Changing Demands on the World's Forests: Meeting Environmental and Institutional Challenges
Roger A. Sedjo
Resources for the Future
Today there are a number of important demands on the world's forests that are undergoing changes. On the one hand the world's forests continue to be the source of timber and industrial wood used for building materials and paper products. On the other hand the world's forests are increasingly looked at as a source of a variety of recreational, environmental and ecological services. Increasingly the provision of timber is being viewed as in conflict with the provision of one or more of these other services.
A number of recent changes are occurring that have implications for the world's forests. While part of the world, the tropics, is continuing to experience deforestation, net reforestation is occurring in the temperate zone of the world. The deforestation of the tropics is driven primarily by land use conversion for other purposes, primarily agriculture. The reforestation of the world also is driven by changes in the agriculture sector, but in this case the abandonment of agricultural crop and pasture lands in temperate regions.
A second important change relates to the nature of the way society provides for wood supply. Today we see the continuation of the gradual transition of wood production from a foraging operation, where the bounty provided by natural forests is collected, to a cropping operation akin to agriculture. Food production experienced most of its transition from hunting and gathering to livestock raising and cropping many centuries ago. For forestry, however, most of this transition began in the 20th century and the transition is far from complete. However, the process has been accelerating and trees are increasingly being planted, cared for and harvested in a cropping mode. The benefit of direct tree planting, as in agriculture, is to provide an approach that leads to increases in yields and productivity, and the effect of which is to substitute a supply of wood from intensively managed plantations for wood that had traditionally been obtained from natural forests through an extensively managed process. Planted forests also provide an opportunity for embodying technology in the planted forest. Superior trees are being developed through traditional breeding techniques and, perhaps in the future, through biotechnological innovations. As in agriculture, planting allows the selection of seed stock and provides the opportunity to capture the financial benefits of investments in improved germ plasm. Hence, the transition to planted forests is accelerated by the opportunities that plantations provide for the application of modern technology. High productivity from planted forests opens the promise of relieving logging pressures on natural forests and thereby allowing many of them to be used for other, nontimber, purposes.
However, although the specialization inherent in this approach suggests that less forest land will ultimately be required to meet society's timber needs, some areas with particularly favorable tree growing conditions may expect to further increase their specialization in timber production. Thus, just as Iowa tends to specialize in the production of corn, other regions may be expected to specialize in wood production from planted forests. This appears to be happening currently in the U.S. south.
Additionally, there are important changes occurring on the demand side for industrial wood. Even as planted forests have been replacing natural forests, very recent decades have seen the relative stabilization of global demand for industrial wood. This stabilization reflects a relative decline in the importance of the marketed commodities of the forest and particularly industrial wood as a material. Whether this trend is temporary or permanent remains to be seen. However, there are a number of factors that suggest the stabilized demand could well be a permanent feature.
Even as demand growth is ebbing, the forests are increasingly being looked at as a source of noncommodity values including recreation, environmental and ecological services, carbon sequestration and biodiversity. Until recent decades, there was little serious concern about the losses of overall biodiversity or the function of forests as a storehouse of carbon, which decreases the amount of the carbon dioxide greenhouse gas in the atmosphere. However, this perspective has changed dramatically over the past decade or two and programs are increasingly being designed to protect biodiversity and/or promote forest carbon sequestration.
Furthermore, it should be noted that all of these changes are occurring in the context of a global population that, while it is becoming progressively richer, may also be well on its way to stabilization, or even decline. A globe with a stable and perhaps largely wealthy population is likely to place different demands on its forests than was experienced in the 20th century.
This paper examines separately the questions of commodity demand and industrial production within the context of a global society that is changing in values, production potential and population. The focus is on the pressures of the market demand for industrial wood because to the extent that these pressures abate over the next several decades, this will ease the ability of humans to redirect those forests into the production of nontimber outputs. Also examined is the question of supply and the history of and recent trends in the production of industrial wood with some speculation as to the future implications of existing or likely soon-to-be developed technologies. Finally, the paper tries to synthesize these factors into a coherent overview of one possibility for the future of the world's forest.
Changing Consumption of Industrial Wood
Human demands and perception of the world's forests have changed dramatically in the past several decades. Traditionally, forests were viewed as a source of timber and game, with recognition also of some other values, e.g., watershed values. More recently the emphasis has been on forests as a source of industrial wood for economic and industrial development. This view can be ascribed to the creators, one hundred years ago, of the National Forest System of the U.S. where the National Forest System was created to provide water and a continuous supply of timber. Today, the forests are increasingly being viewed as a source of various nontimber outputs including biodiversity, environmental and ecosystem services.
