Forests and Globalization: Challenges and Opportunities for Sustainable Development 9781138787391, 9781315766539, 1138787396

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Forests and Globalization

The overarching contribution of this book is a review and assessment of the current and future impacts of globalization on the world’s forests. The work has been developed by the “Resources for the Future” Task Force for the International Union of Forest Research Organizations (IUFRO). Four key themes are addressed: the effect of globalization on forests (including future trade flows); plantations as the primary source of forest products and its consequences, including plant breeding and forest health; the effect of new products such as bio-products and markets on forests; and the emergence of forest ecosystem services and their impact on the landscape and human communities. These four themes are examined in detail to map out the impacts of these trends for forests throughout the world and at multiple scales, and how forest research needs to be adapted to address these trends. Overall, the volume provides a major synthesis of current thinking and knowledge on the topic for advanced students, as well as policy-makers and professionals in the forest sector. William Nikolakis is a lawyer and a Research Fellow in the Department of Forest Resources Management, Faculty of Forestry at the University of British Columbia, Canada. John Innes is Professor and Dean of the Faculty of Forestry at the University of British Columbia, Canada. He is the author or editor of several books on sustainable forestry, forest policy and forest health, and coordinator of the Task Force “Resources for the Future” for the International Union of Forest Research Organizations (IUFRO).

The Earthscan Forest Library

This series brings together a wide collection of volumes addressing diverse aspects of forests and forestry and draws on a range of disciplinary perspectives. Titles cover the full range of forest science and include the biology, ecology, biodiversity, restoration, management (including silviculture and timber production), geography and environment (including climate change), socio-economics, anthropology, policy, law and governance. The series aims to demonstrate the important role of forests in nature, peoples’ livelihoods and in contributing to broader sustainable development goals. It is aimed at undergraduate and postgraduate students, researchers, professionals, policy makers and concerned members of civil society. Series Editorial Advisers: John L. Innes, Professor and Dean, Faculty of Forestry, University of British Columbia, Canada. Markku Kanninen, Professor of Tropical Silviculture and Director, Viikki Tropical Resources Institute (VITRI), University of Helsinki, Finland. John Parrotta, Research Program Leader for International Science Issues, US Forest Service – Research & Development, Arlington, Virginia, USA. Jeffrey Sayer, Professor and Director, Development Practice Programme, School of Earth and Environmental Sciences, James Cook University, Australia, and Member, Independent Science and Partnership Council, CGIAR (Consultative Group on International Agricultural Research). Recent Titles: Rainforest Tourism, Conservation and Management: Challenges for Sustainable Development Edited by Bruce Prideaux Large-scale Forest Restoration David Lamb Forests and Globalization: Challenges and Opportunities for Sustainable Development Edited by William Nikolakis and John Innes Smallholders, Forest Management and Rural Development in the Amazon Benno Pokorny Managing Forests as Complex Adaptive Systems: Building Resilience to the Challenge of Global Change Edited by Christian Messier, Klaus J. Puettmann and K. David Coates Evidence-based Conservation: Lessons from the Lower Mekong Edited by Terry C.H. Sunderland, Jeffrey Sayer, Minh-Ha Hoang Additional information on these and further titles can be found at http://www.routledge.com/books/series/ECTEFL

“This book covers a wide range of issues critical to the understanding of changes in forest resources management for this century and beyond. I strongly recommend it to anyone who has an interest in the future of the world’s forests.” Ben Cashore, Professor, School of Forestry and Environmental Studies, Yale University, USA. “If you read this awesome and many-sided book you will develop a sound understanding of the importance of the world’s forests – that forests and their sustainable use are the key to our future wellbeing. I warmly recommend this book to anyone who is interested in the future development of the forest sector and humankind.” Hannu Raito, Director General, METLA, Finland. “Forests and Globalization presents timely, diverse and thought-provoking insights on how to address the pressures of globalization on forests. It is a ‘must read’ for foresters, policy makers, academics, development practitioners, forest campaigners and students.” Rod Taylor, Director, Forests, WWF International.

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Forests and Globalization Challenges and opportunities for sustainable development Edited by William Nikolakis and John Innes

First published 2014 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN And by Routledge 711 Third Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2014 William Nikolakis and John Innes, selection and editorial material; individual chapters, the contributors. The right of the editors to be identified as the authors of the editorial material, and of the authors for their individual chapters, has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Forests and globalization : challenges and opportunities for sustainable development / edited by William Nikolakis and John Innes. pages cm. -- (The Earthscan forest library) Includes bibliographical references and index. 1. Sustainable forestry. 2. Sustainable development. 3. Agroforestry. 4. Forest resilience. 5. Forest ecology. I. Nikolakis, William. II. Innes, John L. SD387.S87F68 2014 634.9⬘9--dc23 2014015469 ISBN: 978-1-138-78739-1 (hbk) ISBN: 978-1-315-76653-9 (ebk) Typeset in Baskerville by Saxon Graphics Ltd, Derby

Contents

1

Foreword Author biographies

ix xi

Resources for the future

1

J O H N I N N E S AN D WILLIAM N IKOLAKIS

2

Forces shaping the globe’s forests and forest use

7

D A V I D CO H EN

3

Thoughts on transforming the forest sector: the potential (and reality) of the bio-economy

25

D O N R O B E R TS AN D WILLIAM N IKOLAKIS

4

Globalization and its implications to forest health

36

A N D R E W L I E B HOLD AN D MIC HAEL WIN GFIEL D

5

The consumer-country response to illegal logging and the international trade in illegal timber

48

D U N CA N B RAC K

6

Voluntary zero net deforestation: the implications of demand-side retail sustainability for global forests

65

J AN E L I S TE R AN D PETER DAUV ERGN E

7

IKEA: a furniture company’s view on wood A N D E RS H I L DEMAN AN D M ATTIAS C ARLS S O N

77

viii

Contents

8 Roots of recognition and contested claims: opportunities and challenges for pro-community forest tenure reform since 2002

87

A L E XAN D R E C ORRIV EAU-B OURQ UE, J EN N Y SPRI NGE R, A N D Y W H I TE, AN D D. B RY S ON OGDEN

9 Future directions for plantations: investment options and product markets

106

R O B D E F É G ELY

10 New Generation Plantations: what future role towards sustainability?

119

L U I S N E VE S S ILV A

11 Commercialization of forestry genetic research: from promise to practice

130

M I KE M A Y A N D S TAN LEY HIRS C H

12 Can European forests meet the demands of the bio-economy in the future? Wood supply alongside environmental services

153

G E RT-J A N N A B UURS , M ART-J AN S C HELHAAS , KE E S HE NDRI KS A N D GE E RTEN M . HEN GEV ELD

13 Bamboo and rattan production and the implications of globalization

166

J . CO O S J E HOOGEN DOORN AN D AN DREW B ENTON

14 What is needed to make markets for forest ecosystem services a reality?

185

D A V I D BRAN D AN D DEV Y AN I S IN GH

15 Lessons in the design of payments for environmental services: theory and experience

202

S VE N W U N DER, HARRY N ELS ON AN D WILLIAM NI KOL AKI S

Index

215

Foreword

In 2010, the International Union of Forest Research Organizations (IUFRO) launched a new strategy aimed at addressing some of the top research challenges facing the global forest research community. Amongst six priority areas that were identified following extensive consultations was the issue of the future of the world’s forest resources. In recognition of the importance of this subject area, IUFRO created an interdisciplinary Task Force to address the issue. The Task Force was given the challenge of identifying some of the most important research questions within this theme, and looking at potential solutions which might then be followed up with further, more disciplinary, research activities in the future. Professor and Dean Dr. John Innes, Faculty of Forestry, University of British Columbia, was elected as coordinator of the Task Force. The Task Force took a wise approach by involving not only researchers but also end users of the research. This reflects some of the most basic principles of successful innovation. Unless there is demand for an innovation, it is very difficult to sell a new product, either literally or figuratively. This is amply illustrated by some of the difficulties surrounding the commercialization of new forest products, such as nanocrystalline cellulose and cellulose filaments. However, the problems addressed by the Task Force run much deeper than the development of new products. It has examined the role of globalization on the forest sector, including both the impacts on trade and the possible consequences for the spread of pests and diseases that globalized trade brings. It has examined the rapidly evolving area of bio-energy and what the implications of this are for more traditional products, such as pulp and paper. For example, bio-energy plants may in the future compete with pulp mills for feedstocks, changing the economics of pulp mills significantly. The rising value of feedstocks, which until now have often been seen as waste products by the forest sector, are changing the economics of forestry, with widespread potential repercussions, including for forest governance and for the ecological services provided by forests. I warmly welcome this book, which provides a state of the art picture of some of the developments that the Task Force has been examining. It

x

Foreword

brings together a diverse array of authors who provide a series of stimulating chapters that examine future directions for our forest resources. Many new and exciting research areas are covered, and the book represents an important milestone in the development of the sector in the twenty-first century. Therefore on behalf of IUFRO as the global network for forest science, I thank the authors for their combined efforts and congratulate them on the result. Niels Elers Koch President, International Union of Forest Research Organizations (IUFRO)

Author biographies

Andrew Benton is Head of Networking and Partnership Development at the International Network for Bamboo and Rattan (INBAR), Beijing, China. Duncan Brack is an independent environmental policy analyst, based in the UK. He is an Associate Fellow of Chatham House and an Associate of Forest Trends. David Brand is CEO of New Forests Pty Limited, Australia. Mattias Carlsson is Wood Supply Manager, IKEA of Sweden AB. David Cohen is a Professor in the Faculty of Forestry, The University of British Columbia, Canada. Alexandre Corriveau-Bourque is a Tenure Analyst with the Rights and Resources Initiative. Peter Dauvergne is a Professor of International Relations at the University of British Columbia, Canada. Rob de Fégely is President of the Institute of Foresters of Australia. Kees Hendriks researchers ecosystem services at Alterra, Wageningen University and Research, the Netherlands, working in the fields of forest ecology, soil sciences, and impact studies. Geerten M. Hengeveld is Researcher in European forestry and resource management at Alterra, Wageningen UR and Wageningen University, the Netherlands. Anders Hildeman is Forestry Manager, IKEA of Sweden AB. Dr. Stanley Hirsch is Group CEO Futuragene. Dr. Hirsch has been involved in the development of automated systems for plant tissue culture and he is a co-inventor of patents in plant biotechnology and micropropagation systems. Dr. Hirsch received his D. Phil. from Oxford University in cell biology and immunology. J. Coosje Hoogendoorn is the Director General of INBAR, Beijing, China.

xii

Author biographies

John Innes is Dean of the Faculty of Forestry, University of British Columbia, Canada. Andrew Liebhold is a Research Entomologist at the US Forest Service, West Virginia, USA. Jane Lister is a Senior Research Fellow, Liu Institute for Global Issues, University of British Columbia, Canada. Mike May is Vice President of FuturaGene. Gert-Jan Nabuurs is Special Professor of European Forest Resources at Wageningen University and Research at Alterra. Harry Nelson is Assistant Professor in the Department of Forest Resources Management, Faculty of Forestry at the University of British Columbia, Canada. Luis Neves Silva is the New Generation Plantations platform Manager, Portugal. William Nikolakis is a lawyer and Research Fellow in the Department of Forest Resources Management, Faculty of Forestry at the University of British Columbia, Canada. D. Bryson Ogden is a Private Sector Analyst with the Rights and Resources Initiative. Don Roberts is CEO of Nawitka Capital Advisors (formerly Managing Director CIBC Canada, Bioenergy). Mart-Jan Schelhaas is Researcher in European forestry at Alterra, Wageningen University and Research, the Netherlands. Devyani Singh is a PhD Candidate at the Faculty of Forestry, University of British Columbia, Canada. Jenny Springer is Director of Global Programs for the Rights and Resources Initiative. Andy White is a Coordinator at the Rights and Resources Initiative. Michael Wingfield is a Professor at the Forestry and Agricultural Biotechnology Institute, University of Pretoria, South Africa. Sven Wunder is Principal Scientist at the Center for International Forestry Research, Brazil.

1

Resources for the future John Innes and William Nikolakis

In 2010, the International Union of Forest Research Organizations published its strategy for the period 2010–2014. It identified a number of areas where research was needed, including one called “Resources for the Future.” The Strategy identified that sustainable management and protection of forests (including forest landscape degradation and restoration) will remain the dominant theme for the forest research community in the future at the global, regional, national and local levels. It argued that understanding the role of insects and pathogens would be important, particularly as they related to global change. The Strategy went on to explain that innovation in the field of forest products, goods and services together with sustainable and responsible operations would play an important role in determining future management options. The development of new processing techniques and environmentally, socially and politically acceptable products were identified in the Strategy as having key importance for the future. At the same time, it argued that benefits and values of non-wood forest products to large portions of the world’s population would need to be accepted, realized, and properly accounted for. This implied that changes in governance and the understanding of governance structures against different socio-cultural conditions would play an important role for the sustainable management of the world’s forests. The Strategy set out a number of areas for special emphasis, including trends in demand for innovative forest products, ecosystem goods and services and conflicting needs, management options (including conservation, avoided degradation, restoration concepts), and globalization and changes in governing systems. To encourage progress in these areas, IUFRO established a Task Force on “Resources for the Future,” which it intended would bring together a diverse range of scientists from within its nine Divisions. The Task Force did more than that, drawing in policy makers, decision makers, end users and a range of other stakeholders who all held a common interest in the future of resources derived from the world’s forests. Many of the contributions from these individuals were brought together in a conference held at the University of British Columbia in Vancouver, Canada, August 2013. This book represents the outcome of

2

Innes and Nikolakis

this conference, supplemented by a number of additions from individuals who were unable to get to the conference.

Globalization The first major theme covers the impacts of globalization on the forest sector. The forest sector is changing rapidly, and evidence of this change occurs at many scales. Cohen in Chapter 2 examines these changes in detail, starting with an analysis of the drivers affecting the demand for forest products. Many of these changes are arising from the increasing recognition that the world needs to move towards a more sustainable Green Economy (also often termed the bio-economy). He considers that the four most important drivers affecting forests and necessitating a shift towards a Green Economy are: population growth, a geographic shift in economic power and growth of the middle class, growing resource demand, scarcity and commodity prices, and the environmental degradation that is accompanying the growing demand for resources. Roberts and Nikolakis in Chapter 3 continue this theme, examining how far companies have transformed towards the Green Economy. Much of this is revolving around a suite of new bioproducts that are being developed in response to the need to switch from unsustainable products derived from fossil fuels to a range of more sustainable products derived from forests. Such a change has the possibility of reinvigorating the forest sector, particularly in Europe and North America, but the changes have been slow in materializing. It seems likely that such changes will only occur through government incentives, as witnessed by the major changes that have occurred in Europe in response to requirements for power utilities to increase their use of sustainable sources of energy. The authors conclude with policy considerations to consider in support of further bio-energy investments. Liebhold and Wingfield in Chapter 4 describe that rapid globalization has broken down the geographical barriers that once protected forests. Today, forests are exposed to a range of disturbances, pathogens and invasives, often transferred from wood products. The authors contend that in developing trade agreements policy makers need to consider phytosanitary regulations to limit insect and disease movement in the future, with the ambition to protect both native and plantation forests.

