculated from small samples.

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References Birch, T.W. (1996) Private Forest-land Owners of the United States, 1994. Resource Bulletin NE-134. US Department of Agriculture Forest Service, Northeastern Forest Experiment Station, Radnor, Pennsylvania, 183 pp. Dillman, D.A. (1978) Mail and Telephone Surveys: the Total Design Method. Wiley-Interscience, New York, 375 pp. Gardner, A.B., Olson, S.C, Haney, H.L., Jr and Siegel, W.C. (1984) Election by forest estates of certain federal estate tax provisions. Journal of Agricultural Taxation and Law 6(1), 400–428. Harris, T. and DeForest, C. (1994) Policy implications of timberland loss, fragmentation, and urbanization in Georgia and the southeast. In: Wear, D.N. and Talmon, J. (eds) Proceedings of the 1993 Southern Forest Economics Workshop. Duke University, Durham, North Carolina, pp. 70–83. Herman, T. (2001) A change in death and taxes? Debating the options for an estate-tax overhaul. The Wall Street Journal Feb. 26, C1. Howard, T.E. (1985) Estate planning for nonindustrial forest owners. Land Economics 61(4), 363–371. Internal Revenue Service (1996) Statistics of Income Bulletin. Publication 1136. US Department of the Treasury, Internal Revenue Service, Washington, DC.

Lucas, G.K. (1963) Death taxes as related to the forest enterprise. Masters thesis, Auburn University, Auburn, Alabama. Morrow, R. and Fritschi, B. (1997) Banking on timber. Forest Landowner 56(6), 25–28. Northern Forest Lands Council (1994) Appendix E – subcommittee research findings: land conversion. In: Finding Common Ground: Conserving the Northern Forest. Northern Forest Lands Council, Concord, New Hampshire, pp. A17–A22. Peters, D.M., Haney, H.L., Jr and Greene, J.L. (1998) The effects of federal and state death and gift taxes on nonindustrial private forest lands in the Midwestern states. Forest Products Journal 48(9), 35–44. Sutherland, C.F., Jr (1978) The importance of death taxes to forestry. In: Haney, H.L., Jr and Gunter, J.E. (eds) Proceedings of the Forest Taxation Symposium, 1997. Forestry and Wildlife Series 2-78. Virginia Polytechnic and State University, Blacksburg, Virginia, pp. 81–91. Sutherland, C.F., Jr and Tedder, P.L. (1979) Impacts of federal estate taxation on investments in forestry. Land Economics 55(4), 510–520. US Department of Commerce (1992) Statistical Abstract of the United States, 1994. US Government Printing Office, Washington, DC. Walden, J.B., Haney, H.L., Jr and Siegel, W.C. (1987) The impact of recent changes in state and federal death tax laws on private nonindustrial forest estates in the South. Southern Journal of Applied Forestry 11, 17–23.

21

Global Trade Liberalization and Forest Product Trade Patterns Jianbang Gan1 and Sabyasachi Ganguli2

1Department

of Forest Science, Texas A&M University, College Station, TX 77843-2135, USA; 2Forest Resources Program, Tuskegee University, Tuskegee, AL 36088, USA

Introduction One of the recent economic trends is regional economic integration and global trade liberalization. Among recent multilateral trade agreements are the World Trade Organization (WTO) and the North American Free Trade Agreement (NAFTA). The main objective of NAFTA, in effect since January 1994, is to curtail most barriers to trade and investment between Canada, Mexico and the USA in four phases. As the Uruguay Round (UR) negotiations of the General Agreement on Tariffs and Trade (GATT) came to a close in December 1993, the WTO emerged. The WTO negotiations began in late 1999 and have become the centre of focus for multilateral trade policy activities for member countries. The WTO agreement furnishes a common organizational and institutional framework for the conduct of trade relations among its members and serves as a forum for negotiations on further trade liberalization and additional legal disciplines. A reduction or removal of existing trade distortions is likely to affect global trade flows. The effects of trade liberalization on trade flows can generally be classified into trade creation and trade diversion. For example, a reduction in the import tariff of a wood product will reduce the import price, leading to more import demand. This is the trade creation effect of the tariff reduction. If tariff

reduction rates are not identical for all import sources, relative import prices from different sources will change. As a result, import shifts from one source to another may occur, leading to trade diversion or substitution. Several studies on the impact of regional and global trade liberalizations on forest product trade have been conducted. Wisdom (1995), based on a review of the trade data from 1989 to 1995, found that the NAFTA would have little impact on forest product trade between Canada, Mexico and the USA. He indicated that the Mexican economic crisis of 1994 and 1995 and the associated drastic peso devaluation had probably a much greater effect on forest product trade between the USA and Mexico than the NAFTA by altering the relative pricing structure for forest products. Prestemon (1996) assessed the NAFTA impacts on the US and Canadian forest product exports to Mexico using an econometric approach with the inputs on macroeconomic effects from general equilibrium studies. He identified that the NAFTA would have a significant impact on US and Canadian exports of selected wood products to Mexico. Barbier (1999) analysed the effects of the UR on global forest product trade. He found that forest product trade gains from tariff reductions under the UR were positive and significant, but that the magnitude of the impacts on global forest product trade would be relatively small, 1.6–2% gains for the countries studied.

©CAB International 2003. Forest Policy for Private Forestry: Global and Regional Challenges (eds L. Teeter, B. Cashore and D. Zhang)

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All these studies applied the partial equilibrium approach and focused on a few wood products. There is a need to assess sector-wide effects as well as effects on specific products. Moreover, the partial equilibrium approach fails to capture the intersectoral effect of the tariff changes. Given the relatively low distortions in forest product trade and extensive interactions of forest product sectors with other economic sectors, the intersectoral effect could be significant. A computable general equilibrium (CGE) model permits interactions throughout the economy to be taken into account in a consistent manner. A CGE model could be used to analyse the effects of policy actions and other exogenous events in the context of a consistent, interrelated global system (Borges, 1986; Ethier, 1988). Since the pioneering work by Harberger (1962) and Johansen (1973), CGE has had increasing application in impact assessments of trade and environmental policies. Its applications in forestry, though limited, are also visible (Boyd, 1987, 1998). This study develops a CGE model to evaluate the impacts of the NAFTA and GATT/WTO on the global forest product trade patterns. The outcomes of this study will include both intrasectoral and intersectoral impacts of these trade polices on the global trade of forest products.

Methods The CGE model used in this study is based on the Global Trade Analysis Project (GTAP) model constructed to analyse the economic effects of global trade (Hertel, 1997). The standard GTAP model is a comparative static multi-market, multi-region model. Its basic assumptions include constant returns to scale in all production sectors and perfect competition in all markets. For each region in the model, expenditures by the regional household are determined by an aggregate utility function that allocates expenditure across private, government and savings expenditures. On the other hand, the regional household sells endowment commodities to firms. Profit-maximizing firms use these endowment commodities along with intermediate goods to produce final goods and services. Firms sell final goods and services to private households and governments to generate income. In addition, there are two global sectors in the model: global transportation and banking.

The global transportation sector redeems its service with the difference between the f.o.b. (free on board) and c.i.f. (cost, insurance and freight) values for a particular commodity shipped along a specific route. The global bank intermediates between global savings and investment by creating and distributing the investment good to all firms. For the purposes of this study, the countries in the database were grouped into the following ten regions: Australia and New Zealand, Japan, the Rest of Asia, Canada, USA, Mexico, Central and South America, the European Union (EU), Former Soviet Union, and the Rest of the World (ROW). In each country/region, there are ten sectors: agriculture, forestry, mining, food and tobacco, manufacturing, lumber, pulp and paper, services, construction, and dwellings (Gan and Ganguli, 2001). The GTAP database version 3 was used in this study with the base year of 1993, the year prior to the NAFTA implementation.1 The CGE model is capable of analysing various separate or joint effects of NAFTA and GATT/WTO. The model is appropriate for capturing the substitutions in production and consumption between goods and services, and the resulting changes in trade flows and values. All experiments were conducted in a multi-country, general equilibrium closure. Output, prices, incomes, imports and exports are endogenous for all regions. The experiments involved the partial and complete removal of ad valorem import and export taxes in NAFTA and GATT/WTO members. While the analysis was conducted, the WTO negotiations were ongoing. The associated trade reforms, when known, could be incorporated into the analysis, for an assessment of additional WTO liberalization by the member countries in the future. In addition to tariff reductions or elimination, the NAFTA and GATT/WTO also deal with non-tariff trade barriers (NTB). One question that immediately arises is what to assume about the reduction or elimination of non-tariff barriers. Consistent with the spirit of the agreements, the most desirable way to handle the NTBs would be to represent them in terms of their tariff equivalents and then to assume that these would be reduced to zero. Unfortunately, there are not sufficient data to measure NTBs as tariff equivalents. There is also an issue of whether or not many of the existing NTBs will in fact be eliminated over whatever period specified in the negotiations. That is, it

Trade Liberalization and Forest Product Trade Patterns

is conceivable that countries may find ways to continue to impose their NTB restrictions in their present form or in some future alternative form yet to be determined. In such an event, the tariff equivalents of such NTBs should be only partially reduced and the quantitative restrictions should remain in place, so that the effects of the reduction or elimination of tariffs in these sectors would be diminished. Another issue is the assumptions on labour and capital mobility. In this model, labour and capital are assumed to be perfectly mobile between sectors in each region, but perfectly immobile between regions. This may capture some of the short- and medium-term effects of trade liberalization as compared to the long term when all factors of production are mobile. Current tariffs vary tremendously across commodities and countries/regions. Each trade agreement also has complex tariff reduction schemes for different countries and products. To consider all cases of the tariff reductions under the NAFTA and GATT/WTO is impossible. In light of the foregoing considerations, five scenarios were formulated to simulate the impacts of NAFTA and GATT/WTO (Table 21.1). These scenarios represent different levels and scopes of trade liberalization, ranging from NAFTA to the UR and to perfect free trade.

Results NAFTA impacts on global forest product trade are presented first, followed by the GATT/WTO. Current forest product trade is dominated by developed countries and regionalized in a few major markets including the Pacific Rim, North

Table 21.1.

221

America and the EU. This analysis will focus on how NAFTA and GATT/WTO would affect current trade patterns of forestry, lumber, and pulp and paper products. All the changes in imports and exports presented here, if not specified, are relative to the benchmark levels of year 1993.

Impacts on the forestry sector The impacts of NAFTA and GATT/WTO on the trade of products in the forestry sector are shown in Table 21.2. The primary product of the forestry sector is logs. The current major log exporting countries/regions are the USA, the Rest of Asia, the former Soviet Union, the EU and ROW. On the other hand, Japan, the Rest of Asia and the EU dominate global log imports. NAFTA would have little impact on current global log imports and exports except for the log trade between the USA, Mexico and Japan. When NAFTA is fully implemented, Mexico would increase its log imports by US$11 million from its 1993 level. Almost all of the Mexican increased log imports would come from the USA. Under NAFTA, the total US log exports would not increase much, the increased US log exports to Mexico would be met primarily by reducing exports to Japan. Given the magnitude of US log exports to Japan, the impact on Japan could be ignored. Moreover, Japan would partially compensate for its import loss from the USA through increasing its imports from the Rest of Asia. The UR would increase log exports from the Rest of Asia, the USA and ROW, but decrease log exports from the former Soviet Union. Compared with 1993 levels, log exports from the Rest of Asia,

Tariff reduction scenarios implicated by NAFTA and GATT/WTO.

Scenario

Description

I II

A 100% cross the-board cut of the existing tariffs in all sectors for NAFTA countries A cross the-board cut of 36% of the existing tariffs in all sectors for developed countries and 24% for developing countries A cross the-board cut of 100% of the existing tariffs among NAFTA members, 36% of the existing tariffs for developed countries, and 24% for developing countries outside NAFTA. A combination of scenarios I and II A 50% cross the-board cut of all existing tariffs for all sectors and all countries/regions A complete elimination of all existing tariffs for all sectors and all countries/regions

III

IV V

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J. Gan and S. Ganguli

the USA and ROW would increase by US$126 million (5.5%), US$89 million (3.9%) and US$167 million (8.0%), respectively. The Rest of Asia increased exports would mainly go to Japan. Japan and the Rest of Asia would also account for most of the increased US exports. The ROW would expand its log exports to many regions/countries including Japan, the Rest of Asia, the EU and ROW. Under the UR, the former Soviet Union would see an US$80 million reduction in log exports, resulting from reduced imports by Japan and the EU. This indicates that under the UR the former Soviet Union would face stiffer competition from the Rest of Asia, the USA and ROW in the global log markets. The combination of NAFTA and UR would have similar effects on global log trade patterns except for promoting US log exports to Mexico by US$6 million. The additional tariff reductions beyond NAFTA and UR would significantly boost log exports from the Rest of Asia, the USA and ROW, but reduce log exports from the EU and

the former Soviet Union. With the complete elimination of all tariffs, the Rest of Asia log exports would reach US$3046 million, a 31.5% increase from the 1993 level. Japan would be the major market for the Rest of Asia increased exports. Currently, there are relatively high log import tariff rates in Asia. The removal of these tariffs would stimulate log trade among the Rest of Asia countries. Under the complete free trade scenario, US log exports would go up by US$396 million (17.1%) from the 1993 level. Japan and other Asian markets would account for most of the US exports’ increase. The ROW would experience a 36.9% (US$768 million) increase in its log exports from the 1993 level under complete free trade. The main destinations of the ROW’s increased exports would be Japan, other Asian countries and the EU. With the increasing trade liberalization, the former Soviet Union and EU would continuously lose their market shares in the global log markets. In the complete free trade situation, the former Soviet Union and EU would end up with an exports loss

Table 21.2. Imports and exports in the forestry sector due to NAFTA and GATT/WTO tariff reductions (US$ million).

Region/country Australia and New Zealand Japan Rest of Asia Canada USA Mexico Central and South America European Union (EU) Former Soviet Union Rest of World (ROW) Total

Import Export Import Export Import Export Import Export Import Export Import Export Import Export Import Export Import Export Import Export Import Export

Base year (1993)

Scenario I

Scenario II

Scenario III

Scenario IV

Scenario V

14,785.4 14,260.8 4,783.2 14,711.9 2,699.4 2,316.9 14,258.5 14,228.5 14,144.0 2,314.5 14,728.5 14,724.3 14,741.8 14,256.9 2,650.3 14,655.3 14,785.2 14,730.2 14,695.2 2,085.6 11,311.5 8,884.9

14,785.4 14,261.4 4,773.4 141,11.9 2,694.4 2,323.4 14,257.4 14,230.4 14,143.7 2,301.1 14,739.5 14,721.7 14,741.5 14,258.2 2,647.0 14,655.3 14,785.2 14,730.4 14,695.1 2,082.5 11,302.2 8,876.3

14,785.5 14,266.4 5,067.8 14,710.4 2,808.3 2,443.3 14,254.6 14,240.2 14,145.1 2,403.6 14,730.8 14,723.9 14,743.5 14,267.5 2,627.0 14,636.2 14,785.7 14,650.4 14,734.7 2,253.0 11,723.0 9,194.9

14,785.5 14,266.8 5,061.6 14,710.4 2,804.9 2,447.8 14,253.9 14,241.5 14,144.8 2,394.7 14,738.1 14,722.1 14,743.3 14,268.6 2,624.7 14,636.1 14,785.7 14,650.4 14,734.6 2,250.7 11,717.1 9,189.1

14,785.5 14,274.7 5,161.8 14,710.0 3,234.2 2,673.2 14,253.1 14,252.2 14,145.7 2,512.4 14,731.5 14,723.8 14,749.9 14,277.4 2,593.7 14,591.9 14,786.4 14,562.7 14,797.7 2,438.8 12,278.8 9,617.1

14,786.1 14,246.5 5,514.0 14,788.7 3,876.2 3,046.1 14,248.0 14,279.1 14,148.6 2,710.7 14,735.0 14,723.2 14,760.5 14,298.0 2,533.5 14,533.5 14,787.7 14,437.2 14,939.8 2,854.1 13,369.4 10,437.1

Notes: The tariff reduction scenarios are shown in Table 21.1. Imports and exports are valued at c.i.f and f.o.b., respectively. The values for the base year are derived from the GTAP database version 3.

Trade Liberalization and Forest Product Trade Patterns

of 40.1% (US$293 million) and 18.6% (US$122 million), respectively. The former Soviet Union’s drop in log exports would primarily be because Japan and the EU would increase their imports from the Rest of Asia and the USA. Overall, NAFTA would have almost no impact on current global log trade patterns. However, the UR and WTO would have significant impacts on global log trade flows. The increasing global trade liberalization would stimulate log imports by Japan, other Asian countries and the ROW. The increased global demand would be met by increased exports from the Rest of Asia, the USA and ROW. The increase in Japanese imports, and in both imports and exports in the Rest of Asia and ROW implies that the global trade liberalization would promote log trade among Asian countries (including Japan) and ROW. Moreover, the former Soviet Union and EU would lose their competitiveness in the global log markets to the USA, the Rest of Asia and ROW with the increased reductions or removal of trade tariffs.

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Impacts on the lumber and wood products sector Of the three forest product sectors, the lumber and wood products sector would be affected most by the NAFTA and GATT/WTO (Table 21.3). The EU, the Rest of Asia, Canada, the USA and ROW are currently major lumber and wood products exporters. And the EU, the USA, ROW, Japan and other Asian countries also dominate the global lumber and wood products imports. Although the Rest of Asia, the EU, the USA and ROW are both major importers and exporters, the Rest of Asia is a net exporter while the others are net importers. NAFTA and GATT/WTO would not dramatically change the dominant roles of these countries/regions in the global lumber and wood products markets. Their impacts on the global lumber and wood product trade flows vary, and in some cases would be significant. First, NAFTA would have no noticeable impact on the global lumber and wood product trade flows outside North America. However, NAFTA would

Table 21.3. Import and export values of lumber and wood products due to NAFTA and GATT/WTO tariff reductions (US$ million).

Region/country Australia and New Zealand Japan Rest of Asia Canada USA Mexico Central and South America European Union (EU) Former Soviet Union Rest of World (ROW) Total

Import Export Import Export Import Export Import Export Import Export Import Export Import Export Import Export Import Export Import Export Import Export

Base year (1993)

Scenario I

Scenario II

Scenario III

Scenario IV

Scenario V

14,997.3 14,818.9 8,092.4 14,705.7 5,924.7 14,090.0 2,742.2 8,462.7 14,321.2 7,252.8 1,072.8 14,780.0 1,082.1 1,580.0 22,400.8 16,434.8 14,654.1 14,836.4 9,343.8 6,609.6 66,631.4 57,570.9

14,995.5 14,820.0 8,077.7 14,706.2 5,918.9 14,110.9 2,826.6 8,505.9 14,484.7 7,649.8 1,465.2 14,833.9 1,075.3 1,580.2 22,379.0 16,426.7 14,653.9 14,835.7 9,345.0 6,600.8 67,221.8 58,070.1

1,073.7 14,825.6 8,818.2 14,725.5 6,095.1 14,531.4 2,742.7 8,642.3 14,466.1 7,536.3 1,161.7 14,815.0 1,155.6 1,621.6 22,458.1 16,677.3 14,725.4 14,720.5 9,771.6 7,022.6 68,468.2 59,118.1

1,072.4 14,826.3 8,809.2 14,725.6 6,091.0 14,545.2 2,795.1 8,670.5 14,570.8 7,797.7 1,422.6 14,847.7 1,150.4 1,622.5 22,442.7 16,670.0 14,725.3 14,720.0 9,772.0 7,016.2 68,851.5 59,441.7

1,134.1 14,847.7 9,143.2 14,777.2 7,080.5 15,328.6 2,736.7 8,825.5 14,470.6 7,750.1 1,195.5 14,838.6 1,380.2 1,791.1 22,431.0 16,779.5 14,826.5 14,614.6 10,432.5 7,585.9 70,830.8 61,138.8

1,435.8 14,793.0 10,218.9 14,936.0 8,528.3 16,801.9 2,753.8 9,215.0 14,738.5 8,241.0 1,341.3 14,902.7 1,819.8 2,075.0 22,456.6 17,438.1 1,030.2 14,456.6 11,801.5 8,773.8 76,124.7 65,633.1

Notes: The tariff reduction scenarios are shown in Table 21.1. Imports and exports are valued at c.i.f and f.o.b., respectively. The values for the base year are derived from the GTAP database version 3.

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boost lumber exports of all three NAFTA countries, promoting exchanges of lumber and wood products between the USA, Canada and Mexico. When NAFTA is fully implemented, the US exports of lumber and wood products would reach US$7649.8 million, a 5.5% (US$397 million) rise from the 1993 level. Mexico would account for 93% of the US increased lumber and wood products exports. Mexico would see a US$53.9 million increase in lumber and wood products exports, which would mainly go to the USA. Canada would also experience a minor lumber and wood products export increase, a US$43 million rise from the 1993 level, as a result of the increased US imports from Canada. Second, the UR would promote the imports and exports of lumber and wood products for almost all regions except the former Soviet Union exports. Under the UR, EU lumber and wood products exports would increase by US$242.5 million from the 1993 level. The increased exports would be distributed among all regions outside the EU. Meanwhile, the EU would reduce its own market share in the EU lumber and wood products market. The EU total imports would basically be unchanged under the UR, but the EU would reduce its imports from the former Soviet Union, and increase its imports from ROW, the Rest of Asia, the USA, Canada, and Central and South America. Canada would also enjoy a 2.1% (US$180 million) export gain compared with the 1993 level. Japan would absorb most of the increased exports from Canada. The US exports would increase by US$283.5 million, but would be lower than that resulting from the full implementation of NAFTA alone. The increased US exports would largely be designated to Japan and other Asian countries. The UR would boost ROW exports by US$413 million (6.3%). Most of the ROW new exports would be shipped to the EU. The drop in the former Soviet Union exports would be mainly due to the EU’s shifting its supply of imports to other regions, particularly ROW. Third, adding NAFTA to the UR would not alter the global lumber and wood products trade patterns under the UR except for the trade flows within North America. Compared with the scenario under the UR alone, the combination of the UR and NAFTA would significantly increase US exports and Mexican imports, but have relatively small effects on Canadian imports and exports of lumber and wood products. The

increased US exports would be largely due to the increased Mexican imports. Fourth, further tariff reductions beyond NAFTA and UR would considerably promote the global trade of lumber and wood products. With the complete elimination of all tariffs, the Rest of Asia, Canada, the USA, Central and South America, EU and ROW would become big winners in lumber and wood products exports, while the former Soviet Union would suffer a large percentage export decline. Meanwhile, lumber and wood products imports by Australia and New Zealand, Japan, other Asian countries, the USA, Mexico, Central and South America, the former Soviet Union and ROW would increase significantly. Under the ideal free trade situation (Scenario V, see Table 21.1), the Rest of Asia lumber and wood products exports would increase by US$2712 million (19.3%) from the benchmark level. The Rest of Asia export increase would be attributed largely to the increased imports by Japan, other Asian countries and ROW. This further stimulates regionalization of lumber and wood products trade in Asia (including Japan) and trade between developing countries. Canada would also record a noticeable export increase, a US$752 million (8.9%) climb from the 1993 level. Japan would be the number one designation for the new Canadian exports, followed by the USA. The US gain in lumber and wood products exports would amount to US$988 million (13.6%). Under complete free trade, the US would increase its exports to all regions/countries except Canada. The EU would consolidate its exports with a US$1003 million (6.1%) gain through expanding its exports to all regions. Central and South America would experience a US$495 million (31.3%) rise in lumber and wood products exports. The effects of complete free trade on ROW would also be sizable. Under this scenario, ROW exports would jump by US$2164 million (32.7%). Although ROW would expand its lumber and wood products exports to all regions, the EU would account for most of its increased exports. Again, the decline in the former Soviet Union exports would be largely due to the reduced imports by the EU. With increased global trade liberalization, the former Soviet Union would lose its competitiveness in the global wood products markets. The relatively low existing import tariffs for wood products originating from the former Soviet Union and its ageing wood processing facilities may be the main reasons

Trade Liberalization and Forest Product Trade Patterns

for it to lose market share. On the other hand, wood products imports by the former Soviet Union would go up by US$376 million, or 57.5%. The increased imports would largely come from the EU. Japanese imports would rise by US$2126.5 million (26.3%). The majority of the Japanese increased imports would originate from other Asian countries, Canada and the USA. The wood products imports by the Rest of Asia would increase dramatically, a US$2603 million (43.9%) rise from the 1993 level. The sources for the increased imports would be the Rest of Asia itself, the EU and the USA. The ROW imports would also jump by US$2458 million (26.3%). The increased imports by ROW would be supplied by all major wood products exporters including the Rest of Asia, the USA, EU and ROW. Impacts on the pulp and paper sector Pulp and paper products are the most traded forest products in the world. Table 21.4 presents

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the amount of pulp and paper imports and exports by various regions/countries. The USA and EU are currently the largest pulp and paper products importers and exporters. Canada is also a major exporter while the Rest of Asia and ROW are importers of pulp and paper products. NAFTA would basically have no impact on current pulp and paper trade patterns within North America and worldwide. This is because of the existing relatively low tariffs for pulp and paper products in NAFTA countries and the price inelasticity of Mexican import demand for pulp and paper products. The UR would have small positive, but insignificant, impacts on current global pulp and paper trade flows. The UR would enhance pulp and paper exports from Canada, the USA and EU. Under the UR, Canadian exports would go up by US$145 million (1.1%), US exports would rise by US$122 million (0.8%) and EU exports would increase by US$269 million (0.9%) relative to the 1993 levels. On the import side, Australia and New Zealand, Japan, other Asian countries and ROW

Table 21.4. Import and export values of pulp and paper products due to NAFTA and GATT/WTO tariff reductions (US$ million).

Region/country Australia and New Zealand Japan Rest of Asia Canada USA Mexico Central and South America European Union (EU) Former Soviet Union Rest of World (ROW) Total

Import Export Import Export Import Export Import Export Import Export Import Export Import Export Import Export Import Export Import Export Import Export

Base year (1993)

Scenario I

Scenario II

Scenario III

Scenario IV

Scenario V

2,323.6 14,930.1 3,568.6 2,828.4 12,099.5 4,881.0 4,544.9 12,866.7 14,548.5 14,877.6 2,434.3 14,664.5 3,589.4 3,092.8 31,302.0 31,729.5 14,511.6 14,386.4 12,212.4 5,721.0 87,134.8 77,978.8

2,321.5 14,931.3 3,561.4 2,834.3 12,090.9 4,889.4 4,538.6 12,890.9 14,651.2 14,857.3 2,510.1 14,710.3 3,580.4 3,107.7 31,286.0 31,759.2 14,511.6 14,386.4 12,214.3 5,720.9 87,266.0 78,087.7

2,418.9 14,919.3 3,782.5 2,819.8 12,370.7 4,865.9 4,501.4 13,011.3 14,563.4 14,999.8 2,409.6 14,685.9 3,630.5 3,121.9 31,218.6 31,998.4 14,546.5 14,364.7 12,503.6 5,880.9 87,945.7 78,667.9

2,417.4 14,920.2 3,777.9 2,823.2 12,365.1 4,871.4 4,497.5 13,026.8 14,629.0 14,983.7 2,456.7 14,714.5 3,623.8 3,132.6 31,207.1 32,016.8 14,546.5 14,364.7 12,504.5 5,880.5 88,025.5 78,734.4

2,478.2 14,923.3 3,870.7 2,915.5 13,381.9 5,427.8 4,475.2 13,104.5 14,553.1 15,144.0 2,388.9 14,695.2 3,859.2 3,310.6 31,231.8 32,375.1 14,595.9 14,341.3 12,993.6 6,064.0 89,828.5 80,301.3

2,853.4 14,869.8 4,167.4 3,099.3 14,926.1 6,170.8 4,445.5 13,371.1 14,659.3 15,389.2 2,343.9 14,729.3 4,171.8 3,576.7 31,166.6 33,372.1 14,686.3 14,306.5 13,924.2 6,461.5 93,344.5 83,346.3

Notes: The tariff reduction scenarios are shown in Table 21.1. Imports and exports are valued at c.i.f and f.o.b., respectively. The values for the base year are derived from the GTAP database version 3.

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would increase their pulp and paper imports slightly. The further trade liberalization beyond the NAFTA and UR would have some significant impacts on the global pulp and paper trade patterns. The complete elimination of all tariffs would stimulate pulp and paper exports from the Rest of Asia, Canada, the USA, Central and South America, EU and ROW and increase imports by Australia and New Zealand, Japan, the Rest of Asia, Central and South America, the former Soviet Union and ROW. The pulp and paper exports from the Rest of Asia would reach US$6170 million, a 37.2% jump from the 1993 level. More than a half (56%) of the increased exports by the Rest of Asia would be due to expanded trade among the Rest of Asia countries. The Rest of Asia new exports would go to ROW and Australia and New Zealand as well. The Rest of Asia imports would also increase considerably, US$2827 million (23.4%) higher than the benchmark level. Most of the Rest of Asia increased imports would come from the Rest of Asia itself (38%), the EU (32%) and the USA (13%). Canada would see a 3.9% (US$504 million) rise in its exports due to the increased imports by the EU, Japan and other Asian countries. The USA would also enjoy some (3.4% or US$512 million) export increase. Probably the most important impact on the USA is not the change in total export values but in trade flows. Under complete free trade, the US would increase pulp and paper exports to Japan, the Rest of Asia, Australia and New Zealand, and ROW while reducing its exports to Canada and Mexico. Central and South American imports and exports would go up modestly. The USA would be the major source for increased imports by Central and South America, and the main designations for new exports would be ROW and Central and South America itself. Another winner from complete free trade would be the EU, whose exports would climb by US$1643 million (5.2%) with stable imports. As a result, the EU would become a pulp and paper net exporting region. The Rest of Asia, ROW, and Australia and New Zealand would absorb most of the EU new exports. The ROW would remain a pulp and paper net importing region even though its exports and imports would significantly increase under free trade. The USA would supply most of the ROW’s expanded imports, while the ROW export increases would be attributed to increased exchanges within ROW

and imports by the EU and the Rest of Asia. Under the free trade scenario, both exports and imports of the Rest of Asia, Central and South America, and ROW would increase, but all would remain pulp and paper net importing regions. The increased imports and exports would be mainly due to enhanced exchanges within each individual region and between these regions. Therefore, free trade would stimulate pulp and paper product trade between developing countries.

