Economic impacts of increased forest conservation in Europe: a forest sector model analysis

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Abstract

Scenarios with either 3% or 5% of the productive forest stock in Western Europe set-aside for conservation are compared to a baseline case. The latter case is further compared to cases where the whole of Europe and North America join the 5% conservation program. The scenarios are created by employing a global forest sector model, EFI-GTM.

The aggregate conservation impacts seem relatively low, mainly because international trade counterbalances regional shortages and because roundwood harvests are well below the annual forest growth in many European countries. Conservation increases the forest owners’ wood sales income. The 5% set-aside raises roundwood prices in Western Europe by 4% and decreases harvests by 3% from the base case levels during 2010–2020. The production of pulp and mechanical forest products then decrease by 1.4 and 1.7%, respectively. The paper market is affected least. The leakage impact of forest protection is most pronounced in Russian roundwood harvests. Simultaneous conservation in the whole of Europe raises the roundwood costs of the Western European forest industry, but it does not prevent the leakage of roundwood harvests to Russia. Conservation in North America has a low impact on the European roundwood market.

Introduction

Recent decades have witnessed a growing concern for the environmental services provided by forests. Among these, biodiversity protection has been at the forefront. The main challenges in Europe have been the diminishing areas of old growth or virgin forests and forest management practices which, it is claimed, have favored industrial roundwood production while not adequately considering biodiversity protection.

Even in Nordic countries where a relatively large share of the forest area has been conserved, the conservation measures taken can be considered insufficient in terms of their representativeness and adequacy relative to forest types. In Sweden, the distribution of forests within reserves is skewed towards old, low-productivity forests in Northwest Sweden (Fridman, 2000). In Northern Finland, 17% of the forested land is strictly protected, while most of the valuable biotopes and endangered species exist only in Southern Finland where the strictly protected forest area consists of only 1.6% of all forested land (Metsien, 2000). The situation is repeated on a European scale. In the whole of Europe, 1.6% of the forest area is under strict protection (Parviainen and Frank, 2003), but the major share of the conserved area consists of boreal forests of Northern Europe. Nevertheless, the biodiversity status of temperate forests is much more eroded than that of boreal forests (e.g., Norton, 1996, Duinker et al., 1998). The Fourth Ministerial Conference in Vienna 2003 calls for enhancing and conserving biological diversity in European forests.

This article aims to assess how increased forest biodiversity conservation would affect the forest sector in Europe and the international trade in roundwood and forest industry products. The period of study extends to the year 2020. There is no internationally agreed target for the proportion of forests that should be protected, and no such target would guarantee that the protection network so created would be ecologically representative. Nevertheless, in order to assess the economical impacts of conservation, it is practical to consider conservation measured as a fixed percentage level of existing forest resources. We compare the status quo to the cases where 3% or 5% of the productive forest resources in Western Europe are set-aside for conservation. In order to assess the impacts of international conservation policies, the results are compared to the cases where conservation is increased in the rest of Europe and North America as well.

Forest conservation set-asides considered in this article could result from various regional conservation goals and policies. For example Framstad et al. (2002) recommend, from an ecological perspective, the conservation of at least 4.6% of the forest area in Norway. The present conservation level is around 1%. Finland aims to conserve more forests in Southern Finland in the next coming years. In many other European countries, e.g., in France, Germany, Austria, the UK, or Spain, conserving an additional 3% of the forests area would raise the share of the strictly protected forest area close to the current level in Finland, i.e., 3.6% of the total forest area (Finnish Statistical Yearbook of Forestry, 2001).

Our results clarify the issue of the distributional and market impacts of conservation for consumers and producers of the forest products in Europe, whereas a number of previous studies provide information on the valuation of the benefits from the conservation to European citizens. Such studies include Kriström (1990) in Sweden, Hoen and Winter (1993) and Veisten (2003) in Norway, Desaigues and Ami (1999) in France, and Lehtonen et al. (2003) and Li et al. (2004) in Finland. These studies indicate that there is a hypothetical willingness to pay for increased forest conservation. For Finland, Leppänen et al. (2005) evaluate the compensatory costs of strict forest conservation to the tax-payers.