Governance Good governance at all scales will be an essential component of the future forest sector. Governance takes many forms, and is so complex that IUFRO has devoted a Task Force to looking at this single issue (the IUFRO Task Force on International Forest Governance). Attempts to develop a global convention on forests have been unsuccessful, but forests are covered in

Resources for the future

3

many existing international conventions, such as the World Heritage Convention and the Convention on Biological Diversity. Most countries have enacted detailed forest legislation governing the use and protection of their forest resources, but in some countries, corruption and lack of enforcement are severely limiting the value of such laws. Brack in Chapter 5 examines these issues in relation to illegal logging. This is primarily a domestic issue, since the basic issue is one of illegality in a particular country. However, there is also a globally significant trade in illegal logs, and Brack also summarizes this problem, pointing out that until quite recently, it was not unlawful for consumer countries to import illegally logged wood. This has changed with new legislation in countries such as the USA, Australia and in the European Union. Tools such as certification have been encouraged, but the uptake of certification has been very low in tropical countries. Procurement policies within countries and by major consumers (see Chapter 7 by Hildeman and Carlsson) is having an effect, but will not help prevent the illegal logging of timber for domestic consumption. At a local level, Corriveau-Bourque et al. in Chapter 8 have examined the implications of changing policies associated with forest tenures. This is particularly important if more products are to be derived from forests in the future. There are fundamental questions being posed over ownership of forests – such questions occur not only in tropical countries, but also in countries such as Canada where Aboriginal peoples are questioning why they do not have full rights and title over their ancestral and traditional territories. International agreements such as the United Nations Declaration on the Rights of Indigenous People, the mainstreaming of Free, Prior, and Informed Consent (FPIC), and the development and adoption of the Voluntary Guidelines on the Responsible Governance of Tenure have all helped set the stage for changes in tenure arrangements for forests. Such changes are not only regulatory, there is increasing pressure on the private sector to adopt socially just and environmentally beneficial practices (see Lister and Dauvergne Chapter 6). Major companies are increasingly concerned about corporate social responsibility (CSR); in fact it has become a standard in day to day practice and in reporting. Tools such as certification help this, but it extends beyond certification, especially in countries where forestry regulations are limited or not enforced. Many such companies are adopting a zero net deforestation policy in an attempt to minimize their global footprint on forests, although it is still too early to say whether these policies are going to be effective. An example of how a major consumer of forest products is adapting to these changes is provided by Hildeman and Carlsson in Chapter 7. IKEA is one of the world’s biggest furniture retailers, and consumes 15 million m3 annually. It has not specified that it will require particular types of wood. Rather, it has specified what it will not accept in its timber supply. For

4

Innes and Nikolakis

example, wood must not be sourced from forestry operations engaged in forest-related social conflicts or be harvested from Intact Natural Forests (INF) or other geographically identified High Conservation Value Forests (HCVF), unless they are certified as responsibly managed. Wood must not be harvested from natural forests in the tropical and sub-tropical regions being converted to plantations or non-forest use, nor can it come from officially recognized and geographically identified commercial Genetically Modified (GM) tree plantations.

Wood supply It is evident that the sources of fiber will change in coming years, particularly given the increasing rate of global fiber consumption. The proportion of fiber derived from plantations has been steadily increasing and with massive new investments in plantations in countries such as China, this trend is set to continue. However de Fégely in Chapter 9 argues that there are a number of important considerations associated with future investments in forest plantations. These include a progressive reduction in the land area available for plantations, changes in government policies towards plantations, and growing concerns about their environmental impacts. Attracting new investors will require marketing more than wood as a return. Carbon credits, biodiversity credits and other ecosystem service payments will make investment more attractive, but this will also require changes in the way that plantations are established and managed. Such changes are on the way. Neves Silva in Chapter 10 argues that plantations have a critical role to play in the future Green Economy, and that if managed well, they can make a major contribution to the conservation of biodiversity. The New Generation Plantations concept being promoted by WWF illustrates this change in thinking. It is based on the principles of sustainable forest management: environmentally sound, socially responsible and economically viable. The potential for biotechnology to deliver step changes in yield is discussed by May and Hirsch in Chapter 11. While advances in biotechnology mean plantations can generate more fiber using less inputs, there is the need to obtain social license before such advances are widely adopted in practice. Nabuurs et al. in Chapter 12, argue that many different factors are at play in Europe, and all have potential ramifications for timber supply. Attempts are being made to make plantations more environmentally friendly, but the trade-off is reduced timber productivity. This reduction is not being offset by payments for environmental services associated with the changes in silvicultural practices. The bio-economy in Europe is currently hotly debated, as is the potential of European forests to provide bio-energy. Bio-energy demands in particular may result in a fiber deficit, necessitating the import of wood products from outside Europe.

Resources for the future

5

Trends in non-conventional forest products Many jurisdictions have been strongly advocating the increased use of forest products. Forest products are renewable, and are therefore a more sustainable option to many competing products, especially those derived from fossil fuels. There are several approaches to this, including the promotion of more wood in buildings, and the development of new materials based on wood and its components. Hoogendoorn and Benton in Chapter 13 show that globalization has always affected rattan and bamboo products. Rattan in particular was developed on the basis of a global trade in the product, and in recent years, bamboo products have penetrated many markets that previously were exclusively wood-based. Bamboo has many advantages, not least of which is its rapid growth. It has proven to be very adaptable, and engineered bamboo products are now widely available.

Ecosystem services The provision of ecosystem services by forests is dependent on the continued existence of forests that can meet the needs of human wellbeing. Forests are under threat because of continued conversion to other forms of land use, particularly in the tropics. They are also under threat from pests and diseases, the incidence and severity of which may change as a result of both globalization and climate change. Brand and Singh in Chapter 14 discuss the development of markets for ecosystem services. For many years, there has been a lot of talk about payments for ecosystem services (PES), but relatively little action. However, in a number of places around the world, valid schemes have been developed, resulting in better valuation of standing forests. Brand and Singh argue that ultimately, there is a need for both conservation and production functions of forests to be accorded appropriate value. They suggest that the correct allocation of property rights, price signals and regulatory instruments should result in the redirection of capital flows into more sustainable investment strategies. Wunder et al. in Chapter 15 focus on important design principles to support the effectiveness of PES. Drawing on practical experience in developing PES, the authors consider how the socio-economic impacts of PES can be addressed through careful design with particular focus on conditionality.

Conclusions The forest sector is currently undergoing a major transformation. Both areas of production and markets are changing rapidly, as is the nature of the goods and services provided by forests. These changes will provide both challenges and opportunities. The array of stakeholders in the forest sector

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Innes and Nikolakis

is evolving, and new partnerships are being developed, such as those between pulp mills and chemical companies or between conservation organizations and forest plantation managers. These changes have implications for forest research, which is increasingly being conducted by non-traditional forest research organizations. As is happening in the industrial sector, forest researchers may have to seek out new partners who can help them develop research in these new areas of endeavor.

2

Forces shaping the globe’s forests and forest use David Cohen

Introduction There are new forces buffeting businesses, including the forest sector, worldwide. A fundamental structural shift is underway, towards a global business model where long-term firm profit is predicated on operations that improve global sustainability. Businesses that provide solutions to environmental and social problems will have a competitive advantage in the marketplace. This concept (named shared value by some) is gaining acceptance in both the academic literature (e.g. Carroll and Shabana, 2010; Berns et al., 2009; Porter and Kramer, 2006; Porter and Kramer, 2010, Cohen et al., 2013) and publications from strategic consulting firms (e.g. MIT and BCG, 2011; Bonini and Gorner, 2011; KPMG, 2011). Firms transform themselves to align with new competitive realities, documented in the rich academic literature on business transformation (e.g. Armenakis and Bedeian, 1999; Kotter, 1995; Pettigrew et al., 2001). This chapter examines the drivers of today’s new economic reality that is helping shape the new business model, the emerging bio-economy which is the economic face of sustainability and how it impacts the forest sector, and what these drivers mean for future forest management. An early definition of bio-economy was “the sustainable, eco-efficient transformation of renewable biological resources into food, energy and other industrial products” (Schmid et al., 2012 quoting DG Research, 2005). This chapter first discusses the four key drivers of the evolution to a global bio-economy using examples from forestry and the forest industry. The four drivers are: 1) population growth; 2) a geographic shift in economic power including, middle class growth in developing countries; 3) ballooning resource demand leading to scarcity, and commodity price growth; and 4) the resulting degradation of the environment. Following this is a short section on how the growing resource demands will fundamentally change forest management regimes.

Major forces shaping forest and forest use According to the Millennium Ecosystem Assessment (2005b) the use of Earth’s ecosystems for the provisioning of goods and services has contributed

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Cohen

to decades of economic growth and poverty alleviation, but there has been an environmental cost – the ability of these ecosystems to continue to provide these goods and services is now severely threatened. This has consequences for economic growth and it is clear there is a need for an alternative approach which aims to maintain the integrity of ecosystems so they can continue to provide goods and services at a rate that sustains economic growth and poverty alleviation. One approach, like that described by Roberts and Nikolakis in their chapter, is to substitute the use of non-renewable materials with renewables, like the replacement of fossil fuel based materials with those produced from woody and fiber biomass – the bio-economy. There is a relatively simple explanation why the shift to a global bio-economy will become a major force throughout the first half of this century. Growing populations, with higher living standards, consume more goods and services than before. Increasing consumption puts more pressure on natural resources, in turn leading to escalating commodity prices and exacerbating global environmental degradation. Increased demand for global resources is fuelling a paradigm shift in our management and use of resources, including enhanced use of buyer led certification systems like that described by Jane Lister’s chapter, a pricing of environmental externalities like that discussed in Brand and Singh, and Wunder et al.’s chapters, and more innovation in extraction and processing, as well as public policy “bolstering the long-term resilience of society in the face of the resource challenge” (Dobbs et al., 2011: p. 3). In the next section we examine each of the four major drivers for forests and forest use. Population The dramatic world population increase over the past 60 years will continue until at least 2050 (Figure 2.1). This unprecedented growth is a result of a variety of factors including a 50 percent increase in human life-span between the 1950s and the first decade of the twenty-first century, due to lower infant mortality, better health care and better clinical support for those less healthy (UN WPP, 2012). According to a recent world population update (UN WPP, 2012) most of this population growth will occur in developing countries.1 Youth are entering the labor force in large numbers, creating the need for more new permanent jobs over a short period to support social cohesion. Increasing youth populations helped drive massive employment creation in China during the first decade of the twenty-first century (The Economist, 2002) and youth under-employment was one of the drivers of the Arab Spring (Mirkin, 2013). While there is a picture of growing and youthful population in developing countries, it is much different in the developed world, particularly in Europe and Japan, where population growth will stagnate and age compared to the developing world. This has resulted in a shift of economic growth and hence power from developed regions to developing regions, evidenced by the rise of Brazil, Russian, India and China (the BRIC countries).

Forces shaping the globe’s forests and use 2.5

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7.0

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Source: UN World Population Prospects, The 2010 Revision, medium variant

Figure 2.1 World population growth 1950–2050 (WPP, 2012)

Population growth: impacts on forests An increasing population in developing countries has led to growing demand for wood products. As population increases, demand grows for housing, durable goods, as well as commercial and public building products such as structural wood components, concrete forms and stripping to attach interior finishes for concrete high rises. Growing populations can have significant impacts on forest area and health. In Africa, wood fuel removal is a major cause of deforestation, while in Asia rapid urbanization contributed to a reduction in natural forests and an increase in monoculture plantations in the past 20 years (FAO, 2011). The ability of Asia’s forests to produce non-timber and environmental products and services from primary forests is now threatened. Plantations will continue to increase but the multi-functional demands on plantations are likely to increase which is discussed in more detail in the chapters by Rob de Fégely, and Luis Neves Silva. Agriculture remains a major contributor to deforestation, and this is likely to continue, as food is required for growing populations (FAO, 2011). Increasing populations occurred with growing cumulative deforestation as shown in Figure 2.2 (FAO, 2012). Shift in global economic power The economies of many developing countries are growing much faster than the economies of the developed countries of Europe and North America. Figure 2.3 shows the existing (until 2010) and World Bank projections of the proportion of world GDP by country for three developed countries (US, Germany and Canada) and two developing countries (China and India).

Cohen 8

Deforestation (billions ha.)

2.0

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Figure 2.2 World population and cumulative deforestation 1800–2010 (FAO, 2012)

Instead of showing this in US dollars, Figure 2.3 shows it as a percentage of global Gross Domestic Product (GDP)2 using Purchasing Power Parity (PPP). The World Bank calculates PPP by using a basket of 150–200 items to adjust every country’s currency to an International Dollar that reflects what money can buy in each country. Economists expect China to equal or surpass the US, and India to almost double the size of Germany by 2016. Between 1990 and 2010 the proportion of the world’s population in developing regions living in extreme poverty, defined by the UN as living on less than $1.25 per day, declined from 47 percent to 22 percent and resulted in over 700 million fewer people living in extreme poverty (UN MDG, 2013). In addition, there have been over a billion people joining the global middle class from developing countries (Wilson et al., 2010) leading to over half the growing world population being middle class (The Economist, 2009).3 China and India, as the two most populous countries in the world, have been responsible for much of the shift away from extreme poverty and the growing middle class, contributing to the increased demand for goods and services in these countries. Shift in global economic power: impact on forests Developing countries close to the equator affect forests both in terms of wood supply (planted forests) and demand (wood imports) as well as the production and trade of wood products. In terms of wood supply the greatest growth in planted forests4 since 1990 has been in developing countries located near the equator with Brazil planting the greatest area designated for production – 21.5 million hectares (FAO, 2012) and China planting the greatest area – 49.7 million hectares for both production and environmental purposes (FAO, 2010). According to the Global Forest Resources Assessment (FAO, 2010), planted forests (76 percent of these

Forces shaping the globe’s forests and use

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Percent of global GDP

25 20 15 10 5 0

07

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Source: International Monetary Fund (IMF), World Economic Outlook (WEO) Database, October 2011

Figure 2.3 Proportion of world GDP (PPP) by country (IMF, 2013)

are for production purposes with the rest for a variety of environmental or recreational use) increased by an average of 3.6 million hectares per year from 1990–2010 with the greatest increase occurring from 2000–2005 (5.6 million hectares per year) falling to 4.2 million from 2005–2010. The regions with the greatest increase in area of planted forests from 1990–2010 were in developing countries, with the greatest growth in China, India, Mexico, Brazil and Vietnam (all over 1 million ha/yr) (FAO, 2010). The projection is for declining harvests (supply) in temperate regions due to declining forest health from insects, disease and fire (e.g. bark beetles in Canada, fire in SW USA), increased environmental considerations (parts of Europe) and high costs relative to competing supply regions. Planted forest area will continue to grow in regions with short growing seasons (near the equator), growing demand (developing countries) and governments favoring resource development (relative to developed regions) to meet growing domestic demand and to serve export markets. Since 2001, when China joined the World Trade Organization, they have come to dominate global trade and production of wood products. According to FAOSTAT data, China has increased its log imports from 14.4 percent of total world imports in 2001 to a peak of 36.7 percent in 2011. This does not include any illegal imports although research by Dieter (2009) suggests that China imports between 39–69 million cubic meters of illegal wood annually which would result in China being responsible for over half of all the globe’s actual log imports. For more on illegal logging see the chapter by Duncan Brack. In 2001 (the year China joined the WTO), China was not among the top ten producers of any major forest product, but by 2009 China was the largest global producer of plywood, medium density fiberboard (MDF), blockboard and wood furniture. They were the second largest producer of

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hardwood lumber and the third largest producer of softwood lumber. They were the largest exporter of wood products (by value) and the second largest importer. They have grown to be a global wood products producer, importing approximately half of all the raw materials needed for their wood and paper manufacturing sectors while increasing their forested area through plantings (UN/ECE/FAO, 2012 and FAOSTAT, n.d.). This shift in wood manufacturing from developed temperate forest countries to China exemplifies the global shift in economic power. As wages in China are increasing, some wood furniture manufacturing production is moving to lower cost regions such as Vietnam and Laos. This trend is likely to continue and China will attempt to make better quality furniture that will further affect furniture production in developed regions. Such is the way of Schumpeter’s (1942) creative destruction, where innovation propels the product life cycle forward by first destroying the existing order, which is then replaced by a new and often more innovative order (e.g. OSB replacing plywood). Growing resource demand and prices Growth in consumption leads to an increasing derived demand for materials from natural resources. These resources include metals, agricultural products, energy and building materials, such as concrete and steel. This has caused a reversal in the declining commodity price trends of the last century as supply has expanded to meet growing demand through intensified resource extraction and improved extractive and processing efficiencies. This shift is not an anomaly, but represents a fundamental change in the value of resources and corresponding commodity prices (Dobbs et al., 2011 and PWC, 2011). As reported by Dobbs et al. (2011) the McKinsey Global Institute’s Commodity Prices Index declined by 48 percent during the twentieth century but has increased sharply during the first 11 years of the twenty-first century to not only wipe out the previous century’s decline but surpass the peak set over 100 years ago. The recent price escalation is shown in Figure 2.4. While growing resource prices are likely to continue, there will be price corrections, causing erratic growth, but the demand and supply dynamics driving increased resource demand are the new reality. China has responded by seeking to secure access to many of the world’s untapped resources especially in South America, Africa, and now in Canada (Zweig and Jianhai, 2005). The demand for natural resources is feeding development across the globe but has not come without negative externalities, which some policy makers have attempted to price, so that firms will internalize some of these ecological and social costs. Growing resource demand and prices: impacts on forests While prices for commodities have trended upward this century, not all commodities have increased in value. According to the Bank of Canada

