6.5 economic implications of biodiversity conserva- tion for timber … · 6.5 economic...

if Taxes were reduced on species wiTh low markeT prospecTs (buT high populaTion

densiTies), companies would be more likely To diversify Their producTion.

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6.5 Economic implications of biodiversity conserva-tion for timber producers

ROMAIN PIRARD

The ITTO/IUCN voluntary guidelinesGovernment regulations for timber production — as related to sustainability of practices, biodiversity retention, and other matters — differ among countries. unfortunately, as acknowledged by the international Tropical Timber organization (iTTo): “Determining the level of attainment of sFm is extremely difficult ... measuring the effects of management on [ecological] values is beyond the resources of many, if not all, tropical forest manag-ers” (iTTo 2006). To promote biodiversity conservation in managed forests, iTTo (with iucn) published guidelines (iTTo/iucn 2009) for the conservation and sustainable use of biodiversity in tropical timber production forests (hereafter, “guidelines”).1

Content and cost implicationsThe guidelines comprise eleven principles – such as political commitments and land use and spatial planning – that are further divided into priority actions that are required of timber producers, e.g., mobilize the capacity of nGos for biodiversity surveys and maintain databases on forest ownership. They cover a very broad range of actions, evidence of the need for a coherent strategy from planning to effective logging.

compliance with the guidelines is likely to be costly, as it generally is to convert from conventional logging to more sustainable forest management practices (pearce, putz and Vanclay 2003) and to achieve certification (Durst et al. 2006). producers may resist their implementation if they do not receive financial support. investments are beneficial insofar as they generate economic benefits for producers (through a better corporate image in the market place), people living in and around the concessions (through sustained sources of food or medicinal plants), national governments (fewer conflicts), and people outside the country (satisfaction that their purchases have contributed to conservation).

Romain Pirard works for the institute for sustainable Development and international relations, paris. he has a primarily academic interest in increasing understanding of the economic issues related to forestry and biodiversity conservation in the tropics. it is part of a body of work on the economics of the forest industry in indonesia, rEDD and various conservation approaches.

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in 2007 i studied the implementation costs that timber producers face to comply with the guidelines. i performed a desk study, followed by field visits and administration of a questionnaire to stakeholders in Brazil (mostly organizations and communities), cameroon (forest concessionaires) and indonesia (forest concessionaires and industrial plantations). This article summarizes my findings.

Preliminary cost estimations and their implicationsLiterature review and desk studyThree baselines underlie calculations of the incremental costs to comply with the guidelines:

1. the most common practices (including illegal activities when relevant);

2. the national regulations with which compliance is required; and

3. certification requirements if one assumes the guidelines would be applied only by companies which already maintain certification standards in their operations.

in the literature search i found few sources of information that were helpful in calculating the cost of compliance with the guidelines. what i did find was often conflicting. To illustrate: kumari (1996) estimated the incremental costs of alternative modes of transportation for logs and timber in malaysian concessions and reported a net positive social benefit. similarly, in a comparison of the costs of reduced-impact and conventional logging in amazonian Brazil, holmes et al. (2000) reported that the former was substan-tially more profitable due to reduced waste, lower damage to valuable trees in the residual stand, and efficiency gains. in a study on reduced-impact logging (ril) in Guyana, van der hout (1999) similarly found that “there are strong indications that the cost of fell-

ing will be reduced in the future, when the operators have gained more experience in using the felling method and directional felling is carried out with greater flexibility.” This conclusion was confirmed by Bull et al. (2001), who studied 266 publications on the topic. in contrast, healey, price and Tay (2000), in a comparative study of ril and conventional logging in sabah, malaysia, reported quite the opposite; ril was sub-stantially less profitable than conventional harvesting, mostly because the former avoided logging on steep slopes and in stream-side buffer zones.

These few examples indicate that calculating the incremental costs of the guidelines is not straightforward. as summarized by Dennis et al. (2007): “although the recommended actions are quite detailed, many of them are phrased in rather vague terms and leave potential implement-ers with the question on how these actions should be implemented.” This observation has substantial implications for estimating incremental

costs; in other words, the costs depend on how the guidelines are interpreted. This is not surprising, as the guidelines’ vagueness is due to political interference, and they should not be seen only as a checklist for operators.