Changes in the forest sector and in society's perceptions of the role of the forests are taking place in the context of a stabilizing global demand for industrial wood. This section focuses on industrial wood consumption (which at equilibrium also equals production). Figure 1 presents global production/consumption of industrial roundwood over the past two decades. Amazingly, despite the large increases in global economic activity, wealth and world population over the past two decades, the total consumption of industrial wood has barely changed. Note that although this period experienced some minor economic downturns, a major characteristic of the period was widespread economic growth, including the emergence of China and other countries in Asia as important economic powers. Nevertheless, worldwide production (and consumption) was essentially flat over the most recent two-decade period.
Interestingly, the rate of wood consumption growth has deviated from that of the earlier several decades, where wood consumption had experienced modest growth. As shown in Table 1, the rate of worldwide wood consumption growth has declined gradually but consistently over the past half-century. Hence, the lack of growth in worldwide consumption (and production) of the past two decades can be viewed as consistent with the longer-term gradual reduction of consumption/production growth toward zero (or perhaps even future negative values).
World Industrial Roundwood Production
Source: FAO, Rome
of Industrial Wood, 1950-2000 (annual percentage)
Source: 1950-1980 from Sedjo and Lyon (1990) table 3-1, page 56..FAO Rome.
1980-2000 from FAOSTAT, FAO online statistical database.
Past forecasts of wood production and availability have been fraught with error. Those who know the experience of the U.S. know of the major concerns at the onset of the 20th century with an anticipated future "timber famine." Marion Clawson (1979) identified four Forest Service projections undertaken during the first and middle parts of the 20th century that generated substantial underestimates of timber availability in the U.S.
Inaccurate projections were not confined to the U.S. Both the FAO and the World Bank generated 20-year forecasts at the beginning of the 1980s for global wood production for the year 2000 that were substantially in error (Table 2). Of course, some forecasts did better. However, even the lowest forecast projects of which I am aware, our own at RFF, were still about 1.7 billion cubic meters, well above the approximately 1.5 billion actually experienced in 2000.
Source: See Sedjo and Lyon, p. 177.
Why were past forecasts so inaccurate? Specifically, why did consumption stagnate over the past two decades? The two final decades of the 20th century experienced rapid worldwide economic growth and growing populations. Both of these factors suggested increasing consumption levels. Additionally, although the real prices of industrial wood experienced increases during that period, those increases were quite modest. Thus it cannot be argued that rising real prices "choked off" demand.
In retrospect a number of reasons for the stagnate growth of wood consumption can be given. With the demise of the Soviet Empire in the early 1990s, the wood production of the world's second leading producer fell dramatically. This appears to have occurred not only because of the overall economic decline of the former Soviet Union countries as a result of their transition to various degrees of market economies, but also because wood production in the former Soviet Union was both highly subsidized and especially inefficient. Perez-Garcia (2001) explains some of these changes with reference to structural changes in the global forest sector. Today production is now responding to market signals. With the wood production now having to bear most of the cost of transportation in that huge country where much of the wood supply is far from populations centers, much of the earlier types of wood production that were not efficient are unlikely to be reintroduced, even after the overall economy has recovered.
A second factor has been the increased use of recycling globally, especially in paper production. The increased use of recycled fiber has taken some pressure off of virgin fiber. Although recycling has it limits, its increased use undoubtedly accounts for some of the observed stability in wood fiber consumption. A third factor may be the relatively maturity of many economies, including the U.S., Japan, and much of Europe, that tend to use wood materials intensively. Many of the rapidly expanding economies of the world tend not to be large users of wood for many types of construction, e.g., China.
More generally, the most important explanation of stagnate wood production may be found in the substitution of alternative materials, bricks, concrete, steel, aluminum, and so forth for wood. This trend is likely to be complemented by the gradual substitution of electronic communications for traditional paper sources. Newspaper production, for example, is stagnating.
There is no obvious reason why the above trends away from the use of wood should not continue into the future. Additionally, there is another truly remarkable phenomenon that is occurring that has been little noticed by the media or the layman, but that is likely to impact importantly over the long term, perhaps profoundly, on the entire host of outputs generated from the temperate and tropical forests. This is the anticipated decline in population growth, and then absolute level, which many project in the 21st century. This recognition struck me recently, when in Japan I learned that they expected their population to decline absolutely beginning in 2007.
