Why sustainably-managed eco-friendly wood is more expensive for consumers
May 19, 2005
Eco-friendly wood is all the rage these days. Companies from Ikea to Home Depot require their suppliers of tropical wood to be certified by various organizations like the Forest Stewardship Council (FSC), which aim to ensure wood is harvested in a sustainable and responsible manner. Typically, sustainablly managed wood products are more costly for consumers. Why is this wood more expensive?
Sustainable management implies the maintenance of the productivity of the asset base. Thus, in theory, under sustainable forest management, logging should meet the needs of the present without compromising the continuity of the ecosystem and the goods and services that it provides. However, sustainable management implies additional costs on concessionaires, namely lower yield due to low impact harvesting, higher costs resulting from stricter standards, and reduced revenue from a different distribution of costs and revenues over time.
The problem of lower timber yields in the short run under sustainable forest management is offset in the long run by a greater overall volume since the resource is replenished. Under standard forest management, the timber resource is not effectively replenished in a reasonable time frame due to damage to the resource base (the forest) and poor utilization.
Mist Rising from the rainforest of Ranomafana National Park in Madagascar
A more difficult problem is the time horizon, or distribution of costs and revenues over time, under sustainable forest management. When rainforest is clear-cut, little time elapses between agreeing to harvest a concession and bringing the timber to market. Conversely, under sustainable forest management, there are substantial initial costs including planning, training, assessment, and inventory. Revenue from the harvest is spread out over a number to years due to harvest restrictions in place to ensure sustainability. When interest rates are high – as they often are in developing countries – sustainable forest management is particularly unattractive as the more drawn out the revenue stream the lower the present value of the harvest.
To address this time horizon problem, either low interest rates are needed (nearly an impossibility because inflation is an exceedingly complex factor in monetary policy) or compensation for concessionaires that participate in such sustainable forest management schemes. Higher compensation tends to come from concessionaires being able to charge a higher price for their sustainably managed wood products.
Some recent studies have suggested that reduced impact logging techniques are more economically feasible than once thought. A study by IMAZON scientists in Paragominas, Brazil found that reduced impact logging raised productivity 30%, reduced waste 78%, reduced total costs 12%, and increased revenue 19%. IMAZON scientists concluded that reduced impact logging techniques could allow a fixed area of the Amazon to be harvested indefinitely to provide the world’s wood supply.
Illegal loggers undermine the system by avoiding taxes and undercutting prices. Because they don’t have legal title to land there is no incentive to harvest forests in a sustainable manner. Increasing forestry organizations that do adhere to national and international standards for timber harvesting are targeting these illicit operators. The American Forest and Paper Association (AF&PA) recently sponsored a report that condemed illegal logging in in the tropics. In the report, the authors found:
- Each year $23 billion dollars of forest products are produced globally from illegally harvested timber.
- Timber of suspicious origin is involved in between 5% and 10% of the logs, lumber, and panels traded globally (measured in terms of value).
- If all exports associated with illegally harvested logs were phased out by 2007, international roundwood, lumber, and wood panel prices would rise by 19%, 7%, and 16%, respectively, and companies operating legally would earn much more money.
- Without illegal logging, the United States would have exported $4.6 billion more roundwood, sawnwood, and wood panels between 2002 and 2012.
The lesson is there are good reasons that eco-friendly wood is more costly than wood of unknown origin. Chances are, it’s worth what you’re paying for if you value forests and biological diversity in the tropics.