Summary and Conclusions This study assesses the impacts of NAFTA and GATT/WTO on the global trade flows of forest products using a computable general equilibrium model. The results provide both intrasectoral and intersectoral impacts of the tariff reductions under these trade agreements. The current trade tariffs for forest products vary across products and regions/countries. In general, the tariffs among developed countries or treaty countries are relatively low, and those among developing countries and between developed countries and developing countries are relatively high. Moreover, the trade distortions in forest products are smaller than many other sectors. The relatively low tariffs for forest products might result in small or insignificant intrasectoral impacts of trade liberalization, but intersectoral impacts could be significant. The CGE approach allows us to combine the intra- and inter-sectoral impacts. However, the CGE model is not without limitations. It is a static, not a dynamic, model and assumes perfect competition and the equilibrium of all markets. Due to the limitation of the sectoral aggregations in the database, the model lacks the ability to examine the impacts on a specific wood product. Nevertheless, our results would be a good complement to the existing findings using sectoral models and the partial equilibrium approach. Combined with the findings of previous partial equilibrium studies, our results would provide a more comprehensive picture of the impacts of NAFTA and GATT/WTO on the magnitude and directions of global forest product trade. NAFTA and GATT/WTO impacts on the global forest product trade patterns vary across product groups and countries/regions. In general, NAFTA and UR would have relatively small or

Trade Liberalization and Forest Product Trade Patterns

modest impacts on current forest product trade patterns. Further trade liberalization could result in significant impacts on current trade flows of forest products. As a regional trade agreement, NAFTA impact would be confined within North America, particularly for the lumber and wood products markets in the region. NAFTA would stimulate lumber and wood products trade among NAFTA countries. It would significantly expand US lumber and wood products exports to Mexico. However, the limited log market and existing low tariffs in NAFTA countries would impede NAFTA from producing large effects on current log trade patterns within North America. Similarly, NAFTA impacts on pulp and paper trade flows would also be minimized due to low tariffs and price inelasticity of Mexican import demand for pulp and paper products. The UR impacts on forest product trade are broader and more significant. The UR would increase log exports from the Rest of Asia and ROW, promote lumber and wood products trade across almost all regions, and slightly enhance pulp and paper exports from Canada, the USA and the EU. Under the UR, Japan and other Asian countries would significantly increase their lumber and wood products imports, supplied mainly by the USA, Canada, the EU and the Rest of Asia. In addition, the EU would shift its wood products imports from the former Soviet Union to ROW. Additional global trade liberalization beyond the NAFTA and UR would have important and considerable impacts on global forest product trade. For logs, ROW and the USA would expand their exports to Japan and the Rest of Asia. The EU would reduce its exports while further increasing its imports from ROW. In the lumber and wood products markets, the traditional major exporters including Canada, the USA and the EU, would significantly increase their exports, mainly to Japan, other Asian countries and ROW. Probably, the most significant impacts would be the increased trade (both imports and exports) of wood products in emerging markets and developing countries, including the Rest of Asia, Central and South America, and ROW. In terms of pulp and paper products, complete free trade would have a considerable impact on the total amount of trade as well as trade flows. Canada, the USA and the EU would remain as major players in the global pulp and paper markets. The USA would shift its exports from Canada and Mexico to the Rest of Asia and

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ROW. The EU would become a pulp and paper net exporter largely due to its increased exports to the Rest of Asia and ROW. The developed countries would continue to dominate global forest product markets, but increasing global trade liberalization would stimulate forest product trade among developing countries, particularly within the Rest of Asia, Central and South America, and ROW. The former Soviet Union’s current limited engagement in global forest product trade would not be improved much. Its exports in lumber and wood products, and pulp and paper would decrease, continuing to lose its competitiveness in the global markets to developed countries as well as other emerging forest product exporting regions like the Rest of Asia, and Central and South America.

Acknowledgements This study was financially supported in part by US Department of Agriculture Cooperative State Research, Education, and Extension Service (Grant No.: 97-38814-4181). The authors would like to thank Dr Larry Teeter, Dr Janaki R.R. Alavalapati, and an anonymous reviewer for their valuable comments and suggestions.

Endnote 1 The version 3 database was used instead of a newer one because it contains pre-NAFTA information, making it appropriate as a benchmark to compare the impact of NAFTA. Year 1993 was also the transition time from the GATT to the WTO. Moreover, version 3 and version 4 contain the same aggregation of the forestry and wood products sectors. Using a newer version (version 4) did not confer any advantage in terms of the sector aggregation for the purpose of this study.

References Barbier, E.B. (1999) The effects of the Uruguay Round tariff reductions on the forest product trade: a partial equilibrium analysis. World Economy 22(1), 87–115. Borges, A.M. (1986) Applied general equilibrium model: an assessment of their usefulness for policy analysis. OECD Economic Studies 7, 7–43.

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Boyd, R. (1987) The impact of the free trade agreement on the U.S. forestry sector: a general equilibrium analysis. Journal of Business Administration 20 (12), 236–253. Boyd, R. (1998) The economic impact of a subsidy on Mexican grains and forestry: a CGE analysis. Forest Science 44(4), 578–585. Ethier, W. (1988) National and international returns to scale in the modern theory of international trade. American Economic Review 73, 389–405. Gan, J. and Ganguli, S. (2001) A CGE approach to assessing the effects of NAFTA and WTO on US forestry sectors. In: Proceedings of Society of American Foresters 2000 National Convention. Society

of American Foresters, Washington, DC, pp. 519–521. Harberger, A. (1962) The incidence of the corporation income tax. Journal of Political Economy 70, 215–240. Hertel, T.W. (1997) Global Trade Analysis – Modeling and Applications. Cambridge University Press, New York. Johansen, L. (1973) A Multi-sectoral Study of Economic Growth. North-Holland, Amsterdam. Prestemon, J.P. (1996) The impacts of NAFTA on U.S. and Canadian forest product exports to Mexico. Canadian Journal of Forest Research 26, 794–809. Wisdom, H.W. (1995) NAFTA and GATT: what do they mean for forestry? Journal of Forestry 89(12), 30–35.

22

Gaining Leverage: NGO Influence on Certification Institutions in the Forest Products Sector Erika N. Sasser Nicholas School of the Environment and Earth Sciences, Box 90328, Duke University, Durham, NC 27708-0328, USA

Introduction: NGOs and Private Governance There is a tendency in both life and literature to underestimate the strategic intelligence of nongovernmental organizations (NGOs). Traditionally, these groups have been seen as ‘gadflies’, minor players busily buzzing in the ear of government, trying to prompt action in the tug of war between states (and sometimes, between states and firms). Recently, however, scholars have begun to point out the inadequacy of this perception, demonstrating that, in a multitude of cases, NGOs have played instrumental roles in transforming both the legal regimes of individual states (Keck and Sikkink, 1998) and the rules and expectations of international institutions and firms (Risse, 2000). One area in which NGOs have been particularly active in the last 10 years is in the creation and enforcement of certification institutions – private (i.e. non-governmental) programmes that set voluntary standards for firms, usually to guarantee certain environmental or social behaviours, and then oversee the actions of participating firms to make sure they conform to those standards. Certification institutions have arisen in many different industrial sectors, including chemicals, automobiles, forest products, fisheries, footwear and apparel. Some of these institutions focus primarily on environmental behaviours – pollution, accident response, use and disposal of toxic

materials, and so on. Other certification institutions are concerned with social issues such as child labour, fair wages and decent working conditions. NGOs have been influential in the creation of both social and environmental certification institutions, and in encouraging firms to adopt their principles. Prompted by globalization and the spread of multinational firms, NGOs are actively promoting new forms of governance in the form of voluntary certification institutions. These institutions essentially bypass government, and in some cases (depending on how the institution is structured) allow NGOs to become primary actors in measuring, challenging and controlling the behaviour of multinational firms. As NGOs take on more responsibility in this arena, they have become increasingly sophisticated in their strategies and tactics, learning how to supplement their relatively scarce resources with the enormous market power of their moral legitimacy. In the forest products industry, they have been increasingly successful in forcing firms to adopt ever-more-stringent certification mechanisms to demonstrate ‘green’ performance to customers. This chapter focuses on the role NGOs have played in developing and promoting certification in the forest products sector. In doing so, it achieves two goals. First, it sheds light on the ways in which certification institutions – private, voluntary mechanisms governing firms’ behaviour – emerge and evolve over time. Second, it demonstrates

©CAB International 2003. Forest Policy for Private Forestry: Global and Regional Challenges (eds L. Teeter, B. Cashore and D. Zhang)

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that NGOs are indeed becoming a ‘third force’ in international politics (Florini, 2000), shifting power away from governments and forever transforming the traditional relationships between states, firms and consumers.

Certification Institutions and Supply Chains: Combining Theories Despite increasing interest in the rise of voluntary certification institutions in a number of sectors, there has been little systematic analysis of these institutions and the forces that shape them. Though some early work attempts to identify and explain the multitude of certification institutions that have emerged in industries ranging from chemicals to footwear to fisheries (see Nash and Ehrenfeld, 1997; Howard et al., 1999; Kolk et al., 1999; Prakash, 1999, 2000; Haufler, 2001; Hutson, 2001), some key questions remain. Specifically, researchers have recently turned to questions such as: Why are these institutions emerging now (Gereffi et al., 2001)? What functions do they serve (Garcia-Johnson, 2001a,b)? How do different groups (governments, firms, NGOs, other civil-society actors) feel about them? (Cashore, 2002) And finally, how effective are certification institutions? This paper focuses on a subset of these issues, asking specifically (i) what factors have shaped the development of voluntary certification mechanisms in the forest products sector, and (ii) how in particular have NGOs been involved in this process?

Predicting the emergence of certification institutions Quite a variety of certification institutions have emerged in the last 15 years (with a few emerging even earlier). In some cases, individual companies have established codes of conduct paired with a reporting mechanism, such as a corporate environmental report, to clarify their environmental or social behaviour to the outside world. This would be a first-party certification institution, where rules are set and monitored/enforced by the firm itself. In other cases, such as with the chemical industry’s Responsible Care programme, an industry association sets the rules, and firms report conformance

to and are monitored by that association. This is a second-party certification institution. In third-party certification institutions, rule setting and monitoring/enforcement are conducted by a third party, often an independent organization set up just for that purpose (e.g. the Marine Stewardship Council, the Forest Stewardship Council). A fourth-party certification institution is one that involves government in the rule setting or monitoring/enforcement functions. Many certification programmes involving food, such as organically grown produce, are evolving in this direction. Because programmes with government involvement often compromise the ‘voluntary’ nature of participation, these programmes are considered distinct from truly private certification programmes. For this reason, this chapter limits its analysis to the first three types: first-, second- and thirdparty certification institutions. Of course, all of these theoretical types are often mixed in real-life situations: an industry association might set the rules, but companies themselves will monitor and report conformance (mixed second/first-party certification institution). Or a firm might establish its own code of conduct, but let a third-party in to monitor performance (mixed first/third party certification institution). Early work by Garcia-Johnson (2001a,b) suggests that firms adopt certification mechanisms as a way to consolidate their reputation in an increasingly uncertain global marketplace. All of these mechanisms – whether first-, second-, thirdor fourth-party – provide rules and conformance reports to clarify company behaviour and communicate it to those outside the company (particularly consumers). Sasser et al. (2002) suggest that there are three major variables which determine when a certification institution will emerge and what form it will take: the structure of the industry, the extent to which reputation in the industry is held individually by firms or shared among firms, and the level of threat to reputation posed by civil society. Because this theoretical framework is used as the basis for the present chapter, it is worth clarifying these variables and their interactions more explicitly here. The first two variables – industry structure and level of differentiation in reputation – interact to shape company responses in significant ways. If we assume that firms prefer to maintain operational autonomy, but also want to protect their reputation even if it means sacrificing some of that autonomy, we can understand why firms

NGO Influence on Certification Institutions

participate in certification programmes: where reputation is threatened, the firm will seek to protect itself while giving up the least autonomy. Because certification institutions are private and voluntary, firms may well prefer them to governmental regulation. However, a firm’s ability to manipulate the certification institution (i.e. to maintain discretion over the content and enforcement of the rules) and to use that certification institution to establish a positive reputation for itself will depend on how much power a firm has and whether it can distinguish itself from competitors in the marketplace. Specifically, Sasser et al. (2002) argue that the more concentrated an industry is, the more likely firms are to believe they can protect their reputation (and large market share) by moving toward certification, and the more likely they are to be able to overcome collective action barriers (if necessary) to get other firms in the industry to move in concert with them to adopt a certification institution (fewer actors make cooperation easier). Thus the distribution of power in the industry is very important. The level of differentiation in reputation is similarly important: the more branded a firm is, i.e. the more that reputation rests with individual firms (as opposed to the collective industry), the more that individual firms will feel an incentive to establish or accept a certification institution and the more likely it is that they will receive competitive benefits from doing so. Firms in shared reputation industries (such as chemicals), on the other hand, will find certification at the individual-firm level less helpful in protecting reputation. Because what one firm does is linked to what other firms in the industry do, only cooperative action on the part of all (or most) of the firms in the industry toward ‘greening’ will translate into improved image for the industry. Table 22.1 helps to illustrate the interaction of these variables. Table 22.1.

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Finally, Sasser et al. (2002) add a third variable to this mix: the level of threat to reputation from civil society. A firm’s ability to maintain its autonomy and protect its reputation is heavily dependent on the strength and nature of the opposition from civil society actors such as consumers and NGOs. When civil society is organized, and able to mobilize the public, companies will feel an extra incentive to do something to protect their reputations. While some firms may move toward certification for competitive or moral reasons, many will resist incurring the costs associated with certification unless they feel significantly threatened (see Garcia-Johnson, 2001b). I will return to the civil society threat variable later. Sasser et al. (2002) argue that firms, when faced with a serious threat to their reputation, will try to balance autonomy with the appearance of ‘good citizenship’. Firms will, in general, prefer certification schemes that (i) they themselves set up and (ii) they themselves oversee. If firms cannot set their own rules, they would prefer that a ‘friendly’ second party, such as an industry association, set/enforce the rules. Thus, if we think of this in diagram form (Fig. 22.1), with the arrow representing company preferences, we can see that company preferences decline as we move from first-party standard setting and monitoring/reporting to third-party standard setting and monitoring/ reporting. Where a firm will end up on this diagram in terms of the kind of certification institution it participates in will depend on the three variables mentioned earlier: concentration, individual/shared reputation and level of civil-society threat. The more market power a firm has, the more distinct its reputation, and the lower the civil-society pressure, the more likely it is to be able to exercise its preference for first-party certification institutions. Higher

Variables affecting firms’ ability to shape the format of certification institutions. Reputation

Industry structure

Individual by firm

Shared among firms

Concentrated (few firms)

Reputation setter (firm-specific certification programme protects firm’s reputation, market share and autonomy) Reputation shaper (some firms pursue firm-specific certification programmes, but expected market gains limited)

Reputation sharer (umbrella certification programme protects cooperating parties) Reputation taker (collective action essential but difficult, certification programmes unlikely)

Unconcentrated (many firms)

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civil-society threat, lesser market power, and/or a collective reputation, may force firms to compromise and accept second- or third-party standards and monitoring arrangements.

Adding in supply chains When we try to apply the three variables discussed above to entire industries, we quickly run into problems. It is clear that no matter which industry we look at (including forest products), concentration, reputation, and civil-society threat are not constant across the industry. Rather, these variables depend heavily on the place a company occupies in the supply chain. This means that instead of thinking about industries as unified wholes, we must dissect them and consider how actors at different points in the production process differ from one another. Supply chain analysis divides industries up based on the ‘niche(s)’ that firms occupy in the chain of production from raw materials to retail. A simple diagram (Fig. 22.2) illustrates the concept. Some firms may be highly specialized, operating at only one point of the supply chain. A timber management company, for example, may simply grow trees. Other firms may be more vertically integrated, spreading further across the supply chain to include not only growing trees, but harvesting them and even processing lumber. At each point along the supply chain, firms face

different sets of competitors. Thus a vertically integrated firm may be in competition with one subset of firms when managing/harvesting timber, and in competition with an entirely different subset of firms in its milling and finishing operations. More recent developments in supply chain theory (Gereffi, 1999) have suggested that the dynamics of supply chains vary considerably both between industries and within industries over time. As globalization has accelerated, different industries have become more (or less) vertically integrated, and more (or less) concentrated. The end result is that the locus of power in a supply chain varies significantly across industries: some industries have ‘producer-driven’ supply chains, where the manufacturers remain the most powerful players (automobiles, chemicals), while others have developed increasingly ‘buyer-driven’ supply chains where the retailers have become the dominant forces in the industry (clothing, footwear). In many cases, it is hard to identify a clear ‘locus of power’ in the supply chain. Many supply chains are highly complex, with multiple downstream (retail) segments which may be very different from one another. But the main point is simply that different firms in an industry will face different pressures depending on their place in the supply chain and the shape of the supply chain in that industry. The impact of our key variables – concentration, individual/shared reputation and civil-society pressure – will depend in large part on these supply chain issues. This will become clearer as we turn to the forest products case, and look at the shape of the supply chain in this industry.

Fig. 22.1.

Firms’ preferences for authority structure of certification institutions.

Fig. 22.2.

Basic supply-chain segments.

NGO Influence on Certification Institutions

The Role of NGOs in World Politics Before we turn to the specific dynamics of the forest products case, it is important to provide more background for understanding the influence of civil-society activism on a firm’s willingness to adopt a certification institution. In essence, as civil society becomes more organized and reaches a broader audience, we expect it to become a more effective threat to the reputation of individual firms. The forest products case shows how NGOs are becoming increasingly sophisticated players, ratcheting up the level of threat to companies’ reputations. In doing so, NGOs are increasingly circumventing traditional power relationships. Rather than going to government and demanding satisfaction and/or suggesting solutions, NGOs are challenging multinational firms directly, and instituting solutions independently of government. This idea contradicts much of the extant literature about civil society and its role in policy formulation. With a few important exceptions (see particularly, Vogel, 1978), traditional works in political science have emphasized the supremacy of the nation state, and have seen NGOs and other civilsociety actors as primarily directing their attention and lobbying efforts toward the state as the central controlling actor. Even recent work which suggests that NGOs are gaining power and importance still tends to focus on the impact of that transformation on the central state apparatus (Hyden, 1997). For example, while Princen and Finger (1994: 10), claim that the increasing internationalization of NGOs has given rise to a new political dynamic ‘in which NGOs play a role quite different from the accustomed one of lobbying at the national level’, they still focus on the impact of international NGO activity on the state, concluding that In short, NGOs, by politicizing the biophysical and linking the local and the global, are tugging and pulling at states. Although some of what they do is entirely separate from state behavior, much has the effect of setting the conditions under which states will act, or, maybe more precisely, react (Princen and Finger, 1994: 225; emphasis added).

Thus, even though NGO capabilities are recognized as changing, there is still a tendency to focus on how these changes affect states. An emerging body of literature contradicts this traditional view of states as central actors or focal points of NGO activity. Tracing back to

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Keohane and Nye (1971), Wapner (1996) argues that much NGO activity is directed not at states but at other civil-society actors: at other NGOs, at citizens and at businesses. Rejecting statist, suprastatist, and substatist views, which all continue to give nation states primacy, Wapner claims that ‘nonstate forms of governance exist and can be used to effect widespread change’ (Wapner, 1996: 7). Similarly, other authors have pointed to the growing size, strength and reach of NGOs in global politics, noting that the traditional focus on influencing governments has given way to new power relationships involving NGOs, business, and other non-state actors directly (Willetts, 1998; Schwartz and Gibb, 1999; Florini, 2000; Witte et al., 2000). This emerging literature has several important themes. First, NGOs are becoming more direct participants in global politics and in the solutions to global environmental problems. Where before NGOs tended to work more on national issues, and to serve primarily as information providers and agitators, they are now becoming important actors in finding and implementing solutions to societal problems. As the number and resources of NGOs have increased, NGO capabilities have also increased, allowing them to take on roles that were previously reserved for governments, such as regulating company behaviour and enforcing environmental agreements. In this respect, NGOs may be fulfilling what Witte et al. (2000:1) call an ‘organizational vacuum’, particularly at the international level. As globalization progresses, ‘governments and international organizations alone are no longer able to address ever more complex global policy issues’. Schwartz and Gibb (1999) go even further, arguing that the only organizations now capable of global thought and action . . . are the multinational corporations and NGOs. These two entities find themselves staring at each other across the table, not only because so many governments have left the room, but because their organizational as well as policy concerns are truly global . . . Many national governments, on the other hand, are finding it impossible to stretch beyond domestic political agendas to engage these issues in any real way (Schwartz and Gibb, 1999: 139).

A second, related theme is that in their daily activities, NGOs are circumventing traditional avenues of power and influence. No longer do NGOs turn to government to try to gain leverage over firms’ behaviour. In many cases, NGOs are

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actually taking on firms directly: as Florini (2000) notes Businesses, increasingly the direct target of transnational civil society activities, find it even harder than governments do to keep civil society at arm’s length . . . Although businesses that market directly to consumers have been most affected by transnational civil society campaigns, other types of businesses are increasingly finding themselves forced to change their practices (Florini, 2000: 216).

Market sanctions are increasingly preferred to government sanctions (Schwartz and Gibb, 1999) because of the power of the former in influencing company decision making. The direct interaction between firms and NGOs may lead to more effective controls on company behaviour because of the lack of common ground between the two groups. This is a third theme in the literature about the rise of NGO power: where governments and firms (multinationals or not) are in some respects allies, in most cases NGOs and firms are natural adversaries. Thus NGOs are able to escape the conflict of interest that besets most national governments. Several authors note the coincidence of interest between firms and governments, both of whom are interested primarily in growth and development (Chatterjee and Finger, 1994; Willetts, 1998). This concern with economic progress makes it difficult for governments to be earnest implementers of NGOadvocated reforms, even if they are convinced of the moral worth of those reforms. As Willets notes governments will show varying willingness to side with TNCs [transnational corporations] against NGOs according to the issues being raised in the debate . . . the economic interests of TNCs will often weigh more heavily with governments than the more abstract values promoted by NGOs (Willets, 1998: 213).

By cutting government out of the picture, i.e. by taking more direct approaches to regulating company behaviour, NGOs can increase their effectiveness and make greater progress in protecting the environment. All of these arguments combined suggest that the evolving role and power of NGOs have had a significant impact on the relationship between NGOs and firms. As NGOs have taken on more regulatory functions, and as their capabilities have increased, they have been able to mount more

extensive and effective campaigns against industries. Thus, returning to our three-variable framework for explaining the emergence of certification institutions (level of concentration, individual/ shared reputation and level of civil-society threat), we can say that the strength and nature of the threat posed by NGOs to firms are indeed changing, and this change can be expected to have demonstrable effects on the institutions set up to govern company behaviour.

Explaining Certification Institutions in the Forest Products Industry Let us now turn to the forest products sector and consider how well the three variables – level of concentration, individual/shared reputation and level of civil-society threat – explain the emerging certification institutions. In fact, if these variables are combined with supply chain analysis, so that we think about the interplay of forces in different segments of the industry, a fairly clear picture emerges of how voluntary governance mechanisms are developing. In particular, we can see that the sophistication of the campaigns launched by civil society against the forest products sector has accelerated the trend toward certification and caused a ratcheting-up of certification standards. First of all, it is possible to identify at least 23 distinct certification institutions in the forest products industry. Most of these are national institutions (i.e. they apply to operations within one particular country). These national certification institutions include the Australian Forestry Standard; the Austrian Forest Certification Scheme; the Bolivian Voluntary Forest Certification Council; the Certification of Origin of Forest Raw Materials (CERFLOR) in Brazil; the Canadian Standards Association (CSA); the Finnish Forest Certification System; the French Forest Authorities and Forest Owners Organization, Regulation and Results Programme; the German Forest Certification Council; the National Committee on Forest Certification in Ghana; the Indonesian Ecolabelling Institute (LEI); the Malaysian National Timber Certification Council (NTCC); the Keurhout Foundation in the Netherlands; the Living Forest Project in Norway; the Family Forest Certification Programme in Sweden; the UK’s Woodland Assurance Scheme; the American Tree Farm

NGO Influence on Certification Institutions

System; and the American Forest and Paper Association’s Sustainable Forestry Initiative (SFI). Other certification programmes, such as the Forest Stewardship Council (FSC), the Pan-African Certification Initiative, the Pan-European Forest Certification scheme (PEFC) and ISO14000, are intended for broader application. These programmes have been developed by international bodies or by a consortium of national groups who see advantages to standardizing certification requirements. Some of these programmes, particularly the FSC, have advanced very specific and stringent standards tailored to particular physical environments. Others, like PEFC, are concerned partly with drawing in small private landowners (woodlot owners), or other parties who do not easily fit within programmes designed for large corporations. All of the certification programmes in the forest sector – whether national or international – emerged in the 1990s, beginning with the Forest Stewardship Council in 1993. Each year since 1993 has seen several new programmes emerging: at least seven were under development in 2001. How do we explain the rapid proliferation of certification institutions in this sector, and to what extent has each of them been adopted by firms? In order to explain the emergence of different certification schemes, we must first understand the internal dynamics of the industry. This chapter focuses mainly on the US forest products industry, but much of the analysis applies to the industry in other countries as well. From a structural standpoint, the industry can be broken down into four basic components, as shown in Fig. 22.3.

Mapping out the supply chain In the USA, the supply chain is geographically fragmented, vertically disintegrated and (increasingly) horizontally integrated. Geographical fragmentation While an increasing number of firms in the industry are expanding overseas (particularly from

Fig. 22.3.

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North America/Europe to Latin America, Russia and parts of Asia), traditionally the industry has been organized along national lines, with each nation’s markets dominated by a few big firms. This means that the forest products industry is not one unified set of players but, rather, smaller subsets of players operating within particular economic, social and environmental contexts. Vertical disintegration Firms in the industry traditionally occupy only one or two positions in the supply chain, i.e. while a firm might be both a raw materials extractor and a primary processor, it is less likely to be also a secondary processor and retailer (or vice versa). In recent years, firms have adopted varying tactics under intense competition and economic uncertainty. Some firms have actually been moving away from vertical integration, preferring to specialize in particular market niches. In many cases these are smaller firms which do not have the market power to compete in multiple markets. Larger firms remain more vertically integrated but are also becoming increasingly specialized in their activities (see horizontal integration, below). Horizontal integration The forest products industry is becoming increasingly concentrated at particular points in the supply chain. Extreme price volatility in the sector has made it difficult for firms to compete, and in the last 5 years mergers and acquisitions have accelerated as firms attempt to gain a more solid footing in the marketplace. Most firms have chosen to concentrate on particular market niches (Georgia-Pacific on tissue production, for example) and seek to dominate those niches. The supply chain and certification These characteristics suggest several things about studying the forest products sector. First, in terms of ownership, this is not really an international industry (yet), so we can expect significant differences in industry behaviour in different countries/

Supply-chain segments in the forest products industry.

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regions. This is one of the reasons why we see a number of distinct certification institutions emerging in the sector. Given a geographically fragmented industry, with different segments operating under different sets of rules/regulations and within different ecosystems, it makes sense that the institutional responses to problems will vary. Second, whether or not the industry is considered ‘concentrated’ even within a more regionalized/nationalized perspective depends on the point in the supply chain under consideration. Thus for the purposes of the analysis here I have chosen to focus on the North American – and particularly the US – forest products industry. Though in some respects the US industry may be an exceptional case, the battles over certification in this context still provide insights into larger patterns within the industry viewed internationally. And even within the US forest products sector, it is important to map out the supply chain and consider the differences in concentration and branding (shared/individual reputation) at different points along the chain.

Certification institutions in the US forest products sector Clearly, there are two main certification institutions competing for dominance in the US forest products sector: the Forest Stewardship Council (FSC), and the American Forest and Paper Association’s Sustainable Forestry Initiative (SFI). The FSC is an independent, third-party organization set up in 1993 with support from multiple environmental NGOs, including WWF, Greenpeace, NRDC, Environmental Defense, and others. Under this umbrella, regional standards are established by committee for different parts of the world, and only certain groups are licensed to issue FSC certification to firms. FSC certification consists of two levels: forest management certification (based on very prescriptive management standards), and chain-of-custody certification, which allows firms to use the FSC logo on their products. The SFI was adopted in 1994 by the American Forest and Paper Association (AF&PA), the main industry association for forest products firms. Unlike the FSC, the SFI emphasizes environmental management systems standards, and establishes few on-the-ground performance requirements for

firms. Arguing that strict performance standards hinder the autonomy of firms and restrict their silvicultural activities unnecessarily, the AF&PA has maintained the systems focus of the SFI. The SFI remains relatively closed to outside influence; standards are set at the second-party level and monitoring for most firms remains first-party (the firm itself oversees the implementation of the common SFI standards). However, the AF&PA forced all of its members to adopt SFI principles, and has recently added third-party verification mechanisms and established a product label,1 indicating that it feels intense competition from FSC. How do we explain the emergence of these two competing certification institutions in the forest products sector? Let us examine each of the variables we have identified – concentration, reputation and civil-society threat – and consider the ways they have shaped the FSC and the SFI.