Figure 2 provides the latest UN population projections report estimates that all of the OECD countries, that is the world's industrial countries, have reproduction rates less those required to maintain current populations.
UN World Population Projections
(High, Medium & Low)
Source: World Population Prospects, 1998 Revision, United Nations
The UN's high projection in figure 2 presents a scenario in which global population reaches 11 billion by 2050 and keeps moving on upward. The UN's middle population scenario projects that the world's population will reach about 9 billion by 2050 and thereafter level off and stabilize toward the end of the 21st century at less than 10 billion. In the UN's low population scenario the global population peaks at less than 8 billion in 2040 and then begins to decline thereafter, declining to less in 2050 than in 2040, and continuing it gradual decline thereafter. It should be noted that the UN views each of these scenarios as equally likely.
Of course, such population results have all types of implications for humankind, as well as for future supply and demand of the host of forest outputs. At a minimum the demographic problem of the 21st century for many countries of the world is going to be dealing with an aging population. For example, although at the early part of the century demand for new housing in China will likely be high, subsequent sharp declines might occur as early as 2020.
Regardless of which global scenario is correct, these projections have implications for forests' use, from new housing and other industrial wood uses, to issues of how to best utilize the other outputs of the forest. Of course, the projections also have important implications for humankind well beyond forestry. It will indeed be an interesting new century.
Demand Side Considerations
Table 3 provides some informal forecasts of future world demand to the year 2050. While projecting a range, most of these analysts believe that demand in 2050 will be near 2 billion cubic meters, or roughly a very conservative one-third increase over 50 years above current levels. The World Wildlife Fund (WWF 2000) discusses a broad range of industrial wood production levels, between 2 and 3 billion cubic meters, but leans in its final assessment toward the lower 2 billion level. Victor and Ausubel (2000) provide a range of 2-2.5 billion, but again lean toward the lower estimate of 2 billion and Wernick et al. (1998) argue for only modest growth over this period for the U.S. These results are generally consistent with the projections of more formal modeling such as that of Sohngen et al. (1999) figure 3.
Supply Side Considerations
While the demand for industrial wood through the first half of the 21st century appears likely to experience, at best, only modest growth, what can be said about conditions relating to the supply of industrial wood? Table 4 presents a crude record of the historical transition of forests. Through prehistory, early history and through most of the 20th century wood was collected in a foraging type operation from natural forests. However, evidence of systematic management and tree planting goes back more than 2000 years to China and perhaps even Babylon.
Management and planting became more common after 1800, especially in Europe. However, it was not until the 1960s that commercial tree planting became common in the U.S. Gradually, in the latter part of the 20th century commercial tree planting accelerated in many areas of the world including South America, New Zealand and Australia, and large parts of Asia.
Economic viable plantations depend on low-cost establishment and high timber yields. The planting of superior trees increases timber yields; traditional breeding and cloning reduce costs of producing superior tree seedlings. Table 4 anticipates that the next major innovation in forestry could be the introduction of genetically modified organisms (GMOs).
Table 4 reveals a pattern where humans made a gradual transition in meeting their wood needs from a gathering and foraging mode, as well the logging of the nature forest, to a cropping mode in which trees are planted, cultivated and harvested. This follows a similar pattern to that of agriculture except that today humans are still in transition with some wood provided by foraging natural forests but an increasing amount provided by tree planting and intensive management. We are now in the process of a great transition that is seeing a shift from timber as the product of a foraging mode to timber as a crop. This creates great potentials for timber production even as it reduces the pressure on natural forests to produce timber. This raises the question as to what various nontimber uses should forests be managed.
Table 5 presents a recent estimate of the volume of industrial wood provided by various types of forests throughout the past and to the present. Today it is estimated that about 34 percent of the harvest comes from planted forests, and 10 percent from exotic forests in the tropics and subtropics. However, the percentage coming from planted forests, and especially exotics in the tropics and subtropics, is likely to rise substantially during the first half of the 21st century.
Condition Circa 1999
Source: Sedjo 1999.
Notes: Old-growth includes: Canada, Russia, Indonesia/Malaysia. Adjusted for harvest declines after the demise of the Soviet Union.
Second-growth, minimal management: parts of the U.S. and Canada, Russia
Indigenous second growth, managed: residual
Industrial plantations, indigenous: Nordic, most of Europe, a large but minor portion of U.S., Japan, and some from China and India.