Former multi-regional studies on the sectoral impacts of forest conservation, e.g., Perez-Garcia (1993), Sedjo et al. (1994), Sohngen et al. (1999) and Buongiorno et al. (2003, pp. 195–215) suggest that setting forests aside for protection in some regions leads to increased logging in other parts of the world because of the international trade in wood products. International trade in forest industry products is by volume considerably more important than the roundwood trade. Perez-Garcia (1993) projected that consumers of forest products would be the major losers following increased forest conservation, whereas roundwood producers would gain. Wear and Murray (2004) found in their econometric analysis that lumber consumers were harmed by the past federal roundwood trade reductions in U.S. Northwest, while both roundwood and lumber producers gained from the policy. The general equilibrium model analysis by Das et al. (2005) considers the potential future forest conservation in the same region and suggests that a 20% cut in state harvests due to conservation would increase wood prices by 5% and decrease mechanical forest industry production by roughly 3%, while shifting it to other US regions. Buongiorno et al. (2003) conclude that roundwood harvest restrictions in the United States would shift both roundwood production and forest products manufacturing to other countries and significantly alter roundwood trade patterns.

Compared to existing studies, our study differs particularly in the following points: we focus on Europe, and trade in forest sector commodities is allowed and endogenously determined between each region in the model applied in our analysis.

The next section gives an overview of the method used and assumptions. For more details regarding model structure, assumptions and data input we refer to Kallio et al. (2004), available at www.efi.fi/publications. In Section 3 we discuss the results for alternative scenarios.

Section snippets

Modeling methodology

The use of forest sector models that integrate the dynamics of forest resources, roundwood supply, forest industry, and forest product market demand has a long tradition. Among the most well known of such forest sector models are the Timber Assessment Market Model/TAMM (Adams and Haynes, 1980), the Forest and Agricultural Sector Optimizing Model FASOM (e.g., Adams et al., 1996), the Global Forest Products Model/GFPM (e.g., Buongiorno and Gilles, 1984, Zhang et al., 1997, Buongiorno et al., 2003

Results and discussion

We will discuss the results using the following aggregates of the EFI-GTM regions:

  • Western Europe (WE): The countries in the European Union, Norway and Switzerland

  • Eastern Europe (EE): Albania, Belarus, Bosnia-Herzegovina, Bulgaria, Croatia, Moldova, Romania. The former Yugoslav Republic of Macedonia, Yugoslavia, and Ukraine

  • European Russia

  • North America: Canada and the United States

Our main focus is in Western Europe.

Table 1 summarizes some results for WE from all the scenarios. We start, however,

Conclusions

The increased forest conservation supports biodiversity and brings other benefits of various kinds to current and future citizens, but it also has some economic impacts on the forest sector. In this study, we focused on the distributional and market effects of forest conservation in Europe. For that purpose, alternative scenarios up to year 2020 were created by a global forest sector model, EFI-GTM. The main conservation alternative considered was setting aside 5% of the growing stock available

A. Maarit I. Kallio is a senior researcher at the Finnish Forest Research Institute, where she currently leads a project entitled ”Impacts of forest conservation on the Finnish forest sector in the changing business environment”. She is a member of the evaluation group of the forest biodiversity programme for Southern Finland (METSO). She conducts research on broad areas of economic issues related to the forest sector. She holds a D.Sc. from Helsinki School of Economics.

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    A. Maarit I. Kallio is a senior researcher at the Finnish Forest Research Institute, where she currently leads a project entitled ”Impacts of forest conservation on the Finnish forest sector in the changing business environment”. She is a member of the evaluation group of the forest biodiversity programme for Southern Finland (METSO). She conducts research on broad areas of economic issues related to the forest sector. She holds a D.Sc. from Helsinki School of Economics.

    Alexander Moiseyev is a senior researcher at the European Forest Institute, where he is a principal investigator in a number of international research projects, related to studying impacts of endogenous and exogenous factors on forestry wood chain in Europe in connection to the global trade in forest products. His interests are now directed towards the economic potential of bioenergy production from wood and the impact of climate change on the forest sector in Europe. He holds a PhD in forest economics from Moscow Forest State University.

    Birger Solberg is a professor in forest economics at the Norwegian University of Life Sciences, Department of Ecology and Natural Resource Management, where he leads several research projects related to forest management, policy means and economics. He has played an active role in international bodies like European Forest Institute (EFI), IUFRO and IPCC, and is currently particularly interested in direct and indirect impacts on forest management and the forest sector of possible climate changes. He holds a D.Sc. in forest economics from the Norwegian University of Life Sciences.

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