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(2014), from 2000 to 2013 commodities prices increased by 94.1 percent with non-renewable resources increasing more rapidly than renewable resources (e.g. Energy increased 115.7 percent, Metals and minerals 133.8 percent compared to Agriculture 98.2 percent, and Forestry 25.3 percent). Commodity forest products have increased very little over the past 40 years (see Figure 2.4) due to increased supply from low cost plantations, innovation in product development such as engineered and composite wood products and increased reuse and/or recycling of wood and paper products. With non-renewable resource prices increasing much more rapidly than those for renewable resources, market forces (and basic economic theory) suggest that opportunities exist to replace products made from increasingly costly non-renewable resources with those made from less costly and renewable resources. Research into bioproducts from both wood and agricultural materials has increased, particularly in developed countries (e.g. Biopathways in Canada and KBBPPS, an EU-funded program to address scientific and industrial standards for bio-based products). As discussed in Roberts and Nikolakis’s chapter, the range of bioproduct being explored is expanding from biofuels to replace fossil fuels to bioplastics and biochemicals. This growth of research driven innovation has already resulted in pilot plants for many new biomaterials and bioproducts, and as Roberts and Nikolakis observe, much of this would not occur without government support. These global pressures are not just affecting forestry firms. Many firms such as IBM, GE, Unilever and others are adapting their short- and long-term strategies to focus on increasing long-term profitability by working to help alleviate the problems resulting from the growing population, increased living standards, resource limitations and environmental degradation (MIT and BCG, 2011). There is also a structural change in paper demand, particularly from pulp produced in the temperate forests of developed countries, which is driving increased attention into the bio-economy. For years, growth in paper consumption, such as newsprint, was closely linked with growth in GDP and formed the basis of consumption projections for most models (e.g. FAO 1999a; FAO 1999b). However, this relationship began to lose its efficacy in predicting future demand during the late stages of the twentieth century (Hetemäki and Obersteiner, 2002). Much of the pulp derived from temperate softwood forests in North America and Europe are used to produce either newsprint or printing and writing papers. Since the introduction in 1995 of software programs, such as Netscape and Explorer, that enabled the public to access and eventually surf the World Wide Web, the demand for these types of papers has delinked from economic growth. The dramatic growth of information and communication technology (ICT) and the remarkable growth in the use of the internet since 1995 transformed communication and media. One result has been the slowing growth followed by the rapid decline of papers used for printing, writing and

Bank of Canada commodity price index

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Cohen 2500 2000 1500 1000 500 0 72 975 978 981 984 987 990 993 996 999 002 005 008 011 2 2 1 1 1 1 1 1 1 1 1 2 2

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Metals and minerals

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Figure 2.4 Commodity price index 1972–2013 (Bank of Canada, 2014)

reading. Despite this decline, pulp and paper are major components of the forest sector in North America and Northern Europe and account for between half and two-thirds of exports from Northern Europe, the US and Canada5 (FAOSTAT, n.d.). Figure 2.5 clearly illustrates the decline of graphic papers in Northern Europe and Canada and the US.6 From 1995–2012 global GDP grew by 66 percent (IMF, 2013) while graphic paper production in Northern Europe, and the US and Canada has declined by 22 percent (FAOSTAT, n.d.). This decline is not reflected in other paper products produced from pulp originating in these temperate zones (e.g. packaging, unbleached kraft paper, magazine stock and wrapping papers). Global production of household and sanitary papers has increased by 19.4 percent from 2005–2012 (FAOSTAT, n.d.). Not only is usage of graphic paper declining, but also paper recovery rates continue to increase, exacerbating demand for pulp used for graphic paper, i.e. harvests from urban recycling are replacing some of the need for some of the waste wood that goes into pulp production. According to the US Environment Protection Agency (EPA), in 1996, paper recovery was 40 percent of paper consumed. This increased to over 56 percent by 2012 while in Europe the recycling rate reached 72 percent in 2009 according to the ERPA (2013). From 2005–2009, recycling rates averaged 54 percent in the US, 79 percent in Japan, 91 percent in South Korea and 38 percent in China (FAOSTAT, n.d.). See Box 2.1 for examples of how some companies are transforming to adapt to this long-term structural change in demand. Declining graphic paper demand and increasing recovered paper supply lead to increased availability of lumber by-products that coincides with increasing interest in bio-energy and bioproducts to replace materials produced from increasing costly non-renewable resources, a fortuitous timing.

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50 45 millions of tonnes

40 35 30 25 20 15 10

first public access to internet

5 0 61 64 67 70 73 76 79 82 85 88 91 94 97 00 03 06 09 12 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 USA and Canada North and West Europe

Figure 2.5 Graphic paper production (FAOSTAT, n.d.)

Increasing demand for non-renewable resources to feed growing consumer demands due to both population increases and a higher standard of living in developing countries is leading to increasing environmental degradation discussed in the next section.

Box 2.1 Examples of industry response to structural market change Two examples show how some firms are responding to the structural change in demand for graphic paper. The first, Domtar a firm based in Montreal, Canada, has moved up the value chain using cash flow from successful pulp, paper and lumber operations to downsize the graphic paper operation and move up the value chain into consumer products. John Williams, the CEO, is reported to have stated that continued growth in personal hygiene products, especially adult diapers, will offset the continuing 3–4 percent annual decline in their core paper business (Gibbens, 2013). They have invested $US 1.5 billion in this sector and expect it to contribute a substantial part of their earnings by 2017. This is an example of a firm transforming their business model by moving up the value chain. The second example is UPM, also examined in Roberts and Nikolakis’s chapter, the Finnish company, who has committed to becoming a leader in the new bio-economy by creating a new industry category, Biofore, that they are striving to integrate into all of their other business units. One example of this, described by Viita (2014), is the development of the wooden car that premiered at the Geneva International Motor Show in March 2014. It displays an eco-friendly

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Cohen car built from a variety of materials made from wood (biomaterials) that runs on bio fuel (also made from wood). It is the first step in working with the automotive sector to develop materials and products that are both lighter and more eco-friendly but will equal or exceed current performance requirements. This is an example of a firm transforming their business model by creating new products for new markets based on new technologies and is discussed more fully in the section “Shift to the Bio-economy.”

Increasing environmental degradation Increasing use of natural resources (both renewable and non-renewable), combined with growing amounts of waste distributed on land, and in the air and water, is degrading many of the planetary ecosystems faster than they can be replenished (MEA, 2005a). The MEA, a global scientific evaluation of the world’s major ecosystems completed in 2005 after five years of intensive study, found that in the last half of the twentieth century: Humans have changed ecosystems more rapidly and extensively than in any comparable period of time in human history. This has resulted in a substantial and largely irreversible loss in the diversity of life on Earth. (MEA, 2005a: p. 1) The human impact on Earth is outpacing our capacity to regenerate it. To address these impacts will require technological innovations combined with consumption control, as well as conservation strategies to mitigate the effects of population growth and development. One way of looking at human beings’ impact on the global environment is by examining our increasing ecological footprint.7 The ecological footprint is a standardized measure of the amount of land and marine resources required for provisioning the human population, and assimilating their associated waste with minimal harm to ecosystems. Considering all the resources, renewable and non-renewable, used by humans as natural capital, like financial capital one can consider the existing resources as the principal and the increase in resources as interest. Much of this growth is due to the increase of renewable resources through management (e.g. forest plantations) or increased access to non-renewable resources due to technology (Wackernagel et al., 1999). The ecological footprint is a single measure of how much natural capital and interest we humans are using. Since the late 1960s, we have been using our natural capital (like the principal in your bank account) and not living off just the interest. According to the Global Footprint Network in 1970 humanity used a quantity of resources which did not degrade

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natural capital. By 2010 this increased to needing 1.5 Earths and given current trajectory this will increase to three Earths by 2050. Clearly, this is not sustainable over the long term and likely to have deep financial and environmental impacts. According to The Economist (2013), environmental degradation, resulting from China’s rapid growth, has resulted in a loss equivalent to 9 percent of GDP. This not only negatively affects economic growth but also exacerbates human health due to air pollution and reduced human nutrition because of reduced soil nutrients (The Economist 2013). Increasing environmental degradation: impacts on forests As resource demand increases, the pressure on forestland also increases. Nilsson (2011) identifies five forces that are increasing pressure on forestland just from the provisioning perspective. These are for forests to provide: Food – forest conversion to agricultural use (e.g. palm oil plantations in Malaysia and Indonesia); Fodder – management and use of forestland for grazing (e.g. cattle in Brazil); Fuel – both for bio-energy and increased subsistence use (e.g. in Africa 90 percent of harvests are for subsistence fuel use (FAO, 2011); Fiber – due to increased wood product production; and Feedstock – for production of bioproducts to replace those currently made from increasingly costly non-renewable materials (e.g. bioplastics, biochemicals and biomaterials) (adapted from Nilsson, 2011). There is pressure in all these five areas to increase the provisioning of services (as described in MEA, 2005a) from forestland globally. Many of these provisioning activities link with regulating services. For example, increasing demand of forestland for fuel production (provisioning) and the need for forests to increase their efficacy in regulating air quality as air pollution increases (regulatory service) provide similar pressures on forestland. A recent study found that “more than half the population in 71 countries live in regions with annual mean PM2.5 concentration in excess of the WHO guidelines of 10ug/m3 annual mean leads to particulate air pollution that threatens human health” (Hsu et al., 2014: p. 45). They recognize that improving household wood stoves for subsistence heating and cooking along with moving larger quantities of cleaner waste wood to energy plants can contribute to reducing air pollution in both developing and developed regions. This will not only reduce air pollution, but also can contribute to slowing the growth of Green House Gases (GHG) to help slow climate change. This is an example of how new layers of forest management objectives are added to an already complex and multifaceted management approach.8 Other regulatory measures provided by forests include water and erosion regulation, pest and disease regulation, water purification, biodiversity maintenance, species habitat protection and soil remediation. Many of China’s planted forests serve environmental regulatory purposes (FAO, 2010).

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Government regulations are being enacted to reduce the environmental impact of growing populations and consumption. Numerous national and global regulations are mandating policies to improve fuel efficiency in transportation that leads to increased use of lighter weight organic material (such as wood fibers) in composite products used in vehicle construction, increased use of bio-energy in the form of ethanol and more rigorous pollution control regulations such as those currently emerging in China. Other regulations that directly impact market access for wood products include the Lacey Act Revisions of 2008 in the US and the EU Forest Law Enforcement, Governance and Trade (FLEGT) Voluntary Partnership Agreements which seeks to prohibit the import of wood or wood products using illegal wood (Brack, 2009). See Box 2.2 for an example of how a European regulation for renewable energy is driving bio-energy development in North America.

Box 2.2 The rise of wood pellets The EU has set a target for each country to get 20 percent of its energy from renewable sources by 2020 leading many countries, especially the UK, to look to wood since this cannot be achieved from solar and wind alone (The Economist, 2013). According to Wood Markets (Palmer, 2014), global production of wood pellets has increased from 11 million tonnes in 2008 to over 22 million tonnes in 2012 driven by European imports resulting from European subsidies for renewable and carbon neutral wood energy. However, pressures are rising to reconsider this carbon neutral designation for wood energy that would have dire consequences for the production and export of wood pellets (Palmer, 2014; and Greenpeace, 2011). Roberts and Nikolakis address this more fully in Chapter 3.

One of the greatest impacts on forests of the increasing environmental degradation is the emerging recognition of the need to develop payment for environmental services as their value to humanity is increasing due to the major forces shaping forest and land use (for more information see chapter 15 by Sven Wunder, Harry Nelson and William Nikolakis). The management of forests to store carbon to control GHG and help reduce the intensity of climate change is the forest based environmental service closest to global recognition and economic value. One such program is REDD+, under development through the UN that seeks to fund reduced deforestation and degradation in high-risk regions which is a major contributor to global GHG emissions. The need to ensure that forests continue to store carbon and convert CO2 to oxygen is important to slow climate change. This creates a dilemma for forestland set aside from human activity. Changing climate

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with associated changes in temperature, sunlight and moisture regimes may endanger the forest health of existing stands requiring human intervention in protected areas to ensure long-term health and maintenance of critical environmental services. These services are also becoming critical for water management, as the concept of green infrastructure is increasingly important in water supply management in the growing number of regions facing long-term shortages (UN/FAO, 2012). Another response to increasing commodity prices and greater environmental degradation is the rapid growth in efforts to reduce, reuse and recycle all forms of materials and goods. The development and adoption of Engineered Wood Products (EWP) such as Wood I-joist provides good examples since reduced amounts of wood fiber make products that performs equally or better than solid wood or other material alternatives. The increasing use of building materials recovered from demolitions in new construction, often as featured architectural adornments, is a good example of reuse. The growth in paper recovery is a global recycling success and has increased on average almost 5 percent each year from 1961 to 2012 (FAOSTAT, n.d.) employing continuously improving technology to constantly increase the proportion of paper that can be recycled. All these have improved the material efficiency of products from wood fiber and contributed to keeping prices relatively low (see Figure 2.4). Ecological degradation is not only impacting forests but also firms operating in the forest. In interviews with 43 senior executives at 33 forest sector firms and 12 experts on forest sector transformation at the firm level in Northern Europe, Canada and the US, 95 percent of executives indicated their firm was involved in transformation but most considered they were less than halfway along the process. Global external factors were the main drivers of transformation according to most executives. Respondents had a wide range of descriptions of firm transformation ranging from incremental changes such as improving processing efficiency to more radical changes such as entering unfamiliar markets with completely different products than currently produced (e.g. bioproducts to the automotive industry as discussed in Box 2.1). Over 40 percent of executives indicated that transformation involved a change in the portfolio of products, processes and services to exploit evolving opportunities. One R&D manager stated “It’s like changing your business’s DNA … and changing focus from your traditional products…” Over a third indicated that transformation included a more radical change to their business by redefining the business model and adopting a new strategic direction.9 For some firms these changes could be seen as shifting from producing lumber, panels and pulp to producing lumber, bio-energy and bioproducts with the last three product groups well positioned to serve the emerging bio-economy. The next section synthesizes much of the information presented in this chapter to describe how the management of future forests will change.

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Future forests Forests cover 30 percent of the world’s land mass (FAO, 2010) and they will have to play an increasingly important role in reversing the environmental impacts of increasing populations, the growing middle class in developing countries and escalating resource scarcity. These forces will cause a global shift to a bio-economy, first noted in the introduction. The bio-economy will nurture the natural capital and rebalance humankind’s ecological footprint. This will require a new approach for forest management since humans’ expectations of what forests can provide will soon exceed the ability of the forest, as currently managed, to supply. Future forests will need to produce increasing quantities of wood products for sustainable buildings designed for disassembly and carbon sequestration in wood products also designed for reuse. Forests will have a major role to play in meeting growing demand for myriad environmental services from carbon sequestration to ensuring water quantity and quality with reduced use of chemicals, providing biological based medicines from the forest flora, and supplying feedstock for many cellulosic-based products and energy to replace diminishing and increasingly costly non-renewable materials and energy. As the growing middle class populations continue to urbanize, the social and spiritual value of forests will increase since research indicates improved emotional and health recovery in natural environments (Park et al., 2007). The challenge for the first half of this century is how to get more (products, services, etc.) from our limited forestland while reducing forestland conversion and enhancing its ecological functions. New types of research will need to explore how to accomplish this challenging task and successfully address the intensifying pressure on forestland. Few forests, natural or planted, will have only a single use be it conservation or industrial extractive management. Research will have to explore how to ensure ecological integrity while increasing both products and environmental or social services. This research will have to further the emerging systems of payment of environmental services, and determine the economic and policy parameters to encourage the substitution of non-renewable energy and materials with forest based renewable energy and materials. It will also have to address how to encourage forest resilience with changing climate and moisture regimes in a political environment that has little value for long-term solutions. It will take new forms of forest management to manage the growing needs for wood products, environmental services, cultural provisioning, bio-energy from forest waste and aesthetic and recreational needs. New types of plantations, urban forestry and management regimes will have to balance an increasing cacophony of demands from a limited land based in a finite ecosystem buffeted by the impacts of climate change, growing populations and demand for products and services. The chapters in this book should help initiate a discussion on how we can start our evolution to new forms of management where terms like resilience, adaptable, environmental services,

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bioproducts, forest values and human wellbeing become as common to forest management nomenclature as annual allowable cut, ecosystem management and legality of wood. Forests can be a Treasure Chest of solutions or a Pandora’s Box of single issues compounding our social, environmental and economic problems depending on changing management philosophies and actions.