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6.5EcoNomicimplicaTioNsoFbiodivERsiTycoNsERvaTioNFoRTimbERpRoducERs

Field dataField studies confirmed the uncertainty about estimating the costs of following the guidelines:

• activities are often inter-connected, so estimating their separate costs is frequently misleading (e.g., partnerships with external organizations to conduct field surveys);

• compliance varies according to the willingness and understanding of the timber producers (e.g., the number of timber species included in inventories);

• the costs of compliance depend on specific local conditions (e.g., timber producers’ financial costs per hectare (ha) for setting aside areas and the costs of fighting poaching);

• no general rules can be applied in all contexts, because whether costs are additional or business-as-usual, scenarios vary greatly, depending on national regulations, law enforcement, involvement in the certification process, and the standards followed by the certification bodies;

• an accurate estimation of incremental costs would require a long-term study with baseline cases for comparison (e.g., ril vs. conventional logging); and

• the associated benefits of compliance are hard to assess, but should be part of the estimate (e.g., use of local knowledge in marketing non-timber forest products (nTFps) by the timber company).

To help timber producers choose the right way to implement components of the guidelines, i separated them into broad categories.

Surveys and inventoriesThese costs are related to such things as recruiting or training company staff to identify biodiversity resources, purchasing of equipment and data processing. in cameroon, the costs of standard and multi-resource inventories are us$1/ha and us$2.5/ha, respectively. The purchase of Geographic positioning system (Gps) units for the inventories amounted to about us$0.15/ha. in indonesia, fauna and flora inventories, coupled with mapping and reporting, cost us$30 and us$10/ha, respectively.

Opportunity costsTimber production can be either reduced (fewer trees harvested) or modified (different species harvested), or both. opportunity costs can be calculated in two ways: if some trees are left in harvested plots (e.g., emblematic species), then opportunity costs will equal the sale price minus operational costs. if entire plots are set aside (e.g., as corridors), then opportunity costs equal the profit margin per unit area. it is important to note that companies interested in a voluntary application of the guidelines are those with above-standard practices (usually certified) but often limited profit margins.

Transaction costscollaborations and partnerships are formed between timber producers and external organizations, other nearby timber producers (within the same forest) or local populations. companies included in the study reported costs for preliminary meetings of less than us$10/event (cameroon); assistance during inventories of a few cents per ha

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(cameroon); and for meetings to inform villagers at us$50/village in indonesia and less than us$5/village in cameroon.

Modification of forest management plansThis includes modifications to road networks or setting aside areas previously allocated for production. Too many activities could fit in this category. in the delineation of protec-tion areas, which requires staff time and the use of paint, cost estimates from indonesia and cameroon were quite different (us$85/km against us$7/km, respectively).

Implementation of new activities or modification of usual activitiesThis includes measures to combat poaching and the establishment of permanent sample plots. according to one indonesian company, it spends roughly the same amount every year on anti-poaching measures (publication and dissemination of pocket books at us$45/book); erection of information boards to provide information about protected species (us$10/board); establishment of permanent sample plots (us$100/ha) and on repeated observations and avoidance of encroachment.

Implications: finding synergiesDue to the numerous problems encountered in estimating the costs of compliance, it might help to use a novel logical framework (Figure 1). This framework could help clarify the logical links; for example, paying attention to trees that provide habitat for key animal species during harvesting operations is recommended in combination with promoting complete inventories and thematic maps. stressing such links is essential in convincing timber producers to comply with the guidelines through reducing the costs of implementation.

Designing the appropriate financial supportreducing the costs of implementing the guidelines is a priority. as stated by ichiro Fujikake (2007): “Japanese forestry has shifted to the species that are desirable from the economic perspective at the expense of the ecological functions of the forests.”

Timber producers cannot be expected to deliver biodiversity conservation without appropriate incentives and financial support. in addition to the usual incentives — market-like mechanisms and certification schemes — there are two promising alternatives. First, in response to timber companies that complained about officials’ repeated and abusive interference in their operations, Jarvis and Jacobson (2006) propose that in indonesia certified companies should not be subject to administrative controls over the annual plans they submit to the ministry of Forestry (they make “self assessments” so as to avoid abusive corruption fees). This same line of thought could be applied to other aspects of the adoption of the guidelines.

second, tax systems can be used to prioritize taxes on production instead of land and to reduce taxes on species with less commercial value compared to those subject to high harvesting rates. as the field study observed in cameroon, the annual land taxes paid by the companies on their concessions represent a perverse incentive to increase annual production.

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Collaborations with research institutes/universities• participation in conferences• visiting universities/research institutes• permanent sample plots• hosting students, etc.