Concentration in the US forest products sector If we return to our supply chain outline (see Fig. 22.4), we can make a couple of generalizations. First, the most concentrated portion of the forest products sector in the USA is the retail end. As shown in Fig. 22.4, this consists mainly of the do-it-yourself (DIY) home improvement firms, builders, bookstores, office supply stores, newspapers, and generalized retail outlets like WalMart and K-Mart, which sell many products using wood pulp (cosmetics, toothpaste) as well as wood/paper products. Secondary processing (printing/publishing and containers/packaging) also tends to be fairly concentrated, though less so than the retailers. The raw materials/primary processing segments of the supply chain tend to be less concentrated, though even here we see that the top firms have a significant market share. The more concentrated the segment of the supply chain, the more we would expect that firms would have the market power (and therefore the autonomy) to establish a first-party certification institution that could really help them protect their reputation. Thus firms like Lowe’s or Home Depot, if worried about their environmental reputation, should be more likely to move independently toward certification, setting up strict ‘codes of conduct’ and issuing corporate environmental reports

NGO Influence on Certification Institutions

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Fig. 22.4. Market share concentration in the forest products supply chain, October 2001. Data obtained from Standard and Poor’s online Market Insights page, http://umi.compustat-com/cgi-mi-auth/mihome.cgi? app = mi

to indicate how well they are meeting these standards. And this is exactly what we see if we look at the history of certification institutions: early on, firms at the retail end of the supply chain were likely to issue internal codes of conduct and to try to project a positive environmental image to the outside world by demonstrating their compliance with these standards. Home Depot, for example, began issuing its ‘Corporate Social Responsibility Report’ in 1992, stating an intention to offer certified products and claiming, in 1994, that ‘improving the environment is the ultimate home improvement we can make’ (Jenkins and Smith, 1999: 311). However, firms further up the supply chain – primary processors, or raw materials extractors – should be less certain that individual action can convince consumers of their greenness: they simply do not have the market share to gain a competitive advantage or recognition for establishing a rigorous first-party certification institution. Instead (assuming they are concerned with their environmental reputation), they might try to pressure the industry association to help them overcome the collective action problem and establish an industry-wide certification system. Some of the larger firms within the industry (International Paper, Georgia-Pacific, Weyerhaeuser) may be

particularly influential in pushing the industry association to help them ‘rein in’ the industry. Again, this is exactly what happened in the forest products sector with the establishment of SFI: the less concentrated extractive segment of the supply chain bands together to form a second-party certification institution where rules are set by the industry association and overseen by the firms themselves.

Branding in the US forest products sector The second variable of interest is the extent to which reputation is shared or held individually by firms within the industry. Again, it is important to note that this will depend on which segment of the supply chain is considered. As with most industries, the reputation of individual firms within the forest products industry is most distinct at the retail end of the supply chain (DIY stores, bookshops, general merchandise retailers, newspapers, etc.). Retailers deliberately accentuate their brands: they depend on them to bring in customers and generate sales. But these brands then become a double-edged sword – while they make firms more prominent in consumers’ minds,

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they also make firms’ mistakes more prominent. In other words, as consumers become more attuned to particular brands, they start to care more about the lifestyle imagery behind the brand and they notice when the firm gains a reputation for being a bad social or environmental actor. The most branded segments of the forest products chain therefore have to be particularly careful about protecting their reputation. But they also have the advantage of being distinct in consumer’s minds, i.e. environmental action by Home Depot is associated positively with Home Depot (and not attributed to Lowe’s); environmental irresponsibility by Home Depot will hurt that company’s sales, but will not affect Lowe’s. Thus firms in branded segments of the supply chain should be expected to move toward first-party certification institutions. If we stick with the Home Depot example, it did so early on: both highly concentrated and highly branded, this firm was concerned about its environmental image and established a corporate code of conduct in 1992. However, firms further up the supply chain do not have this advantage of highly differentiated reputation. When consumers go to buy wood, they do not go to buy ‘IP wood’ or ‘Weyerhaeuser wood’. To them, in the words of one NGO activist, ‘milk comes from the grocery store’, i.e. wood comes from a DIY centre and the supplying timber harvester/mill never comes into the picture. This is one of the main reasons that NGO campaigns against timber producers have met with only limited success: NGOs ultimately rely on the threat of public (i.e. consumer) discontent, and past campaigns have shown that producers’ isolation from consumers makes them difficult targets. If consumers do not know that the 2 × 4 they buy comes from Boise Cascade, specifically, then they will not translate a giant dinosaur balloon with the slogan ‘I Love Logging Old-Growth’ outside Boise Cascade headquarters into something that prohibits their purchase of that 2 × 4. Instead, they are more likely to think that all of the 2 × 4s available in the marketplace are produced unsustainably, i.e. to tar all producers with the ‘Boise Cascade’ brush. The fact that consumers lump all of the firms at the top of the supply chain together means that those firms have a collective reputation problem. Boise Cascade moving to establish a first-party certification institution will not aid the firm’s reputation significantly. In the mind of the concerned public, Boise Cascade is lumped together with all

the other upstream forest products firms, and until that entire segment of the industry greens, concerned consumers will not be satisfied. Establishing a first-party certification institution in the face of shared reputation does little to protect a firm’s reputation but consumes valuable resources. Thus we expect that firms at the upper end of the supply chain will deem it essential to move collectively toward a new set of rules that can help protect their reputation. Instead of pursuing firstparty certification, firms like Georgia-Pacific, Weyerhaeuser and International Paper should push for second-party certification, understanding that only when all of their competitors move toward certification are any of them protected, given their shared reputation. This helps to explain even more clearly why it is that the AF&PA moved to adopt the SFI in 1994: only a coordinated move by all major players in the industry could protect the reputation of individual firms. The moderate concentration in the upper reaches of the supply chain made it easier to establish the second-party certification institution, because the limited number of players were able to overcome collective action barriers and force potential free-riders to participate. (In fact, AF&PA members who refused to seek SFI verification had to leave the industry association.)

The lynchpin: adding in civil-society dynamics So far the industry structure and reputation variables have done pretty well in explaining the emergence of first-party codes of conduct and the second-party certification institution in the form of SFI. But what about FSC and the impact it seems to be having on the evolution of SFI? Where did FSC come from amidst these industry dynamics we have been discussing? And why is it that FSC seems to be so powerful, forcing SFI to evolve toward third-party monitoring and chain-ofcustody accounting? It is only when we bring in the third variable – level of civil-society threat – that the dynamics of certification in the forest products sector can really be explained. NGO activism (i.e. the presence of an organized civil-society threat) seems to be shaping certification in the forest products sector in highly significant ways. Specifically, it appears that as NGOs have grown in sophistication, they have

NGO Influence on Certification Institutions

learned how to manipulate the industry by identifying the most vulnerable points in the supply chain. The emergence of FSC in 1993 set an early precedent for rigorous standards for certification in the forest products sector. Though ideas for some sort of certification programme had been floating around the sector for several years, the industry itself did not move to establish a programme until its hand was forced by the NGO community with the establishment of FSC. And because the FSC set forth tough third-party standards and monitoring requirements, and even established a chain-ofcustody tracking system, industry’s initial effort, with its second-party standards and first-party overseeing, had legitimacy problems from its inception. Having established strict performancebased standards and third-party overseeing mechanisms, NGOs were unlikely to accept SFI certification. However, NGOs also recognized that the very existence of SFI standards would make it harder to push firms toward FSC certification. How could they gain enough leverage to force firms to select FSC over SFI? Interviews with key NGOs campaigning for reform in the forest products sector have shown that NGOs quickly learned how to gain this leverage. There have been a couple of significant developments in the relationship between NGOs and forest products firms. First, it is clear that interactions are increasingly occurring directly between firms and NGOs: government is no longer the middleman. In fact, argued one Greenpeace activist, governments are glad to be left out of the negotiations: caught between the demands of NGOs and the needs of firms, governments have a hard time crafting solutions acceptable to both groups. By insisting that certification should be private and voluntary, the government can leave these two forces to negotiate their own solutions, and regulation at the national level becomes merely the baseline for minimal environmental performance (9 March 2001, personal communication). Thus certification becomes a mechanism for pushing firms to exceed governmental standards, a faster, more adaptable approach to reward firms which become environmental innovators. This bypassing of government is consistent with the predictions of much of the literature on global civil society reviewed earlier. As civil-society groups gain in strength and capability, they no longer seek traditional avenues of influence (i.e. through governments) over firms.

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A second, and even more critical, development in the relationship between NGOs and firms in the forest products sector is the increasing sophistication of NGO tactics – and particularly the emergence of market campaigning. While NGOs have tried in the past to organize boycotts of particular producers’ products, they had not been particularly successful. Their attention was focused on demonstrations near the source of the damage (protests in national forests, for example), and this did not translate into consumer action. Beginning in the early 1990s, NGOs began to shift their efforts from targeting resource extractors (the upper end of the supply chain) to targeting the more vulnerable retailers at the bottom of the supply chain (2 March, 9 March, 15 March 2001, personal communications). Recognizing the importance of branding, and the enormous concentration of market power in retailers such as Home Depot and Staples, NGOs began to focus heavily on these retailers in their protest campaigns. In doing this, they have demonstrated a shrewd understanding of the supply chain dynamics discussed earlier. Market campaigning against retailers apparently started almost by accident in the early 1990s: when protests against MacMillan Bloedel’s actions in Clayoquot Sound, British Columbia, were producing little effect on business as usual within the province, international NGOs took their campaign to Europe, targeting end-business consumers of MacMillan Bloedel products. Spearheaded by Greenpeace, this European campaign quickly provoked a strong reaction against MacMillan Bloedel by major European businesses: DIY outlets, publishers, newspapers and paper-products companies. These branded firms were vulnerable to a rapid increase in outrage among consumers, and it was not too difficult for them to insist that no old-growth wood be used in their products. After all, the necessary management changes and difficult implementation tasks of switching from existing forest management techniques to new ones would not be borne by them. Instead, they could conveniently pass the true challenges of sustainable forest management on to their suppliers, all the while claiming credit for being environmentally sensitive and innovative. Soon, MacMillan Bloedel was experiencing significant boycott pressures, which forced the company to abandon clearcutting and other silvicultural practices to which the environmental community objected (14–15 March 2001, personal

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communications). The company, like many others in the forest products industry, was forced to incur heavy costs to ‘green-up’ to NGO demands. These costs were both monetary and strategic, as the company lost decision-making autonomy. As David Vogel pointed out in Lobbying the Corporation (1978), concerned citizens and activists have long sought leverage over the corporation. But where initial efforts focused on shareholder activism, local sit-ins or boycotts by individuals, recent campaigns have become much more sophisticated, powerful and widespread. In the words of one Greenpeace activist, stumbling upon market campaigning was like ‘discovering gunpowder for environmentalists’ (9 March 2001, personal communication). For the first time, NGOs had found a mechanism for raising widespread opposition to the practices of entire industries (or at least major segments of the supply chain), and were able to force blocs of firms to change their practices very rapidly. Emboldened by their success with market campaigns in Europe, groups such as Greenpeace, Rainforest Action Network (RAN) and Natural Resources Defense Council (which together formed the Coastal Rainforest Coalition or CRC), quickly turned their attention to other firms engaged in unsustainable practices. Almost simultaneous with the campaign against MacMillan Bloedel, campaigns were launched against the New York Times and PacificBell in the USA, criticizing these firms for using old-growth wood pulp in their products. When agreements with these firms were reached, the NGO community searched for new targets, and their campaign against Home Depot, launched in 1997, was deliberately structured to capture the public’s attention. Although Home Depot had been targeted by RAN and other groups on a more limited scale since 1992, the campaign intensified during 1998–1999. Nationwide demonstrations against Home Depot at retail outlets (including banner displays, sit-ins, protests and leafleting), accompanied by letter-writing campaigns and a series of well-placed advertisements in the New York Times, provoked a strong reaction among the public. Ultimately, the company was forced to declare on 26 August 1999, that it would give preference to FSC-certified products and stop selling old-growth wood. RAN rewarded Home Depot in yet another New York Times advertisement in October 1999, praising the company and criticizing its competitors. Shortly thereafter, Wickes Lumber and Homebase, two other large DIY

outlets in the USA, followed in Home Depot’s footsteps. With barely a pause, RAN and other groups turned then to the home-building industry, launching a major campaign against firms such as Centex and Kaufman & Broad in January 2000. Why did RAN and other groups target Home Depot first? ‘We recognized the enormous market power’ of the home-improvement retailers, one RAN activist explained (2 March 2001, personal communication). ‘We needed a “big fish”’, agreed a Forest Ethics (formerly CRC) leader (15 March 2001, personal communication). The real targets were the timber harvesting firms like MacMillan Bloedel (now owned by Weyerhaeuser), International Forest Products (Interfor), Doman/Western Forest Products, and West Fraser. But these firms are more difficult targets, partly because they are further removed from the end consumer. Although the extractive end of the supply chain is reasonably concentrated, firms within it share a reputation. As discussed above, this makes it difficult for individual firms (even the most powerful ones) to establish certification institutions to protect their reputation. However, the lack of branding also makes it difficult for NGOs to gain the leverage they need to force firms to act to protect their reputation. Shared reputation makes firms slippery; branding makes them more vulnerable (and more likely to act to protect their reputation). Like extractive firms, firms in the middle of the supply chain, such as wholesale distributors and smaller lumbermills, make poor targets; protests against these firms are unlikely to raise public outcry because they have little name recognition among consumers. In addition, targets that do not resonate with the public will not generate membership and funds to support the NGO’s campaigns. Thus, said one Greenpeace activist, only large NGOs can afford the luxury of even occasionally targeting firms in the middle of the supply chain. And even some retail targets are better than others: the construction industry is more dispersed than the DIY retail trade, and the general retailers like WalMart and KMart, while highly concentrated, sell products that are less obviously derived from timber (toothpaste additives, etc.) (13 March 2001, personal communication). These differences among different segments of the supply chain have forced NGOs to be innovative in their approaches, seeking levers to prompt action throughout the supply chain. By targeting the most concentrated, branded retailers

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first, NGOs have produced ripple effects throughout the industry. When NGOs succeeded in getting Home Depot and Lowe’s (which together control 71% of the US DIY market) to declare preferences for FSC products, they knew they had a major triumph: when Home Depot talks, the whole industry listens. If these companies, with their enormous market power, require their suppliers to provide them with certified wood (and no old-growth timber), then firms throughout the supply chain will scramble to provide it. RAN activists argue that they now have 25% of the US wood market under ‘lip service agreements’ to stop buying old-growth wood and give preference to FSC certified products (2 March 2001, personal communication). Such a large percentage of the downstream market demanding environmentally sustainable timber will literally ‘ricochet’ up the supply chain, causing changes throughout the industry. Activists may also have recognized that retailers like Home Depot and Lowe’s would see few costs in promoting FSC-certified products: the true costs were hidden, borne by the up-stream producers, who were much more resistant to FSC certification. It is clear from this analysis that NGOs are becoming more attuned to the dynamics of the entire forest products sector; they have successfully identified the most vulnerable points in the supply chain and have launched targeted campaigns that inflict maximum damage on these firms. The recent trend toward consolidation in the sector has been ‘serendipitous,’ making desirable targets even more obvious and more vulnerable to NGO pressure. In an incredibly competitive sector,

Fig. 22.5.

The new boomerang effect.

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environmental reputation is seen as a critical competitive factor. Firms seek to outdo one another in ‘greenness’ as in other areas, and this accentuates their vulnerability to NGO campaigns. Risse (2000) and Keck and Sikkink (1998) talk about the ‘boomerang model’ of international human rights activism, arguing that when domestic groups in Country A are blocked from influencing their national government’s human rights stance, they can turn to the international community, linking up with other NGOs in the global sphere. These other groups, which have access to their own national governments (in Countries B, C, D), can then force the governments of Countries B, C and D to put pressure on Country A. Because Country A sees Countries B, C and D as legitimate actors in the world scene (whereas it did not see the NGOs as legitimate actors at the domestic level), Country A may then move toward the very reforms that the domestic NGOs originally advocated. What we see happening in the forest products sector with regard to the interaction of NGOs and firms is very similar – indeed, we might call this the ‘new boomerang effect.’ While not necessarily international, NGO market campaigns get at their target indirectly. Unable to gain much leverage over Company X, either by pressuring the company directly or pressuring government to institute regulations, NGOs turned to another audience (consumers/retailers) who they knew had major influence over Company X’s decisions (see Fig. 22.5). By convincing this other audience of the legitimacy of their concerns, NGOs were able to indirectly force Company X to change its practices.

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NGOs have learned to use market campaigning to gain leverage against companies that traditionally have been somewhat insulated from the effects of their campaigns. And, as noted above, sometimes NGO campaigns have caused ripples throughout the entire industry. In fact, rather than a simple boomerang effect, we may be seeing a ricochet effect, where campaigns against retailers are translated into demands from those retailers that primary and secondary processors supply them with certified goods (see Fig. 22.6). These demands then force processors to look further up the supply chain and demand sustainably harvested timber from the timber companies. Though these companies may be the NGOs’ original targets, it is only through this indirect ricochet up the supply chain that NGOs are ultimately able to fulfil their goal. This ricochet up the supply chain establishes a strange kind of dialogue between NGOs and timber-harvesting firms. In some cases, the ongoing market campaigns of the NGOs may force the barrier between firms and NGOs to become more permeable: rather than continue to suffer the negative publicity generated by the NGO’s market campaigns, the company may prefer to sit down with the NGO directly and negotiate a solution. But even if the company refuses to do this, NGOs still may be able to make the firm comply with their demands.

Fig. 22.6.

The ricochet effect.

The interesting thing about the market ‘boomerang’ effect, which ‘ricochets’ up the supply chain, is that it does so in the complete absence of government. In both of these scenarios, government is a silent presence. Neither NGOs nor firms seek to involve this traditionally powerful central actor. Rather, both groups are content to battle away at one another, albeit sometimes indirectly, in the public arena. Both seem to acknowledge that involving government, instead of promoting solutions, may actually hinder progress. NGOs, traditionally dependent on governments to influence company behaviour through regulation, are increasingly disgruntled with both the slowness of government and the mediocrity of government solutions. NGOs still work for government regulation on many fronts, but they think of this as only a minimum set of standards, and they expect that firms, or at least those who wish to establish ‘green’ reputations for themselves, will go far beyond government regulation and will desire some means of certifying their exceptional environmental performance. As long as they know that some firms seek competitive advantage through a green reputation, and as long as competition in the forest products sector remains as strong as it is at present, NGOs will continue to have a lever to force firms to comply with their wishes.

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Ratcheting-up Certification Standards

Conclusion

NGOs, by discovering the points in the forest products supply chain that are most vulnerable and by applying pressure cleverly at those points, have forced the forest products industry to jump to protect its reputation. All along the supply chain, and particularly in those segments that are highly concentrated and highly branded, firms have realized the danger of deviating too much from the path advocated by NGOs. One indication of this is the effect of the NGO campaigns on the industry’s challenge to the third-party FSC. The SFI started out as a set of second-party standards which individual firms could adopt and monitor internally. Over time however, the SFI has undergone significant changes, first moving to allow third-party monitoring of company compliance with SFI standards, and most recently issuing a product label for SFI participants to use on their products. These initiatives seem to be direct outgrowths of the more stringent certification requirements of the FSC and its ‘chain-of-custody’ logo. Moreover, the AF&PA, in conjunction with the Canadian forest products industry, has recently launched a new multi-million dollar advertising campaign promoting the use of wood and advancing the new SFI label. These efforts by the US and Canadian forest products industries suggest that the industry is worried about the FSC becoming the sole ‘legitimate’ certification programme for the industry. Indeed, some NGO activists argue, the new industry advertising campaign can be seen as a direct attempt to eclipse the rising star of the FSC. Hopeful that the new SFI logo might capture public attention, or at least confuse customers who cannot distinguish it from the FSC logo, forest products firms are moving proactively to try to maintain their autonomy in the face of increasingly sophisticated tactics from NGOs. The end result: a ratcheting-up of certification standards and expectations across the board. Where the FSC was once thought of as a way of rewarding the top 5–10% of forest products firms, it is now becoming almost standard in some segments of the industry. Furthermore, SFI is rapidly evolving toward a third-party monitoring norm, industry now acknowledging that the original certification programme may not satisfy customers’ concerns about the performance of firms.

The race for certification in the forest products sector has become an iterative game, and industry is on the defensive. Continuing pressure in the marketplace from carefully constructed NGO campaigns has forced the US forest products industry to scramble to protect its reputation. But NGOs, too, have had to scramble: as the industry has greened, it has taken some of the wind out of NGO’s sails. As the SFI has evolved in the US, for example, it has come to be a serious challenger to the FSC, more so because the FSC has had internal problems of its own. Like many NGO initiatives, FSC was launched ‘when the ship was only half built’ (9 March 2001, personal communication), and the NGO community has had a difficult time keeping it afloat. Industry resources far outnumber NGO resources, and it is only the resonance of NGOs’ claims with the public, and their appearance of superior moral legitimacy, that allow them to fight such an effective fight against a wealthy industry. NGOs have had to learn very rapidly what tactics are most effective, and against which particular targets. They now focus intensely on weak points in the supply chain, trying to gain maximum leverage with every inflatable dinosaur and every advertisement in the New York Times. It remains to be seen which of the multitude of certification institutions out there – SFI, FSC, PEFC, CSA – will reach the finish line first.

Endnote 1 According to the AF&PA, the product label was intended to be launched in Autumn 2001. The label indicates that a ‘procurement systems audit’ (not a chain-of-custody audit) has been performed. The AF&PA argues that chain-of-custody auditing is close to impossible for products such as paper, which are produced at centralized mills that receive wood pulp from multiple sources.

References Cashore, B. (2002) Legitimacy and the privatization of environmental governance: how non state market-driven (NSMD) governance systems gain rule making authority. Governance 15(4), 503–529

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Chatterjee, P. and Finger, M. (1994) The Earth Brokers. Routledge, London, 191 pp. Florini, A. (ed.) (2000) The Third Force: The Rise of Transnational Civil Society. The Carnegie Endowment for International Peace, Washington, DC, 295 pp. Garcia-Johnson, R. (2001a) Multinational corporations and certification institutions: moving first to shape a green global production context. Paper presented at the International Studies Association Convention, Chicago, 20–24 February. Garcia-Johnson, R. (2001b) Certification institutions in the protection of the environment: exploring the implications for governance. Paper presented at the 23rd Annual Research Conference of the Association for Public Policy, Analysis, and Management, Washington, DC, 1 November. Gereffi, G. (1999) A commodity chains framework for analyzing global industries. Draft paper. Gereffi, G., Garcia-Johnson, R. and Sasser, E. (2001) The NGO–industrial complex. Foreign Policy July/ August, 56–65. Haufler, V. (2001) A Public Role for the Private Sector. Carnegie Endowment for International Peace, Washington, DC, 160 pp. Howard, J., Nash, J. and Ehrenfeld, J. (1999) Industry codes as agents of change: responsible care adoption by US chemical companies. Business Strategy and the Environment 8, 281–295. Hutson, A. (2001) ISO 14001 and the American automobile industry in Mexico. Master’s project, Nicholas School of the Environment, Duke University, Durham, North Carolina. Hyden, G. (1997) Building civil society at the turn of the millennium. In: Burbidge, J. (ed.) Beyond Prince and Merchant. Pact Publications, New York, pp. 17–46. Jenkins, M.B. and Smith, E.T. (1999) The Business of Sustainable Forestry. Island Press, Washington, DC, 356 pp. Keck, M.E. and Sikkink, K. (1998) Activists Beyond Borders: Advocacy Networks in International Politics. Cornell University Press, Ithaca, New York, 228 pp. Keohane, R.O. and Nye, J.S. Jr (eds) (1971) Transnational Relations and World Politics. Harvard University Press, Cambridge, Massachusetts, 428 pp.

Kolk, A., van Tulder, R. and Welters, C. (1999) International codes of conduct and corporate social responsibility: can transnational corporations regulate themselves? Transnational Corporations 8(1), 143–180. Nash, J. and Ehrenfeld, J. (1997) Codes of environmental management practice. Annual Review of Energy and the Environment 22, 487–535. Prakash, A. (1999) A new-institutional perspective on ISO 14000 and responsible care. Business Strategy and the Environment 8, 322–335. Prakash, A. (2000) Responsible care: an assessment. Business and Society 39(2), 183–209. Princen, T. and Finger, M. (1994) Environmental NGOs in World Politics. Routledge, London, 262 pp. Risse, T. (2000) The power of norms versus the norms of power: transnational civil society and human rights. In: Florini, A.M. (ed.) The Third Force: the Rise of Transnational Civil Society. The Carnegie Endowment for International Peace, Washington, DC, pp. 177–209. Sasser, E., Garcia-Johnson, R. and Gereffi, G. (2002) Private regulation: the role of firms and NGOs in the development of certification institutions. Duke University Project on Social and Environmental Certifications, Working Paper No. 3 (in press). Schwartz, P. and Gibb, B. (1999) When Good Companies Do Bad Things. John Wiley & Sons, New York, 194 pp. Vogel, D. (1978) Lobbying the Corporation. Basic Books, New York, 270 pp. Wapner, P. (1996) Environmental Activism and World Civic Politics. State University of New York Press, Albany, New York, 238 pp. Willetts, P. (1998) Political globalization and the impact of NGOs upon transnational companies. In: Mitchell, J.V. (ed.) Companies in a World of Conflict: NGOs, Sanctions, and Corporate Responsibility. Earthscan, London, pp. 195–226. Witte, J.M., Reinicke, W.H. and Benner, T. (2000) Beyond multiculturalism: global public policy networks. International Politics and Society 2. http:// www.fes.de/IPG/jpg2_2000/artwitte.html

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1Forest

Company Choices on Sustainable Forestry Forest Certification: the Case of JD Irving, Ltd James Lawson1 and Benjamin Cashore2

Policy Center, School of Forestry and Wildlife Sciences, Auburn University, Auburn, AL 36849-5418, USA; 2Global Institute for Sustainable Forest Management, Yale School of Forestry and Environmental Studies, 360 Prospect Street, Room 34, New Haven, CT 06511-2189, USA

One of the most important developments in the globalization of forest policy has been the development of international and domestic forest certification systems that recognize individual forest companies for practicing ‘sustainable forest management’ (SFM) according to predefined rules (Fletcher and Hansen, 1999; Sasser, 2001). Forest certification is part of a wider emergence of ‘non-state sanctioned, market-driven’ (NSMD) governance systems, in which different stakeholders create incentives for forest managers to conform to distinctive standards or procedures in forest management (Cashore, 2000). Under these systems, government neither grants nor cedes its traditional sovereign policy making authority. Instead, these mechanisms hold authority through the conscious decisions of individual companies to participate in the face of both ‘carrot’ and ‘stick’ incentives. Under NSMD, the market’s supply chain is the institutional setting for broad-based struggles over environmental rules. This chapter addresses the emergence of NSMD by exploring the choices JD Irving made about forest certification in the Canadian Maritimes1 and US Northeast.2 JD Irving is one of the first North American forest companies to support the international, environmental groupsupported Forest Stewardship Council (FSC). Irving’s position was unique: most other forest

companies in the US Northeast either hesitated to support any programme, or supported industryinitiated ones. Yet Irving eventually withdrew its commitment to the FSC in the Maritimes, while maintaining its support for the FSC in the Northeast. These two regions share similar forest ecosystems, forest management problems caused by spruce budworm infestations, high private forestland ownership, and clientelistic forest policy communities. Why the same company, operating in similar regions, would make such different choices is important to students of sustainable forest policy, corporate greening (Sharma, 1998; Vertinsky and Zietsma, 1998; Prakash, 1999, 2001), and policy instruments (Howlett, 2000), as well as to those involved first-hand in the forest certification issue. This chapter seeks to explain these two stages of decision making through an historical analysis. We turn to organizational sociology’s literature on corporate greening, and political scientists’ work on historical institutionalism and policy subsystems, to develop five explanatory hypotheses. The first two explain Irving’s initial proactive and supportive approach in both regions, while the latter three address the later divergence. JD Irving originally committed to the FSC for defensive and proactive reasons: it sought to answer critics of its forest practices by adopting the

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very standard that most environmental groups supported; but it also saw in the FSC an opportunity to distinguish itself from its competitors. Yet the same issues that led some groups to criticize Irving’s forest practices – and policy choices made in traditional public policy processes – also drew some of Irving’s strongest critics into the FSCMaritimes process. On the other hand, many of the environmental and other groups that entered the FSC-Northeast process had a slightly different agenda than some of their counterparts in the Maritimes, and saw the FSC process as another multi-stakeholder tool with which to negotiate changes in forestry in closer collaboration with industrial forestry interests. As we detail below, the result of these dynamics was that Irving remained committed to the FSC-Northeast, but felt excluded from the FSC-Maritimes and withdrew. Our overall argument is that these differences in support are due to the way industry/environmentalist relations in the public policy process can ‘spill over’ to these new ‘private governance’ initiatives. In this case these spill-over effects led to differences in each region’s decision making processes and ultimately very different regional standards. The chapter proceeds in four parts. First, it reviews the development of forest certification and the FSC. Secondly, it develops the five explanatory hypotheses. Thirdly, it illustrates their validity through a step-by-step historical account. It concludes by reflecting on the implications for the future of NSMD governance.