Industrial exotic plantations
Second-growth, minimal management: the residual
The FAO estimates that the percentage of planted forests could rise to 50-75% of the world's industrial wood needs by the year 2030. This is consistent with the projects of Sohngen et al (1999) presented in Figure 3.
Some recent informal estimates of future supply potential are given in table 6. Sedjo and Botkin (1997) demonstrate that if intensive industrial forestry is broadly applied, all of the world's industrial wood could be produced on an area that is less than 10% of the world's forested area today. Victor and Ausubel (2000) develop a scenario where by 2050, 12% of the world's forest area produces most of the industrial wood. FAO (1997) estimates of current planting levels and WWF's (2001) projections of future plantation harvests suggest that there are likely to be strong movements towards a forest economy relying primarily on forest plantation production over the next several decades.
This view is supported by a recent comprehensive analysis and projection of global timber supply by Sohngen et al. (1999). The study estimates global timber production of about 2.0 billion m3 for 2035. Over this period the study projects industrial wood real prices (adjusted for inflation) will rise, but only very modestly. Furthermore, Sohngen et al. project the harvest level by three types of forest. Figure 3 provides harvest projections for 150 years. Note that the portion provided by "emerging plantations" (tropical and subtropical) accounts for all of the harvest increase over that period, while harvests from the "economic wilderness" (old unmanaged forests) are small and declining.
Figure 4 presents a graphical way to look at the impact of plantations on timber supply and on the mix of industrial wood coming from natural and planted forests. In the absence of plantations demand is represented by the downward sloping line D and supply from natural forests is represented by the upward sloping line S. Equilibrium is represented by eo, with price, Po and quantity Qo. Suppose now that planted forests become economically viable at a price, P1. The supply now is modified so that beyond point a the supply curve is horizontal. Supply is now represented by curve S', which coincides with S up to point "a" after which it becomes horizontal. Harvests of OQ1 will now be made from natural forests with harvests of Q1'Q1 being made from planted forests. Notice that with plantations the equilibrium price is reduced from 0Po to 0P1, and the equilibrium harvest increased from 0Qo to 0Q1. Furthermore, notice that the harvests from natural forests have been reduced from OQo to OQ1. Overall, the world is benefited with increased harvests, lower prices and reduced logging from natural forests. Thus, to the extent that the logging of natural forests impacts negatively on environmental and ecological values, plantation forestry provides an alternative wood source that "protects" natural forests and associated environmental and ecological values.
Technology in Forestry
Technology offers substantial potential for increasing the volumes and quality of industrial wood while also reducing its cost. Traditional breeding techniques have been used in forestry for decades orientated primarily toward creating "superior trees" with enhanced yields. More recently, biotechnology and genetic engineering have given promise of even greater productivity increases as well as providing for additional desired traits in the seedlings and mature trees.
Table 7 presents a brief list of some important tree improvement attributes. In addition to growth rates, desired attributes include disease and pest resistance, climate range and adaptability, and tree form and wood fiber quality, e.g., straightness of the stem, the absence of large or excessive branching, the taper in the trunk. Additionally, desired fiber characteristics may relate to ease in processing, e.g., the breakdown of wood fibers in chemical processing.
Table 8 provides an indication of yield gains that have been achieved in loblolly pine through the application of various traditional breeding approaches. The current view is that genetic engineering applications would best be applied on tree stock that had already been improved through traditional breeding techniques. Thus, traditional breeding and genetic engineering are viewed as complementary approaches rather than as substitutes.
Approaches: Loblolly Pine
Source: Westvaco Corporation
Table 9 lists some potential applications of biotechnology to forestry with estimates of their potential financial benefits and also the additional costs that may be associated with their introduction. The development of a low cost clonal system for the replication of superior conifer stock is a technology that in itself has great potential for lowering the costs of improved seedlings. Additionally, it may even be more important as an enabling technology that would allow the low-cost introduction of a much broader range of biotechnological innovations into conifer seedling stocks. While cloning is difficult for most conifers for many non-conifers (hardwoods), cloning is not a problem.
Additional biotechnological innovations would include gene modifications that would provide widespread seedling herbicide resistance, disease resistant trees, and the development of trangenic (genetically altered) trees with desired wood and fiber characteristics, tree form, and so forth. Most of the biotechnological innovations of table 7 can be economically introduced into many short fiber hardwoods without further major developments in the cloning technology.