Forest management1. Appropriate zoning • set-aside areas for conservation, criteria, scale and location • measures against encroachment • measures against poaching

2. Appropriate choice of timber species • identification of timber species with lower commercial value but promising prospects • adaptation of national regulations and certification requrements to local conditions • early identification of hollow trees

1. making inventories

2. ecological dynamics

3. phenology and silviculture practices

Forest planning1. Lower impacts from secondary roads • design of the road network • attention to biodiversity resources with no immediate commercial prospect

2. Felling operations that take into account biodiversity resources • felling operations with attention to resources of conservation value

allows for better

increases

Expertise/training• recruitment of staff with expertise in biodiversity issues (e.g., biologist, taxonomist)• training sessions for internal staff

• design of appropriate inventory methods• identification of relevant resources to inventory• choice between multi-resource inventories and separate studies on flora/fauna/HCVF

• interpretation of signs of fauna• elaboration of appropriate measures when specific biodiversity resources are identified in the production forest• consideration of the landscape level when designing conservation measures

• determination of sustainable harvesting rates for all relevant species• determination of minimum diameter to ensure sufficient regeneration of harvested tree species

Knowledge

Figure 1. Logical framework

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These fixed costs are a financial burden that often prevents companies from reducing their timber production because of the high opportunity costs of doing so. as noticed by the indonesian partners, area-based fees are a disincentive to set aside conservation areas unless land taxes are reduced accordingly. The proposition made by the association of in-donesian Timber producers (aphi) to not pay taxes on protected lands is a case in point.

homogeneous taxes for all species are a disincentive to explore the commercial opportuni-ties of lesser-known timbers, especially when overall production is limited by mandatory government regulations. if taxes were reduced on species with low market prospects (but high population densities), companies would be more likely to diversify their production, which aligns with the guidelines and otherwise reduces harvesting pressure on key species. Furthermore, this shift in attention to lesser-known species would result in inventories including more species and would indirectly lead to better forest planning.

past studies highlight the fact that tropical production forests can be managed more effectively for conservation when managers consider not only consumer premiums as paid by certification systems, but also public action beyond management regulations. indeed, obstacles and disincentives not under the control of companies can be identified and eliminated by the authorities.

although my study was exploratory in nature and was focused on the iTTo/iucn guide-lines, it highlights more generally the need for and value of more detailed examinations of the incentives that might be able to benefit good conservation practices in production forests. That is the way forward.

Endnote1. See article 6.4, this issue.

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ReferencesBull, G.Q., R. Pulkki, W. Killmann and O. Schwab. 2001. “Exploitation coûteuse ou rentable.” Actualités des Forêts Tropicales 9/2, OIBT.

Dennis, R., E. Meijaard, L. Gustafsson and R. Nasi. 2007. Overview of Biodiversity Guidelines for Sustainable Forest Management in South East Asian Timber-Producing Nations. unpublished report.

Durst, P.B., P.J. McKenzie, C.L. Brown and S. Appanah. 2006. “Challenges facing certification and eco-labelling of forest products in developing countries.” International Forestry Review 8: 193–200.

Fujikake, I. 2007. “Selection of tree species for plantations in Japan.” Forest Policy and Economics 9: 811–821.

Healey J.R., C. Price and J. Tay. 2000. “The cost of carbon retention by reduced impact logging.” Forest Ecology and Management 139: 237–255.

Holmes, T.P., G.M. Blate, J.C. Zweede, R. Pereira, P. Barreto, F. Boltz and R. Bauch. 2000. Financial Costs and benefits of Reduced Impact Logging in the Eastern Amazon. Alexandria, Virginia: Tropical Forest Foundation, 48 pp.

ITTO (International Tropical Timber Organization). 2006. Status of tropical forest management 2005. Yokohama: ITTO Technical Series No. 24, 305 pp.

International Tropical Timber Organization (ITTO)/International union for the Conservation of Nature (IuCN). 2009. ITTO/IUCN Guidelines for the conservation and sustainable use of biodiversity in tropical timber production forests. ITTO Policy Development Series No. 17. Yokohama: ITTO. www.itto.int/policypapers_guidelines, accessed online January 2010.

Jarvis, B. and M. Jacobson. 2006. Incentives to promote forest certification in Indonesia. Prepared for international Finance Corporation, PENSA.

Kumari, K. 1996. An application of the incremental cost framework to biodiversity conservation: a wetland case study in Malaysia. CSERGE Working Paper GEC 96-15. Norwich: Centre for Social and Economic Research on the Global Environment.

Pearce, D., F.E. Putz and J.K. Vanclay. 2003. “Sustainable forestry in the tropics: panacea or folly?” Forest Ecology and Management 172: 229–247.

van der Hout, P. 1999. Reduced Impact Logging in the tropical rainforest of Guyana: ecological, economic and silvicultural consequences. Tropenbos Guyana Series 6. PhD dissertation, university of utrecht, published by The Tropenbos Foundation.

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