Emergence of the Forest Stewardship Council (FSC) and Competitor Programmes Forest certification first emerged as an international force after the failed global forest convention at Rio (Humphreys, 1996, 1999; Lipschutz, 2001). By 1993, environmental non-governmental organizations (ENGOs), retailers and other social organizations had responded by creating the FSC, now headquartered in Oaxaca, Mexico, and then sought to use market incentives to force forest managers to comply with its sustainable forest management rules (Moffat, 1998; Elliott, 1999; Forest Stewardship Council, 1999b; Romano, 2000).

As a market-based ENGO strategy, the FSC stepped beyond traditional boycotts, because it offered a ‘carrot’ for compliance alongside the traditional ‘stick’ of boycott campaigns. The FSC is noted for: (i) prescriptive performance-oriented standards; (ii) a broad economic, social and environmental scope to the standards; (iii) third-party certification of voluntary compliance; (iv) an institutionalized corporatist-style international decision making structure; and (v) chain-ofcustody and ecolabelling programmes. Point (iv) covers an important decision making feature: social, environmental and economic chambers, themselves divided equally between developing and developed countries, are each given one-third of the votes at the international policy making level. This feature is intended to leave no one stakeholder group dominant. The FSC’s ten international principles and criteria are designed to guide national and regional standards development. The latter generate the more specific rules governing forest management. As a result, separate regional standards-setting processes – and decision making structures – are central to FSC operations. As the FSC has grown, various forest industry and landowner associations have created national programmes that compete with it. In the USA, the American Forest and Paper Association (AF&PA) has created the Sustainable Forestry Initiative (SFI); and in Canada, the Canadian Pulp and Paper Association (CPPA) contributed to the Canadian Standards Association’s (CSA) programme. Both build on the International Organization for Standardizations’ (ISO) flexible, process-oriented systems and, while supported by firms and some landowners, have found efforts to gain support from environmental groups and buyers groups more difficult (Clancy and Sandberg, 1997; Vogt et al., 1999; Balsillie, 2000). In developing policy, each programme has a distinctive number of organizational levels and opportunities for stakeholder input: many are national, single-stakeholder initiatives, though they often consult more widely. Thus, this story is not a window into universal patterns in all programmes; rather, it investigates one programme in a wider, evolving relationship. Competition has provoked changes to each kind of programme. The FSC has made some principles more palatable to industry; the SFI has systematized many of its once-flexible rules, and has shared some policy making authority. In the

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two regions we discuss, there were notable differences in the FSC’s main competitor, and therefore in the pressures for change. In Canada, the commitments the CSA demanded of certifying firms were relatively high, without offering strong ENGO endorsement or strong international name recognition (Clancy and Sandberg, 1997; Moffat, 1998; Elliott, 1999). The FSC became the initial centre of certification politics in the Maritimes, but never won broad support from landowners or large industrial forest companies, in the Maritimes, most of whom became certified under ISO’s 14001 Environmental Management System (Canadian Sustainable Forestry Coalition, 2001), which unlike the CSA, contain no rules governing forest management. In the USA, by contrast, the most popular option has been the industry-backed SFI (McNulty et al., 2000–2001; Sustainable Forest Project, 2000; Sustainable Forestry Initiative (SM), 2000). Recent changes in standards and third-party certification appear to have increased the SFI’s credibility among some conservation-oriented ENGOs, leading retailers, and some other stakeholders who had originally only supported the FSC.

Explanatory Hypotheses Just why some firms choose to become proactive environmental innovators when responding to outside pressure, while other firms either conform or resist, has been subject to significant scrutiny among organizational sociologists (DiMaggio and Powell, 1991; Oliver, 1991; Sharma, 1998) and political scientists (Prakash, 1999, 2001; Cashore and Vertinsky, 2000). We address these literatures, both in Irving’s early choice to distinguish itself by supporting the more prescriptive FSC, and in its subsequent decision to differentiate its support. As to Irving’s initial move to establish itself as a leader in sustainable forestry, three factors from the literature are important: the organizational culture and structure that mediate firm-level choices (Prakash, 2001), leadership and personnel changes (Vertinsky and Zietsma, 1998), and the structure of a firm’s external environment (DiMaggio and Powell, 1991; Oliver, 1991). The environmental factor has been explored extensively within organization theory’s neoinstitutional (Scott, 1987; Zucker, 1987; Greening,

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1992; Greening and Gray, 1994; Jennings and Zandbergen, 1995), stakeholder (Caroll, 1989; Brenner and Cochran, 1991), and resourcedependency theorists (Rowley, 1997). DiMaggio and Powell (1991) have explored how firms internalize pressures: coercive, normative or mimetic pressures can result in a process of ‘isomorphism’. Oliver (1991) has theorized that a complex external environment with competing prescriptions and pressures is more likely to provoke resistance than a response. Sharma (1998) and Sharma and Vredenburg (1998) have likewise addressed cases in which firms go beyond merely responding to existing pressures, to attempt to be seen as proactively green. All three factors played a role in our story. The family-owned JD Irving was known for swift decision making and implementation; earlier research suggests that family-ownership would also increase Irving’s incentive to protect its name against criticism (Raizada, 1998; Cashore and Vertinsky, 2000; Cashore et al., 2001). New leadership sought out a longer-term solution to these conflicts, which FSC certification appeared to provide. Any company wishing to be seen as an environmental leader in an industry already growing in its support for the SFI, would arguably have to be drawn to the more prescriptive FSC.

Hypotheses accounting for initial Irving decision to support FSC Reflecting these dynamics, we hypothesize that:

•

•

Hypothesis 1 – when a specific firm has been targeted in a sector by environmental groups and other stakeholders to adopt green policies, it is more likely to take proactive responses to new greening initiatives than competitors who have been shielded from such pressure. Hypothesis 2 – when an industry sector generally accepts NSMD governance systems but multiple systems exist, firms that want to be seen as proactive are more likely to accept ‘stricter’ systems, in order to differentiate themselves from their competitors.

Political science’s work on existing governance and regulatory regimes provides additional insight for hypotheses about ‘green reversals’ –

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companies withdrawing their support. Reflecting findings by Porter and van der Linde (1995) about the impact of regulatory frameworks on company choices to pursue innovation, Prakash (1999, 2001) and Cashore and Vertinsky (2000) have found that the existing policy climate has strongly mediated firm-level choices under these pressures. Likewise, environmental and other groups (such as ENGOs) may be less likely to facilitate a firm’s commitment to being green insofar as strong historical animosity has existed. We will develop three hypotheses, building deductively on the above literatures and inductively from the Irving case.

Hypotheses accounting for Irving’s divergent responses in Canadian Maritimes and US Northeast

•

•

•

Hypothesis 3 – environmental and other groups are more likely to accept and facilitate a proactive firm’s efforts to adopt the stricter NSMD governance system when there has already been a history of public/private collaborations in the subsystem. Hypothesis 4 – environmental and other groups are less likely to accept and facilitate a proactive firm’s efforts when traditional public policy networks in the subsystem have been closed historically to non-industry interests. In such cases environmental and other groups are more likely to use the emerging NSMD governance system as a way to contain industry interests, in an effort to overcome the limits of their influence in the public policy subsystem. Hypothesis 5 – a proactive firm will choose to remove its support for an NSMD governance system when it believes it is being excluded from the policy making process and choices over specific rule development.

We now illustrate and develop these hypotheses through the Irving case.

JD Irving Headquartered in Saint John, New Brunswick, Canada, JD Irving is part of the family-owned Irving group with multiple interests. As of August

1999, Irving managed over 2 million ha of woodland, around 15 sawmills, six pulp and paper mills, and some 3000 people. In the Maritimes, its economic and political influence is legendary. One of about 12 dominant firms in Maine’s Northern Forest, Irving Woodlands holds about 607,000 ha there (Banville, 1999; JD Irving Ltd, 2000b, c). The firm’s widely acknowledged initial commitment to the FSC went against the early industry taste for competitor programmes (Boetekess et al., 2000). It achieved early certification in both regions: the Black Brook lands in northwestern New Brunswick (announced 8 October 1998); and the Allagash lands in Aroostook County, Maine (announced 1 June 2000) (JD Irving Ltd, 1998, 2000d). Irving’s motivations appear to be complex. First, as a mid-sized international price-taker, Irving had economic interests: it wanted to lead in a differentiated certified wood products market, and it was influenced in its thinking by a US client, Home Depot (JD Irving Ltd, 1998, 2000d; Caulfield, 1999; Forest Stewardship Council, 1999a; Carlton, 2000). But secondly, some report that it was not merely responding to external market pressures. Instead, it pursued certification proactively and before market pressures were heavy, precisely to distinguish itself as an environmental leader. A suggestion of more complex motivations is that the timing of its earliest contact with Home Depot began in 1993, before that firm’s 1999 commitment to purchase FSC-certified wood. Thirdly, though it would not abandon clearcuts or biocide use, other changes suggest it was working to merge its business and environmental strategies. For Irving, the certification process brought in outside expertise that was a potential catalyst for internal change. During the late 1990s, it made large land acquisitions in Maine (JD Irving Ltd, 2000a), and bought hardwood mills for the US market (Banville, 1999). In Chuck Gadzik, it recruited an advocate of workable, sustainable forest management from Maine’s forest service to be its chief US forester (Dobbs and Ober, 1996). Fourthly, several debates had led certain audiences to contest Irving’s ‘greenness’ and social responsibility. Under the wide-ranging FSC principles and criteria, certification would have seemed to be a way of dampening such criticisms. We now turn to the debates in this public policy background, and then to the FSC procedures that channelled debate into a substantially new governance mechanism.

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Differences in prevailing policy issues The Canadian Maritimes and the US Northeast have frequently faced similar forestry problems, but have approached them in different ways. In these debates, Irving has often been both a target of concern and an influential player; they gave it multiple external incentives to seek FSC certification, but they also created substantially different regional climates within which to realize Irving’s goals. Other stakeholders perceived their own influence over public policy formation, and the level of public policy innovation, in different ways in these areas in the two regions. These differences affected the respective standards-setting processes, and ultimately forest certification standards and choices. First, the intense spruce budworm infestations of the 1970s and 1980s generated quite different lead policy debates. In the Maritimes, pesticide spraying to combat the budworm lasted into the 1990s, and provoked a strong counter-reaction over risks to the environment, public health, and even some economic factors. Anti-spraying campaigners strongly believed that they had been shut out on this public issue for decades, especially in New Brunswick.3 By contrast, the Northeastern infestation had ended by 1986. Debate focused more on the impact on long-term timber supply, large-scale clearcutting during salvage work, and the accompanying increase in other intensive industrial forestry techniques. As we will see, some ENGOs and other stakeholders were drawn into multi-stakeholder processes on these issues. A second difference was in public policy conflict over otherwise similar land ownership patterns, notably involving large vertically integrated forest companies and small woodlot owners. In the Maritimes, a major debate arose over the price and supply of fibre that NIPF owners sold at the mills of vertically integrated firms. In the 1960s and 1970s, they had organized associations and sought marketing boards in response. One NIPF leader keenly felt at a disadvantage in influencing this public policy: The forest industry in [our province] is pretty well controlled by multinationals and large companies and through the control and the influence that they have on politicians and on bureaucracy, which controls so much of what happens. They know that woodlot owners will never really have any strength if they are not united and they

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manage to always get the organizations against each other: the details don’t really matter (personal interview).

Such issues also existed in the US Northeast. But given the geographical concentration of vertically integrated industry in the ‘Northern Forest’ (northern New York State, Vermont, New Hampshire and Maine) and smaller NIPFs in the southern and coastal areas, they were more commonly expressed through the public-policy issues of separate subregions. In particular, as we will see, traditional stakeholders in the Northern Forest responded to a wave of land sales and land parcel fragmentation with relatively fruitful dialogue, but these talks were oriented in part towards stemming the spread of smaller landownerships and part-time residents more typical of the South (Dobbs and Ober, 1996). Moreover, within the Northern Forest, some large interests, such as the Seven Islands Land Company and Baskahegan, were primarily privately held land managers. Without mills with fixed volume requirements to meet, they could focus more on the long-term value of their timberlands (Dobbs and Ober, 1996; McNulty et al., 2000–2001). Many of the private land managers were respected in business circles but this ‘conservative’ forest management strategy also impressed many ENGOs. This allowed a few companies to play a key mediating role. For instance, after its early certification in 1993, Seven Islands became an influential moderating force in the FSC-Northeast process (e.g. Floyd et al., 2001). Seven Islands’ certification led some – but not all – sustainableforestry advocates to see FSC certification as improving on-the-ground forest practices, creating a relatively hospitable climate for FSC certifications of large industrial companies like Irving’s. By contrast, Irving itself was the first large certification in the Maritimes, which led to concerns by some environmental groups that the FSC might recognize existing industrial forest practices, rather than forcing them upward. Finally, property rights and the public– private divide were debated in sharply different ways. Amidst the Maritimes standards development talks themselves, these issues centred primarily on the Mi’kmaq (Micmac) people, their claim to historic treaty rights to the forest and public land, and their acute sense of historical exclusion from Maritimes resource policy. Their on-shore claims

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confronted provincial governments, but also forest interests who, like Irving, harvested timber from the contested public lands (Canadian Broadcasting Corporation, 1998; Lagasse, 1998; Forest and Nicholas, 1999; Union of Nova Scotia Indians and Assembly of Nova Scotia Mi’kmaq Chiefs, 1999). In the US Northeast, property-rights issues centred on the large-scale land sales and fragmentation, during which Irving incidentally made large land purchases and assumed a more public profile.4 Private-forestland states such as Vermont and Maine debated the impact on traditional openaccess arrangements for local recreationists on private forestland, but this further stimulated subregional dialogue and innovation (Dobbs and Ober, 1996). By contrast, in New York State’s Adirondacks Park in the late 1980s, a new plan to regulate these trends sparked grievances among local residents about their property rights and their historic exclusion from park decisions (Dobbs and Ober, 1996).

Differences in decision making processes Irving also faced two substantially different experiences of FSC standards development. With respect to formal process in the US Northeast, decision making rules were clear, and were agreed early on. In the Canadian Maritimes, consensus decision making rules demanded subtle and discerning communications, and few backup procedures were arranged in advance. Different kinds and degrees of informal consensus also emerged. The US Northeast process developed an informal and collegial approach, while in the Maritimes, positions appeared more entrenched and focused on broad social and environmental concerns about the nature of industrial forestry itself, and the role of such firms in existing public policy processes. This consensus among industry critics in the Maritimes related directly to their perception of alternative change strategies. In the US Northeast’s Northern Forest, debates over timber supply and harvest techniques had fuelled public policy innovation, often winning ENGO support on the basis of multi-stakeholder negotiation. ENGOs (e.g. Johnson, 2000) appear to have been more predisposed to negotiation, in part because a relatively legalistic policy environment made

them more programme-oriented. Hence, the major Northeast ENGOs became stout FSC supporters (Bryan, 2000; Natural Resources Council of Maine, 2000; Wormser, 2000), but continued to consider other such policy instruments, whether public or private, on a pragmatic basis. While the Northeastern ENGO’s legislative frustration appears to have been intense, Maritimes ENGOs generally perceived that they had less routine influence in the public sphere. Their existing capabilities and achievements had stronger roots in oppositional grassroots campaigns (e.g. antispraying campaigns).

The US Northeast: a Relatively Smooth Standards Development Process FSC-Northeast standards development was launched amidst successive state and regional public policy reviews in the Northern Forest. In many ways, these state-sanctioned discussions predefined the subregional and the multistakeholder procedures at the core of the FSC’s regional standards development (FSC-Northeast and Reidel, 1999). Converging on a common budworm emergency and unprecedented sectoral change, industry and moderate ENGOs were drawn into dense public and private exchanges (Dobbs and Ober, 1996). All this strongly conditioned Irving’s certification decisions. A groundbreaking review of the Northern Forest came in the late 1980s, instigated initially by several well-placed US senators. The seminal USDA Northern Forest Lands Study (Harper et al., 1990) led to the Northern Forest Lands Council (1990–1994), a multi-stakeholder regional forum that addressed shoring up more traditional forest practices, communities and interests in the subregion (Dobbs and Ober, 1996). The various states followed up on this work. In Vermont, a relatively polarized debate ensued over biocides and clearcutting. In New Hampshire, a moderate multistakeholder experience emerged (Ryn, 1997), but the mixed Maine experience probably affected certification standards most. On one hand, the Maine Council of Sustainable Forest Management (MCSFM) reviewed the department of conservation and forest-practices law, again on a multi-stakeholder basis (McNulty et al., 2000–2001). Unlike provincial agencies in the

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Maritimes, it saw a formally sanctioned role for forest certification. On the other hand, in 1996, some ENGOs became convinced that multistakeholder, state-sanctioned strategies were exclusionary and would not bear substantial fruit. They launched the first in a series of forest referenda, which cut short the Council’s work. The referendum sponsors sought a direct legislated end to clearcuts and other trends in Northeastern forestry. The larger ENGOs at the state level were unconvinced. Indeed, they negotiated a compromise Forest Compact with state government and industry, which ran against both the status quo and the proposed alternative. The Forest Compact would have legislated more modest forest-practices reforms, monitoring and study; while envisioning exemptions for FSC-certified landowners from planned state audits (Anon., 1996). The Forest Compact nearly won a three-way referendum race; but even in defeat – and just as the US Northeast FSC standards development process was getting underway – it appeared to reshape public debate in the ENGOs’ favour (Dunning, 1998). The FSC process itself was kept deliberately quiet and business-like. The work of a generally moderate, technically experienced working group, and launched early in the life of the FSC, it was later characterized by the group’s sympathizers as a model of success (FSC-Northeast and Reidel, 1999). A procedural framework was put in place well before substantive controversies were broached. In subsequent meetings, mutual trust grew, and the formal voting rules informally gave way to a consensus method. But a clear early framework played an important role, shaping what and whom stakeholders like Irving confronted, and setting key measures of successful talks. The Northeast Working Group began as an initiative of the New England Environmental Policy Center (NEEPC), in consultation with FSC-US leadership, then headquartered in the region. (The Center’s vice president sat on the FSC’s international dispute resolution committee.) In October 1996, a trained forester was hired as regional coordinator, and began preparatory consultations. Stakeholders were reportedly eager to build on the wider atmosphere of negotiated public policy reform, with the additional advantages of a quieter, low-profile process. Organizers recruited individuals to the drafting committee who formally represented wider constituencies and wanted

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to build the FSC by reaching beyond single constituencies.5 Meanwhile, the NEEPC developed a 422-page resource manual and other supporting documents. Members’ initial responses were then compiled for the group’s first meeting on 25–26 August 1997, where formal procedures were also agreed. After multiple drafts had been reviewed and circulated, draft standards were announced in May 1998. By then, in Maine, referendum politics were altering state-level dynamics again. A runoff vote in 1997 narrowly defeated the Forest Compact, and key ENGOs in Maine spent much of 1998 organizing legislative initiatives on the same issues, though few were passed (McNulty et al., 2000– 2001; Natural Resources Council of Maine, 2001). Many of the leading ENGOs increasingly focused on the private arena and FSC forest certification. Between the industry’s assertion that major reform had been rejected by voters and ENGOs’ assertion that the need for reform was pressing, Maine legislators separately negotiated a special reporting relationship with the industry’s SFI. The wider atmosphere of reform and SFI’s private and flexible character all made this easier for industry to endorse than regulation or the FSC. The agreement intensified the perceived competitiveness between SFI and FSC. Meanwhile, from 1998, Irving was working on the Allagash FSC certification, which it now had few reasons to abandon. A hiatus had ensued in the regional standards process, apparently because of NEEPC personnel changes, but three more FSC standards-development meetings occurred, the last in January 1999. Substantively, the FSC negotiations focused on harvesting and silviculture on large landholdings, of primary concern to ENGOs and large businesses in the Northern Forest (FSC-Northeast and Reidel, undated), while chain-of-custody and ‘FSC marketing’ remained relatively minor. This centred attention on precisely those stakeholders who participated in the processes of the Northern Forest. The Maritimes crisis (see below) and the rising credibility of SFI also raised the costs of failure. Thus, amidst ENGO frustration with the public arena in at least one key state, and news of a worsening FSC crisis in the Maritimes, key FSC stakeholders had proved willing to work in this new private setting towards FSC standards that their business counterparts would accept.

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The Canadian Maritimes: a Volatile Context for Certification6 In the Canadian Maritimes, Irving was certifying while at the centre of a standards development process that gradually reached an ideological and procedural impasse. This outcome can be directly traced back to various perceptions of unresolved public policy conflicts, and more immediately to key procedural problems. While the public policy legacy created plausible motivations for Irving to prove its good intent through certification, they also drew some stakeholders to the FSC who viewed it as a new counterweight in the regional balance of power, a supplement to their own emphasis on public campaigns against an exclusionary and unsustainable public policy arena. Here one local ENGO activist assesses different strategies. But, yeah, for me, I definitely feel that it is the best decision in terms of strategy within the environmental community: pushing the governments to enact legislation . . . I think environmental companies gave up a powerful weapon [consumer boycotts] when they bought into the certification schemes because I don’t think they fully exploited the tactic to its logical conclusions. I think one of the reasons that industry has embraced certification is exactly to take the heat off of them (personal interview).

For some of these stakeholders, relatively high, wide-ranging FSC standards were more important than Irving’s agreement. The impasse can also be partly explained by some key procedural problems. First, as we have suggested, formal consensus decision making became dominant there from the start, with few backup rules to resolve the region’s entrenched disagreements. Reworking formal procedures later linked the number of seats each group should hold, and ultimately the regional legitimacy of the FSC itself, to the outcome of substantive debates. Second, Maritimes FSC rules left the representative role of key individuals unclear to many. This uncertainty led some ENGO participants to question the role of Irving. The Irving chief forester . . . has a private membership in the FSC . . . Irving [has] had all the advantages of being a member of the working group through their head forester, but when it comes to being accountable, it is only his answers:

he is personally reliable for his actions, but not the company (personal interview).

The role of environmental groups was also criticized. Boetekess et al. (2000) found that the Falls Brook Centre played triple roles as provider of office facilities, decision maker, and advocate (Boetekess et al., 2000) and that this led to frustration and confusion among stakeholders. In April 1996, some 175 people met to launch standards development, at roughly the same time as Irving’s first on-site inspections at Black Brook. Unlike the international and national levels of the FSC, the regional meeting organized as many as nine interest-based groups to appoint a representative Technical Standards Writing Committee (TSWC). This group met monthly for 2–3-day sessions over more than 2 years. Overwhelmingly, consensus procedures were used. Until talks finally collapsed, this succeeded, making votes by house unnecessary; more precise voting procedures and seating rules were accordingly neither developed nor used. Initially, the results appeared positive, in part by deferring the more controversial debates. Increasingly broad public consultations and standards consolidation occurred in August and November 1997, and again in May 1998. The process culminated on 23 June 1998, in a second, smaller review meeting.7 Then on 15 July 1998, a new Maritimes Regional Steering Committee (MRSC) was established to steer a final review of the standards, in the light of extensive TSWC public consultations, and seek their approval. The selection process became controversial, especially for the economic members. The Nova Scotia Forest Products Association (NSFPA), an association of medium-sized operations and a potential industrial-forestry ally for Irving, was prepared to commit to FSC principles and become eligible for voting FSC membership. However, two of its nominees fell out of the selection process, one reportedly because he was never contacted (Boetekess et al., 2000). This meant that future calls for representative reform came to be associated with a stronger voice for allies of industry.8 On 19–21 July, despite the absence of Irving’s lead executive on certification, the MRSC began and concluded its consideration of the TSWC consultation results, and also revised the proposed standards, all in its first meeting. On 1 August, it passed the results to the FSC Canada Working

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Group (CWG) for referral to FSC-International in September. Irving FSC members and their supporters interpreted this as particularly hasty and exclusionary. The CWG board called instead on the MRSC to revisit specific industry concerns, notably about key restrictions on industrial forestry: biocides, species conversion of forestland, and exotic species. Only in these matters, which had also been central to public policy debates, had consensus failed. Black Brook had been a technically superior exemplar of such practices, and Irving opened it to stakeholders, trying to justify at least some resort to these tools. By autumn, it could boast FSC certification for the site, and had launched ISO certification as well (JD Irving Ltd, 1999). Some observers who saw FSC as an NSMD route to more sustainable forestry considered Irving’s FSC certification a coup, proof to other industrial operations that FSC standards could be relevant to them. But a number of different sustainable-forestry and ENGO opinion makers also saw a disturbing degree of ecological transformation in Black Brook. The Sierra Club of Canada (SCC) appealed the certification; on its behalf, a member of the MRSC from a Cape Breton ENGO began to investigate biocide use at Black Brook (Brunsdon, 1999a; Sierra Club of Canada, 1999, 2000; Restino, 2000). The MRSC held increasingly polarized meetings during the autumn, with confusing results. A fleeting consensus on 11 November included: (i) a general ban on biocides, and (ii) case-by-case exceptions, approved by a regional technical committee (Boetekess et al., 2000). The next day, Irving’s leadership reportedly withdrew their consent, but the other members sought ratification anyway (Boetekess et al., 2000). To varying degrees, the 18 came to believe that this [the withdrawal] was just another instance of JDI throwing its substantial weight around. To [Irving’s chief forester and lead voice on the MRSC], it contributed to his perception that the Maritimes standards process, and the MRSC in particular, was stacked against his employer and other large forestry interests (Boetekess et al., 2000: 30).

Just under the surface of these antagonisms were deep mutual animosities and opposed perceptions that had built up for years. As one ENGO activist told us:

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The kinds of things that have been published by the industry about environmentalists, it has slowed down progress over the years. You don’t just bury that stuff overnight . . . There have been a lot of things said, and there is a definite lack of respect for our position. We learned to develop campaigns and tactics that took that into account. Having to sit down and reach consensus with the industry . . . it is really a tough one to pull off (personal interview).

For their part, Irving officials argued that a special interest local group, an anti-industry local group, has developed standards that clearly don’t have broad stakeholder support (B. Brunsdon, quoted in Canadian Broadcasting Corporation, 1998).

Indeed, those sympathetic to Irving believed that the Maritimes process had been ‘hijacked’ by exclusionary extremists. But many of those involved, including the Falls Brook leader and the woodlot owner cited below, clearly felt that substantial compromise in the FSC would simply reproduce the failings of a closed public-policy process. Well, [our province] is sort of a Banana Republic you know? . . . We give away our resources so that someone will give us jobs you know, and even today the politicians buy into that as quick and as easy as they did 40 or 50 years ago. It hasn’t changed a bit you know (personal interview). [M]aybe Irving isn’t used to making decisions with a broad, stakeholder committee (Jean Arnold in Canadian Broadcasting Corporation, 1999a).

This time, the CWG broadly accepted the draft standards on 24 November, and passed them on to the international level; at the same time, it sought guidance on some elements. On 18 December 1998, Irving appealed this decision; in January 1999, the FSC-International board endorsed the standards. But again Oaxaca set important preconditions that effectively reopened time-limited negotiations on biocides and other issues, and made the results subject to approval by its executive director (FSC-Maritimes, 2000: Annex 1, 55–56). Any substantial deviation from higher level FSC provisions would require ‘significant agreement by all relevant stakeholder groups’ and a review after 2 years. With reference to the Irving appeal, FSCInternational called for a Canadian disputeresolution process, launched on 22 February. Meanwhile, the MRSC met periodically over the

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preconditions, finding some solutions, but not on biocides. Other regional industrial interests began to voice support for Irving, and after years of hesitation sought to participate in FSC processes; Irving also consolidated its ISO credentials, with a final audit in March (JD Irving Ltd, 1999). But its leadership remained isolated on the MRSC, and FSC-Canada’s skeleton resources were overwhelmed by the mounting concerns of industry. When the MRSC majority referred the matter back to the CWG, the latter again requested renegotiation. Finally in September, the CWG endorsed a third referral (Boetekess et al., 2000). Meanwhile, the Canadian dispute resolution process rejected Irving’s appeal, but recommended procedural reform and standards review (FSCMaritimes, 2000: Annex 4, 59–60). In October, both these decisions were forwarded to the FSCInternational. In a November visit, an FSCInternational delegation confirmed reports of entrenched differences over the MRSC’s work. In the end, Oaxaca itself presented new wording for the key standards, consulted, and finally endorsed the results conditionally on 20 December 1999 (FSC-Maritimes, 2000: Appendix IV, 53–56). The text included a phase-out of biocides for certifying firms. But no time-frame was set for this; and the standard was subject to revision by a restructured regional body within the year (Boetekess et al., 2000). FSC-International reported that only JD Irving’s executives and one ENGO member openly objected to this solution. However, on 29 December, Irving broke with the FSC-Maritimes, publicly indicted it as unrepresentative and biased, and returned its Black Brook certification, appealing against the endorsement of the ‘flawed local standard’ (Brunsdon, 1999b; Canadian Broadcasting Corporation, 1999b). Key figures publicized the withdrawal and demanded a swift response (Boetekess et al., 2000). On 10 January 2000, FSCInternational announced an official inquiry and interim suspension of certifications, and promised a streamlined standards-development process and harmonized standards across the Canada–USA border (Johansson and Synnott, 2000). The FSC response did not enjoy uniform ENGO support. The SCC registered a new complaint about Black Brook in January, based on records of biocide use there that the FSC had specifically banned. (Irving argued that the chemical use was strictly experimental (Restino, 2000; Sierra

Club of Canada, 2000).) Top Irving executives continued to monitor the attempts to reconstitute the MRSC, and retained its other ties to the FSC, primarily through certification in the Northeast. Irving also remained committed to third-party certification, pursued other certification options with SFI and ISO, and said it would consider rejoining a suitably reformed FSC-Maritimes (Canadian Broadcasting Corporation, 2000). In short, a draft regional standard had advanced through the house-based, consensusdriven FSC process, in the face of vehement business opposition. The question then arises why FSC-International was prepared to move ahead. The most likely explanation appears to be that Oaxaca came to perceive the proposed standards as an interim element in a larger package. Since the latter included constitutional revisions and a new regional body to review the standards, the important matter became the poor stakeholder relations on the present committee. Other stakeholders might abandon a process that stalled much longer, and leave the entire region without an FSC structure. In Maine, Maritimes events influenced critics of both the FSC and Irving. Moderately committed stakeholders focused more attention on making the SFI competitive than on building the more moderate FSC-Northeast. In an unusual crossborder move, the SCC appealed against Irving’s Allagash certifications as well. Back in the Maritimes, intense efforts to form a new regional body culminated in Moncton the following summer. But, despite preparations, elections in the new economic chamber broke down, and the meeting ended with a split between small woodlot owners and industrial interests. To Irving, this outcome confirmed that the FSC-Maritimes held little promise. For its part, the FSC’s internal review of the Maritimes experience has forced a review of its internal procedures and external funding arrangements.