An example of a useful genetic modification is the introduction of the herbicide tolerant gene, which has been introduced into corn and soybean thereby allowing the more judicious use of herbicides early in the growing cycle. This technology could readily be transferred to forestry so as to allow more optimum application of herbicides to planted seedlings. As reported in table 9, the cost savings for plantations in some regions can be large.
The importance of these modifications, whether accomplished by traditional breeding or through the application of gene-altering technologies, is that they increase productivity of planted forests, thereby reducing costs and promoting the further substitution of wood from planted forests for wood from natural forests. In practice, traditional breeding and biotechnology are expected to function in a complementary fashion, with both approaches being used.
Source: Context Consulting
Figure 5 provides a representation of the economics of this transition. For a given technology annual plantations starts will be determined by the intersection of demand, D, with the cost function or supply curve S. As innovations reduce the cost of establishment (or increase the future returns for a given cost of establishment), the cost function or supply curve will shift down to S'. The result is an increase in the area planted in a given year, from Qo to Q1, and an increase in future harvests and lower long-run industrial wood costs.
Here again the result is a shift away from natural forest to planted forest, with its attendant improvement in forest environmental and ecological outputs.
Implications for the Forest
Plantation forestry has the same types of implications for forestry that cropping has had for agriculture. Increased productivity leads to the abandonment of marginal sites and increased management intensity on the best sites. Often these sites are former agricultural lands, which typically have roads and other infrastructure in place. Planting leads to concerns about the quality of the planting stock and the ability to capture higher returns associated with improved seed stock. Investments in the selection and improvement of the stock, which in turn leads to enhanced productivity, often can be economically justified.
Plantation yields are often an order of magnitude higher than growth rates experienced in natural forests. Higher productivity results in lower costs thereby continuing to enhance the economic advantages of plantation wood over that of natural forests. This provides the opportunity, over the longer term, for producing more wood on less land.
These favorable economic circumstances of forest plantations are further enhanced by the deteriorating economics of harvesting from natural forests, which are often the result of policies specifically designed to protect the natural environment. The creation of protected forest areas, for example, will reduce the availability of natural forests for industrial wood harvests. Additionally, sterner forest practices requirements have substantially increased the costs of harvests in many natural forests.
In short, both the improving cost structure associated with planted forests and the higher costs associated with natural forests, often driven by environmental policy, bode well for an increasing role for wood plantations.
Summary and Conclusions: The Forest of 2050
The above has argued that world consumption of industrial wood has stabilized over the past two decades. The stabilization has not been due to lack of supply choking off production, as might be reflected in dramatically higher prices. Rather, there appears to be a lack of increases in basic demand worldwide, probably due largely to the substitution of other materials for wood.
Recent assessments by a variety or organizations have suggested the likelihood of only modest increases in consumption and demand over the next several decades. Simultaneously, in the latter part of the 20th century there has been a burgeoning of investments and activity in fast growing planted forests. This has been especially true in North and South America, Oceania, and parts of Asia and Europe. The production of these forests has impacted worldwide markets and greater portions of world industrial wood output come from these forests. The world has seen a shift in the source of industrial wood away from old-growth and second-growth forests to planted and intensively managed forests. Furthermore, the rates of planted forest expansion and the potential for additional expansion are both great. This basic trend is being promoted by technological improvements, particularly related to tree breeding, which enhance the economics of tree-growing. Furthermore, biotechnology offers the potential to further accelerate this process. As this process continues, the portion of the world's natural forest free from serious commercial logging pressure will increase.
As the world moves to through the first half of the 21st century it is likely to move toward a global forest that is largely in some broad global balance. Industrial wood production will be increasingly confined to high productivity sites where very intensive management is practiced. The total area involved in industrial plantation forests, although large in an aggregate sense, will be small on a global scale - perhaps consisting of a couple of hundred million ha, or perhaps about 5 per cent of the 3.4 billion has of land area currently in the global forest. Some natural forests will continue to be harvested for specialized types of industrial wood, but as of today, specialized wood types will constitute only a small fraction of total industrial wood requirements. This will leave approximately 90 percent of the world's forest for other purposes. In under a host of conditions these forests will be providing environmental and ecological services ranging from watershed protection to biodiversity reserves.
The major threat to the natural forest over the next fifty years is the continuation of high levels of deforestation in the tropics as lands continue to be converted from forest to other uses, particularly agriculture uses. The appropriate remedial actions for this problem, however, have relatively little to do with industrial wood and commercial logging directly, and probably more to do with the spatial distribution of infrastructure and roads.
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