Notes 1 Developing countries refers to those countries identified as Emerging Market and Developing Countries in the World Economic Outlook 2013 (IMF, 2013). 2 GDP is the total value of goods and services produced by a country in a given year. 3 Goldman Sachs (2010) defines middle class in developing countries as those earning between $6,000 and $30,000 annually while Kara (2010) defines middle class as having daily per capita spending from $10–$100 PPP. 4 A planted forest is one predominantly composed of trees established through planting and/or deliberate seeding (FAO, 2010: p. 212). The definition for plantations has evolved from 1980 (“Forest stands established artificially by afforestation on land which previously did not carry forest”) to 2000 (“Forest stands established by planting or/and seeding in the process of afforestation or reforestation. They are either of introduced species (all planted stands), or intensively managed stands of indigenous species, which meet all the following criteria: one or two species at planting, even age class, regular spacing”). From Table 2 at www.fao.org/docrep/007/ae347e/ae347e02.htm downloaded January 2014. The shift to the use of the term planted forest was to simplify an evolving and overly complex definition for plantations. 5 67.7 percent of Northern Europe exports, 59.6 percent of US exports and 55.8 per cent of Canadian exports by value in 2012. 6 Graphic papers have two components; newsprint and printing and writing papers based on the FAO product descriptions. 7 For more information on ecological footprints see the Global Footprint Network at www.footprintnetwork.org/en/index.php/GFN/page/basics_introduction/ (January 2014). 8 This reminds me of a quote from Fred Bunnell, a forest ecologist from UBC “Forestry is not rocket science; it is much more complicated than that.” 9 Drs. David Cohen and William Nikolakis conducted this research with interviews occurring between February and June 2013. A Webinar was held on December 12, 2013 to ensure rapid transfer of results to industry and the scientific community. Scientific publications are being prepared. The webinar is available at http://mediasitemob1. mediagroup.ubc.ca/Mediasite/Play/f4869f807e4840d1a602c9c1d43dcc641d.

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UN/ECE/FAO FPAMR. 2012. Forest Products Annual Market Review 2010–2011. Downloaded March 2013 from www.unece.org/fileadmin/DAM/publications/ timber/FPAMR_2010-2011_HQ.pdf. UN/FAO. 2012. Coping with Water Scarcity. An Action Framework for Agriculture and Food Security. FAO Water Reports 38. Downloaded November 2013 from www. zaragoza.es/contenidos/medioambiente/onu//newsletter12/880_eng.pdf. UN MDG. 2013. Millennium Development Goals Report 2013. Downloaded July 2013 from www.un.org/millenniumgoals/pdf/report-2013/mdg-report-2013-english.pdf. UN WPP (World Population Prospects). 2012. The 2012 Revision. Downloaded July 2013 from http://esa.un.org/unpd/wpp/Documentation/publications.htm. Viita, Kasper. 2014. Back to the future with wooden cars. Bloomberg Business Week February 10–16: 23. Wackernagel, M., L. Onisto, P. Bello, A. Linares and I. Falfan. 1999. National natural capital accounting with the ecological footprint concept. Ecological Economics, 29/3 (June): 375–390. Wilson, D., A. Kelston and S. Ahmed. 2010. Is this the BRICs decade? BICs Monthly Issue 10/03 (May 2010). Zweig, David and Bi Jianhai. 2005. China’s global hunt for energy. Foreign Affairs 84/5 (Sept.–Oct.): 25–38.

3

Thoughts on transforming the forest sector The potential (and reality) of the bio-economy Don Roberts and William Nikolakis

Introduction The world is changing, as David Cohen highlights in his chapter on the forces of globalization, a growing population, resource scarcity, pollution and climate change are creating a need for more sustainable production and consumption. Alongside these forces, forest product companies in temperate Europe and North America are seeing a decline in demand for graphic papers, and their competitive advantage in the production of Northern bleached softwood kraft (NBSK). Furthermore, improvements in paper making technology and advances in synthetic biology are eroding the market for NBSK pulp. Attention has increased on the potential for wood fiber being used as a feedstock in refitted pulp and paper assets to produce bioproducts, commonly referred to as the biorefinery model (Van Heiningen, 2006; Pu et al., 2008; Phillips et al., 2013; Näyhä and Pesonen, 2012; Trung and Leblon, 2011; Puddister et al., 2011; Palma et al., 2010; Hurmekoski and Hetemäki, 2013). These bioproducts could compete against non-renewable materials on their Green and Renewable credentials. While the bio-economy appears to be an obvious fit for forest product companies, competing in these new areas is not without its challenges for forest product firms. Given the structural changes in paper production, governments have stepped in to support research and development and the commercialization of bioproducts for forest businesses, particularly in Canada and Scandinavia, where the forest sector is an important regional economic driver (Nikolakis et  al., 2014; Natural Resources Canada, 2013; Koskinen, 2013; Skogs Industrierna, 2013). For example, the Canadian government invested $500 million over four years in an Investments in Forest Industry Transformation (IFIT) program to support innovative projects, typically in biopower and efficiency gains. Global investment on bio-energy between 2005 and 2013 was roughly $115 billion (USD) on biofuels, and $95 billion on biomass-based power. Figure 3.1 shows the trends in bio-energy investment between 2006 to third quarter 2013. The US and Brazil dominate investment in biofuels, largely for corn or sugar based ethanol production (the US representing over

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one-third of total spend), while the European Union (EU) and China lead in biomass (the EU represents about one third of total investment here) (Roberts, 2014). From 2005–2012, eight of the world’s largest oil companies, including Shell, Valero, Petrobras and BP, invested $9.4 billion to the biofuels sector; this peaked in 2011 at $3 billion (USD), then fell to ~$0.5 billion in 2012 (Roberts, 2014). Most of this activity was focused on first generation biofuels in Brazil using enzymatic hydrolysis-related technologies (a process used for the production of cellulosic ethanol). Wood fiber based biofuels and biomass has not received the attention of other feedstocks, but there has been activity in exploring its feasibility. Some forest firms have attempted to develop partnerships with oil companies, but thus far the results have generally been disappointing. For example, a partnership between Stora Enso and Neste Oil in Finland to produce biodiesel was shelved because of the significant investment required to commercialize the product. The Catchlight joint venture between Weyerhaeuser and Chevron also appears to be winding down as of early 2014. However, the forest companies which appear to have made the most progress in the bio-energy space are those like Finland’s UPM. While both have pursued partnerships, they have not been with the large oil companies. Trends in bio-energy investment Overall, there has been a decline in global bio-energy investment, from a peak of $28 billion in 2008, to roughly $10 billion/year in 2012 and 2013 (Roberts, 2014). Within overall bio-energy investments, the amount spent on biomass based energy production has become relatively more important

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since 2009. Like Nabuurs et al. highlight in their chapter, the EU expects to double its existing biomass capacity by 2020 to ~26 gigawatts (approximately ~$50 billion USD in investment), and China is now targeting to increase biomass power from 10,000m3/year

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Concluding thoughts Wood is probably the material that has contributed the most to human development throughout history. It has been used to build our houses, to heat them and to furnish them. It has provided the keels on which the explorers have crossed the seas to find new continents. It is the source of the raw material for paper, the carrier of education and knowledge around the world. However strange it may sound, with wood being a material used by mankind for so long, we believe there is a huge need for development of wooden products and the production of them. The reason is: we are seeing a combination of a growing middle class worldwide and a need for using renewable energy-efficient materials leading to a new magnitude of wood use and also new uses of wood for the future. We will need to use all the material we take from the forests a lot more efficiently. So, from our perspective, most still remains to be done in the wood sector to provide affordable, long lasting and sustainable products which simplifies life for many people. As wood is the most important raw material for IKEA, the future of the company is intrinsically linked to the long-term availability of wood raw material. We are therefore committed to contributing to healthy, growing and productive forests. These forests should not only fulfil the needs of future generations for wood based products, but also provide ecosystem services, harbor the natural biodiversity and perform social and recreational functions. Business cannot content itself with using and managing natural resources exclusively for the raw material. It has to contribute to safeguarding and improving all the values of the forests and move closer to true sustainability.

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Roots of recognition and contested claims Opportunities and challenges for pro-community forest tenure reform since 2002 Alexandre Corriveau-Bourque, Jenny Springer, Andy White, and D. Bryson Ogden

Introduction Few things are as political as the rights to the world’s remaining forest lands. Forests are viewed by a wide range of actors as a source of timber, fiber, food, fuel, medicine, carbon storage, biodiversity, spirituality, and as sites of cultural belonging. Vast mineral, gas, and oil resources are also found beneath the world’s forests. As many of the other chapters in this volume have noted, populations and global incomes are growing, resulting in additional pressures on the shrinking, yet increasingly important forest estate and the resources it contains. To understand the current contestation for these resources, it is important to understand the following questions: Who “owns” or “controls” these resources? How is this contestation manifesting itself? And what are some of the implications of this contestation on local peoples, governments, investors, and the forests themselves? Over the past decades, Indigenous Peoples and other forest communities have substantially increased their share of legal control and ownership over the world’s forests, and are mobilizing in new and more effective ways to assert and defend their rights. Many lands and resource rights claimed by these peoples remain unrecognized or are circumvented, but pressure is mounting on policy makers. Indigenous Peoples and local communities have been at the forefront of developing and using a number of tools to advance and defend their rights to their lands and resources over the past decade, including: the United Nations Declaration on the Rights of Indigenous People (UNDRIP); the mainstreaming of Free, Prior, and Informed Consent (FPIC); the development and wide adoption of the Voluntary Guidelines on the Responsible Governance of Tenure (VGGTs); the legal reforms catalyzed by processes such as REDD+ and the negotiation of Voluntary Partnership Agreements (VPA) between governments and the European Union to ensure compliance with Forest Law Enforcement, Governance, and Trade (FLEGT) regulations; and the opening of fora for the mediation of communities’ grievances against company abuses in the

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Forest Stewardship Council (FSC) and Roundtable on Sustainable Palm Oil (RSPO). National and international judicial systems have also increasingly become vehicles for Indigenous Peoples and local communities to challenge abuses and to establish legal benchmarks for recognizing their rights. With these increased legal rights and other tools, Indigenous Peoples and local communities are able to leverage unprecedented power and gain access to policy conversations about the future use, management, and preservation that had formerly excluded them. With these developments gaining momentum, the costs for governments and private sector investors of resisting or ignoring this groundswell of indigenous and community mobilization are rising. Furthermore, there is a growing base of evidence that demonstrates that local rights to land and forest resources are essential for the meaningful achievement of economic development, conservation, and climate change mitigation goals (Chhatre and Agrawal, 2009; Larson et al., 2010; Porter-Bolland et al., 2012; Nolte et al., 2013). The findings in this chapter are based mainly on research released in the 2014 Rights and Resources Initiative publication, What Future for Reform? Progress and Slowdown in Forest Tenure Reform since 2002. First, this chapter will present data on changes in the area of forest land under four statutory tenure categories from 2002 to 2013 in 40 countries,1 33 of which are low and middle income countries (LMICs).2 The 40 countries represent 82 percent of the global forest area and the 33 countries represent 85 percent of the forest area in LMICs. These results are further disaggregated between Africa, Asia, and Latin America to highlight important differences in the legal recognition of community rights, which has increased over the past decade. The report will then provide an overview of a broader set of literature on the importance for governments, investors, and conservation actors to respect and strengthen community rights. Understanding the trends and patterns pertaining to these questions over the past few years will allow us to better grasp the potential sites of conflict and collaboration in the coming years, and to identify policy objectives to ensure an equitable and sustainable future for forests and the people who live in and depend on them.

Forest tenure typology The 2002 report by White and Martin, Who Owns the World’s Forests?, presented a typology of four categories of statutory forest tenure rights and established a baseline for assessing changes in the extent of forest area in each of these categories over time. The report found that while governments retained legal ownership over more than three-quarters of the global forest estate, governments had been increasingly recognizing communities’ rights to forest land since the 1980s. Sunderlin et al. (2008) updated this analysis and found a continued transition from state ownership to forest ownership or control by Indigenous Peoples and local communities.

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The typology used for this analysis tracking change from 2002 to 2013 is based on the one used by White and Martin (2002) and Sunderlin et al. (2008), but has been slightly adapted to reflect new data and our ability to interpret it. The tenure categories for the analysis presented in this chapter are defined as follows: •

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Forest land administered by governments. This category includes all forest land that is legally claimed as exclusively belonging to the State. It includes areas where community rights are limited to basic access or withdrawal rights that can be legally extinguished with relative ease by the State. Forest land designated by governments for Indigenous Peoples and local communities. Some rights to forests under this category have been recognized by governments on a conditional basis for Indigenous Peoples and local communities. While rights-holders have some level of “control” exercised through management and/or exclusion rights over forests, they lack the full legal means to ensure the security of their claims to forests (i.e. having all three rights to exclude, to due process and compensation, and to retain rights for an unlimited duration).3 Forest land owned by Indigenous Peoples and local communities. Forests are considered to be “owned” where communities’ rights are legally defined as being unlimited in duration, where they have the legal right to exclude outsiders from using their resources, and they are entitled to due process and compensation in the face of potential extinguishment by the State of some or all of their rights. In this analysis, alienation rights are not considered to be essential for community ownership. Forest land owned by individuals and firms. In these areas, individuals and firms have full legal rights of ownership of forest land.

There are many other forms of tenure that are not easily captured within the above typology, among which are the rights to forest land acquired by individuals and corporations through long-term leases or concessions. This lacuna exists because individuals and firms may acquire time-bound rights to the forests under any one of these four categories. The true extent of these leases is not yet fully understood on a global scale (and particularly not for forest areas alone), nor is the extent of the overlap of these leases with different forms of community rights or individual and firm ownership. The consequences of these overlaps on community claimed, controlled, and owned land will be discussed later in this chapter.

Global forest tenure transition: 2002–2013 Figure 8.1 presents the aggregate findings on changes in the area of forest land from 2002 to 2013 in 40 countries, 33 of which are LMICs. Figure 8.1 reveals that it is apparent that governments still overwhelmingly claim control over forest land at the global scale. In four of the eight

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most-forested countries (by area),4 governments retain legal administrative control and ownership over at least 90 percent of their respective forest estates. The Russian Federation alone encompasses nearly 20 percent of the global forest estate and, by law, all of its forests remain “administered by government.” The Democratic Republic of the Congo also has 100 percent of its forests under government administration. Indonesia and Canada retain 96 percent and nearly 92 percent of their respective forests under government control. Together, these four countries contain over a third of the world’s forests and nearly 57 percent of the area under government administration. This means that the absence of large-scale tenure reforms in these countries presents major impediments to global progress in the recognition of local rights to forest land. Even in the absence of major shifts in four countries with sizable forest areas, the total forest area under the legal ownership or control of Indigenous Peoples and local communities increased from 383 Mha (just over 11 percent of global forest area) in 2002 to over 511 Mha (15.5 percent) in 2013. Over the same period, the proportion of the forests owned by individuals and firms increased less than 1 percent. By 2013, 31 countries out of the 40 had some form of recognition of community rights. Of these 31 countries, 27 recorded increases in the forest area under legal community ownership or control. Nine of these countries5 had not implemented any form of recognition of community rights to forest lands in 2002, meaning that some reforms were implemented for the first time during this period, though these reforms were overwhelmingly in the “designated for Indigenous Peoples and local communities” category. Therefore, most of the communities benefiting from these reforms in these countries still lacked the full ability to secure their rights.