Conclusions Irving forged its initial commitment to the FSC in two regions that respectively became host to one of the FSC’s more harmonious standards development processes, and to one of the most controversial. Irving’s early decision to certify with

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FSC addressed critics over aerial biocide spraying, fibre supply and aboriginal rights (Hypothesis 1), but also outflanked the mounting industrial support for the less prescriptive SFI in the Northeast (Hypothesis 2). We have also seen that the issues that arose in the two regions were different, however, in ways that undermined the conditions for moderation and compromise in the FSCMaritimes. More generally, Irving’s interest in environmental leadership focused the attention of critics on it alone, rather than on the sector as a whole. Irving’s way to certification was facilitated in the Northeast by the existing developments in public policy dialogue, particularly in the Northern Forest (Hypothesis 3). There, some ENGOs and some large concerns had become willing and able to engage in dialogue with one another, if not always to agree. But in the Maritimes, Irving was increasingly affected by other stakeholders’ perceptions that the FSC was an occasion to counterbalance relatively closed public policy arenas (particularly in New Brunswick) with new, higher NSMD standards (Hypothesis 4). Committed to consensus as a method, the Maritimes process paradoxically attracted actors in profound disagreement over policy. This created the principal dynamics that led Irving to seek important changes in the draft standards, and reluctantly to abandon the FSC-Maritimes process (Hypothesis 5). The present research demonstrates the ongoing importance of public policy debates for NSMD mechanisms like the FSC during their own standards development period. It also demonstrates how NSMD outcomes for some regions can create spill-over effects in others, primarily through firms with cross-border and global strategies. In creating new policy regions, the FSC also created internal spill-overs, as when the biocides issue allowed the anti-spray campaigns of Nova Scotia to influence New Brunswick. Clearly, some actors in both regions are also prepared to be quite pragmatic about the choice between the public and the NSMD arenas. This suggests that more research must be done into developments across the public–private divide as new NSMD governance mechanisms emerge. Research is also necessary into the conditions in both public and private institutions that are necessary for NSMD programmes to establish a stable degree of influence over policy areas such as sustainable forestry, separate from their relationship with the public policy arena.

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Acknowledgements The authors wish to thank Deanna Newsom, several informants, and the anonymous reviewers for their helpful comments.

Endnotes 1 This region includes the provinces of New Brunswick, Nova Scotia and Prince Edward Island. 2 This region includes the states of New England (Maine, New Hampshire, Vermont, Connecticut, Rhode Island and Massachusetts) and New York. 3 Later, ENGOs achieved key anti-biocide goals in Nova Scotia, but more through campaigns than in dialogue with industry. 4 Land buy-backs for the Passamaquoddy Indians settled similar land claims in northern Maine in 1979 (Dobbs and Ober, 1996). 5 This also meant that other stakeholders were excluded and considered the representation narrow. 6 A special FSC Commission of Enquiry compiled a narrative of events in relation to this region’s FSC crisis (Boetekess et al., 2000). The following account generally follows its outline of events, though we do not commit ourselves to its conclusions. 7 All previous participants had been invited, but industry attendance was reportedly sparse. 8 Indeed, others felt that industry had decided to undermine the legitimacy of the process.

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Dynamic Analysis. Faculty of Commerce and Business Administration, Vancouver. Vogt, K., Larson, B.C., Gordon, J.C., Vogt, D.J. and Fanzeres, A. (1999) Forest Certification: Roots, Issues, Challenges, and Benefits, CRC Press, Boca Raton, Florida. Wormser, J. (2000) Opinion/Editorials: Timber industry’s SFI pure greenwash. Bangor Daily News. 9 March. Available at: http://pqasb.pqarchiver. com/bangor/ Zucker, L.G. (1987) Institutional theories of organizations. Annual Review of Sociology 13, 443–464.

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Improving Forest Management Through the Supply Chain: an Assessment of Wood Procurement Management Systems in the Forest Products Industry Stephen Harris and Rene Germain

State University of New York, College of Environmental Science and Forestry, Syracuse, NY 13210, USA

Introduction Non-industrial private forestlands (NIPFs) are a key supplier of raw materials to the forest products industry in the USA. In response to concerns regarding the sustainability of forest management on NIPFs (Nyland, 1986; Nilsson, 1999), forest products companies are striving to improve their wood procurement policies and practices. These concerns exist because of trends towards smaller ownerships, a general lack of knowledge or interest in forestry by owners of smaller holdings and the lack of forester involvement when these owners decide to harvest and sell their timber. In fact, loggers are often the first, and only, point of contact when a landowner decides to sell their timber (Birch, 1995; DeCoster, 1998). In addition, because most forest products firms procure a majority of their wood fibre on the open market directly from loggers and brokers, the quality of forest management associated with their raw material supply is often unknown. These are among the reasons that certification programmes, such as the Sustainable Forestry Initiative Program (SFI), require participating companies to adopt wood procurement policies and strategies. For example, the SFI standard requires participating companies to increase

their use of professionally trained loggers. It also encourages companies to initiate or renew public outreach and landowner assistance programmes as a means to improve forest management on NIPFs. Similarly, the Forest Stewardship Council (FSC) developed the concept of chain-of-custody as a means to assure consumers and the public that the wood products they purchase were procured from sustainable forests. While these are promising trends, the degree to which forest products firms are adopting management systems to improve forest management throughout their supply chain is unknown. Environmental management systems (EMS) are formal policies and procedures that define how an organization will manage its potential impacts on the environment and are critical for systematically maintaining, adapting and continuously improving environmental performance (ISO, 1998; Welford, 1998; Darnall et al., 2000). Through a nationwide survey, this study measured the development of wood procurement management systems designed to improve forest management on NIPFs and describes operations at different levels of development. We also provide some insight into which forest products operations have the greatest capability to improve forest management throughout their supply chain.

©CAB International 2003. Forest Policy for Private Forestry: Global and Regional Challenges (eds L. Teeter, B. Cashore and D. Zhang)

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Methods Selection of wood procurement practices To measure wood procurement management systems, wood procurement practices that lead to improved forest management were identified using the SFI standard and available literature (Stier et al., 1986; Lones and Hoffman, 1990; SFI, 1999). Informal interviews with wood procurement managers throughout the nation bolstered or added to the selection of wood procurement practices. The following practices guided questionnaire development. 1. Maintain written wood procurement policy. 2. Implement landowner assistance programmes. 3. Implement public outreach programmes. 4. Use professionally trained loggers. 5. Select wood dealers or timber brokers based on their use of professionally trained loggers. 6. Participation of procurement staff in continuing education. 7. Use defined standards when harvesting standing timber. 8. Monitor percentage of supply delivered by trained loggers and coming from lands managed with forester involvement.

Questionnaire development Corporate strategy research proposes that environmental policies, programmes and actions develop along a continuum from non-existent to highly formalized as a firm becomes more proactive in managing environmental issues (Hunt and Auster, 1990; GEMI, 1993; Darnall et al., 2000). The survey measured this development through summated rating scales. Summated rating scales combine several indicators to measure a broader latent concept that is assumed to have an underlying quantitative measurement continuum (Spector, 1992). Scales are more reliable than single questions because they can thoroughly describe complex concepts, whereas single questions oversimplify them. Furthermore, a series of questions measuring the same concept

are more precise because they more accurately differentiate between respondents. The wood procurement management system consisted of three distinct but interrelated attributes of an EMS drawn from the ISO 14001 Environmental Management System Standard. These attributes were: (i) policy and planning, (ii) implementation and operation, and (iii) monitoring and evaluation. Individual questions measured the implementation of every practice within each attribute, contributing to the overall development of that attribute (Table 24.1). Each attribute contributed to the overall development of the management system. Likert-scale responses allowed questions to be measured at some level of magnitude or strength not directly observable (DeVellis, 1991). The responses to the questions were based on 6- and 7-point scales. The underlying premise of the scale was the presence of formalized policies, operating procedures and methods for monitoring and evaluating performance within a given management system. Thus, a higher score was an indication of a more developed management system. Policy-related questions asked respondents to indicate, by their level of agreement with the statement, if the magnitude of policy and planning development described in the question applied to their operation. A ‘1’ indicated strongly disagree and ‘6’ strongly agree. Points ‘2’ and ‘5’ represented disagree and agree, while ‘3’ and ‘4’ represented mild disagreement or agreement. A 6-point scale was chosen because it lacked a neutral point, forcing people to decide their level of agreement with the statement (Presser and Schuman, 1980; Bishop, 1987). Responses to the implementation and operation and the monitoring and evaluation questions were on a 7-point scale that measured frequency, where ‘1’ meant never and ‘7’ always. Points ‘2’ and ‘6’ represented rarely and almost always, while point ‘3’ represented seldom and point ‘5’ most of the time. A ‘4’ represented a response of sometimes. Because the scales for each attribute were different, a proportion (the average proportion of the three attributes) served as the overall management system score. A higher proportion indicated more highly developed management systems. Four categorical thresholds were established to represent different levels of management system development.

Table 24.1.

Wood procurement management system with attributes and management practices in the questionnaire. Attributes

1. General policy 1. issues 2. Landowner 1. assistance 3. Public outreach

4. Forester throughout 1. supply chain 5. Supplier selection

6. Continuing 1. education 7. Standards for 1. harvesting standing 1. timber

Detailed, written procurement policy Communicate policy to suppliers Communicate policy to public Formal landowner assistance programme Formal public outreach programme

Purchase from loggers based on environmental performance requirements Timber brokers selected based on skill of loggers from which they buy wood

Detailed, written standards for harvesting standing timber

Implementation 1. Training and competence 2. Responsibilities and programmes 3. Ongoing monitoring

Monitoring and evaluation 1. Long-term monitoring 2. Review policies and procedures Review and set new objectives yearly

We have staff positions dedicated to landowner assistance Systematically distribute educational materials on forest management to landowners Systematically distribute educational materials on forest management to the general public Logs purchased by our operation come from lands managed by a forester Loggers supplying gatewood are paid more if professionally trained Loggers supplying gatewood have completed professional logger training Forestry staff participates in continuing education yearly Loggers harvesting stumpage have completed professional logger training Our operation uses foresters or forest technicians to purchase standing timber Logging contracts require BMP compliance

Evaluate effectiveness of landowner assistance programme Evaluate effectiveness of outreach programmes

Track percentage of wood supply from lands managed by a forester Track percentage gatewood from trained loggers Track total supply from trained loggers Staff evaluated for meeting environmental performance goals Inspect harvests of standing timber

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Practices

Policy and planning 1. Policies 2. Objectives 3. Communication

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Level of development Undeveloped Poor Moderate Well-developed

Score range 0.0–0.35 0.36–0.60 0.61–0.85 0.86–100.0

These thresholds correspond with the average response on the Likert scale. They are not absolutes, but guidelines along a continuum of development. Operations with undeveloped management systems rarely or never implement the practices measured within the survey. Poorly developed management systems are characterized by minimal policy development, inconsistent levels of implementation, and minimal monitoring and evaluation. Operations with moderately developed systems will implement most of the practices measured in the survey with some level of consistency within all three attributes. Operations with well-developed management systems will ‘always’ or ‘almost always’ implement every practice throughout the management system framework. Such operations will maintain defined policies and systematically implement, monitor and evaluate their wood procurement practices. The validity of the scales was assessed through expert review on two different draft surveys. The survey also collected data on categorical operations-specific characteristics to facilitate the descriptive analysis including participation in a forest management standard, ownership structure (e.g. public or private ownership), production capacity, number of employees and manufacturing type (e.g. sawmill, pulp and paper mill, or engineered forest products mill).

Sampling design Questionnaires with cover letters were sent to a random sample of 700 pulp and paper, engineered forest products, and sawmill operations drawn from 37 state forest products and three state industry directories, following techniques developed by Dillman (1978). To maintain the focus of the study on year-round operations, only mills producing more than 1,000,000 board feet or volume equivalent were included in the study. The required sample size was based on a desired sampling error of 5% and a sample frame population of 3498. The operations level, referring to an individual mill or a production complex

of mills, was chosen rather than the firm or subsidiary because operations of the same company can vary based on manufacturing technology and product mix (Stier et al., 1986). In addition, regional location can affect wood procurement and forest management practices, depending on land ownership patterns, forest type and the state’s regulatory atmosphere based on the comprehensiveness of policies and level of enforcement (Dillon and Fischer, 1992; Ellefson et al., 1995).

Statistical analysis One-way ANOVA was used to compare the mean wood procurement management system score across categorical demographic variables. An α value of 0.05 established statistical significance. When the ANOVA F-ratio indicated a significant difference in means, individual group differences were tested using Tukey’s honestly significant differences method. Contingency tables between the different levels of system development and categorical independent variables facilitated further descriptive analysis. Cronbach’s α coefficient was used to measure the reliability of the scales (Carmines and Zeller, 1979). Cronbach’s α may range from 0 to 1, where higher values indicate greater reliability. The reliability of all three scales was deemed sufficient (Table 24.2).

Results Out of 668 deliverable surveys, 264 usable surveys were returned, giving a 40% response rate. To assess the potential for non-response bias, 20 variables were tested for differences between early and late respondents as defined by the return date Table 24.2. Summated ratings scales for wood procurement with their associated Cronbach’s α coefficient.

Scales Policy and planning Implementation and operation Monitoring and evaluation

Number of items

Cronbach’s α

7 11

0.8376 0.7938

8

0.8775

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of the questionnaires. Three variables revealed significant differences. Early respondents were more likely to be publicly owned than late respondents (P < 0.005). Late respondents were more likely to have lower overall EMS scores within their wood procurement operations (P < 0.027) and less likely to adhere to a forest management standard (P < 0.032). Therefore, we suspect that our non-respondents generally have less developed management systems than our sample.

Demographic description of the sample Of the respondents, 81% were sawmills (n = 216). The remaining operations were split among pulp and paper mills (n = 24) and engineered forest products mills (n = 24). The average production was around 5–10 million board feet annually. The average number of employees was about 25–100. Forty-five respondents were from the Northeast, 135 from the Southeast, 53 from the Midwest, and 31 from the West. Of these 142 (54%) of the operations did not participate in a forest management standard, although 55 operations adhered to the Tree Farm programme standards. Of the 58 operations participating in the SFI Standard, 27 had also undergone a third-party assessment of their conformance to either the SFI Standard (10 operations), the International Organization for Standardization’s 14001 Environmental Management System standard (13 operations), and the Forest

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Stewardship Council’s principles and criteria for good forest management (4 operations).

Characterizing levels of development The distribution of EMS scores ranged from a low of 12 to a high of 99 (Fig. 24.1). Most of the operations (81%) fell in the middle range (poor to moderate) of management system development; 29 operations had undeveloped wood procurement management systems while 107 operations had poorly developed ones. In total, 111 operations were in the moderate stage of development and 14 operations in the well-developed stage. Operations participating in the SFI Program, or that had undergone a third-party conformance assessment to a forest management standard, had more developed wood procurement management systems than operations participating in the Tree Farm system or in no forest management standard (Table 24.3). Tree Farm participants had more developed management systems than operations that did not participate in any forest management standards. Operations adhering to the SFI standard and which underwent third-party assessments of conformance to SFI or ISO or the FSC standards were predominantly in the moderate stage (81 and 67%, respectively) of wood procurement management system development. Operations participating in the Tree Farm programme possessed poorly (50%) and moderately (40%)

Fig. 24.1. Number of operations within each stage of wood procurement management system development.

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Table 24.3.

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Level of wood procurement management system development by category. Level of management system development

Operations specific variables Forest Management Standard Ownership Production

Employees

Manufacturing type

None Tree Farm SFI Third-party Private Public 1–5 mmbf 5–10 mmbf 10–30 mmbf > 30 mmbf < 25 25–100 100–500 > 500 Saw Engineered Pulp and paper

Management system scale

Undeveloped

Poor

Moderate

Well

n

Mean

Standard deviation

25 4 – – 29 – 20 4 3 2 20 6 3 – 27 2 –

72 30 2 2 103 4 35 22 27 21 34 48 20 5 99 6 2

44 24 25 18 79 32 17 23 16 47 20 36 35 19 82 11 18

1 2 4 7 5 9 5 – 1 7 3 4 2 4 4 5 4

142 60 31 27 216 45 77 49 47 77 77 94 60 28 212 24 24

0.52a 0.58b 0.73c 0.79c 0.55a 0.75b 0.50a 0.57a 0.56a 0.68b 0.50a 0.58b 0.63b 0.72c 0.56a 0.67b 0.74b

0.16 0.16 0.11 0.13 0.10 0.17 0.19 0.14 0.15 0.13 0.19 0.15 0.15 0.11 0.16 0.20 0.9

Within a category, mean scores with shared letters are not significantly different.

developed management systems, while firms that did not participate in any standard were predominantly in the poor stage (51%). Privately owned operations had less developed wood procurement management systems than publicly owned operations (Table 24.3). Privately owned operations generally possessed poorly developed wood procurement management systems (48%), while publicly owned operations were moderately developed (71%). It is important to note that the majority of sawmills are privately held companies, while engineered wood products and pulp and paper operations are more likely to be publicly owned. Operations with a production capacity greater than 30 million board feet (mmbf) had significantly more developed wood procurement management systems than all other operations with 61% in the moderate stage of development (Table 24.3). There were no differences between all other production levels. Operations with lower production capacities were predominantly in the poor stage of system development. In terms of number of employees, operations with more than 500 employees had the most developed management systems, with 68% in the moderate stage of development. Operations with less than 25

employees had the least developed management systems, with 70% in the poor or undeveloped stages. In addition, 50% (15 operations) of the undeveloped group do not purchase standing timber, while 42% (12 operations) rely completely on the open market for their wood supply.

Development by manufacturing type Operations with undeveloped and poorly developed wood procurement management systems are predominantly privately owned sawmills (mean development score = 0.56) (Fig. 24.2), particularly if they have fewer than 100 employees and a production capacity of less than 30 million board feet (Table 24.3). The weaker performers do not adhere to any forest management standards or participate in the Tree Farm programme. Sawmills producing more than 30 million board feet and employing more than 100 employees account for most of the operations at the moderate stages of development. Operations in this stage are more likely to participate in the SFI Program or third-party certification. Of the three manufacturing types, this was the only sector in which

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Fig. 24.2. Number of sawmill operations within each stage of wood procurement management system development.

Fig. 24.3. Number of engineered wood products operations within each stage of wood procurement management system development.

publicly held operations (mean score = 0.72) out-performed privately owned operations (mean score = 0.55) (Table 24.3). The engineered wood products sector performed significantly better than the sawmills (Table 24.3), exhibiting a wide distribution of EMS scores (Fig. 24.3). Engineered wood products operations participating in the SFI Program or third-party certified had moderately developed EMS for wood procurement. The limited number of respondents (n = 24) did not produce significant results in terms of production levels and number of employees. Noteworthy, however, was the significantly higher EMS score for privately (mean score = 0.79)

versus publicly (mean score = 0.61) owned operations. The pulp and paper sector also performed significantly better than the sawmills, but not significantly different from the engineered wood products operations (Table 24.3). Whereas the sawmills were normally distributed across the continuum (Fig. 24.2), and the engineered wood products were widely distributed (Fig. 24.3), the pulp and paper sector was skewed to the moderate to well developed location of the continuum (Fig. 24.4). Similar to the other sectors, participation in the SFI Program or third-party certification yielded significantly higher EMS scores versus participation in

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Fig. 24.4. Number of pulp and paper operations within each stage of wood procurement management system development.

Tree Farm or no participation. We suspect that the limited number of respondents (n = 24) contributed to the lack of significant differences in terms of production level and number of employees categories. The EMS scores were nearly identical for privately (mean score = 0.74) versus publicly (mean score = 0.75) owned operations.

Discussion The distribution of EMS scores across the industry suggests that management systems for wood procurement operations are still a relatively new phenomenon. Few operations have well-developed management systems, while half of the sample is collectively in the poor and undeveloped stage. Given that the non-respondent bias analysis indicated that non-respondents were more likely to have lower overall EMS scores within their wood procurement operations, we suspect that this study may actually overstate EMS development for wood procurement. The results are consistent with the history of supply chain management, which has traditionally focused on the ‘ends’ of securing and maintaining wood fibre rather than the ‘means’. Forest products industry managers have only recently begun to evaluate the ‘means’ by which they secure inventory, a trend similar in all industries (Porter, 1985; Riggs and Robbins, 1998; Welford, 1998). Much of this has to do with the relative ease of

obtaining their wood fibre supply during most of the 20th century. Today, however, a wide host of factors such as the increasing demand for wood products, societal demands for sustainable forest management, increasing fragmentation and parcelization of timberlands, further conservation of private lands, and growing evidence of diameter limit cutting and high-grading are all conspiring to limit available wood supplies (Fajvan et al., 1998; Nilsson et al., 1999; Alig et al., 2000). ‘Just getting the wood to the yard’ is no longer an effective procurement strategy. The study results suggest that wood procurement managers are beginning to incorporate a systems approach. Specifically, larger scale operations adhering to the SFI or a third-party standard had the most developed wood procurement management systems. The positive role of the SFI Program is not surprising as it is the only standard that explicitly addresses wood procurement practices. Many of the individual wood procurement practices within the SFI Program, particularly the use of trained loggers to deliver wood fibre, are fast becoming accepted practices within the industry. However, the state of wood procurement management systems within this group should be viewed in light of the type of operation that is a member of the American Forest and Paper Association – mostly large pulp and paper operations, many of which have undergone third-party assessments of their conformance to a forest management standard. Furthermore, it is important to note that these large firms have been under the most public and

Assessment of Wood Procurement Management Systems

government pressure to improve their environmental performance, from air and water emissions in the 1970s to forest management issues in the 1990s (Lent et al., 1998). The SFI Program is now serving as a primary vehicle for these firms to regain public confidence in how they manage both their own forestlands as well as the increasingly strategic NIPFs. In addition, the human, financial and organizational resources available to larger operations enable them to make the investments in time and money needed to implement improved wood procurement practices. Mills with production capacities greater than 30 mmbf (or volume equivalent) require more sophisticated management systems to support and maintain a larger procurement staff. In contrast, mills producing less than 30 mmbf, particularly operations in the 10 mmbf range, tend to be small, family-owned sawmill businesses with a thin layer of management that must focus their resources on maintaining the technology required to maximize productivity and ultimately profitability (Barrett et al., 1996). Wood procurement staff are often too consumed with the day-to-day challenges of securing high quality logs to dedicate resources towards developing an EMS for wood procurement. Exacerbating the matter, rising stumpage and log costs are translating into narrowing profit margins, making it increasingly difficult to focus on improving wood procurement practices. This lack of financial and people resources is a major reason why smaller firms in most industries are resistant to environmental regulation and initiatives (Harris, 1985; O’Laoire and Welford, 1998). The opportunity for movement up the developmental scale seems limited since procurement, in general, puts more strain on earnings than most anything else in a business, including labour and overhead (Porter, 1985). Again, this is particularly so for sawmills, due to the high cost of logs and the fact that sawmills have a narrower range of options to meet their supply needs compared with pulp and paper and engineered forest products mills. The later two can utilize a wide spectrum of resources to meet their needs, such as low-grade roundwood, recycled fibre, chips and fibre from short-rotation, high-yield plantations. In contrast, sawmills are limited to sound logs capable of producing marketable wood products such as spruce–fir framing lumber, white pine boards or hardwood dimensional lumber. However, even small incremental

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improvements in wood procurement management systems can make a positive contribution to longterm supply issues for sawmills. Improved stewardship and increased productivity on NIPFs within a mills’ woodshed will provide greater assurance of a reliable supply of higher quality wood from sustainably managed forests in the future. This is important, since sawmill operations customarily serve one geographical region and depend on that area for their timber supply (Propper de Callejon et al., 1998). Relevant to all industries is the fact that improving general environmental performance is gradually becoming a standard business-tobusiness requirement (Tibor and Feldman, 1998; Darnall et al., 2000). For example, large corporations (e.g. in the automobile or chemical industries) are requiring their suppliers to implement and certify environmental management systems. At the retail end of the forest products industry, the home improvement sector is beginning to develop procurement policies that favour wood products that come from forests known to be sustainably managed (Lober and Eisen, 1995). If such policies become common throughout the retail sector of forest products, than the quality of wood procurement practices may dictate market access (Jenkins and Smith, 1998). Wood procurement practices will continue to become increasingly relevant to the sustainable management of forest resources for all segments of the forest products industry. Those forest products operations that continue to develop their wood procurement management systems to improve forestry practices on all forestlands will improve their productivity as well as short- and long-term competitiveness. To further facilitate the improvement of wood procurement management systems across the industry, future research efforts should focus on testing wood procurement strategies that simultaneously lead to costs savings and improved forest management. This will be particularly critical to the sawmill operations that currently lack the resources to incorporate EMS for wood procurement.

References Alig, R.J., Butler, B.J. and Swenson, J.J. (2000) Fragmentation and national trends in private forest lands: preliminary findings from the 2000 Renewable Resource Planning Act Assessment. In:

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Proceedings of Fragmentation 2000 Conference – Sustaining Private Forests in the 21st Century, 17–20 September 2000. Annapolis, Maryland. Barrett, R., Barrett, G. and Johnson, A. (1996) The hardwood sawmill today – industry survey reveals some interesting trends. Weekly Hardwood Review January 22. Available at: http://www. hardwoodreview.com Birch, T.W. (1995) The private forestland owners of the United States, 1994. Resource Bulletin NE-134, USDA Forest Service, Northeastern Forest Experiment Station, Radnor, Pennsylvania. Bishop, G.F. (1987) Experiments with the middle response alternative in survey questions. Public Opinion Quarterly 51, 220–232. Carmines, E.G. and Zeller, R.A. (1979) Reliability and Assessment. Sage University Paper 17. Sage Publications, Beverly Hills, California. Darnall, N., Ringling Gallagher, D., Andrews, R.N.L. and Amaral, D. (2000) Environmental management systems: opportunities for improved environmental and business strategy? Environmental Quality Management 9, 1–9. DeCoster, L.A. (1998) The boom in forest owners – a bust for forestry? Journal of Forestry 96(5), 24–28. Devellis, R.F. (1991) Scale Development: Theory and Applications. Applied Social Research Methods Series 26. Sage Publications, Newbury Park, California. Dillman, D.A. (1978) Mail and Telephone Surveys: the Total Design Method. John Wiley & Sons, New York. Dillon, P.S. and Fischer, K. (1992) Environmental Management in Corporations: Methods and Motivations. Tufts Center for Environmental Management, Medford, Massachusetts. Ellefson, P.V., Cheng, A.S. and Moulton, R.J. (1995) Regulation of private forestry practices by state government. Station Bulletin 605-1995. Minnesota Agricultural Experiment Station. University of Minnesota, St Paul, Minnesota. Fajvan, M.A., Grushecky, S.T. and Hassler, C.C. (1998) The effects of harvesting practices on West Virginia’s wood supply. Journal of Forestry 96(5), 33–39. Global Environmental Management Initiative (1993) Environmental Self-assessment Program. Global Environmental Management Initiative, Washington, DC. Harris, R.A. (1985) Business responses to surface mining regulation. Research in Corporate Social Performance and Policy 7, 73–101. Hunt, C.B. and Auster, E.R. (1990) Proactive environmental management: avoiding the toxic trap. Sloan Management Review 31(2), 7–18. International Organization for Standardization (1998) Information to Assist Forestry Organizations in the Use of Environmental Management System Standards ISO 14001 and ISO 14004. ISO/TR 14061. International Organization for Standardization, Geneva.

Jenkins, M.B. and Smith, E.T. (1998) Meshing operations with strategic purpose. In: Jenkins, M.B. and Smith, E.T. (eds) The Business of Sustainable Forestry: Strategies for an Industry in Transition. Island Press, Washington, DC. Lent, T., Propper de Callejon, D., Skelly, M. and Webster, C. (1998) Sustainable forestry within an industry context. In: The Business Of Sustainable Forestry: Case Studies. The Sustainable Forestry Working Group. The John D. and Catherine T. McArthur Foundation. Available at: http://www. islandpress.org/ecocompass/macarthur/ execsum.html# Sustainable Forestry Within an Industry Context Lober, D.J. and Eisen, M.D. (1995) Retailing, certification and the home improvement industry. Journal of Forestry 93(4), 38–41. Lones, J.R. and Hoffman, B.F. (1990) Wood procurement practices in Maine. Forest Products Journal 40(1), 25–28. Nilsson, S., Colberg, R., Hagler, R. and Woodbridge, P. (1999) How Sustainable are North American Wood Supplies? Interim report. International Institute for Applied Systems Analysis. Available at: http://www.iiasa.ac.at Nyland, R.D. (1986) Exploitation and greed in the eastern hardwood forests. Journal of Forestry 90(1), 33–37. O’Laoire, D. and Welford, R. (1998) The EMS in the SME. In: Welford, R. (ed.) Corporate Environmental Management: Systems and Strategies. Earthscan Publications, London. Porter, M.E. (1985) Competitive Advantage. The Free Press, New York. Presser, S. and Schuman, H. (1980) The measurement of a middle position in attitude surveys. Public Opinion Quarterly 44(1), 70–85. Propper de Callejon, D., Lent, T., Skelly, M. and Crossley, R. (1998) Marketing products from sustainably managed forests: an emerging opportunity. The Business of Sustainable Forestry: Case Studies. The Sustainable Forestry Working Group. The John D. and Catherine T. McArthur Foundation. Available at: http://www.islandpress. org/ecocompass/macarthur/execsum.html# Sustainable Forestry Within an Industry Context Riggs, D.A. and Robbins, S.L. (1998) The Executive’s Guide to Supply Chain Management Strategies. American Management Association. Available at: http:// www.amanet.org/books/catalog/0814403859. htm SFI Program (1999) The Sustainable Forestry Initiative Program. The American Forest and Paper Association. Available at: http://www.afandpa.org Spector, P.E. (1992) Summated Rating Scale Construction: an Introduction. Series in Quantitative Applications in the Social Sciences 82. Sage Publications, Newbury Park, California.

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Stier, J.C., Steele, T.W. and Engelhard, R.J. (1986) Pulpwood procurement practices in the Wisconsin–Upper Michigan pulp and paper industry. Northern Journal of Applied Forestry 3, 10–14. Tibor, T. and Feldman, I. (1998) Introduction to ISO. In: Russo, M.V. (ed.) Environmental Management:

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Perspectives on Forest Certification: a Survey Examining Differences Among the US Forest Sectors’ Views of their Forest Certification Alternatives Graeme Auld,1 Benjamin Cashore2 and Deanna Newsom3

1University

of British Columbia, Department of Forest Resources Management, Vancouver, British Columbia, Canada V6T 1Z4; 2Global Institute for Sustainable Forest Management, Yale School of Forestry and Environmental Studies, New Haven, CT 06511-2189, USA; 3TREES Program, Rainforest Alliance, Richmond, VT 05477, USA

Introduction In the last 5 years the world’s forest policy climate has been jolted by a startling new development: the emergence of an array of private nongovernmental forest certification programmes designed to recognize companies that practice sustainable forest management (SFM). Social and biological scientists have been quick to address this new development, from describing the different types of programmes in the US and globally (Hansen and Juslin, 1999; Rickenbach et al., 2000), to exploring the politics behind them (Elliott, 1999; Cashore, 2002), their intersection between public and private policy (Meidinger, 1997, 1998), and consumer support for such programmes and the products they promote (Forsyth, 1997; Ozanne and Smith, 1998; Forsyth et al., 1999). Despite this increased attention, we are only just beginning to understand how certification programmes gain, or do not gain, support from an array of interests, including environmental, business, governmental and professional organizations, and the effects of this support on the long-term viability of certification programmes.

Why are companies considering or pursuing certification? What are the perceived advantages and disadvantages of certification? Do companies prefer more flexible industry initiated programmes such as the Sustainable Forestry Initiative (SFI), or more prescriptive environmental-group-supported programmes represented by the Forest Stewardship Council (FSC)? What are the conditions under which a company predisposed to one programme would consider another? This chapter is an effort to begin filling this gap by addressing two aspects of forest certification that have received surprisingly scant scholarly attention. First, it examines the attitudes of the key forest companies that will be required to implement forest certification’s management rules. Second, it addresses the views of the broader (manufacturing) forest sector whose demands (or lack of demand) for certified wood products and their willingness to act as a link in product-tracking processes (chain of custody) will most certainly play a key role in the future direction of forest certification. Exploring these questions permits us to perform two key tasks: (i) elucidate better exactly what the forest sector is thinking; and (ii) provide

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useful information to certification programmes and policy makers about the kinds of issues they may need to address or change if they want to obtain support from the very businesses their programmes are designed to affect. The purpose of this chapter is to outline key findings; with future work developing and addressing theoretical issues regarding the influence the forest sector might have in the ongoing debate over forest certification rules. This chapter proceeds in four parts. First, it briefly reviews existing research on this issue, putting this study in context. Second, it illuminates our methodological issues and challenges, explaining why we chose to study both large companies owning forestlands and the broader forest sector. Third, it reviews key findings, examining the level of knowledge of forest certification, the ‘fit’ of different certification programmes with company objectives, the perceived advantages and disadvantages that obtaining certification might bring, and the groups most actively requesting that companies pursue certification. The chapter concludes by analysing the implications of these data for the future of forest certification, and what existing programmes may need to do to address forest sectors’ concerns. It specifically addresses what light these data shed on whether we can expect certification to become a dominant management paradigm, whether it will go the route of niche markets similar to organic labelling or whether it will die out.

Background The increasing interest in forest certification as an innovative market mechanism to achieve SFM can be traced to the failure of the Earth Summit in 1993 to sign a global forest convention (Bernstein and Cashore, 1999, 2000). Environmental groups felt that they had spent a significant amount of effort and resources on state-sanctioned international venues with no discernible policy gains. As a result, in 1992, the Woodworkers Alliance for Rainforest Protection (WARP) proposed the development of the FSC (Viana et al., 1996) with support from leading environmental groups such as the World Wide Fund for Nature (WWF)1 (Elliott, 1999). This effort was perceived as a logical jump from the existing work of the Rainforest Alliances SmartWood programme since it facilitated expanding certification to address temperate

and boreal forests (Ozanne and Smith, 1998; Hansen and Juslin, 1999), reducing consumer confusion resulting from multiple certification programmes (Cabarle et al., 1995), and sidestepping the quagmire of nationalistic interests that stifled progress among intergovernmental forest protection dialogues. Essentially, it expanded the traditional boycott campaign’s stick approach by offering carrots as well. The FSC conception of certification envisions new policy making structures where social, economic and environmental interests compete equally in the (private) policy making process (Cabarle et al., 1995; Viana et al., 1996; Meidinger, 1997, 1998). Procedures are developed with the view to eliminating business dominance and encouraging strict standards with limited discretion on the ground so as to mitigate inadequate implementation. Concerned that FSC would produce strict rules administered by non-forestry professionals; domestic forest industry and landowner associations began to create their own ‘competing’ programmes (Lapointe, 1998). In the USA this trend witnessed the reorientation of the American Forest and Paper Association’s SFI as a forest certification programme. The SFI takes a different approach to certification, it envisions continual improvement and discretionary, flexible policies. Such an approach is believed to foster innovation and avoid straitjacketing companies with costly wide-ranging rules that fail to capture specific circumstances. With this concept, procedural approaches are ends in themselves and individual firms retain ultimate authority over the kinds of objectives and goals they will pursue (American Lands Alliance, 2000). Importantly, governance, at least originally, was dominated by the industry, with other nongovernmental organizations acting in advisory, consultative capacities. Following SFI, the American Tree Farm Programme also reinvented itself as a competitor to FSC as a certification programme for small landowners, and has developed a mutual recognition agreement with SFI (American Forest and Paper Association, 2000b). Another small landowner programme, Green Tag, also emerged as an additional forest certification policy choice. Which programme will gain acceptability among different organizations and interests is a key question. Much research and attention has focused on the demand side, from the creation of buyers

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groups (McAlexander and Hansen, 1998; Forest Trends, 2000) and consumer willingness-to-pay (Ozanne and Smith, 1998; Forsyth et al., 1999) to announcements by Home Depot about their intention to purchase certified wood following rules that only FSC currently meets (Home Depot, 1999). (This announcement was made following 2 years of Rainforest Action Network direct action campaigns, and led to Lowe’s, Centex and a number of other firms making similar commitments.) The purpose of this chapter is to expand on the work of Vlosky and Ozanne (1998) and Hayward and Vertinsky (1999) in the USA and Scrase (1999), Bruce (1998) and others internationally, with the hope of shedding light on the often-neglected supply side, where ultimate choices over certification implementation will be made.

Methods Certification has direct implications for companies engaged in the management of forestlands. Standards typically assess the way in which forest management is planned and/or the actual substantive way in which it is carried out on the ground. Thus, forest sector companies that own forestlands are particularly prone to the effects of certification programmes; however, certification of forestlands alone has remained insufficient from a product-marketing perspective. In attempting to offer assurance to final consumers that a specific product comes from a well-managed forest, certain programmes have developed chain of custody certification, which involves the tracing of products from the stump to the end consumer. Effectively, these efforts have broadened the potential impacts of certification to companies that manufacture wood and pulp and paper products, but play no direct role in the management of forestlands. This necessarily meant researching the views of the broader sector who would be needed to manufacture and sell certified products. Our approach entailed first identifying all US companies that own forestlands. Information was obtained from company websites and annual reports as well as industry directories, such as the Pulp and Paper North American Factbook (Miller Freeman, 1999). The resulting list included 146 companies estimated to own approximately 23.60 million ha of forestland (i.e. approximately 87% of

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the 27.14 million ha industrial forestland base) (Smith et al., 2001). Second, and separately, the broader forest sector was examined by obtaining a stratified random sample of 2000 companies whose operations fell in either the Standard Industrial Classification (SIC) codes 2400 or 2600.2 In all, 1200 companies were sampled from SIC 2400 and 800 from SIC 2600. The information was obtained from Best Mailing Lists, a sales distributor of the Dun and Bradstreet’s industry list, that contains company information, which is continuously updated by way of phone surveys conducted on a 90-day cycle.3 The sample included companies manufacturing paper and allied products, and lumber and wood products, excluding furniture. We sent the questionnaire to top-level executives, who were asked to respond in a manner that reflected the interests of their company as a whole. Having the ultimate authority to set company policies on certification issues, the views of these individuals are central to understanding the views the sector has towards the various certification options. With the broad sector-wide sample (i.e. the SIC 2400 and SIC 2600 companies) and the separate group of landowning companies, we were able to assess differences in forest sector perceptions between companies involved with, and separated from, the management of forestlands. Developing our questions involved adapting some questions from a study already carried out that assessed a similar group of Canadian companies (Takahashi, 1999) and generating others that specially addressed unique features of the US sector. Input was sought from a number of colleagues and some company officials on the specific wording of each question and the overall clarity and structure of the questionnaire. Our mail-out included three separate contacts, which were tailored to balance the pursuit of a high response rate with cost considerations. In this regard we sought advice from a number of sources on mail-out procedures (Fox et al., 1998; Jobber and O’Reilly, 1998; Dillman, 2000). The final sequence of contacts included pre- and post-survey postcards along with the actual survey mailing, which included a stamped, addressed return envelope, the survey, and a cover letter explaining the project. Postcards were sent 1 week before and after the questionnaire. All participants received the post-survey card, since our procedure for ensuring participant anonymity precluded a selective final mailing.

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Results This section outlines key finding from the survey. Our focus is on describing the characteristics of the different participants, exploring how familiar they are with the various domestic and international programmes, uncovering the advantages and disadvantages they perceive as likely outcomes if certification programmes gain broad acceptance, and determining the groups most involved in the direct promotion of certification programmes.

Characteristics of respondents From the broad sector-wide sample of SIC 2400 and 2600 companies, 242 surveys were returned, of which 214 contained usable responses. Removing the 15 returned undeliverable mailings, we obtained a response rate of 11% (214/1985). Of these, 168 operated lumber and wood products manufacturing facilities, while 46 represented companies manufacturing paper and allied products (see Fig. 25.1). This translates into a 14% response rate for the SIC 2400 companies and a 6% response rate for the SIC 2600 companies. Grouped together, 35% of the companies operate in the South, 25% in the North-central, 21% in the West, and 19% in the Northeast.4 These companies had mean net annual sales of $22.5 million, which dropped to $18 million, with a range of $5–175 million and a median of $9 million, when we removed one responding

company that reported $1 billion in net sales. Total per company employment ranged from as low as 10 to nearly 6000, with a mean of 139 and a median of 75; 35% of the responses came from company headquarters with the remaining 65% coming from companies operating in a single location. The median year of establishment was 1972. The low response rate from the broad sector limits the inferences one can draw from the survey results. However, given the nascent nature of most certification programmes,5 the information available from those companies that did participate is key for directing future investigations into the issues these companies feel will surface as the adoption of forest certification continues. From the 146 landowning companies, 72 usable questionnaires were returned, representing a 49% response rate (72/146). By our reckoning, the participants own 16.15 million ha of forestland, which is approximately 60% of the 27.14 million ha of industrial forestlands (Smith et al., 2001). By region, 36% of their operations were in the West, 33% in the South, 21% in the Northeast and 10% in the North-central region. For those companies we were able to obtain information from, net sales ranged from $5 million to over $24 billion and total employment ranged between 40 and 80,000. The median year of establishment was 1953.

Reported level of knowledge With the characteristics of these two groups in mind, we turn to exploring how they differ with

Fig. 25.1. The proportion of respondents whose primary operations involve lumber and wood products (n = 168), or paper and allied products (n = 46).

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respect to their views and attitudes about forest certification. In terms of ‘level of knowledge’, respondents were asked to identify how familiar a list of certification programmes were. These included programmes existing in the USA and some that

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are developing internationally (see Figs 25.2 and 25.3). The most notable result is the separation between the owners and the broad forest sector. Two knowledge gaps are especially relevant. First,

Fig. 25.2. The percentage of respondents indicating that they had some knowledge of the listed certification programmes.

Fig. 25.3. The percentage of respondents indicating that they were quite familiar with the listed certification programmes. This includes respondents who answered 5, 6 or 7 on a scale of 1 (no knowledge) to 7 (extremely familiar).

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both groups indicated low levels of familiarity with certification programmes developing outside the USA. This even applied to the Canadian Standards Association (CSA), with which only 1% of the owners indicated they were ‘extremely familiar’ and only 23% reported high levels of familiarity. Second, the owners reported notably higher levels of knowledge for all the programmes. For the SFI, 37% of the owners indicated that they were ‘extremely familiar’ with the programme, while only 9% of the broad sector marked this response. Similar gaps existed for the other programmes. 21% and 6% of the owners and broad sector, respectively, reported they were ‘extremely familiar’ with the FSC, while 91% and 69% indicated at least some familiarity. Curiously, the International Organization for Standardization (ISO) 14001 programme received relatively low levels of reported knowledge from both groups. Only 9% of the owners reported that they were ‘extremely familiar’ with this programme. Likewise, only 51% of the broad sector reported some familiarity with ISO 14001. In general, respondents indicated the highest familiarity with the FSC and SFI programmes, while international programmes and the recently developed Green Tag programme seemed poorly understood. Indeed, when asked, most respondents indicated that either the FSC or SFI programmes

best matched their company’s needs (see Fig. 25.4). Specifically, 48% and 12% of the broad sector chose the SFI and FSC, respectively, and following suit, 66% and 10% of the owners made the same selections.

Anticipated advantages Researchers and practitioners have asserted that there are social and economic advantages attached to certification (Cabarle et al., 1995; Hayward and Vertinsky, 1999), but the extent to which the forest sector believes these claims is relatively unclear. Here companies were asked to indicate how likely they thought it was that certain advantages would occur. The responding official was asked to answer in a manner that reflected their company’s needs and reflected the programme they had indicated best matched their company’s objectives. Both groups reported similar views on the anticipated advantages, while overall, the owners seemed more optimistic that benefits will be forthcoming (Fig. 25.5). What we see is a hierarchy of benefits with ‘securing public confidence’ and ‘responding better to the pressures from environmental groups’ topping the list, with no less than

Fig. 25.4. The proportion of owners and the broad sector who chose a particular certification programme as best matching their company’s needs.

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61% of the respondents in either group indicating these as likely outcomes. This is further supported by the fact that 57 and 44% of the owners and broad sector, respectively, indicated that they either agreed or strongly agreed that ‘pursuing certification is a way for our company to act as a good corporate citizen’. A split occurs when we move to the next perceived benefit, with 62% of owners indicating that the ability to secure markets is a likely outcome, but only 42% of the broad sector agreeing. As a result, in ranking terms, the broad sector attributes a greater likelihood to the environmental benefits than do the owners when compared to the potential of securing market access. The other key advantage warranting attention is the potential for a price premium. Both groups are evidently sceptical that any premium will emerge, with only 19 and 30% of the owners and broad sector, respectively, reporting this as a likely outcome. Even when broken down by which programme was chosen as best matching the company’s needs (see Fig. 25.4), this perception persists. For the owners choosing the FSC (n = 7), four responded that they felt the programme was likely to help them obtain a price premium; however, those companies from the broad sector who chose

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the FSC (n = 18) were even more sceptical – 48% indicated that the programme was not likely to help them gain a price premium. For those owners who selected the SFI (n = 49), 58% felt that a price premium was not a likely advantage of this programme. Likewise, for the broad sector, 56% of the companies choosing the SFI programme (n = 72) had the same belief. In a less pronounced form, this view is also present in the 41 and 42% of the owner and broad sector participants who indicated that they either disagreed or strongly disagreed with the statement ‘In the future US consumers will provide a strong demand for “green” wood and paper products’. Also, when the same groups were asked whether they felt that ‘becoming certified would effectively differentiate our company from its competitors’, an almost equal number responded that they would agree or strongly agree versus disagree or strongly disagree (36 and 42% for the owners and 30 and 44% for the broad sector). Overall, respondents gave securing public confidence and reducing environmental group pressures the most likelihood of occurring. The environmental benefits came out somewhat neutral, yet all companies seemed quite certain that fully implemented certification programmes

Fig. 25.5. The percentage of respondents from the broad sector and owners who reported that the listed advantages are likely to occur once certification is fully implemented.

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would negatively impact operating costs. Only 15 and 9% of the broad sector and owners, respectively, felt that certification would help them reduce their costs. The issue of increased costs with no clear economic benefit is clarified when we look at anticipated disadvantages.

Anticipated disadvantages For both groups, indirect and direct costs of certification were the top two disadvantages deemed likely to occur. In addition, 86 and 99% of the broad sector and owners anticipated that certification was likely to increase their administrative workload (see Fig. 25.6). Likewise, the direct cost of being certified was felt to be a likely disadvantage by 90 and 94% of the respective groups. Autonomy also arose as an issue of concern. Both groups concurred that their operations will likely be inhibited by specific restrictions on their practices (83% of the broad sector and 79% of the owners). Also, they felt a loss of autonomy was inevitable due to requirements for stakeholder consultation (65% of the broad sector and 57% of the owners). Interestingly, the broad sector

reported that the little control they have over forest management is a likely disadvantage they will face (56%). These concerns were reflected in another question we asked, where 51% of the broad sector (n = 213) either agreed or strongly agreed with the statement, ‘Forest management regulations should emphasize goals without regulating how they are achieved’. Moreover, 68% of the owners responded in the same way. The responses of the owners and the broad sector demonstrate a common concern among the sector over the cost implications of certification given the absence of economic benefits. They also indicate no optimism for the future, with certification becoming more widely accepted. On the other hand, different opinions appear to exist over the issues of management control. While only 30% of the owners consider ‘little control over the management of forests’ as a likely problem, 56% of the broad sector reported this as a likely disadvantage. This might reflect concerns over sourcing certified wood from a diverse array of suppliers to which size might be an additional factor. A tendency for the owners to be large, vertically integrated firms may function to reduce the salience of this issue, as their fibre sources are more stable and secure. Conversely the smaller companies from the broad

Fig. 25.6. The percentage of respondents from the broad sector and owners who reported that the listed disadvantages are likely to occur once certification is fully implemented.

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sector lack this stability and security. Indeed, this makes the issue of chain of custody particularly problematic when multiple companies play a role in product inventory and distribution activities. Effectively, even though levels of familiarity of certification are lower among the broad sector companies there is still an awareness of the potential implications these programmes might have on their activities even though forest management is out of their control.

Pressures to become certified The results seem to paint a gloomy picture of certification, one filled with increased costs, restrictions on operations, and loss of autonomy from outside interests, with no certain economic gains. Yet, companies are still taking part in these programmes. Generally the efforts of environmental groups in concert with the market are fingered as the key impetus for company participation in certification, yet the evidence shows that the programme promoted by markets, the FSC, has yet to gain broad support. Why, then are companies participating in certification? We asked companies to indicate the groups who had asked them to pursue certification (see

Fig. 25.7). The result was a situation where both owners and the broad sector reported the AF&PA (61 and 29%, respectively). Surprisingly this exceeds the proportion of respondents reporting retailers; wholesalers, dealers and brokers, and even environmental groups. While seemingly in opposition to the understanding that the pressures are mostly coming from these groups, the high level reported for the AF&PA is most likely associated with its efforts to promote the SFI programme. Nevertheless, this indicates that the forces encouraging company participation in certification go beyond mere economic considerations or their strategic responses to direct retail or environmental pressures. Rather, the concerted effort of the AF&PA to raise a unified sector-wide voice has played a large role in defining how forest certification is developing in the USA.

Broader Implications of this Investigation These preliminary findings provide a basis from which we can explore some of the emerging issues that are facing the forest sector, the certification programmes, and other groups interested and active in these emerging initiatives. While the 61

American Forest & Paper Association

29 43

Retailers

18 30

Wholesalers, dealers and brokers

13 31

Environmental groups

12 6

Groups

Your company's wood suppliers

7 14

Your company's shareholders

6 9

Consumer associations

5 7

State government agencies

3

Private forest landowners

3 3 3

Labour unions

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Federal government agencies

1

3 1

Indigenous peoples

0

0 Owners Sector Broad sector BroadOwners

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10

20

30

40

50

60

Percentage of respondents

Fig. 25.7. The percentage of respondents who indicated one of the listed groups as having asked their company to pursue forest certification.

70

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response rate for the broad sector-wide sample (i.e. SIC 2400 and SIC 2600 companies) limits the generality of our findings, the information generated can help to elucidate where further investigation would be fruitful. What caused such a low response rate? Do companies that are not involved with the management of forestlands feel immune to certification pressures? Are there barriers that are preventing certain companies from acquiring information on their certification options? Exploiting other research methodologies to uncover some of these issues would be extremely useful. On the other hand, the relatively high level of participation among companies owning forestlands allows more concrete conclusions to be drawn about this segment of the US forest sector. With the responding companies representing 60% of the industrial forestland base, the views expressed by participating officials offer key insights into the future direction certification may follow in the years to come. In this vein, one of the key findings is that the support for the SFI programme among the owners and the broad sector (i.e. 66 and 48%, respectively) is considerably higher than any of the other programmes, including the FSC. The lack of support for the latter is striking, given that growing international and domestic environmental group campaigns have resulted in lumber retailers and homebuilders promoting this programme. The situation in the USA also contrasts with the situation in Canada, where many forest companies have announced their intention to become FSC-certified. What explains the absence of industry support for the FSC in light of these pressures? Three factors seem pivotal. First, the US forest sector relies much less on foreign exports than their Canadian competitors, insulating them somewhat from international pressures. Second, it appears that US anti-trust law may make domestic pressures to buy more certified wood less effective than international pressures. For instance, the US Certified Forest Products Council, an organization providing information and resources to companies wishing to purchase certified wood, has been an instrumental proponent of certification accredited by the FSC. However restrictions stemming from anti-trust laws (Grant, 1989) limit the organization’s ability to mandate buying policies for its members (Simula, 1998; Certified Forest Products

Council, 2001). Third, the US forest sector has undertaken proactive strategic choices in efforts to speak as one voice, in its desire to define a common vision of SFM. This unprecedented level of unification has helped the SFI maintain its position as a viable alternative to the FSC. Does this mean that SFI will become the dominant certification programme in the USA? Its origins as an industry initiative (Wallinger, 1995), alone, do not ensure that the SFI will be durable and, by itself, may not be enough to address public concern over forest management practices. Indeed, the initial ‘flexibility, and discretionary approach’ of the SFI, which appears to have won it so much support from the broad forest sector, seems to becoming increasingly prescriptive as the SFI appeals to interest groups that are demanding measurable change in the way forests are managed. Likewise SFI’s advisory panel has turned into the SFI Sustainable Forestry Board (American Forest and Paper Association, 2000a), and an SFI onproduct label is scheduled for release this autumn. Indeed, there exists the very real potential that SFI could be weaned from the AF&PA. The FSC, on the other hand, while having some forest sector supporters, is criticized for its chain of custody approach which is deemed too complicated and difficult for the fragmented US forest ownership structure. But, ironically, the same chain of custody appears to give the FSC increased salience to environmental groups and their supporters, who want proof that what consumers are being offered actually comes from a certified forest. How these seemingly contradictory levels of support for FSC and SFI interact remains an important question, since each programme has fundamentally different impacts on forest management (Ozinga, 2001). What seems clear is that more analysis is needed, comparing these approaches for their ecological, social and economic benefits. In this regard the future looks promising. Sophisticated efforts are underway to compare these programmes on paper (Meridian Institute, 2001) and in the field (Mater et al., 1999; Pinchot Institute for Conservation, 1999; Price, 2000), as well as broader evaluations of overall support (Cashore, 2000; Sasser, Chapter 22, this volume), which will help to shed light on this evolving process and its effects on the longer term goal of promoting ‘good’ forest management.

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Conclusions Two questions permeate an analysis of forest certification: (i) are programmes operationally designed to communicate sustainable forestry recognition to retailers, developers and end consumers; and (ii) do any of the programmes have measurable impacts on improving forest management across the broad landscape? With regard to the former, our findings indicate that a great number of forest sector officials believe that the SFI can improve their company’s image with the general public. On the other hand, the forest sector is sceptical, about the ecological benefits these programmes are likely to offer. This highlights the need to conduct more research into demand and supply side support for certification, and the link between this support and the actual substantive improvements in SFM.

Acknowledgements Thanks must be extended to a number of individuals who were instrumental in the development of the survey and the work involved in generating this report. A number of questions used in this study came from an investigation carried out by the Forest Economics and Policy Analysis Unit at the University of British Columbia. In this regard, we would like to thank Ilan Vertinsky and Taku Takahashi for their support. In addition, Robert Kozak, Steverson Moffat, Rick Fletcher, Mark Dubois, Daowei Zhang and Bob Prolman were exceedingly helpful in offering comments on the specific wording of questions and overall structure of the questionnaire. Finally, we would like to recognize the assistance provided by Jim Seroka in dealing with some of the methodological issues surrounding our survey approach.

Endnotes 1 Although the acronym has not changed, The World Wide Fund for Nature changed its name from the World Wildlife Fund in 1995 but the Canadian and US sections opted to keep their original names. 2 Information on SIC codes can be obtained from OSHA at their website: http://www.osha.gov/oshstats/ sicser.html

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3 Information obtained from sales representative with Best Mailing List Inc. 4 The regions used are those of the US Census Bureau. 5 With the exception of the American Tree Farm system, the programmes examined in this study were all developed sometime in the 1990s (Coulombe and Brown, 1999; The Society of American Foresters Task Force on Forest Management Certification Programmes; The Society of American Foresters).

References American Forest and Paper Association (2000a) MultiStakeholder Sustainable Forestry Board to Manage SFI Program. American Forest and Paper Association’s SFI Program, Washington, DC (http://www. afandpa.org/news/news.html) American Forest and Paper Association (2000b) SFISM AFF’s American Tree Farm System® and AF&PA’s Sustainable Forestry Initiative (SFI)SM Program Collaborate to Expand the Practice of Sustainable Forestry. American Forest and Paper Association’s SFI Program, Washington, DC (http://www.afandpa.org/news/ news.html) American Lands Alliance (2000) Perspectives on AF&PA’s ‘Sustainable Forestry Initiative’ and Forest Certification. American Lands Alliance, Portland, Oregon, 7 pp. Bernstein, S. and Cashore, B. (1999) World trends and Canadian forest policy: trade, international institutions, consumers and transnational environmentalism. Forestry Chronicle 75, 34–38. Bernstein, S. and Cashore, B. (2000) Globalization, four paths of internationalization and domestic policy change: the case of eco-forestry policy change in British Columbia, Canada. Canadian Journal of Political Science 33, 67–99. Bruce, R.A. (1998) The comparison of the FSC forest certification and ISO environmental management schemes and their impact on a small retail business. MBA, University of Edinburgh, UK. Cabarle, B., Hrubes, R.J., Elliott, C. and Synnott, T. (1995) Certification accreditation: the need for credible claims. Journal of Forestry 93, 12–16. Cashore, B. (2000) Legitimacy and the privatization of environmental governance: How non state market-driven (NSMD) Governance systems gain rule makin acuthority. Governance 15(4), 503–529. Certified Forest Products Council (2001) How the CFPC Operates. Available at: http://www.certifiedwood. org/ Coulombe, M. and Brown, M. (1999) The Society of American Foresters Task Force on Forest Management Certification Programs. The Society of American Foresters.