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Figure 8.2 shows that during the period from 2002–2013 most of the global forest tenure transition towards legal community control and ownership took place in LMICs. In fact, almost all (97 percent) of the global change in the recognition of community rights over the 2002–2013 period took place in LMICs, with the bulk in Latin America. More specifically, from 2002, the total forest area under legal community ownership or control in LMICs rose from just over 353 Mha (just over 21 percent of forest area) to at least 478 Mha (30 percent) in 2013. This equates to an increase of at least 125 Mha of forests in which communities’ rights have been recognized. More than 62 percent of these 125 Mha are owned by communities.

A regional comparison of the forest tenure transition However, there is considerable regional variation in statutory recognition of forest land rights. As Figure 8.3 shows, the implementation of reforms in sub-Saharan Africa is lagging far behind those in Latin America and Asia, though closer inspection within the regions further nuances this observation. Forest tenure transition in sub-Saharan Africa Of the 12 countries with complete data for this region, five failed to recognize communities’ rights to forest lands.6 Of the remaining seven countries where community rights have been recognized, tenure reforms have affected less than 6 percent of each country’s forest area. Only Tanzania and the Gambia exceeded this proportion.

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Figure 8.3 Statutory recognition of forest tenure, by region

Overall, as of 2013, less than 6 percent of forests in sub-Saharan Africa are “designated for Indigenous Peoples and local communities” (see Figure 8.3). The implementation of Tanzania’s Village Land Act (1999) and Forest Act (2002) account for over 89 percent of this area. Furthermore, there is no recorded area under community “ownership” in Africa. This partly reflects a lack of data for the two countries – Mozambique

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and Liberia – that have enacted statutory frameworks recognizing community ownership of forest land,7 but could not be included within the set of countries due to the absence of reliable data.8 The forest area owned by communities in these countries may be substantial because these laws recognize the rights of communities regardless of whether or not formal titles exist; however, the extent of this area is not yet known. Nevertheless, even if the entire forest estate of these two countries is recognized under community ownership, there would still be very limited recognition of community rights in the region, due to limited implementation of legal reforms in the Congo Basin Region,9 where states retain legal administrative control over 99 percent of the region’s forest estate. Nearly 68 percent of the forests in sub-Saharan Africa are in the Congo Basin. However, the lack of legal recognition in any of these countries does not indicate that these lands are uncontested – quite the contrary – most are claimed by the communities that depend on these resources and directly manage them through customary tenure systems (Alden Wily, 2012). The weak enforcement of existing rights or absence of recognition of communities’ rights by governments is a profound source of economic and political insecurity for these communities and contributes heavily to their political marginalization and poverty, in addition to environmental degradation (Okereke and Dooley, 2010). While communities in these countries may not have recognized legal rights to control or own their lands, many hold rights through international norms, such as ILO 16910 or the more widely adopted UNDRIP, the VGGTs, or through national laws to consultation and/or compensation if existing customary claims are extinguished. Even such marginal rights are routinely ignored, with devastating consequences for communities and with potential effects on governments and the investors who conduct these abuses, consequences which will be explored later. Forest tenure transition in Asia Of the 12 countries with complete data in the Asia region, three countries recorded increases in the area owned by communities while nine recorded increases in the area recognized as “designated for Indigenous Peoples and local communities” between 2002 and 2013. By 2013, all 12 countries had implemented some form of community tenure regime; however, this implementation has affected less than 4 percent of the countries’ forests in seven of these countries. As of 2013, nearly 31 percent of the forests in Asia are under the ownership of Indigenous Peoples and local communities, and 6 percent are under community control (see Figure 8.3). However, 78 percent of the forests owned by Indigenous Peoples and local communities in Asia are found in China within rural collectives.11 If China is excluded from the set of countries, only 10 percent of the region’s forest land is under community

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ownership. Similarly, India represents nearly 82 percent of the regional share of forest land “designated for Indigenous Peoples and local communities.” At the same time, the size of China and India should not overshadow the extent of recognition in smaller countries such as Nepal, the Philippines, and Papua New Guinea, which have implemented recognized community rights to 32 percent, 39 percent, and 97 percent of their respective forest areas. Even though the recognition of rights in Papua New Guinea has been extensive, these reforms have not been complemented by improved governance, and therefore communities’ rights in the country remain under threat (Oakland Institute, 2013). Only a third of the countries in the Asia set of countries have implemented tenure reforms recognizing community ownership of forest land while ten out of the 12 countries have implemented tenure regimes recognizing more limited degrees of community control. In this latter set of countries, seven have implemented reforms recognizing community rights on 3 percent or less of the total forest area. This absence of recognition of Indigenous Peoples and local community rights is particularly stark in peninsular Southeast Asia, where states retain legal control over 99 percent of forest land. In archipelagic Southeast Asia, governments retain control over at least 73 percent of forest land, which is on par with the global recognition. However, the progress in the Philippines and Papua New Guinea obscures the lack of recognition of community rights in Indonesia, which remains at about 1 percent of the total forest area. Reliable data was not available for Malaysia. Large-scale forest tenure reforms in the countries of these two sub-regions would therefore be needed to shift the balance of government and community forest rights in Asia. As in sub-Saharan Africa, the large areas of forests under government administration in Asia are deeply contested. For instance, in Indonesia, of approximately one million hectares formally recognized to be under community control, most are “designated for communities” in the form of “village plantations.” However, the Indigenous Peoples’ Alliance of the Archipelago (AMAN) challenges this figure, estimating that, nationally, there are approximately 40 Mha of customary land in Adat villages with contiguous (forest and non-forest) natural resource areas.12 Forest tenure transition in Latin America Many Latin American countries have implemented large-scale forest tenure reforms recognizing the rights of Indigenous Peoples and local communities, and tenure reforms have been more widely distributed across countries than in other regions. In the period 2002–2013, eight of the nine country cases recorded increases in the area recognized under community rights, accounting for an 85 Mha total increase in the area under statutory community control or ownership. This represents nearly 66 percent of the global increase in area under community ownership or control from 2002 to 2013.

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In Latin America, communities now own nearly 33 percent of forests and legally control more than 6 percent of all forests (see Figure 8.3). In the seven countries that recognize community ownership, community-owned forests range from just over 10 percent to nearly 70 percent of their countries’ respective forest areas. Of the two countries in the set that only recognize community control, Guyana’s reforms recognize community control of nearly 17 percent of forests, while Suriname’s reforms cover less than 4 percent. However, even within areas formally titled to indigenous communities, there is often contestation with other land uses – especially when these community lands overlap with state-designated protected areas and oil and gas concessions. A study on extractive industries in Guatemala, Colombia, Panama, and Peru found that investments in all four countries contributed to community displacement, large-scale deforestation, and the destruction of local livelihoods (Flórez, 2013), driven by the government retaining legal control over subsoil resources, which undermines communities’ rights. To bring this tension into context, as of 2011, approximately 48 Mha of oil and gas concessions had been granted in the Peruvian Amazon, covering 61 percent of the forest. These concessions have been found to overlap with four territorial reserves, five communal reserves, and at least 70 percent of native communities – many of whom reject the presence of mining and oil companies (Espinoza and Feather, 2011). Furthermore, in January 2014, the Peruvian government announced the expansion of the Camisea gas project in the Peruvian Amazon, and three-quarters of the area under this concession is inside a territory that was established by the government for Indigenous Peoples living in voluntary isolation (REDD-Monitor, 2014).

Global overview of the forest tenure transition The scale at which this information is examined reveals varying trends – from a global perspective, the forest tenure transition is clearly taking place in LMICs. However, five countries – Bolivia, Brazil, China, Colombia, and Peru – account for the majority of the increase in forest area under indigenous and local community ownership recorded between 2002 and 2013. While not highly visible in global aggregates, some countries with smaller forest areas, such as the Philippines and Honduras, have also substantially increased the proportion of their forest land owned by Indigenous Peoples and local communities since 2002. Of the total forest area legally owned by Indigenous Peoples and local communities in 2013, 80 percent is found in only five countries. China and Brazil alone account for 55 percent of the global area, while Colombia, Mexico, and Papua New Guinea account for another 25 percent. Of the forests designated for use by Indigenous Peoples and other communities, 84 percent are found in Brazil, India, and Tanzania, with the bulk of the increase in this tenure category in the period 2002–2013 taking

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place in Brazil and India. Smaller countries, such as Guyana, Nepal, and The Gambia, have also substantially increased the proportion of their forest land designated for Indigenous Peoples and local communities since 2002.

A “slowdown” in the recognition of community rights However, further examination13 indicates that the growth in each of these two categories was higher in the period 2002–2008 than 2008–2013, suggesting a “slowdown” in terms of the recognition of rights on the ground. The slowdown was particularly noticeable in terms of the indigenous and local community ownership category, where the recorded increase from 2002–2008 was 66.8 Mha and the recorded increase from 2008–2013 was only 11.2 Mha. To a degree, some of this “slowdown” can be ascribed to the consolidation of reform processes among the large forested countries of Latin America, where most of the implementation took place. Many of these countries began their reform processes in the 1980s and 1990s. However, this does not mean that there aren’t remaining unrecognized claims in the countries that have recorded the most progress by area – for instance, in Brazil, which is one of the global “leaders” in recognition by sheer area, only 207 Quilombos communities have been issued titles to their lands since 1988, while more than 1,200 claims are pending (Carniero, 2014). In Peru, 71 percent of the country’s forest remains under government administration, much of which is claimed by communities. According to one estimate by Indigenous Peoples’ organizations, at least 20 Mha14 of additional land, much of it in the Peruvian Amazon, is claimed by Indigenous Peoples but remains unrecognized by the government (Espinoza and Feather, 2011: p.  8). The few outlying countries in the LMICs that recorded a greater increase in the ownership category during 2008–2013 were Honduras, India, and the Philippines. The “slowdown” in the recognition of forest land designated for Indigenous Peoples and local communities was less drastic than in the ownership tenure category. From 2002–2008, the recorded increase was 26.8 Mha while from 2008–2013, the recorded increase was 19.7 Mha. However, in this category, several countries recorded larger increases from 2008–2013 than in the earlier period. These countries include Guyana, Gabon, Honduras, Lao PDR, Nepal, Tanzania, and Vietnam. While the increase in some of these countries was incremental, they can hopefully serve as a platform to push for greater recognition, to strengthen the rights already recognized, and to increase the ability for communities to exercise those rights in law and practice.

Countervailing forces – what future for the recognition of rights? The apparent slowdown in the recognition of Indigenous Peoples’ and communities’ rights from 2008–2013 to forest coincides with a range of converging global processes and trends. On one hand, 2007 marked the

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adoption of UNDRIP by the United Nations General Assembly, as well as the adoption of several major decisions on REDD+ during the 13th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP 13), which was widely seen as the launching point of REDD+. These developments were widely expected to serve as catalysts for the broader recognition of local rights. In the context of REDD+, 27 of the 35 national REDD+ programs acknowledged insecure tenure rights as a driver of deforestation, and 31 identified the clarification of tenure as key to the implementation of REDD+ (Rights and Resources Initiative, 2012a). However, as these developments came online, the steady increase in commodity prices resulting from a building demand through the 2000s for biofuels, food, and other raw materials found and produced in forest areas was driving the expansion of industrial concessions – a category that was not captured in the forest tenure typology. The relatively limited share of forests owned by individuals and firms reflected in Figures 8.1, 8.2, and 8.3 therefore mask a major ongoing change in individual and corporate access to forest land and resources. In 2012, the International Land Coalition (ILC) identified up to 203 Mha in land acquisitions approved or under negotiation between 2000 and 2010, with the rate of acquisition increasing dramatically between 2005 and 2009 (Anseeuw et al., 2012: p. 4). Between October 1, 2008 and August 31, 2009 alone, Deininger and Byerlee (2011) identified 71 Mha allocated globally for large-scale land acquisitions. While these estimates are contested,15 their impacts on communities are undeniable when governments and companies do not engage “communities” – defined as more than individual power brokers or powerful segments of the society – as equal partners. Furthermore, the time-based limitation of these studies neglects that the large-scale transfer and acquisition of lands by companies is not a recent feature on the tenure landscape. Therefore the estimates do not truly capture the global footprint of concessionary agreements. One component of these investments is quite apparent – low and middle income forest countries are a major destination for these investments (Rights and Resources Initiative, 2013a,b, forthcoming) and the forest areas of these countries are extremely vulnerable to conversion for oil palm (ABN, 2007; Casson, 2003; Schoneveld et al., 2010; Venter et al., 2009), logging – in spite of moratoria (Greenpeace, 2012; Global Witness, 2013; Forest Trends and Rights and Resources Initiative, 2013), for oil and gas exploration (Flórez, 2013; Espinoza and Feather, 2011), amongst other uses. Governments are attempting to capitalize on the growing demand for natural resources by ceding the right to develop domestic natural resources to third parties in exchange for a stream of payments or other benefits. They have seen these concessions as a means to decrease dependence on aid, generate formal employment, and increase national incomes. However, in the rush to open their countries for investments, governments have

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repeatedly sidelined communities in negotiations – both those with legal rights to own and control their lands, and those who do not.

The impacts of contestation The body of literature on the impacts of large-scale land acquisitions that neglect local rights is extensive – and growing. These impacts range from the forcible eviction and destruction of homes (ABN, 2007; Schoneveld et  al., 2010), to the destruction of sacred sites (Afrol News, 2011; FOEI, 2013); the appropriation of lands and destruction of resources that are essential for local livelihoods (FOEI, 2013; Overbeek, 2010), and as a source for social and political conflict (Monachon and Gonda, 2011; Zander and Dürr, 2011). As Wunder et al. highlight in their chapter in this volume, weak rights limit the potential for payment for ecosystem services projects, which can support the regeneration and conservation of forests. The mechanisms through which individuals and communities resist these encroachments are also widely documented. Some common approaches include protests, complaints to local officials, and legal challenges, allying with NGOs to launch awareness campaigns, and/or the use of sabotage or violence – all tactics of which create delays and increase operational costs for the concessionaries. Communities and their civil society advocates are also beginning to use dispute-resolution mechanisms in productcertification bodies like the Roundtable on Sustainable Palm Oil (RSPO) and Forest Stewardship Council to challenge large multinational corporations, often from countries where the court systems often lack the capacity to effectively hear a case or can be corrupted by more powerful interests. And while the outcomes of these challenges are not legally binding, their outcomes can inflict substantial reputational costs on the corporation, as well as compel companies to re-examine their business practices, or lose valuable certifications. One area of study which is only beginning to be explored in the literature is the costs for investors who fail to conduct proper due diligence on the tenure implications of their investments – the costs that Indigenous Peoples and local communities can impose on corporations when their tenure rights are infringed. These are costs to which the private sector is beginning to awaken. A 2012 study by the Munden Project found that companies that neglect local rights – even those that are not necessarily recognized in law or formally delimited – can incur substantial costs, through operational delays, legal costs, counterparty and reputational risks. With sufficient mobilization, local opposition can threaten the viability of an investment, affect the credit-rating of the company, and even result in the financial collapse of the project or the withdrawal of support by the government or by primary investors. In the example of Stora Enso, one of the world’s largest pulp and paper companies, the firm’s land acquisitions practices in southern China resulted in local protests and violent conflict (Ping and

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Nielsen, 2010). Conflict between the company and local farmers was driven by the company’s failure to perform adequate due diligence of their acquisitions. The company relied heavily on local government and middlemen in the transactions, rather than directly negotiating with communities and fully ensuring the legality of their transactions. The 2010 study demonstrated that local landholders were neither properly consulted nor properly compensated, and in some cases were forcibly coerced into transferring their land. Following the backlash from these incidents, which resulted in major operational delays, increased costs, and reputational damage, Stora Enso implemented a moratorium on leasing any further collectively-owned lands, and has been reviewing their acquisition policies and working with civil society organizations in an attempt to rectify the tenure issues surrounding their investment and avoid future conflicts, though it appears that the company still has some steps to take to ensure that all their lands have been legally acquired (Ping and Xiaobei, 2014). In the oil palm sector, which is highly active in the world’s forest areas, Indigenous Peoples and local communities have increasingly begun to use fora such as the RSPO to confront companies for their land-rights based abuses. A preliminary review of the cases submitted to the Dispute Resolution Facility of the RSPO revealed that of the 40 cases received against palm oil growers and processors since the mechanism was put into place in 2009, 23 were explicitly based on community grievances, including violations or disputes over land rights, intimidation of community members during consultation, failures to fully implement FPIC, contamination of community lands or water as a result of the processes used on the plantations, and the use of violence against protesters (RSPO, 2014). The experience of the Malaysian firm Sime Darby, the world’s largest producer of certified palm oil, is a useful example of the dispute resolution function of industry roundtables. In 2009, the company signed a 63 year concession with the government of Liberia for 220,000 hectares of land on which to develop oil palm and rubber. However, in 2011, villagers complained that in beginning operations, Sime Darby had forced them off their customarily held lands, cleared forests, and destroyed wetlands that were essential to their local livelihoods (Rights and Resources Initiative, 2012b). With the assistance of civil society organizations, communities formally raised the issue with the RSPO, which resulted in suspension of company operations pending an agreement and bilateral discussions between the company and community members. The delays resulting from the dispute have hampered the company’s efforts to bring production to scale in the country. Nor is the mining sector immune to the costs of disruption resulting from tenure risk (Sosa, 2011). According to the UN Special Representative for Business and Human Rights, operational disruptions resulting from community protests can cost world-class mining operations between US$20–30 million a week (Business Ethics, 2011).