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Dillman, D.A. (2000) Book Mail and Internet Surveys: The Tailored Design Method, 2nd edn. John Wiley & Sons, New York, 464 pp. Elliott, C. (1999) Forest certification: analysis from a policy network perspective. PhD thesis, Ecole Polytechnique Federale de Lausanne, Lausanne, Switzerland. Forest Trends (2000) Spreading third-party certification programs underpin forest sustainability movement. In: The Forest Trends Newsletter, Trendlines, Vol. 1. Forest Trends, Washington, DC. Forsyth, K. (1997) Customer Attitudes Towards Environmentally Sound Wood Products in Three British Columbian Home Improvement Markets. University of British Columbia, Vancouver, Canada. Forsyth, K., Haley, D. and Kozak, R. (1999) Will consumers pay more for certified wood products? Journal of Forestry 97, 18–22. Fox, C.M., Robinson, K.L. and Boardly, D. (1998) Costeffectiveness of follow-up strategies in improving the response rate of mail surveys. Industrial Marketing Management 27, 127–133. Grant, W. (1989) Government and Industry: a Comparative Analysis of the U.S., Canada and the U.K. Edward Elgar Publishing, Aldershot, UK, 303 pp. Hansen, E. and Juslin, H. (1999) Geneva Timber and Forest Discussion Papers: the Status of Forest Certification in the ECE Region. United Nations Economic Commission for Europe Food and Agriculture Organization of the United Nations, New York and Geneva. Hayward, J. and Vertinsky, I. (1999) What managers and owners think of certification. Journal of Forestry 97, 13–17. Home Depot (1999) The Home Depot Launches Environmental Wood Purchasing Policy: Company Promises to Reduce Wood Sourced From Endangered Forests During Next Three Years. Home Depot, Atlanta, Georgia. Jobber, D. and O’Reilly, D. (1998) Industrial mail surveys: a methodological update. Industrial Marketing Management 27, 95–107. Lapointe, G. (1998) Sustainable forest management certification: the Canadian programme. Forestry Chronicle 74, 227–230. Mater, C.M., Sample, V.A., Grace, J.R. and Rose, G.A. (1999) Third-party, performance-based certification: what public forestland managers should know. Journal of Forestry 97, 6–12. McAlexander, J. and Hansen, E. (1998) J. Sainsbury plc and Home Depot: Retailers’ Impact on Sustainability. In: The Business of Sustainable Forestry Case Studies: a Project of the Sustainable Forestry Working Group. The John D. and Catherine T. MacArthur Foundation, Chicago, Illinois. Meidinger, E. (1997) Look who’s making the rules: international environmental standard setting by non-Governmental organizations. Human Ecology Review 4, 52–54.

Meidinger, E.E. (1998) ‘Private’ Environmental Regulation, Human Rights, and Community. [Online paper]. Available at: http://www.law.buffalo.edu/ homepage/eemeid/scholarship/hrec.pdf Meridian Institute (2001) FSC/SFI Comparative Analysis: Design and Facilitation of a Multi-Party Dialogue. [Project information]. Available at: http://web.mitretek. org/meridian/home.nsf/projectareaall/ BF4AEAB809C148B285256A0F006C1B92 Miller Freeman (1999) Pulp and Paper North American Factbook. Ola Jane Gow, San Francisco, California. Ozanne, L.K. and Smith, P.M. (1998) Segmenting the market for environmentally certified wood products. Forest Science 44, 379–388. Ozinga, S. (2001) Behind the Logo, an Environmental and Social Assessment of Forest Certification Schemes. Based on case studies by WWF France, Taiga Consulting, Taiga Rescue Network, Natural Resource Defense Council (NRDC), Fern, Finish Natural League, and Greenpeace, Moreton-in-Marsh, UK, 64 pp. Pinchot Institute for Conservation (1999) Annual Report. Pinchot Institute for Conservation, Washington DC, 27 pp. Price, W. (2000) Forest Certification Pilot Projects Expanded on State and Tribal Lands. Pinchot Institute for Conservation, Washington, DC. Rickenbach, M., Fletcher, R. and Hansen, E. (2000) An Introduction to Forest Certification. Oregon State University Extension Service, Corvallis, Oregon. Scrase, H. (1999) Certification of Forest Products for Small Businesses: Improving Access – Issues and Options. United Kingdom Department for International Development, and Renewable Natural Resources Knowledge Strategy, Llanidloes, UK, 61 pp. Simula, M. (1998) Timber Certification: Progress and Issues [Commissioned report]. Available at: http:// www.itto.or.jp/inside/timber_certification/1. html Smith, B.W., Vissage, J.S., Darr, D.R. and Sheffield, R.M. (2001) Forest Resources of the United States, 1997. USDA Forest Service, North Central Research Station, St Paul, Minnesota. Available at: http:// www.ncrs.fs.fed.us/pubs/gtr/gtr_nc219.pdf Takahashi, T. (1999) Survey of Forest Certification in Canada. The University of British Columbia, Vancouver, Canada. Viana, V.M., Ervin, J., Donovan, R.Z., Elliott, C. and Gholz, H. (eds) (1996) Certification of Forest Products Issues and Perspectives. Island Press, Washington, DC, 261 pp. Vlosky, R.P. and Ozanne, L.K. (1998) Environmental certification of wood products: the US manufacturers’ perspective. Forest Products Journal 48, 21–26. Wallinger, S. (1995) AF&PA Sustainable forestry initiative: a commitment to the future. Journal of Forestry 48, 16–19.

26

Certification: a Comparison of Perceptions of Corporate and Non-industrial Private Forestland Owners in Louisiana

1School

Richard P. Vlosky1 and James E. Granskog2 of Renewable Natural Resources, Louisiana State University, Baton Rouge, LA 70803, USA; 2USDA Forest Service, Southern Research Station, 701 Loyola Avenue, New Orleans, LA 70113, USA

Background Environmental certification of forest products and forestry practices is fast becoming an important issue facing the forest products industry. In response to environmental concerns, some environmental organizations, retailers and wood products companies are encouraging consumers to purchase wood originating from certified sustainable forests. These efforts are intended to counter a common perception by the general public that most forest practices involving the harvesting of wood do irreversible damage to the environment (Petersen, 1994). The basis for certification is a perceived need for consumers to be assured by neutral third-party organizations that the forest industry is employing sound practices that will ensure a sustainable forest. Many groups have a stake in forest certification. Previous studies of certification perceptions and attitudes have been done for various stakeholder segments in the USA, such as consumers, homebuilders, architects and home improvement retailers, federal and state public forestland owners, and non-industrial private forestland owners (Ozanne and Vlosky, 1997; Vlosky and Ozanne, 1997; Vlosky, 2000a,b). Around 73% of US timberland is privately owned; therefore, private forestland owners have a major stake in forest certification. To date, most certification programmes have been designed for

large, corporate forestland owners, and not the non-industrial ownerships that make up 80% of private forestland. Little research has been done to understand the different perspectives of the corporate and non-industrial private forestland owners. The USDA Forest Service estimates that 298.1 million ha of forest exist nationwide in the USA, representing 33% of the total land area (Powell et al., 1994). Two-thirds (198 million ha) of the nation’s forests are classified as timberland (Birch, 1996). Of this, 144.9 million ha are in private ownership, both corporate and non-industrial. Non-industrial private forestland (NIPF) owners are defined as private forest owners who do not own or operate wood-processing facilities, and include farmers, miscellaneous individuals and non-forest industry corporations, such as banks, insurance companies and the like (Bliss et al., 1997). According to Powell et al. (1994), private individuals or groups own 59% of the nation’s timberland. Although production is lower on non-industrial private forests relative to corporate holdings, they are the principal source of raw materials for the forest products industry (Henry and Bliss, 1994). Industrial forestlands, held by firms which often own wood-processing facilities, are managed almost exclusively for timber production. With regard to production patterns in the southern states of the USA, a large share of the region’s softwood timber production (35%) comes from the relatively

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small share of forested acreage (23%) owned by forest industries. A much larger share of the region’s forestlands (67%) is held by NIPF owners, but they produce a smaller share of the region’s softwood timber products (58%) from their lands (Newman and Wear, 1993). The differences in relative output reflect differences in management approach between the two ownerships. This chapter compares the perceptions of two important stakeholder groups, the non-industrial private and corporate forestland owners. The study objectives were to better understand forestland owner perceptions about certification in general, gauge the potential for their participation in certification and to solicit opinions on potential alternatives to third-party certification. The setting for the study is Louisiana, a state where forestry-related industries, second only to the chemical industry in size, account for over $5 billion in value added to the state’s economy (Vlosky et al., 1997).

Research Methodology and Design The sample frame for this study was 6660 non-public timberland owners in Louisiana. This random sample was extracted from a list of over 41,000 timberland owners in the state of Louisiana provided by the Louisiana Cooperative Extension Service. In addition, directories of forest landowners and state association membership lists were used. Mailing lists, key informants, and selected demographic and industry data were compiled using these sources. Pre-testing of draft survey instruments and telephone-administered questionnaires were conducted using 25 randomly selected individuals from the sample population. In addition, input was solicited from the Louisiana Department of Agriculture and Forestry and the Louisiana Forestry Association. Pre-testing included followup interviews. Based on pre-testing, the survey instrument was refined before final distribution. Non-response bias is a common concern in survey research. Bias caused by non-response can be evaluated by comparing those who respond to the initial mailing (early respondents) to those who respond as a result of subsequent mailings and other follow-up efforts (Armstrong and Overton, 1977). In this study, information regarding acres of forestland owned and geographical location of

sample members was known. By examining differences between respondents and non-respondents, using two-tailed t-tests, no statistically significant differences were found with regard to acres of forestland owned or geographical distribution (at α = 0.05). This lack of statistical differences reduced the concern about non-response bias. Although total design method (TDM) procedures call for two mailings, due to cost constraints, the survey process included one mailing in addition to TDM-recommended pre-notification and reminder postcards (Dillman, 1978). For respondent frame-of-reference consistency, environmental certification was defined in the cover letter and in the survey. In addition, it was clearly communicated to respondents that questionnaires were confidential, an approach that has historically been associated with increased response rates. Study respondents were promised, and received, a copy of summary study results for participating in the study.

Results Response rate Of the 6660 surveys that were mailed to forestland owners in Louisiana, 1176 were either undeliverable or inappropriate because the respondent was deceased or no longer owned forestland. Eventually, 979 surveys were returned as usable and fell into either the NIPF or private corporate ownership categories. Of these, corporate timberland owners comprised 13% of the respondents (129 respondents), while 850 respondents were non-industrial private forestland (NIPF) owners.

Demographics Using two-tailed t-tests, statistical differences (at α = 0.05) between NIPF and corporate respondents were found for all demographic characteristics included in the study. On average, NIPF respondents were older, earned less income, had a lower level of education and had a higher representation of females. In addition, NIPF respondents had about half the representation in an environmental group than corporate

Corporate and Non-industrial Private Forestland Owners

respondents. However, this may very well be a matter of definition.

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Certification issues

statistically significant at α = 0.01. Of the NIPF respondents, 21% ‘strongly agreed’ that there is a need for certification of private forests in the USA while only 10% of corporate respondents ‘strongly agreed’.

Certification of public and private forestland

Perceived impetus for certification

Because certification is intended to impact both temperate and tropical forest resources, respondents were asked whether certification was necessary on both forest types (Fig. 26.1). For all forest/ownership types, NIPF respondents felt a greater need for certification. All differences were

Although the acreage of forestland currently certified is small, certification in the USA is gaining momentum. Respondents were asked to assess the impetus for certification (Fig. 26.2). By a wide margin, respondents believe that nongovernmental organizations (NGOs) are strongly

Fig. 26.1. There is a need for certification in these forests. Scale: 1 = strongly disagree to 5 = strongly agree. *Significant difference at P = 0.01.

Fig. 26.2.

Impetus for certification. Scale: 1 = strongly disagree to 5 = strongly agree.

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influencing the certification movement. Closely following NGOs are the third-party certifiers and certification consultants who have a stake in promoting certification efforts. Forestry organizations/associations and consumer demand were perceived to have lower levels of influence. Level of trust to certify forest management and harvesting One important issue is to discern which entity or scheme respondents would trust to certify forest management and harvesting. Respondents were asked to evaluate their levels of trust in a number of entities including the federal government, self-regulation by the forest products industry, non-government environmental organizations (NGOs) and third-party certifiers. As seen in Table 26.1, the entity that respondents trust most is professional foresters who have been approved by a certification organization (rated 3.7 on a 5-point scale of trust). The only other entities rated above neutral (3.0 on a 5-point scale) are forest-related associations (3.05), so-called second-party certifiers, and state government (3.02). Ranked last for NIPF respondents is the Table 26.1.

federal government, while NGOs rank last for industry respondents. Similarly, in Alabama, landowners were asked to indicate how much they trusted various organizations to be involved in the design and implementation of forest certification programmes. Landowner associations, professional foresters and the state government were the three organizations rated most trustworthy by landowners in Alabama. Least trustworthy organizations were non-governmental organizations and groups or companies which perform certification audits (Newsom et al., 2002; see also Chapter 27, this volume). Is certification necessary? As seen in Table 26.2, it seems that respondents in both groups are somewhat indisposed toward the notion of certification per se, with mean scores hovering just above 3.0 (neutral value). However, they do see certification as potentially bringing with it an unnecessary additional layer of regulation, something they are dead set against. This contrasted to results found by Newsom et al. (2002; Chapter 27, this

Level of trust in entities to certify. Rank

Certified foresters State governments Forest-related associations Non-profit third-party certifiers International Standards Organization (ISO 14000) For profit third-party certifiers Industry self-certification by each company Non-governmental organizations Federal government

NIPF

Industrial

Scale mean

1 2 3 4 5 6 7 8 9

1 3 2 6 5 7 4 9 8

3.73 3.02 3.05 2.89 2.78 2.63 2.62 2.34 2.27

Rank: 1 = most trusted; 9 = least trusted; scale: 1 = strongly disagree to 5 = strongly agree. Table 26.2.

The need for certification.

I believe federal forestry laws make certification unnecessary I believe forestry laws in my state make certification unnecessary Certification adds an additional unnecessary level of regulation

Note: *Statistically different at 0.05; **Statistically different at 0.01. Scale: 1 = strongly disagree to 5 = strongly agree.

NIPF mean

Industry mean

Significant difference*

3.1 3.1 3.6

3.2 3.3 3.9

**

Corporate and Non-industrial Private Forestland Owners

volume) in a study of forest landowners in Alabama. In that study, 50% of respondents viewed forest certification as ‘just an additional layer of regulation’. Also less than half (42%) agreed or strongly agreed that certification can significantly improve forest management in Alabama. Willingness to pay for certification Generally, respondents are not averse to having certifiers check their forestry operations (Fig. 26.3). In our survey, 25 and 23% of NIPF and corporate respondents, respectively, said they would allow such monitoring, and an additional 43 and 46%, respectively, said they would consider this. This may indicate self-confidence that they are conducting forest management in an acceptable manner. However, willingness to pay for certification is weak (Fig. 26.4). Only 2% of NIPF respondents and 1% of corporate respondents said they would incur the cost to certify their forestland, and 70% from both groups said that they would not pay

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anything. The balance of respondents said they might pay for certification. In the study of Alabama private forest landowners, Newsom et al. (2002; Chapter 27, this volume) found that 50% of their respondents reported that they would not seriously consider certification for their forestlands unless certification was free. The ability to sell certified wood at a higher price than non-certified wood was cited as a condition of certification by 34% of respondents in that study. Suggested alternatives to third-party certification The last question posed to respondents was openended and asked whether they had suggestions as to what might be viable alternatives to third-party certification of private forestlands. Figure 26.5 shows the ranking of suggested alternatives for NIPF and corporate respondents combined. Three suggestions comprise 75% of the suggested alternatives for respondents. The first is having the Louisiana Department of Agriculture

Fig. 26.3.

Are you/is your company willing to allow certifiers to freely check your forestry operations?

Fig. 26.4.

Are you/is your company willing to pay for the costs of certification?

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Fig. 26.5.

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Suggested alternatives to third-party certification.

and Forestry (LDAF) be the certifying agency. The point here is that respondents felt that adherence to state guidelines is sufficient and that monitoring by the LDAF would be useful. The second alternative is to improve the education of the owners on management and harvesting practices. The third significant suggested alternative is to have professional foresters certify forestlands. This is consistent with the high level of trust which respondents have in professional foresters.

Summary Study results indicate that, overall, private forest landowners question the need for environmental certification and would be reluctant participants in the certification process given current conditions. However, if conditions changed, such as a surge in consumer demand for certified wood products, support for certification could very well increase commensurately. Respondents do indicate that certification is a possible tool to communicate the positive achievements of the industry to the public. However, given their reservations about the need for certification or its efficacy, they are unlikely ever to embrace it as such a tool. Respondents in both groups also believe that certification is mainly being driven by those stakeholders with a vested interest in the certification process; NGOs, third-party

certifiers and consultants. They do not perceive that consumer demand is driving the certification issue or that the public supports certification, which is probably one of the reasons behind their reluctance to support or adopt certification. With regard to trust to conduct the certification process itself, either a certified forester, state forestry organization or a forest-related association was ranked in the top three. In addition, NGOs and the federal government ranked last in the trust category for corporate and NIFP respondents, respectively. Finally, only about one-third of respondents in both groups will not allow certifiers access to their land to check forestry operations. However, 70% of respondents indicated that they would not be willing to bear the costs of certification, with less than 2% indicating that they would bear any costs. This study has certain limitations that preclude results from being generalized. For example, the work is limited in scope to forest landowners in Louisiana and may not be representative of the South or of the USA as a whole. Future research should specifically contrast landowner attitudes about certification and what certification actually offers. This could be done across a number of certification schemes. However, the results of this study can help timberland owners in understanding the implications of certification as well as assist in developing planning and marketing tools for those who desire involvement in certifying their forest resources.

Corporate and Non-industrial Private Forestland Owners

Beyond timberland owners, this information may be useful in ultimately developing an industry-wide certification strategy. In addition, although it is always difficult to draw precise conclusions from market research, some organizations involved in certification may also find these results interesting as they work to broaden the appeal of their programmes.

References Armstrong, S.J. and Overton, T.S. (1977) Estimating nonresponse bias in mail surveys. Journal of Marketing Research 14, 396–402. Birch, T.W. (1996) Private Forest-land Owners of the United States, 1994. USDA Forest Service, Northeastern Forest Experiment Station. Resource Bulletin NE-134. Bliss, J.C., Nepal, S.K., Brooks, R.T. Jr and Larsen, M.D. (1997) In the mainstream: environmental attitudes of mid-south forest owners. Southern Journal of Applied Forestry 21(1), 37–43. Dillman, D.A. (1978) Mail and Telephone Surveys: the Total Design Method. John Wiley & Sons, New York. Henry, W.A. and Bliss, J.C. (1994) Timber harvesting, regeneration, and best management practices among west central Alabama NIPF owners. Southern Journal of Applied Forestry 18(3), 116–121. Newman, D.H. and Wear, D.N. (1993) Production economics of private forestry: a comparison of

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industrial and nonindustrial forest owners. American Journal of Agricultural Economics 75, 674–684. Ozanne, L.K. and Vlosky, R.P. (1997) Willingness to pay for environmentally certified wood products: the consumer perspective. Forest Products Journal 47(6), 1–8. Petersen, C. (1994) Green certification of wood. Current Issues in Forestry 6(1). Powell, D.S., Faulkner, J.L., Darr, D., Zhu, Z. and MacCleery, D.W. (1994) Forest Resources of the United States, 1992. USDA Forest Service General Technical Report RM234. Vlosky, R.P. (2000a) US Forest Service, Bureau of Land Management and state forester perspectives on forest certification. Forest Products Journal 50(3), 21–27. Vlosky, R.P. (2000b) Certification: perceptions and suggested alternative strategies for non-industrial private forest landowners. Working Paper No. 41, Louisiana Forest Products Laboratory, LSU Agricultural Center, Baton Rouge, Louisiana. Vlosky, R.P. and Ozanne, L.K. (1997) Environmental certification: the wood products business customer perspective. Wood and Fiber Science 29(2), 195–208. Vlosky, R., Koudou, A.N., Chance, N.P., McDill, M. and Doucet, J. (1997) The Louisiana Solid Wood Products Industry: Resource Assessment, Industry Structure and Value-added Market Opportunities. Final report to sponsor: US Forest Service, Southern Experiment Station, New Orleans, Louisiana, 200 pp.

27

Forest Certification in the Heart of Dixie: a Survey of Alabama Landowners

1TREES

Deanna Newsom,1 Benjamin Cashore,2 Graeme Auld3 and James E. Granskog4

Program, Rainforest Alliance, Richmond, VT 05477, USA; 2Global Institute for Sustainable Forest Management, Yale School of Forestry and Environmental Studies, New Haven, CT 06511-2189, USA; 3University of British Columbia, Department of Forest Resources Management, Vancouver, British Columbia, Canada V6T 1Z4; 4USDA Forest Service, Southern Research Station, New Orleans, LA 70113, USA

Introduction The forest certification discussion in the USA and elsewhere has tended to focus on those parts of the forestry sector that are furthest along the chain of custody: consumers, retailers and wood processors. The ultimate source of much of the forest sector’s raw materials – the forestlands that are in the hands of private landowners – has received less attention. If certification continues to gain momentum, however, the non-industrial private landowners who manage 58% of the country’s 195 million ha of commercial forestland may also be asked to certify their lands. Understanding the attitudes of this group toward the certification concept and current issues relating to certification is important for all groups involved in the process, from the landowners themselves to certifiers to industrial forest landowners. The US state of Alabama provides an interesting case with which to study these issues. The forest industry is the state’s largest manufacturing sector, contributing more than $14 billion per year to its economy (Glover and Jones, 2001). Alabama contains 9 million ha of private forestland, with non-industrial private owners controlling 70%, industrial private owners owning 25%, and 5% in public ownership (USDA Forest Service, 2001).

In 1997, 67% of the roundwood produced in Alabama came from non-industrial private forestlands (Howell et al., 1999). The attitudes of non-industrial private landowners toward certification will play a large role in the future of forest certification in the state and region. The special challenges that forest certification poses for non-industrial private landowners in Alabama and elsewhere have been documented by both academics and concerned landowner groups (see Thornber et al., 1999). Cost is usually cited as the main challenge, as non-industrial private landowners tend to have smaller forest tracts and less financial capital to cover the direct costs of certification, which are proportionately higher than on larger tracts due to economies of scale (Scientific Certification Systems, 2000). Certification programmes operating in the USA and elsewhere have taken measures to try and assist landowners in meeting these challenges, usually by trying to decrease costs through processes such as group certification. The relevance of these various perceived costs of certification – as well as perceived benefits – will doubtless play a large role in future certification trends. In addition to costs and benefits, cooperation and communication are major issues requiring investigation. The degree to which landowners are

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willing to work together may affect the success of some attempts to decrease their costs (e.g. group certification). The level of trust between forest landowners and organizations involved in forest certification may impact on the ability of landowners to stay up to date with new developments and informed about potential markets for certified forest products. Another aspect of communication, the degree to which landowners feel included in the development of certification standards, was an important factor in influencing landowner acceptance of competing forest certification programmes in Europe. In order to determine forest owners’ attitudes toward certification and address the issues discussed above, a mail survey was sent to private landowners in Alabama in the autumn of 2000. The results of the survey are presented in this chapter in two parts. First, we describe landowners’ general attitudes toward forest certification (level of knowledge of and ‘openness to’ the forest certification concept) and the demographic variables that most influence those attitudes. Second, we describe landowners’ views on two specific aspects of the current certification debate: (i) the costs and benefits of certification, including conditions required before landowners in Alabama would seriously consider certification on their own lands; and (ii) cooperation and communication, which addresses landowners’ attitudes toward cooperative certification arrangements, participation in certification programme standard development, and the trustworthiness of various groups active in the certification debate in the southeastern USA.

Methods We used a landowner database created by the Auburn University Private Forest Management Team, which included the names and addresses of all individuals, corporations and organizations owning more than 0.4 ha (1 acre) of forestland in Alabama. Fourteen counties in Alabama were randomly chosen for sampling. In total, questionnaires were sent out to 1960 landowners. The number of landowners sampled in each county was proportional to the total number of landowners in that county. Ten individuals from academic institutions, certification programmes and landowner

associations reviewed draft versions of the survey questionnaire. We conducted pre-tests with seven forest landowners in Alabama and refined the questionnaire based on that feedback. Landowners were sent a postcard in early October describing the project and informing them that a questionnaire would be coming soon. We sent the questionnaire out 2 weeks later. One month after the original postcard, a ‘reminder/thank you’ postcard was sent to all landowners. Respondents were assured that individual responses would be confidential and stored in an anonymous database. We followed the Dillman tailored design method as closely as possible (Dillman, 2000). Of the 1960 questionnaires sent out, 56 were returned unopened due to an incorrect address or deceased recipient, 46 were returned by individuals who were not forest landowners and 464 questionnaires were returned by non-industrial forest landowners as usable, giving an adjusted response rate of 25%. We defined those landowners who do not own wood-processing facilities as ‘non-industrial.’ This chapter pertains only to non-industrial private landowners. The concept of forest certification was explained in the questionnaire. Relationships between demographic and attitudinal variables were examined using χ2 tests when data were ordinal scale, and Spearman’s correlations when data were interval scale. We tested the following demographic variables: age (in four categories), gender, the percentage of income stemming from forestry (four categories), the frequency of interaction with professional foresters and county extension agents (five categories), past participation in government landowner incentive programmes (yes or no), membership in landowner groups (yes or no), size of forest ownership (number of hectares), and length of forest land ownership (number of years). The null hypothesis was rejected when P ≤ 0.05.

General Attitudes about the Certification Concept Previous knowledge of certification After reading the definition of forest certification provided in the survey booklet, 22% of respondents (n = 98) reported that they had

Forest Certification in Alabama

previously heard of forest certification, while 78% (n = 352) had not heard of certification or were not sure. We found many significant relationships between demographic variables and previous knowledge of certification. Men were more likely than women to have heard of certification prior to the survey (χ2 = 9.22, P = 0.002), as were landowners who had participated in government incentive programmes in the past (χ2 = 37.8, P < 0.001). A higher knowledge of certification than expected was also observed in landowners who receive a higher proportion of their total income from forestry (χ2 = 24.5, P < 0.001), landowners who interact more frequently with professional foresters or county extension agents, (χ2 = 91.8, P < 0.000), and landowners who belong to one or more landowner groups (χ2 = 67.7, P < 0.001). The size of forestland holdings was weakly but significantly related to prior knowledge of certification (Spearman’s R = −0.13, P = 0.008). Landowner age and the number of years of forestland ownership were not significantly related to previous knowledge of certification.

Openness to the forest certification and sustainability concepts Respondents were asked to read statements regarding certification and sustainability and indicate their level of agreement or disagreement on a 5-point Likert scale (a ‘no opinion’ option was also available). We found that 69% of respondents agreed or strongly agreed with the statement ‘I would like to learn more about forest certification’ (Fig. 27.1), and 70% agreed or strongly agreed that it is important to stay up to date with new forestry practices and programmes. However, fewer than half (42%) agreed or strongly agreed that certification can significantly improve forest management in Alabama, and fewer than half (44%) agreed or strongly agreed that they had adopted guidelines for forest sustainability on their forest lands. Exactly half of respondents view forest certification as ‘just an additional layer of regulation’ while 42% agreed or strongly agreed that forest certification ‘is a way to get recognition for voluntarily doing good forestry’. Further tests examined the relationship between the level of agreement or disagree-

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ment with the above statements and various demographic variables. None of the demographic variables affected the respondents’ desire to learn more about forest certification. A significant relationship existed between frequent interaction with forestry professionals and higher agreement with the statement that certification can significantly improve how forests are managed in Alabama (χ2 = 39.2, P = 0.001), higher levels of adoption of sustainability guidelines (χ2 = 76.2, P < 0.001) and more importance placed on staying up to date with new practices and techniques (χ2 = 59.1, P < 0.001). Similarly, those landowners who had previous participation in government programmes tended to have higher levels of adoption of sustainability guidelines (χ2 = 24.0, P = 0.002) and more importance placed on staying up to date with new practices and techniques (χ2 = 19.8, P = 0.011). Age was associated with a negative stance toward participation in certification in Finland (Lindström et al., 1999), but was not significant in our study. Research on non-industrial private landowners in Europe revealed that ‘good knowledge is a prerequisite for participation in certification. Knowledge level affects both general attitudes toward certification and willingness to participate’ (Lindström et al., 1999). We found no relationship between knowledge of certification (whether or not landowners had heard of certification before the survey) and any of the attitudinal statements in Fig. 27.1.

Important Certification Issues for Landowners Costs and benefits of certification The direct costs of forest certification, such as hiring an auditing crew or preparing a wildlife inventory, are often said to be prohibitory for small landowners. Field experience has shown that there are economies of scale in terms of the cost per unit area of conducting Forest Stewardship Council (FSC) certification evaluations, even when decreased audit team size and reduced field time for small landowners are considered (Scientific Certification Systems, 2000). Other certification programmes tend to have lower costs, often consisting of a nominal yearly fee.

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Fig. 27.1. Level of landowner agreement or disagreement with statements about forest certification and sustainability.

When respondents were asked what conditions would have to be fulfilled before they would seriously consider certification for their forest lands, 50% reported that certification must be free (Fig. 27.2). A normative conviction that certification is ‘the right thing to do’ was the only more frequently cited condition (67% of landowners). The ability to sell certified wood at a higher price than non-certified wood was cited as a condition of certification by 33.6% of respondents. Further tests revealed that the following types of landowners were more likely to require that certification be free before they would seriously consider it for their forestlands: those who interact less frequently with professional foresters or county extension agents (χ2 = 12.9, P = 0.012), those who have not participated in government incentive programmes in the past (χ2 = 10.0, P = 0.007) and those who are not members of landowner associations (χ2 = 13.3, P = 0.012). Interestingly, the proportion of income from forestry was not significantly related. Landowners were then asked to indicate how important certain potential direct and indirect costs of certification were when considering certification for their own forestlands (Fig. 27.3).

The Forest Stewardship Council’s group certification programme aims at decreasing costs for individual landowners through a stratified auditing system, reduced assessment team size, reduced time in the field, and shared costs of report writing and assessment team travel (Scientific Certification Systems, 2000). The lack of required third-party auditing keeps the costs of other landowner certification programmes in the USA relatively low; nevertheless, these programmes are also taking measures to increase their appeal to private landowners by offering market benefits. For example, the American Tree Farm System’s official mutual recognition with the American Forest & Paper Association’s Sustainable Forestry Initiative (SFI) was created to provide not only ‘new opportunities to work together for continuous improvement on all sizes of ownership’, but also ‘a practical means for all landowners to demonstrate to both domestic and international markets that [they] are second to none in environmental stewardship’ (American Tree Farm System, 2000). Forest landowners, however, appear to consider the non-monetary benefits of certification to be equal to or slightly more important than monetary ones. When asked to examine a list of the

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Fig. 27.2. Percentage of respondents who stated that the listed conditions must be met before they would seriously consider certifying their forest lands (n = 453).