100 Corriveau-Bourque et al. The physical extent of “tenure risk” for investors who neglect the importance of recognizing local communities’ claims to the resources is not to be underestimated. One study to assess the overlap between existing industrial concessions and customarily claimed lands gathered geo-spatial data on lands claimed, or legally controlled or owned by Indigenous Peoples and local communities and forest, mineral, and agricultural concessions in 12 countries in South America, sub-Saharan Africa, and Southeast Asia (Munden Project, 2013). Of the 153.5 Mha of concessions examined, 31 percent overlapped with community-held lands in some way. Given the difficulties in accessing reliable data (on both concessions and community-claimed land), this figure very clearly underestimates the true extent of the overlap. Another study examined the activities of the energy and mining companies listed in the Russell 1000 Index and found that over 30 percent of current oil and gas production is currently sourced on or near Indigenous Peoples’ lands, which also account for nearly 50 percent of known oil and gas reserves (First Peoples Worldwide, 2013). The study found that over 40 percent of current mineral production is sourced on or near indigenous lands, as will be nearly 80 percent of known future projects. Furthermore, the study found that 92 percent of the sites included in the study posed a medium to high risk to shareholders. As the First Peoples Worldwide study demonstrates, the absence of clarity of tenure rights is not a problem that exclusively belongs to low and middle income countries. Many of the mining sites identified in the study as most vulnerable to contested tenure were in Canada. This finding is corroborated in a study by the Fraser Institute (2013) which revealed that disputed land claims with aboriginal communities and individuals had become a major factor deterring mining investment in British Columbia, Canada. Mining is not the only sector where contested tenure is an issue. In December 2013, the FSC also suspended some certifications from Canada’s largest forestry company, Resolute Forest Products, following a complaint by the Grand Council of the Crees that the company had not followed FPIC during their activities (Forest Stewardship Council, 2014). These findings make it increasingly apparent that government agencies and investors in land and forest resources will need to evolve beyond traditional models of extraction and exclusion, by developing more nuanced understandings of land and natural resource tenure, and develop mechanisms to equitably engage with the Indigenous Peoples and local communities living there. The failure to develop these mechanisms and tools will only lead to the continued destruction of the world’s remaining forest resources and the devastation of the lives of those whose livelihoods and identities depend on them.

The future of forest reform? As David Cohen’s chapter highlights, the world’s forests continue to recede at alarming rates, while the demands for forests and the resources they

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contain continue to rise. The world cannot afford to continue to ignore the essential question of who owns and controls these resources. The substantial amount of land in forest areas owned and controlled by Indigenous Peoples and local communities is a massive step forward in social and political history; it increases the chances for cultural survival and locally-determined development; justly positions these peoples and communities as key actors in local, national, and global forest management; and further highlights the need for their participation in the ongoing global discourse on conservation and climate mitigation efforts. However, this recognition remains only a partial step for the advancement of Indigenous Peoples’ and local communities’ rights. The lack of information on the true extent of indigenous and local community claims beyond what is currently recognized, the lack of protection for existing rights, and remaining vast extent of state ownership claims to forests are significant barriers that will continue to hamper the development of more inclusive and equitable mechanisms of engagement between communities and those who wish to invest in their resources or to ensure their conservation. How is the world to reduce pressure on forest areas (through new plantation models as proposed by de Fégely and Neves Silva in this volume, or through REDD+ schemes or VPA mechanisms) when some of the key drivers of deforestation – the lack of clear tenure rights, and tenure conflict – have not yet been addressed? Many cost-effective methods exist for better securing local tenure rights that combine formal survey, titling and registration activities, adjudication, strengthening of customary resource governance, and recognition of collective boundaries. However, in many countries now planning or engaged in land reforms, these methods and best practices are often not known or put into practice. Therefore, in the absence of this clear tenure information over much of the world’s forests, investors or natural resource policy makers must shed the notion that governments, middlemen, or individual leaders alone are reliable representatives of the interests and aspirations of Indigenous Peoples and local communities. It is clear that tenure conflict is a driver of deforestation, as well as a major driver of poverty, and as a source of risk for those seeking to use forest lands and resources – for conservation and/or for profit. Indigenous Peoples’ and local communities’ rights need to be the centerpiece of future local, national, and international policy debates and decisions about forest land and resources. While the findings of this study suggest a “slowdown” in the recognition of Indigenous Peoples’ and local communities’ rights on the ground, the fact is, these groups are becoming more powerful, through the global networking of their efforts and through the development of new tools to assert and defend their rights. This is good news for forests and all of us who depend on them.

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Notes 1 Countries in order of total forest area: Russian Federation, Brazil, Canada, United States, China, Democratic Republic of Congo, Australia, Indonesia, India, Peru, Mexico, Colombia, Angola, Bolivia, Zambia, Tanzania, Myanmar, Papua New Guinea, Japan, Central African Republic, Republic of the Congo, Finland, Gabon, Cameroon, Thailand, Lao People’s Democratic Republic, Guyana, Philippines, Suriname, Vietnam, Ethiopia, Cambodia, Honduras, Republic of Korea, Nepal, Kenya, Bhutan, Costa Rica, the Gambia and Togo. An additional 12 countries were listed in the report, but did not have complete data. 2 This study identifies low and middle income countries as those having a gross national income (GNI) per capita lower than US$12,616, as ranked by the World Bank. http:// data.worldbank.org/about/country-classifications (accessed 12 December 2013). 3 Each of these rights – management, exclusion, unlimited duration, and due process and compensation – are fully defined in Rights and Resources Initiative (2014). 4 In descending order by forest area: Russian Federation, Brazil, Canada, United States, China, Democratic Republic of the Congo, Australia, Indonesia. 5 These nine countries include Angola, Gabon, Cameroon, Thailand, Lao PDR, Guyana, Vietnam, Cambodia, and Honduras. 6 Most of these countries all have national-level legislation to recognize community rights, but have either failed to implement the tenure regimes, or the rights recognized within those regimes are insufficient to exert any meaningful legal control over their resources. 7 In Mozambican law, all lands belong to the State. However, the communities have sufficient legal rights to constitute “ownership” within the parameters of this study. 8 The Mozambican government reports the total demarcated and delimited community lands, however, under law, communities can enjoy ownership rights to their lands without demarcation – therefore, using official figures would greatly under-represent the total area legally under community ownership. 9 The Congo Basin countries represented within this study include: Angola, Cameroon, the Central African Republic, the Democratic Republic of the Congo, Gabon, and the Republic of the Congo. 10 The only country in sub-Saharan Africa to have ratified this is the Central African Republic. 11 Papua New Guinea accounts for much of the balance of forest lands owned by Indigenous Peoples and other communities in Asia, with nearly 18 percent of the total regional share in 2013. The Philippines and India are the only other two countries identified in the region with implemented tenure regimes that recognize community ownership of lands. 12 Mina Setra. The Indigenous Peoples’ Alliance of the Archipelagos. 2013. Personal communication. 13 LMIC only. 14 Some of this area may be non-forest area. 15 These estimates have been criticized due to the methodology used in compiling these data. The ILC has recently revised the total confirmed cases to cover over 35.6 Mha, with an additional 14.1 Mha as “intended” investments (Land Matrix data as accessed on February 10, 2014). However, a series of independent studies by RRI in Liberia, Cameroon, Lao PDR, Peru, and Myanmar used a methodology primarily based on assessing company financial reports and using government concessions data sets, and have been able to confirm a much higher level of investments than are currently reported for these countries by the ILC’s Land Matrix. Furthermore, these agreements are often negotiated in contexts of limited transparency, and several companies which are not publicly traded do not publish their financial statements, making it all the more difficult to assess

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the true extent of investments. These early estimates should therefore be viewed as effective illustrations of the scale of the issue over the past decade alone, but not necessarily as precise indicators.

References ABN. (2007). Agrofuels in Africa: The Impacts on Land, Food and Forest. Kenya: African Biodiversity Network. Afrol News. (2011). Ethiopian “Sacred Forests” sold to Indian Tea Producer. 18 February, 2011. http://afrol.com/articles/37365 Alden Wily, L. (2012). Customary Land Tenure in the Modern World, Rights to Resources in Crisis: Reviewing the Fate of Customary Tenure in Africa. Brief 1 of 5. Washington, DC: Rights and Resources Initiative. Anseeuw, W., L. Alden Wily, L. Cotula, and M. Taylor. (2012). Land Rights and the Rush for Land: Findings of the Global Commercial Pressures on Land Research Project. Rome: International Land Coalition. Business Ethics. (2011). Business and Human Rights: Interview with John Ruggie. 30 October, 2011. Accessed on May 17, 2013 at: http://business-ethics.com/ 2011/10/30/8127-un-principles-on-business-and-human-rights-interview-withjohn-ruggie/. Carniero, J. (2014). Brazilian former slave community fights for land. BBC Brazil. 7 January, 2014. Accessed on March 12, 2014 at: www.bbc.com/news/world-latinamerica-25622027. Casson, A. (2003). Oil Palm, Soybeans and Critical Habitat Loss. Hohlstrasse, Switzerland: World Wildlife Fund Forest Conversion Initiative. Chhatre, A. and A. Agrawal. (2009). Trade-offs and synergies between carbon storage and livelihood benefits from Forest Commons. PNAS 106 (42): 17667–17670. Deininger, K. and Byerlee, D. (2011). Rising Global Interest in Farmland: Can It Yield Sustainable and Equitable Benefits? Washington, DC: The World Bank. Espinoza L. R. and C. Feather. (2011). The Reality of REDD+ in Peru: Between Theory and Practice. Lima, Peru: Forest Peoples Programme (FPP), Central Ashaninka del Río Ene (CARE), Federación Nacional Nativa del Río Madre de Dios y sus Afluentes (FENAMAD) and Asociación Interétnica de Desarrollo de la Selva Peruana (AIDESEP). First Peoples Worldwide. (2013). Indigenous Rights Risk Report for the Extractive Industry (U.S.): Preliminary Findings. Fredericksburg, USA: First Peoples Worldwide. Flórez, M. (2013). Impacto de las Industrias Extractivas en los Derechos Colectivos sobre Territorios y Bosques de los Pueblos y las Comunidades. Rights and Resources Initiative, Asociación Ambiente y Sociedad. FOEI. (2013). Sime Darby and Land Grabs in Liberia. Amsterdam: Friends of the Earth International. Forest Stewardship Council. (2013). Suspension of Resolute FSC Certificates. December 13, 2013. Accessed March 2014. https://ic.fsc.org/newsroom.9.605.htm Forest Trends and Rights and Resources Initiative. (2013) Conversion Timber in FLEGT countries. (Unpublished). Fraser Institute. (2013). British Columbia’s Mining Performance: Improving BC’s Attractiveness to Mining Investment. Vancouver, Canada: Fraser Institute.

104 Corriveau-Bourque et al. Global Witness. (2013). Avoiding the Riptide: Liberia must enforce its forest laws to prevent a new wave of illegal and destructive logging contracts. London: Global Witness. Greenpeace. (2012). Up for Grabs: Millions of Hectares of Customary Land in PNG Stolen for Logging. Ultimo, Australia: Greenpeace. Larson, A. M., Corbera, E., Cronkleton, P., Van Dam, C., Bray, D., Estrada, M., May, P., Medina, G., Navarro, G., and Pacheco, P. (2010). Rights to forests and carbon under REDD+ initiatives in Latin America. CIFOR Infobrief 33: 1–8. Monachon, D. and Gonda, N. (2011). Liberalization of Ownership Versus Indigenous Territories in the North of Nicaragua: The Case of the Chorotegas. Washington, DC: International Land Coalition. Munden Project, The. (2012). The Financial Risks of Insecure Tenure: An Investment View. Washington DC: The Rights and Resources Initiative. ——. (2013). Global Capital, Local Concessions: A Data Driven Examination of Land Tenure Risk and Industrial Concessions in Emerging Market Economies. Washington DC: The Rights and Resources Initiative. Nolte, C., Agrawal, A., Silvius, K. M., and Soares-Filho, B. S. (2013). Governance regime and location influence avoided deforestation success of protected areas in the Brazilian Amazon. PNAS 110 (13): 4956–4961. Oakland Institute. (2013). On Our Land: Modern Land Grabs Reversing Independence in Papua New Guinea. Oakland, USA: Oakland Institute. Okereke, C. and K. Dooley. (2010). Principles of justice in proposals and policy approaches to avoided deforestation: towards a post-Kyoto climate agreement. Global Environmental Change, 20(1), 82–95. Overbeek, W. (2010). The Expansion of Tree Monocultures in Mozambique. Impacts on Local Peasant Communities in the Province of Niassa. Montevideo, Uruguay: World Rainforest Movement. Ping, L. and R. Nielsen. (2010). A Case Study on Large-Scale Forestland Acquisition in China: The Stora Enso Plantation Project in Hepu County, Guangxi, Province. Washington DC: Rights and Resources Initiative, and the Rural Development Institute. Ping, L. and W. Xiaobei. (2014). Forestland Acquisition by Stora Enso in Southern China: Status, Issues and Recommendations. Washington DC: Rights and Resources Initiative. Porter-Bolland, L., Ellis, E. A., Guariguata, M. R., Ruiz-Mallén, I., Negrete-Yankelevich, S., and Reyes-García, V. (2012). Community-managed protected areas: An assessment of their conservation effectiveness across the tropics. Forest Ecology and Management, 268: 6–17. REDD-Monitor. (2014). Peru Approves the Expansion of the Camisea Gas Project into Indigenous Peoples’ Reserve. Retrieved on March 11, 2014 from: www.redd-monitor. org/2014/01/30/peru-approves-the-expansion-of-the-camisea-gas-project-intoindigenous-peoples-reserve/. Rights and Resources Initiative. (2012a). Internal Assessment of National R-PP and R-PIN Documents. Washington DC: Rights and Resources Initiative (unpublished). ——. (2012b). Turning Point: What Future for Forest Peoples and Resources in the Emerging World Order? Washington DC: Rights and Resources Initiative. ——. (2013a). Investments into the Agribusiness, Extractive, and Infrastructure Sectors of Liberia, An Overview. Washington DC: Rights and Resources Initiative. ——. (2013b). Investments into the Agribusiness, Extractive, and Infrastructure Sectors of Cameroon, An Overview. Washington DC: Rights and Resources Initiative.

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——. (2014). What Future for Reform? Progress and Slowdown in Forest Tenure Reform since 2002. Washington DC: Rights and Resources Initiative. ——. (forthcoming). Investments into the Agribusiness, Extractive, and Infrastructure Sectors of Peru, Lao PDR, and Myanmar. Washington DC: Rights and Resources Initiative. RSPO. (2014). Status of Complaint. Accessed February 26, 2014 at: www.rspo.org/en/ status_of_complaint/1. Schoneveld, G. C., German, L., Andrade, R., Chin, M., Caroko, W., and RomeroHernández, O. (2010). The Role of National Governance Systems in Biofuel Development: A Comparative Analysis of Lessons Learned. Bogor, Indonesia: Center for International Forestry Research. Sosa, I. (2011). License to Operate: Indigenous Relations and Free, Prior and Informed Consent in the Mining Industry. Amsterdam: Sustainalytics. Sunderlin, W. D., Dewi, S., Puntodewo, A., Müller, D., Angelsen, A., and Epprecht, M. (2008). Why forests are important for global poverty alleviation: a spatial explanation. Ecology & Society, 13(2): 24 (online version). Venter, O., Meijaard, E., Possingham, H., Dennis, R., Sheil, D., Wich, S., Hovani, L. and Wilson, K. (2009). Carbon payments as a safeguard for threatened tropical mammals. Conservation Letters, 2, 123–129. White, A. and Martin, A. (2002). Who Owns the World’s Forests? Washington, DC: Forest Trends. Zander, M. and Dürr, J. (2011). Dynamics in Land Tenure, Local Power and the Peasant Economy: The Case of Petén, Guatemala. Paper presented at the International Conference on Global Land Grabbing, 6–8 April. Organized by the Land Deals Politics Initiative.

9

Future directions for plantations Investment options and product markets Rob de Fégely

Introduction The future direction of plantations is complex – even the definition of a plantation is not straightforward. In the past the development of large monoculture plantations was quite easy. It was often initiated and funded by governments to create new sources of wood supply for industries that needed scale and to supplement declining supplies from natural forests. Land was often freely available, or natural forests were cleared to provide the area. Environmental controls were often relatively simple. Communities were generally supportive of the environmental and economic costs associated with resource development and benefited from the immediate employment and looked forward to future opportunities. Research and development concentrated on wood production to support the processing industry. The future will be different. Developing new plantations on the scale we have seen in the past will be a challenge. Governments are generally no longer interested in funding plantation development for timber production. Land is harder to find and if available it is invariably expensive. Communities expect more from plantations than just wood fiber and are increasingly uneasy about the establishment of exotic monocultures, preferring endemics or mixed species plantings. Commercial pressure to keep log prices low reduces the attractiveness of new plantation investment. While there are strong economic, environmental and social reasons to develop new plantations they will be different from the past. Objectives such as landscape repair, integration of biodiversity objectives through corridors and restoration of natural forests, protection of water catchments and integration with agriculture are already requirements in some jurisdictions. Certification schemes designed to monitor impacts will become more widespread. Attracting investors and convincing communities of the benefits of plantations will require more than the traditional supply of wood products or the economic and social benefits of resource development. Plantation investment options will need additional products that add environmental value such as carbon sequestration and biodiversity credits

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or that provide broader community benefits such as water quality or recreation. In addition, research and market creation will be required to increase the economic return from products such as biomass or more sophisticated lignin and cellulosic based products such as biofuels, bioplastics, alcohol and pharmaceutical products. Future plantations will be complex structures and will require sophisticated management systems to ensure they are managed cost efficiently and to meet the return expectations of both investors and the community.

Plantations Plantations can cover a spectrum of planting designs ranging from a noticeable planting of exotic species that contrast with the surrounding landscape to the planting of endemic species that quickly blend in with their surroundings. The concept of reforestation of land with plantations of trees is not new. For example, in Germany reforestation dates back to the 1700s where substantial clearing for agriculture and settlement since the Middle Ages and the exploitive harvesting of trees for the smelting of ore had significantly reduced the forest area requiring the replanting of trees for both land rehabilitation and production (German Forest Service, 2014). The definition of a plantation is also not straightforward as the following quote from the Food and Agriculture Organization (FAO) explains. Planted forests are generally defined according to the extent of human intervention in the forest’s establishment and/or management, which depends, to a large extent, on the purpose of growing the forest. In many instances, because there is an extensive range of silvicultural practices applied in varying levels of forest management to achieve different objectives, the difference between a semi-natural forest and planted forests is essentially arbitrary – it is in the eye of the classifier. (FAO, 2000) The FAO adds that there is a need to recognize semi-natural forests which are neither strictly natural forests with minimal management nor planted forests with intensive management. Good examples of this can be found in Australia where the Karri forest (Eucalyptus diversicola) in Western Australia is replanted with seedlings following harvesting and the Ash forests in the central highlands of Victoria are re-established by aerial seeding, however, both are classified in the national estate as natural forests. However, these forests could, in the eyes of some, be considered plantations or at best semi-natural forests. These semi-natural forests provide important wood and non-wood forest products and have important social, cultural, environmental and economic values (FAO, 2000). Therefore a continuum exists between natural and planted forest that is defined by the extent of human intervention. Plantations in the initial stages of this chapter are

108 de Fégely defined as planted forests of single species, mostly exotic and single age class that are intensively managed for timber production. Historically, the development of large areas of monoculture plantations were often initiated and/or funded by governments. Research and development was focused on wood production to support the future processing industry. There are numerous examples where large-scale development of plantations was supported directly by government funding and they can be found in Australia, New Zealand, China, South Africa, Chile, Vietnam and Brazil. The future will be different, particularly in developed countries and hopefully also in developing countries to prevent a repeat of the mistakes of the past. Establishing new plantations on the scale we have seen in the past will be a challenge. Governments are no longer showing interest in directly funding plantation development. On the contrary, they are selling their public resources to private owners, particularly pension funds. The trend in Australia and New Zealand has been towards privatization rather than direct funding support. Large contiguous blocks of land with suitable climate, soils and topographic features are harder to find especially in developed countries. Where land is available the land in suitable climatic areas is invariably expensive and access may be challenged by local communities. Communities expect more from plantations than just wood fiber and are increasingly uneasy about the establishment of monocultures, preferring endemic and/or mixed native species. This chapter describes some key trends driving changes in the plantation development model in Australia with some key references in other jurisdictions.

The old plantation development model As mentioned earlier there is nothing new about plantation forestry – European countries have been involved in their development for centuries. As the supply of wood products from natural forests was depleted, governments and wood processing companies investigated developing supplementary or even wholly alternative supplies from planted forests. The plantation model generally pursued was based on large-scale plantings of monocultures (single species) with the single focus of supplying wood for processing into industrial products such as sawn timber, panels, or pulp and paper. Examples of exotic monocultures include the Radiata Pine plantations in Australia, New Zealand, South Africa and Chile, Sitka Spruce in the United Kingdom, Acacia species in Indonesia and Eucalyptus species in Brazil. From an economic perspective these investments have been a success, providing a fast growing fiber source for processing facilities. However, the environmental and social impact has been challenged as these plantations often came at the cost of the loss of natural forest and some disruption to rural communities.

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The role of governments The development of plantations was invariably initiated by governments, either funding the plantations directly through government owned forest agencies or stimulating the private sector to plant by providing incentives, such as a grant or a significant tax deduction (Enters and Durst, 2004). In Australia for example, expanding the softwood plantation estate was identified as a national goal in the early 1960s to address the significant cost of imports and meet the demand for a growing population and economy (Carron, 1985). This goal was largely achieved by government funding to publicly owned forest agencies. Some private plantation development did occur but it is generally accepted in Australia, even today, that the private sector needs some government incentive to encourage them to take on the agricultural risk associated with growing plantations (FWPA, 2011). Historically, plantations were generally established on either marginal agricultural land, or on land recently cleared of natural forest. Land was selected for two primary reasons, natural forest was relatively or apparently uninhabited and possibly to a degree marginal or depauperate (although this was often open to challenge), and marginal agricultural land was generally cheap to purchase. Governments would select these sites on the basis they could develop plantations of significant scale that would be an incentive to industry to build wood processing facilities without displacing either agriculture or dislocating communities. In addition, the natural forest may provide some merchantable product that could be used to pay for the subsequent development of the plantation. In most cases the initial unrestricted exploitation of the natural forests and the sale of logs at prices below the cost of replacement did not set the correct economic base to make an investment in plantations attractive. Frequently, large processing companies were granted concessions to areas of natural forest provided they developed a significant processing facility that would provide local employment. In many cases some or all of the natural forest was subsequently cleared for the development of plantations, such as occurred in parts of Australia, Indonesia and Malaysia.

Political influence The continued involvement of government agencies in resource development and management has been criticized due to their vulnerability to political influence. The lobbying of government ministers by processing companies and/or industry associations to keep log prices low has meant that the opportunity to attract private investors to develop new plantations is limited. This left governments to undertake the bulk of the new plantation development which was the case for softwood in Australia.

110 de Fégely Unfortunately governments did not always get it right and developed plantations where industry either did not come, or only came on the basis that the government provided the wood to industry at a significant discount, often far below the cost of production. Effectively, in some instances it was a “Field of Dreams” where all the government believed it had to do was get the forest established and industry would automatically appear. It did not always work out this way and where this has occurred not only has the social licence of plantations suffered along with the unfulfilled promise to rural communities of decentralized industry and employment, but any discounting of log prices to attract industry has affected the market as a whole and reduced the attractiveness of establishing new plantations. The many benefits of government initiated plantation development have been potentially weakened by political interference that has ultimately discouraged the private sector from taking over the plantation development role.

Incentives for private sector plantation development Governments all over the world have provided numerous incentives such as grants and generous tax deductions to encourage the private sector to establish plantations. However, these mechanisms have not necessarily achieved satisfactory outcomes. For instance, in Australia managed investment schemes (MIS) were popular amongst retail investors in the late 1990s and early 2000s and were based on a lump sum tax deduction for the investor. These schemes, commonly referred to as MIS, were the major contributors of Australia developing a hardwood plantation estate of nearly one million hectares in the space of a decade. The rapid pace of development of these MIS plantations caused considerable disquiet in rural communities as some traditional farming areas were transformed, and communities suffered a decline in population. Unfortunately the tax deduction, and possibly the ready availability of credit to the MIS companies prior to the global financial crisis rather than the plantation investment per se, appeared to be the major attraction for investors. As a result the majority of the companies promoting MIS have, since 2009, gone into receivership and are now in the process of liquidation or have been liquidated. Tax incentives have been shown to be more effective than most schemes at getting trees planted but they are blunt as the plantations are often poorly established and located (de Fégely, 1989). In the case of government incentive schemes, the lesson from the review by Enters and Durst (2004), suggests that there are no “silver bullet” incentives or support scheme that fits all countries or regions. Rather, policy makers must carefully target the right incentives or other support instruments to deliver sustained outcomes.

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What changed the old model? Change to this old plantation development model was inevitable, as the voice of protest over clearing natural forest for plantations from environmental non-government organizations (ENGOs) grew, and the social impact of large-scale land use change raised community concern. In addition, the pressure on government forest owners to discount log prices brought strong economic questioning of why governments should own or even invest in new plantations. However, despite these pressures the demand for regional development and associated industry demand to expand the plantation estate to improve the competitiveness of industrial processing remained (Nelson and Nikolakis, 2012). As the plantation resources expanded under the old model, land became more expensive and with a shift away from clearing natural forests to purchasing and establishing cleared agricultural land, there was increasing resistance from government treasuries about the financial cost, as well as rural communities concerned about significant land use change and social dislocation of farming families. Depending on whether land is sold or leased, research by Schirmer (2009) in the Australian state of Tasmania suggests that there is a net loss of between 7 percent and 19 percent of the people living on farms after it is sold to a plantation entity and 75 percent of the former residences shift away from the district altogether. Although Schirmer adds that within two years new residents appear in approximately 80 percent of the cases. While the return of new residents assists total population numbers of a farming district the old fabric of the community and connections is disrupted. Simply, the new people are not the same! Dislocation of communities in developing countries has also been a problem as Alexandre Corriveau-Bourque et al. explain in their chapter on the future for forest tenure reform. Hence, the opportunity to develop significant areas of land for contiguous development of monoculture plantations will be increasingly rare in the future.

Certification The economic, social and environmental factors that are driving change from the old plantation model will create a more complex model for plantation development in the future. The advent and implementation of forest certification systems such as those developed by the Forest Stewardship Council (FSC) and the Programme for the Endorsement of Forest Certification (PEFC) will, through a process of continual audit and monitoring of plantations, ensure environmental and social impacts are not ignored. Their global presence in the marketplace will limit the sales options for plantations developed under the old plantation model. While

112 de Fégely FSC and PEFC are different they both have the goal of sustainable forest management. FSC has ten guiding principles and PEFC seven and there are differences in how each is assessed and each scheme has their sectors of support. Ideally, certification should take forest managers from a position of unconsciously non-compliant where they are totally unaware of what they should be doing to achieve sustainable forest management, to be unconsciously compliant where managers instinctively manage their plantations in accordance to the requirements of sustainable forest management. A lot will have been achieved if certification can be gained for all forest managers around the world. Developing countries are still vulnerable to the development of plantations under the old model and without good environmental controls and decent social and local community acceptance. However, increasingly these developers will struggle to sell their products in developed markets. Certification will bring balance in terms of social, environmental and economic forces. Certification will continue to ensure that natural forest and adjoining habitat and biodiversity are not destroyed in the process of developing plantations.

Future directions for plantations – a new model Therefore, the great challenge is how will new plantations be developed and can they be profitable? There are essentially three reasons for developing new plantations (FWPA, 2011): 1 2 3

Development of the supply of renewable resources to meet demand. To maintain a stable and economic regional wood processing industry. Reforestation of degraded landscapes.

Globally, supply will always equal demand. As David Cohen highlights in his chapter on the global drivers of forest and forest product use, the four main drivers of wood demand are increasing population, economic growth, environmental regulation and technological development. With these drivers putting pressure on forest resources and the need for renewable products, coupled with a continuing desire to conserve natural forests, the likelihood is that increasingly wood will be sourced from planted forests.

The economics of new plantation development The return on investment of purchasing cleared agricultural land and developing a long-term 35 year plantation is low. A clear indicator of this lack of new investment is in Australia, where the total area of the softwood plantation estate has not increased significantly for the last 20 years (more or less since the large-scale government funded plantation program ceased).

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While the development of new plantations has stalled there is an active market for existing plantations. The publicly owned plantations and some privately held in the Australian states of Queensland, Victoria, South Australia and Tasmania have all been sold to Timber Investment Management Organisations (TIMOs) over the last decade and a half. New Zealand privatized the majority of its publicly owned plantations in the early 1990s. While the softwood industry in Australia and New Zealand is generally vibrant and there is little excess wood in Australia the log prices are not enticing the development of new plantings in either country. Work undertaken for Forest and Wood Products Australia in 2011 suggested that an investment in land and the development of an average 35 year rotation softwood plantation would make a real internal rate of return on investment of 4.6 percent before tax. Subsequent research by the CIE (2013) found that without a price on carbon, the Internal Rate of Return (IRR) (after tax)1 for a long rotation plantation is around 3.8 percent for softwood (such as Radiata pine) and around 2.6 percent for hardwood species. Plantation profitability is driven primarily by log price (a function of the mill gate price, harvesting cost and transport distance) and productivity (growth rate) followed by land price and establishment costs and then annual maintenance costs. To gain an acceptable real rate of investment return of 7 percent (FWPA, 2011) requires a significant increase of nearly 50 percent in both the average log price and productivity in terms of mean annual increment. However, if the land is leased and carbon credits can be sold at the price of $20 (AUD) per tonne of CO2 equivalent, then the required increase in log prices and growth rate reduced to around 20 percent to achieve a 7 percent return before tax (FWPA, 2011). What this suggests is that new plantations must deliver a suite of goods and services that are justly rewarded for the same to deliver a better return. Improving the log price is every forest manager’s objective, but for it to be sustainable there needs to be a corresponding increase in value of the end products to maintain industry viability. Forestry is an old industry and it is not surprising that the margins at most stages of the supply chain are relatively low, which means a significant increase in price at one point in the chain can cause a detrimental cost impact somewhere else unless there is some flow on through the chain.