Fig. 27.3. Importance of selected arguments against certification when landowners consider the certification of their own forest lands (1–5 are different levels of importance, with 1 being most important and 5 being least important).

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potential benefits of certification and identify which were most important to them, the three most frequently cited benefits included the provision of better wildlife habitat, enhanced timber productivity, and protection of the environment (Fig. 27.4). This result is consistent with survey respondents’ assessment of the primary benefit of land ownership: three-quarters of landowners chose nonmonetary benefits (‘keeping land in the family’, ‘beauty’, ‘recreation’, and ‘hunting’), and onequarter chose monetary benefits (‘income from timber’ and ‘investment, land speculation’). Interestingly, when the same question was asked to Alabama landowners in 1991, 59% of respondents reported non-monetary benefits as primary (Bliss, 1991). Notably unimportant was the benefit ‘certification may be a way for landowners to show their family and friends that they practice good forestry’.

This is somewhat surprising, given the success of the Treasure Forest programme and the Forest Masters programme in Alabama (Glover and Jones, 2001), both of which are strongly associated with a sense of pride in good forest stewardship.

Landowner cooperation and communication around certification Cooperation and communication among individual landowners, and between landowners and other organizations, are increasingly important aspects of certification. For example, cooperative arrangements among landowners have been proposed by certification programmes as a way to decrease the costs of certification and, in the future, communication between landowners

Fig. 27.4. Importance of selected reasons for certification when landowners consider the certification of their own land (1–5 are different levels of importance, with 1 being most important and 5 being least important).

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and other groups may become critical for the exchange of information about markets for certified products. Landowners themselves may choose to become involved in the process of setting standards and guidelines within certification programmes, to ensure that their interests are represented. The success of these arrangements depends on the willingness of landowners to be involved, and the degree of trust between landowners and other core groups. We asked landowners questions to determine their attitudes on these topics. The importance of landowners’ willingness to cooperate with each other varies among forest certification programmes. Whereas certification programmes such as the Alabama-based Treasure Forest programme focus on an each landowner’s individual goals and practices (Alabama Forestry Commission, 1998), the Forest Stewardship Council’s group certification programme requires a degree of cooperation among members of a group. More than half of the landowners in this survey expressed a willingness to be certified with other landowners if it would decrease costs: 58% of respondents (n = 154) agreed or strongly agreed with the statement ‘It makes sense for landowners to get certified together if it decreases individual costs’. None of the demographic variables tested affected the answer to this question. In our survey, 80% of respondents (n = 265) agreed or strongly agreed with the statement ‘It is important that landowners work together when new forestry issues arise’. Respondent age was significantly related to the level of agreement with this statement: younger landowners were more likely to agree or strongly agree than older landowners (χ2 = 22.3, P = 0.03). The size of forestland holdings was weakly but significantly correlated with the level of agreement with this statement (Spearman R = −0.14, P = 0.03). The negative relationship between age and willingness to cooperate suggests that cooperative arrangements such as group certification may meet with increasing success as the next generation of landowners takes over management responsibilities. A survey of landowners’ attitudes toward the concept of ecosystem management by Brunson et al. (1996) indicated that the majority of landowners in the Southeast (59%) were ‘interested in observing a [collaborative] partnership at work, but would need to know more before deciding to join’. While 23% were definitely interested in

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joining, 15% would be unlikely to join such a partnership. Many landowners in that study reported being more likely to join such partnerships if certain conditions were met: if most neighbouring landowners participated (14–18%); if federal agencies were not involved (14–19%); and if protecting commodity uses was a primary partnership objective (15–23%). Alabama landowners were asked to indicate how much they trusted various organizations to be involved in the design and implementation of forest certification programmes. Landowner associations, professional foresters and the state government were the three organizations rated most trustworthy by landowners in Alabama (Fig. 27.5). Least trustworthy organizations were non-governmental organizations and groups or companies that perform certification audits. Similarly, landowners in Louisiana place the most trust in certified foresters, forest-related associations (‘second-party’ certifiers), and state governments (Vlosky, 2000). Federal government and non-governmental organizations also ranked least trustworthy by Louisiana landowners. The importance of landowner ‘networks’ is reflected in the fact that more than a quarter of respondents having heard of certification before the survey had heard of it from other landowners or a landowner association (Fig. 27.6). However, only 12.4% of landowners said that a landowner association must specifically recommend certification before they would seriously consider it for their own lands (see Fig. 27.2). Other important sources of information on certification include professional foresters (25%) and forest companies (15%). Environmental groups ranked lowest as a source of certification information, with only 3% of landowners having heard of certification from such groups. The final component of cooperation and communication that we examined was the participation of landowners in the creation and development of certification programmes. We asked landowners how important their participation is: 44% of respondents said that they would not seriously consider certification for their own forest lands unless they ‘had a say’ in making the rules (Fig. 27.2). Younger landowners were significantly more likely than older ones to cite participation in rule making as a prerequisite for considering certification on their lands (χ2 = 8.1, P = 0.044). The relationship between

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age and desire to participate in the setting of certification standards bodes well for the involvement of landowners in the certification debate in the future.

Conclusion If the demand for certified forest products by retailers (and potentially consumers) in the

Fig. 27.5. Average level of ‘trustworthiness’ of different organizations in terms of creating and implementing forest certification programmes (1 = least trust, 5 = most trust).

Other 12%

Not sure 7%

Another landowner 13% Landowner association 15%

County extension agent 10% Environmental organization 3%

Forest company 15% Professional forester 25%

Fig. 27.6. Sources from which respondents had heard of forest certification and the percentage of respondents who cited that source (sum of percentages does not equal 100 because respondents could choose multiple sources, n = 95).

Forest Certification in Alabama

marketplace continues to increase, the pressure to participate in certification will most certainly reach private forest landowners. In Alabama, private forest landowners currently know relatively little about forest certification, but the majority would like to learn more. There exists a strong scepticism by the majority of landowners, however, about whether certification can improve forest management in Alabama. Certification programmes attempting to reach landowners in Alabama should work with landowner groups and professional foresters, as these groups are seen as most trustworthy by landowners and have already established channels of communication with landowners about certification. Certification programmes would do well to educate landowners about the voluntary and market-based nature of certification, since it is currently perceived by half of Alabama landowners as ‘just another layer of regulation’. Landowner interaction with forestry professionals and participation in government incentive programmes are positively related to landowner adoption of sustainability guidelines, and these activities should be maintained and encouraged as an important compliment to certification. Certain demographic groups in Alabama are more open to sustainability initiatives and the certification concept than others, and they may be a good starting point for outreach efforts by certification programmes. These groups include landowners who have higher levels of interaction with forestry professionals and who have previously participated in government incentive programmes. Certification programmes should consider designing special information programmes to target female landowners, since existing communication channels leave this demographic group less informed about certification than male landowners. Younger landowners may be willing to play a leadership role in forest certification in the future, as they tend to place more importance on cooperation among landowners than older landowners, and are more interested in participating in the development of certification standards. Landowners must be sure that certification is the ‘right thing to do’ before they will participate in a programme. Their values must be assessed by certification programmes and addressed in a meaningful way; research in other sectors has shown that this step is crucial for the long-term legitimacy of new institutional arrangements

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(Jentoft, 1989), such as a certification programme. Once that step occurs, attempts to minimize or even eliminate certification costs for landowners should be undertaken. The majority of Alabama landowners appear to be open to group certification or other cooperative initiatives. When landowners in Alabama are informed about the potential benefits of certification, non-monetary benefits such as improved wildlife habitat and environmental protection should be given equal or more emphasis than potential monetary benefits, such as price premiums.

Acknowledgements The USDA Forest Service, Auburn University Grant-in-Aid Program and the Auburn University Center for Forest Sustainability Peaks of Excellence Program provided financial support for this survey. Thanks to John Bliss and Richard Vlosky for sharing previous survey instruments with us and giving comments on early drafts of the survey questionnaire, and to Mark Dubois, Rick Fletcher, John Schelhaus, Eric Hansen, Richard Donovan and Steverson Moffat for commenting on earlier drafts of the questionnaire. Thanks to Glenn Glover and others at the Auburn University Private Forest Management Team for providing us with the landowner database, and the Forest Economics and Policy Analysis Unit at the University of British Columbia for providing office space for survey assembly. Thanks to Theresa Undeutsch for entering the raw data, and Volker Bahn for commenting on a previous draft of this paper. Two anonymous reviewers provided valuable suggestions for improvement. Of course the biggest thank you goes out to the owners of Alabama forestland who took the time to respond to our survey.

References Alabama Forestry Commission (1998) Treasure Forest: Program Information and Basic Guidelines. Information Brochure. American Tree Farm System (2000) AFF’s American Tree Farm System and AF&PA’s Sustainable Forestry Initiative (SFI) Program Collaborate to Expand the Practice of

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Sustainable Forestry. Press release, 27 June 2000. Available at: http://www.treefarmsystem.org Bliss, J.C. (1991) Alabama’s Nonindustrial Private Forest Owners: Snapshots from a Family Album. Alabama Cooperative Extension Service Circular ANR-788. Brunson, M.W., Yarrow, D.T., Roberts, S.D., Guynn, D.C. Jr and Kuhns, M.R. (1996) Nonindustrial private forest owners and ecosystem management: can they work together? Journal of Forestry 94, 14–21. Dillman, D.A. (2000) Mail and Electronic Surveys: the Tailored Design Method, 2nd edn. John Wiley & Sons, New York, 464 pp. Glover, G.R. and Jones, S.B. (2001) Extension in Alabama: landowner education and support. Journal of Forestry 99, 14–17. Howell, M., Gober, J.R. and Nix, S.J. (1999) Alabama’s Timber Industry – an Assessment of Timber Product Output and Use, 1997. Resource Bulletin SRS-45. US Department of Agriculture, Forest Service, Southern Research Station, Asheville, North Carolina.

Jentoft, S. (1989) Fisheries co-management: delegating government responsibility to fishermen’s organizations. Marine Policy 13, 137–154. Lindström, T., Hansen, E. and Juslin, H. (1999) Forest certification: the view from Europe’s NIPFs. Journal of Forestry 97, 25–30. Scientific Certification Systems (2000) SCS Forest Conservation Program Operations Manual: Group Certification. 23 October 2000. Thornber, K., Plouvier, D. and Bass, S. (1999) Certification: Barriers to Benefits. A Discussion of Equity Implications. European Forest Institute, Joensuu, Finland. USDA Forest Service (2001) Southern Region Forest Inventory Analysis Database Retrieval System. Available at: http: //www.srsfia.usfs.msstate.edu Vlosky, R.P. (2000) Certification: Perceptions of Non-Industrial Private Forestland Owners in Louisiana. Working Paper No. 41, Louisiana Forest Products Laboratory, Louisiana State University Agricultural Center, Baton Rouge, Louisiana.

Index

References to tables and illustrations are in italics. References to end notes are given as the page, with the note number in parentheses, e.g. 48(n11). Since most of the book concerns the USA, references to the USA are only given when these relate to passages in chapters that are primarily about other countries. access to private property for compliance monitoring 121–122 activism see NGOs AF&PA (American Forest and Paper Association) 236, 272, 279 Aggregate Timber-land Assessment System see ATLAS agrarian reform 68, 76 agriculture 2, 177–187 Alabama 291–299 allowable cuts 97–104 American Forest and Paper Association see AF&PA American Forest Congress (1905) 63–64 Antelo, Pablo 73 Asia, Central 144 ATLAS (Aggregate Timber-land Assessment System) 155–156 Australia 49–59 BASE assumptions (USDA) 156–158 best practice programmes 117–119, 209 biocides 249, 253–254 biodiversity 5, 20, 189, 190–202, 194–195 biomass fuel 186 Black Brook, New Brunswick, Canada 253–254 BOLFOR (Bolivian Sustainable Forest Management Project) 72–74 Bolivia 67–80 Bolivian Council for Voluntary Forestry Certification (CFV) 72

Bolivian Sustainable Forest Management Project see BOLFOR boundaries of production 192–195, 197–199 boycotts 239–240 brands and branding 237–238 Brazil 43, 48(n9) buffers, riparian 203–209 bureaucracy as an obstacle 45, 71, 113 CADEFOR (Centro Amazonico de Desarollo Forestal), Bolivia 74, 77 CADEX (Chamber of Exporters) Bolivia 72 Camara Forestal de Bolivia 70, 72 campaigns by NGOs see NGOs, campaign tactics Canada 61–62, 249–250, 252–255, 279 Canada Working Group (CWG) of FSC 252–254 Canadian Standards Association 246–247 Candidate Conservation Agreements 110 carbon sequestration 5–6, 20, 42, 48(n3) impact of carbon policies on land use 166, 171–175 CEE see Europe, Central and Eastern (CEE) Centro Amazonico de Desarollo Forestal (CADEFOR), Bolivia see CADEFOR Centro de Investigacion y Manejo de Recursos Naturales Renovables, Bolivia see CIMAR certification attitudes of landowners 284–289, 291–299 Bolivia 71–75 catalyst for change 248 chain-of-custody 259, 273, 280 301

302

Index

certification continued challenges and difficulties 73–75 company motivations and preferences 230–232 debates and objections 72–73, 252–255 differences between US Northeast and Canadian Maritimes 250–255 discrimination against small farmers 86 Europe 84–87 familiarity with concept 275–276, 292–293, 297 group-certification 85, 291, 294, 297 history 272–273 impetus to become certified 279, 285–286 independence from government 239 influence of branding 237–238 influence of civil society threat 238–242 influence of supply chain position 236–238 institutions involved in certification 234, 286–288, 297 interim suspension 254 landowner communication and cooperation 296–298 perceived advantages and disadvantages 276–279, 294–296 Poland 85–86 representation issues 252 role of industry in obtaining acceptance 73 types 230 willingness to pay 147, 287, 294 wood procurement policy requirements 259 CFMA (Industrial Forest Management Agreements), Philippines 48(n11) CFV (Bolivian Council for Voluntary Forestry Certification) 72 CGE (computable general equilibrium) models 168–171 chain-of-custody certification 259, 273, 280 Chamber of Exporters (Bolivia) see CADEX Chile 48(n5) CIMAL (Bolivia) 73 CIMAR (Centro de Investigacion y Manejo de Recursos Naturales Renovables), Bolivia 72 Clarke-McNary Act (1924) 64–65 Clawson, Marion 1 Clean Water Act (USA) 203 clearance of land 62–63 climate change 5–6, 165 Coastal Rainforest Coalition 240 Collaborative Partnership on Forests see CPF Community Forest Management Agreements, Philippines see CFMA compensation see incentives, financial competition 74, 107, 232 compliance monitoring access to private property 121–122 characteristics of monitoring by US states 118, 119 costs 123

criteria and parameters 120 data collection and use 122–123, 125–127 field monitoring protocols 124 frequency 122 Minnesota 123–126 organizations and personnel involved (USA) 119–120, 121 purpose 118–119 site selection 121, 124–125 computable general equilibrium models see CGE conservation American Forest Congress (1905) 63–64 change from modern to postmodern approaches 17–19 conservation reserves and protected areas 10, 20, 50–51 criteria for protection 130 endangered species 107–115 motivations see motivations, for conservation Natura 2000 network 190–202 of natural forests by plantations 4–5 Natural Heritage Programme, North Carolina 129–131 voluntary agreements 130–131 contracts biodiversity restoration and conservation 196–201 Natura 2000, theoretical considerations 192–195 conventions, international 12–13, 147 cooperatives 82 Costa Rica 20–23 costs of biodiversity conservation 191–192, 194–195 of certification 278, 287, 291, 293–295 of timber production 3, 88 cottonwoods see hybrid poplars cover see forest cover CPF (Collaborative Partnership on Forests) 13 crops food crops 172 short-rotation, woody crops 177–187 deforestation and degradation 10–11 Delphi method 31–34 denationalization see nationalization and denationalization devolution of forests by industry 68 dispute resolution process, Canada 253–254 ‘DOScapital 6.0’ (liberal economies) 68–69 Earth Summit (Rio de Janeiro, 1992) ecological ranks 130, 137 economic issues 12, 77, 203–209

12–13

Index

303

economy effect of carbon policies 173–174 political economy 68–69 transitional economies 81–91, 95–104 ecosystems, management 18, 297 Endangered Species Act (1973) USA 107–115, 203 entrepreneurs 44–45 Environmental Management System Standard (ISO 14001) 260 environmental services of forests 3–4, 10, 189, 193 ESA see Endangered Species Act (1973) USA estate taxes, effects on forests 211–217 EU (European Union) 84–88, 190 Europe, Central and Eastern (CEE) 81–91, 144 see also Ukraine exports 49–50, 73–74, 85, 219

genetic engineering 186, 187 global partial equilibrium approach 146 Global Trade Analysis Project model see GTAP global warming 5–6, 165 globalization 68, 78–79, 89–90, 233 governance Australia 49, 57–58 needs for the future 24–25 non-state forms 233, 242, 245, 247–248, 255, 272 problems of the ‘soft state’ 76–77 ‘green reversals’ 247–248 greenhouse effect see global warming Greenpeace 239–240 GTAP (Global Trade Analysis Project) model 168–171, 220 guidelines, Minnesota 123–126

FARM (Future Agricultural Resources Model) 166–172 FASOM (Forest and Agricultural Sector Optimization Model) 178, 184 financial incentives see incentives, financial Finland 146 fires, forest 10–11, 64 fish-bearing streams 203–209 fisheries 21–22 Forest and Agricultural Sector Optimization Model see FASOM Forest Code of Ukraine (1994) 96–97, 104(n1) forest cover 9–10, 11–12, 150–151 Forest Inventory Analysis 1990, North Carolina 132 Forest Management Trust 72, 74 ‘Forest Principles’ (Rio de Janeiro, 1992) 13 forest-rich and forest-poor countries 11–12 Forest Riparian Easement programme (Washington State) 204, 207, 208–209 Forest Stewardship Council see FSC Forest Superintendency (Bolivia) 70, 71, 76–77, 78 forestlands, incompatibility of private and public sector objectives 41–42 Forestry Act (Sweden) 98 ‘Forests and Fish’ rules (Washington State) 203–209 fragmentation of forest products industry 235–236 of forests 84, 88, 90, 216, 217 France 189–202 Friedman, Thomas 68, 78–79 FSC (Forest Stewardship Council) 71–72, 85–86, 235–236, 238–239, 243, 246–255, 259, 272–273, 276, 280, 293–294 fuels 172, 186 Future Agricultural Resources Model see FARM

Habitat Conservation Plans (HCP), USA 108–113 Hardin, Garrett 21 hardwoods 154–161, 181–187 harvests, timber see timber, harvests HCP (Habitat Conservation Plans, USA) 108–113 Home Depot 240, 241, 248 hybrid poplars 177–187

GATT (General Agreement on Trade and Tariffs) 219–227

JD Irving Ltd, attitudes to FSC 247–255 joint sector plantation companies 46

IFF (Intergovernmental Forum on Forests) 13 IFMA (Industrial Forest Management Agreement), Philippines 48(n10) incentives financial 43–44, 48(n5–9), 64–65, 97, 130–131, 190, 193, 197–199, 204, 207–209 other 131 India 42, 44, 45–47 indigenous groups 70, 75, 249–250 Indonesia 43, 48(n7) Industrial Forest Management Agreement, Philippines see IFMA influence in networks 31–34, 36 information from compliance monitoring 122–123, 125–127 lack of 45, 58, 111 ownership of 57 initiative, entrepreneurial 44–45 Institutional and Legal Framework for Forest Policies in the ECA Region and Selected OECD Countries (World Bank) 143–144 interest intermediation school of network analysis 30 Intergovernmental Panel on Forests see IPF internationalization of forest issues 10–14 inventories of forests 53–57 issue networks 29–38

304

Index

La Chonta (Bolivia) 73 land abandonment as a protest against taxes 65 land trusts 131 land use 150, 166, 171–175, 208 landfill crisis 177 landowners (non-industrial) 58–59, 70 attitudes to certification 284–289, 291–299 case studies on riparian buffers 204–209 comparison with industrial landowners 283–289 cooperation and communication 296–298 demographics 138(n1), 284–285 effects of estate taxes 211–217 motivations for conservation 131–132, 135–137 objectives 190 Landsat mapping 56 Laumann-Knoke issue network analysis 30–33 laws and regulations Bolivia (1966) 67, 68, 69–71 Central and Eastern Europe 82–83 comparisons between OECD, East Europe and Central Asia 144 European Union 190 Norway (hypothetical analysis) 144–146 seen by activists as minimum standards 242 Sweden 98 Ukraine (1994) 97–98 USA 107–115, 203–209 see also guidelines leadership 114 leasing of forestlands see sales and leasing of forestlands Lexus and the Olive Tree, The (Thomas Friedman) 68, 78–79 licences, wood chip exports 49–50 Likert scales 260, 262 loans see incentives, financial logs, international trade 221–223 Long, George S. 63, 64 Louisiana 284–289 lumber, international trade 223–225 lumber recovery factor 3

mandatory management plans 82–83 poor outcomes 83–84 postmodernist management 23–24 process management recommendations 114–115 recommendations for Natura 2000 190–192 of riparian buffers 204–209 sustainable management see sustainable forest management technical management rules 82–83, 90, 97, 98–104 mapping 53–57 Maritimes Regional Steering Committee (Canada) 252–254 market-based instruments see MBI market campaigning tactics of NGOs 239–242 markets 44, 84, 89 projections 178–187 MBI (market-based instruments) 41, 43 McSweeney-McNary Act (1928) 65 methodologies allowable cut calculations 98–102 computable general equilibrium (CGE) models 168–171, 220–221 computer simulations 155–156 evaluation of protection 132–133, 140–141 FARM model to evaluate impact of carbon policies on land use 166–172 forest mapping and inventories 54–56 Likert scales 260, 262 network analysis 31–32, 37–38 pulpwood market projections 178–183 summated rating scales 260 Mid-West (USA) 62–63 Minnesota, guideline implementation monitoring 123–126 models and modelling 155–156, 166–172, 178–187, 204–207, 220–221 monitoring of compliance see compliance monitoring motivations of companies for certification 230–232, 236–238, 248 for conservation 131–132, 135–137 for sustainable forestry management 34, 36–37 multidisciplinarity 22 Mystery of Capital, The (Hernando de Soto) 76

MacMillan Bloedel Ltd 239–240 Maine Council of Sustainable Forest Management 250–251 Malaysia 43–44 management assistance 84, 131–132 best practice programmes 117–119, 209 conservative management 249 ecosystem see ecosystems, management management intensities 152–154, 156

NAFTA (North American Free Trade Agreement) 219–227 NAPAP (North American Pulp and Paper) model 178–184 National Forest Inventory Australia 53–55, 57, 58 USA 55 National Forestry Chamber (Bolivia) 70, 72, 73 National Forestry Directorate (Bolivia), inefficacy of 71

knowledge 21–23 Kyoto Protocol (1997)

6, 165

Index

National Rural Development Scheme (France) 190 nationalization and denationalization 82 Natura 2000 network 190–202 Natural Heritage Programme, North Carolina 129–131 network analysis (issues) 29–38 New Zealand 48(n6) NGOs (non-governmental organizations) 70, 72, 73, 229–230, 233–234, 238–242, 250–255, 286, 297 North American Free Trade Agreement see NAFTA North American Pulp and Paper model see NAPAP Northern Forest Lands Study (USDA) 250 Norway 144–146 Nova Scotia Forest Products Association 252 Oaxaca, Mexico (FSC headquarters) 253, 254 OECD countries 144 Organizational State, The (Laumann, E. and Knoke, D.) 30 ownership of forests 20–21, 76, 82, 132 see also tenure of information 57 multiple ownership 135, 137 policy conflicts 249–250 private landowners see landowners (non-industrial) Pan-European Forest Certification Council see PEFCC Pan-European Forestry Process 81 panarchies 23 paper 177, 180–181, 182, 225–226 paper mills, wood procurement 265 PEFCC (Pan-European Forest Certification Council) 85, 86–87 pesticides 249, 253–254 Philippines 43, 48(n10) pines 83, 156, 157–159, 181–182 planning and reserve design 52–54 plantation forestry 2–3, 4–5, 42, 46, 161 Poland 82, 83, 85–86 policies Australia 52–54 Bolivia 67–70 effects on private and public sectors 34–37 environmental policies 17–19 Europe 147 France 190 impact of carbon policies on land use 166, 171–175 impact of EU accession in Central and Eastern Europe 87–88

305

impact of sustainable forestry management 34–36 implications of simulations and projections 160–162 importance of public policy debates 255 inadequacy of 44 international policies 11–14, 147 national policies 14 need for change in Central and Eastern Europe 90–91 in other sectors 147 policy research 47, 143–144 role of NGOs in global policy-making 233 Sweden 98 trade 47 Ukraine 96–98 US vs. Canadian policies 61–62, 249–250 see also incentives, financial Polish State Forests 85–86 politics, effects on forestry reform 76 POLYSIS model (USDA) 178–186 poplars, hybrid 177–187 Portugal 48(n8) postmodernism 18–19, 24, 61 prices of timber see timber, prices privatization, objections to 88 process management, recommendations 114–115 procurement, survey of practices 260–267 production objectives 41–42 wood production vs. biodiversity 192–195 productivity 83, 168, 180 products (wood) 3, 74, 180–181, 223–225, 265 progressivism 17–18 public–private partnership 41–46 pulp, international trade 225–226 pulp mills, wood procurement 265 pulpwood, market projections 178–187 railroads and the timber industry 63 Rainforest Action Network 240, 241 recycling of paper 177 Reforestation Act (1931, Washington State) 65 Regional Forest Agreement (RFA), Australia 49–51, 53–54, 58 regulations see laws and regulations research need for research 77, 147–148, 175 policy research 47, 143–144 Resource Planning Act (RPA) Timber Assessments (USDA) see RPA Timber Assessment Resources for the Future Inc. 1 restitution of property 82, 85–86 retailers and certification 236–237 rights 21, 107, 108, 113–114, 249–250 riparian buffers 203–209

306

Romania 83 Roosevelt, Theodore 63 rotations, length of 83, 90, 103 RPA Timber Assessments (USDA) 162(n2, n6) Russia 147

Index

taxes

149, 155,

sales and leasing of forestlands 42, 45–46 salmon 203 sampling for forest inventories 56 sawmills, wood procurement 263–264 scarcities of land 3–4 of timber 2, 186 scenarios, hypothetical 144–146, 156–162 science from deterministic to chaotic models 21–22 needs for the future 24–25 settlement of Mid-West (USA) 62–63 SFI (Sustainable Forestry Initiative) 236, 238–239, 243, 246–247, 259, 263–267, 266–267, 272, 280 SFM see sustainable forest management shortages see scarcities Significant Natural Heritage Areas (SNHA), N. Carolina 130, 132–138 simulations, computer see models and modelling single European market 87–88 Slovakia 83 Small Forest Landowner Office (Washington State) 204 SmartWood 72 SNHA (Significant Natural Heritage Areas), N. Carolina 130, 132–138 softwoods 154, 158, 159, 181–187 Soto, Hernando de 76 ‘special use’ valuation of estates 215–216 stakeholders 22–23, 44, 58–59, 77, 110–111, 144, 249, 252, 254, 283 State Forest Inventory (Cadastre), Ukraine 100 streams, fish-bearing 203–209 subsidies see incentives, financial subsistence 12 summated rating scales 260 Sums’ka oblast (Ukraine) 100–102 Superintendencies (Bolivia) 68 see also Forest Superintendency (Bolivia) supply chains 232, 235–237 see also wood procurement, survey of practices sustainable forest management (SFM) 11, 13–14, 29, 31–38, 74–79 see also certification Sustainable Forestry Initiative see SFI Swan Valley Plan, Montana 110

deductions see incentives, financial estate tax effects on forests 211–217 impediment to sustained yield from forests 64–65 for revenue 57 Technical Standards Writing Committee (Canadian Maritimes) 252 tenure, 20–21, 43, 62, 77 see also ownership timber accelerated growth 146, 147 depletion 2 exports see exports, timber harvests 83, 89, 97–104, 146 projections 151–152, 154–155, 161, 183–185 restrictions 203–209 unplanned harvests 216, 217 markets 44, 84, 89, 178–187 prices 2–3, 77, 87–88, 177, 186 supply and demand 2–3, 53, 85, 89, 150, 180–184 yields 3, 4, 83 timber industry Australia 51 Bolivia 72–73 USA 63–65 TNAA models 155–156 trade 11, 219–227 Tragedy of the Commons, The (Garrett Hardin) 21 Tree Farm System 263–264, 265, 294 trusts, land 131 Ukraine 95–104 UN Commission on Sustainable Development (UNCSD) 13 uncertainty of markets 44, 146 of traditional science 22 United Nations Forum on Forests (UNFF) 13 United States see USA Uruguay 48(n5) USA 19–23, 55, 73, 249–251 279 utilitarianism 18 Vinnyts’ka oblast (Ukraine)

100–102

Washington State 203–209 watersheds 20 Weyerhaeuser, F.E (son of Frederick Weyerhaeuser) 63–64

Index

Weyerhaeuser, Frederick 62–63 wood see products (wood); timber wood chip industry 49–50 wood procurement, survey of practices

307

World Trade Organization (WTO) 260–267

yields of timber

3, 4, 83

219–227