Market trends Increasing the capacity to pay for logs by enhancing the value of traditional wood products such as sawn timber to cross-laminated timber panels are showing exciting potential for both utilizing a wider spectrum of sawn timber grades as well as transforming construction methods particularly high rise residential apartments. As Roberts and Nikolakis highlight in their chapter, the emerging bio-economy, including biocomposites, new biopolymers and the more familiar biofuels such as ethanol, and biomass in

114 de Fégely the form of wood pellets are all showing some promise to improve utilization of harvested wood. But apart from wood pellets, most of these products need more research before they can be utilized commercially. Encouragingly the airline Virgin Australia is undertaking research into wood based biofuel as a replacement for petroleum based fuel (White, 2011). While promising, the costs to commercialize these products at the moment is largely prohibitive but with time and more research they could easily become the mainstream products from plantations. Future plantations will be complex structures and they will require sophisticated management systems to ensure they are managed cost efficiently and to meet the return expectations of both investors and the community, but as Luis Neves Silva points out in his chapter on New Generation Plantations, a plantation platform which balances and enhances economic, social and environmental outcomes can support goals such as no net forest loss and mitigating climate change. The great challenge is to achieve these environmental and social goals in an economically profitable way and relying solely on the sale of traditional wood products such as sawn timber to fund these goals is unrealistic and if this remains the case then future plantation investment is unlikely to occur. Achieving these non-traditional wood benefits will raise the question of how wood is priced. It has to be considered more than a commodity product where its price is often historically related to the initial exploitation of natural forests where the cost of growing was not the major component of the log price. In addition, the price of wood from the retail and consumer level back down to the forest should reward wood for its environmental credentials of recyclability, sustainability, biodegradability, carbon positive etc. It should not be price competing with non-renewable commodities such as steel and aluminum. It will require a change in mind set, to price wood not only for its traditional commercial value but also for what it achieves in terms of environmental and social benefits. Government, rather than trying to develop a plantation development incentive mechanism, could concentrate on how the non-wood values are priced. The CIE (2013) suggest that the most important target for policy and industry strategies is to capture the value of ecological services provided by plantations. They suggest that government is in a unique position to correct market failures as it is the principal (potential) customer of the environmental services provided by trees and plantations. Carbon contributes significantly to the improvement of long rotation plantation viability and considerable research has been undertaken globally on how to measure carbon sequestration in various forest types (The CIE, 2013). Even with a carbon price, other incentives may be necessary to stimulate investment in long rotation plantations. In particular, the viability of long rotation hardwood species will require improvements in prices to grow high quality species, investment in research and development, and/or other market and non-market values.

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The greatest incentive for any business is to make a profit and while there are many investors for existing plantations there are few who want to take the risk of developing new plantations without some assistance in the form of either a grant or tax incentive. Discounted cashflow (DCF) techniques are considered the normal method for assessing the profitability of new plantation projects; however, they are not the normal method for many of wood’s competitors. For instance, discounted cashflow techniques are not used to value non-renewables such as coal used in steel making. That is DCF is not used to derive the price of coal based on the timeframe it takes to develop from peat or other forms of carbon. They are priced more on the price of extraction plus some assessment of the capacity to pay a royalty. Therefore, a challenge for the plantation and forest industry in general is to understand if the Faustmann formula is helping the development of renewable materials like wood or hindering it.

Where to plant? New plantations in developed countries are most likely to occur around existing plantation industry clusters, which is where there are currently large plantation estates supplying a mix of processors that utilize both pulpwood and sawlogs and the ensuing residues. The benefit of establishing new plantations around these industry clusters is that the new plantations can be marginally costed against the existing estate. Industry is also more likely to contribute in some form to these plantations as increasing volumes will improve their cost competitiveness. In this instance plantations could be a mix of the old and new model, large plantings on cleared but marginal agricultural land where the farmers have confidence that a sound market exists. Secondly, there is an opportunity for greater integration with agriculture where livestock can benefit from tree planting through additional shade and shelter. Research by Bird (2000) suggests that farmers can plant at least 10 percent of their farm land without any loss of agricultural productivity. In many cases agricultural productivity is enhanced. As an example, ten row shelterbelts have been successfully established in Australia and the returns from commercial timber harvesting have been equal to or superior to the existing livestock operation (Stewart, 2009). This form of plantation development has a number of advantages as it avoids any land use displacement and has a low social impact. It also removes the requirement for capital to purchase the land and the required return on investment for farmers may not be as high as commercial plantation investors due to the multiple benefits the plantation brings to the farming operation.

Reforestation of degraded landscapes Plantations may also be developed to ameliorate degraded landscapes. Australia has significant areas of land affected by dryland salinity, currently

116 de Fégely 2.5 million hectares which could expand to 15 million hectares by 2050 with a business as usual approach (Nambiar et al., 2000). New Zealand has significant areas of eroded hillsides which can be stabilized with deep rooting plants. In both instances tree planting can be part of the solution. A difficultly of these sites is that they may not be close to existing industry, or the sites are so poor or marginal that growing a productive and cost efficient commercial plantation is impossible. Here the role of payment for ecosystem services, like that discussed in the chapter by Brand and Singh, as well as Wunder et al., show that developing appropriate institutional arrangements is a first step to encouraging the growth of markets to support these remediation programs. Potentially this would achieve economic and ecological outcomes simultaneously (Nambiar and Ferguson, 2005). The Sloping Land Conversion Program in China is another example which was the largest land retirement program in the developing world, having the goal of converting 14.67 million hectares of cropland to forests by 2010, principally designed to prevent two to four million tonnes of soil erosion from entering the Yellow and Yangtze Rivers (Bennett and Xu, 2014) Future plantations will be required to not only provide a cost competitive supply of industrial and fuel-wood as demand increases, but they will also be required to provide other services such as carbon sequestration, repairing exploited landscapes and assisting in biodiversity conservation.

A challenge for multiple objective plantations Commercial plantations of endemic species or mixed native species will have a challenge unencountered by exotic species and that is that they are likely to be attractive to local wildlife. The significant expansion of Blue Gum (Eucalyptus globulus) plantations in south-west Victoria in Australia have provided a very suitable habitat for Koalas (Phascolarctos cinereus) and their numbers have expanded significantly creating a challenge for the commercial harvesting of these plantations. If these plantation owners were able to receive income for the environmental benefit of creating koala habitat which is limited in this region, they would be able to consider how to manage the plantations to maximize returns by optimizing the management of koala habitat and timber, leading to better economic and ecological outcomes. Simply focusing on timber values is unlikely to generate the sufficient returns to achieve the multiple objectives if there are trade-offs involved. Once social and environmental requirements are met, plantation profitability is dependent on performance, which for plantations includes good genetics, optimized silviculture and estate management, maximizing value during harvest and haulage to industry nearby that can value add the wood to markets with the highest capacity to pay. It becomes a package of values that needs a different value proposition than the old plantation model which concentrated on wood production at the expense of many

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environmental and social values. If these values cannot be monetized in some form then the development of plantations is likely to remain low.

Conclusion Plantation forests grown on long rotations for solid wood products require investors with long time horizons and low threshold rates of return. Historically, these investors have been governments. The old model of plantation development involving strong government support for either clearing vast tracts of natural forest or establishing on cleared land is unlikely to continue in developed countries but some developing countries remain vulnerable. Governments in developed countries have shifted away from direct involvement in plantation development and are privatizing publicly owned plantations. Support for plantation development is generally indirect, in the form of sympathetic industry wide investment policies, such as open markets for labor, energy and trade and investment in research. The competition for land for food production combined with community concerns about large-scale land use change that accompanies large-scale plantation development will drive the development of more complex plantation development models. These models involve multiple products, services and outcomes. The outcomes from plantations will need to be more than just wood production and include environmental benefits such as landscape repair, water quality benefits, habitat for native wildlife or farm livestock, community recreation or carbon sequestration. Industry will need to adjust to develop efficient management and harvesting methods for smaller, less contiguous, areas of plantation that have multiple products. The irony of the drive to increase the social and environmental attributes of plantations is that they may very well resemble natural forest management!

Note 1 Income flows are subject to the standard company tax rate of 30 percent while all non-land expenses are treated as tax deductible (assuming the company has income to offset expenses).

References Bennett, M. and Xu, J. (2014) China’s Sloping Land Conversion Program: Institutional Innovation or Business as Usual? Workshop on “Payments for Environmental Services (PES) – Methods and Design in Developing and Developed Countries.” CIFOR, Bogor, Indonesia. Bird, P.R. (2000) Farm Forestry in Southern Australia: A Focus on Clearwood Production of Specialty Timbers. Victorian Department of Natural Resources and Environment, Melbourne, Austalia. Carron, L.T. (1985) A History of Forestry in Australia. ANU Press, Canberra.

118 de Fégely de Fégely, R. (1989) Incentives for the Private Investment in Plantations. Dissertation as part of Master of Science (Forest Business Management), Aberdeen University, Scotland, United Kingdom. Enters, T. and Durst, P. (2004) What Does It Take? The Role of Incentives in Forest Plantation Development in Asia and the Pacific. Asia Pacific Forestry Commission, FAO RAP Publication 2004/07. FAO (2000) The Global Outlook for Future Wood Supply from Forest Plantations by C. Brown. Working Paper GFPOS/WP/03, Forest Policy & Planning Division. FAO, Rome, Italy. FWPA (2011) Review of Policies and Investment Models to Support Continued Plantation Investment in Australia. Project No: PRA189-1011, FWPA, Canberra. German Forest Service (2014) The History of German Forestry. Retrieved on March 4, at www. forstwirtschaft-in-deutschland.de/discover-our-forests/historical-development/?L=1. Supported by the German Federal Ministry of Agriculture, Food and Consumer Protection. Nambiar, S. and Ferguson, I. (2005) New Forests, Wood Production and Environmental Services. CSIRO Publishing, Collingwood, Victoria, Australia. Nambiar, S., Cromer, R. and Brown, A. (2000) Restoring Tree Cover in the Murray Darling Basin. CSIRO Forestry and Forest Products, Canberra, Australia. Nelson, H. and Nikolakis, W. (2012) How does corporatization improve performance? Lessons from the restructuring of state owned forest agencies in Australia. International Public Management Journal, 15(3): 364–391. Schirmer, J. (2009) Technical Report 199. Socio-economic Impacts of the Plantation Industry on Rural Communities in Tasmania. CRC for Forestry, Hobart, Tasmania. Stewart, H. (2009) Socio Economic Dimensions of Planted Forests in Changing Landscapes. Presentation for Doctorate of Philosophy Charles Sturt University Institute for Land, Water and Society, 11 November. The CIE and Myoora Investments Pty Ltd (CIE) (2013) Policy Options and Strategies for Renewed Plantation Investment. Report for Forest and Wood Products, Australia. White, D. (2011) Virgin Australia – Sustainable Aviation Fuel Program. Presentation to Forest Industry Engineering Association, Future Forestry Finance Conference Sydney, March.

10 New Generation Plantations What future role towards sustainability? Luis Neves Silva

Introduction Forests are home to the vast majority of land-based species. Some 1.6 billion people depend on them for their livelihoods, while all of us rely on the services they provide, like storing carbon and supplying clean water. Ending deforestation and forest degradation is an urgent priority – yet forests are coming under ever-increasing pressure. As population and incomes grow, maintaining near zero forest loss will require forestry and farming practices that produce more with less land, water and pollution, and new consumption patterns that meet the needs of the poor, while eliminating waste and over-consumption by the affluent. Even with more frugal use and greater efficiencies, net demand for food, energy and fiber is likely to grow. WWF projects that maintaining near zero loss of natural forests after 2020, without significant reductions in consumption, would require up to 250 million hectares of new tree plantations by 2050 (Living Forests Report, WWF 2012a), from which 91 million will be of industrial fast-growing forest plantations (Indufor, 2014), nearly doubling the amount of plantations today. Plantations use less land to produce a given volume of fiber than logging natural forests. They can also have positive environmental and social impacts if the New Generation Plantations (NGP) (see the newgenerationplantations. org) concept is applied. NGP aspires to an ideal form of plantation that maintains ecosystem integrity, protects high conservation values and is developed through effective stakeholder participation, while contributing to inclusive economic growth. The platform participants share a vision, where well-managed plantations, particularly used to restore currently degraded land and ecosystems, will play an increasingly important role in multifunctional landscapes contributing towards sustainable development goals (UN, 2000). NGP is a learning and influencing platform led by WWF, and set up with the private sector and government agencies to promote dialogue and co-construct sustainable solutions for plantation management. The platform advocates better plantation practices in key regions by learning from participants’ real-world experiences, showing and sharing practical

120 Neves Silva examples of better plantation management and the environmental, social and economic benefits. The NGP platform also leverages the engagement with local communities and stakeholders in meaningful processes which goes beyond consultation into processes of empowering communities to achieve their aspirations. For WWF, NGP provides opportunities for dialogue, insights and understanding, and leverage with policy makers and the private sector to advocate environmentally sound, socially responsible and economically viable land-use planning and management practices. This will help to avoid the risks and optimize the full potential value of plantations in meeting the world’s food, energy and fiber needs sustainably.

The importance of plantations in the future WWF’s Living Forests Report is part of an ongoing conversation with stakeholders, policy makers and business about how to protect, conserve, sustainably use and govern the world’s forests in the twenty-first century (WWF, 2012a). For decades we have known that the world’s forests are in trouble. We have made progress in curbing runaway deforestation, but we are still out of balance, gobbling up more forests than the planet can sustain. Problems of this magnitude require bold solutions where the public and private sectors unite for a common goal. The Living Forests Report tells us that, right now, the world has enough productive forest and land available for agriculture to provide essential food, materials and energy without further conversion of forests. But that won’t be the case past 2030, when global population – projected to pass nine billion by 2050 – and rising consumption become serious factors in resource allocation (WWF, 2011). Between now and 2020, there is a window of opportunity to make huge progress toward ending deforestation by addressing poor governance and associated unsustainable forest clearing and logging. In the next decade, we could reduce the loss of natural or semi-natural forest from 13 million hectares a year to near zero (FAO, 2010a). Like that canvassed in the earlier chapters by Brack, as well as Lister and Dauvergne, and Corriveau-Bourque et al., much of today’s forest loss and degradation is a symptom of poor governance – inadequate land-use plans, unenforced laws, corruption, flawed land tenure systems and markets that accept the products of unsustainable forestry and agriculture. With better governance and an associated shift to sound forest stewardship and more productive use of arable land and pasture, the world could produce enough food and wood to meet current global demand (WWF, 2012b). By 2050, forest resources will be under even greater pressure, as we source food, energy, timber and paper for an expected global population of over nine billion people. Strategies to save forests in the face of these pressures

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will need to focus both on increasing supply (e.g., promoting farming and forestry practices that are sustainable, yet produce more per hectare) and moderating demand (e.g., policies to eliminate waste and over-consumption of food and energy). As Cohen describes in chapter 2, the global demand for food, energy and materials will escalate in coming decades: maintaining near zero loss of natural forests after 2020 without significant reductions in consumption will require measures that improve governance, mobilize small and medium growers into production chains and ensure social inclusiveness and environmental sustainability in land-based sectors. Yet current rates of establishment of new forest plantations are inadequate to meet this demand. Tree plantations made up only 7 percent of total forest cover in 2006, but provided 50 percent of industrial roundwood. A growing proportion can be described as intensively managed plantations, with a rotation of 5 to 25 years. These supply around 40 percent of plantation wood and their area has increased by 2 percent per year since 2000, mostly in Asia, Oceania and South America (FAO, 2010b). They yield far more wood per hectare than natural forests, with the highest yields achieved close to the equator. Improvements in landscape planning and planting techniques could boost productivity even more. Uncertainties remain, however, about the long-term impacts of tree plantations. To realize the productivity benefits of plantations with positive rather than negative social and environmental impacts, further expansion of tree plantations should be focused on degraded land, while maintaining or restoring natural ecosystems in the surrounding landscape, safeguarding the rights and livelihoods of indigenous peoples and local communities, and promoting greater benefit sharing (Rights and Resources, 2012).

Box 10.1 Conserving the Atlantic rainforest In 1993, less than 7 percent of the original Atlantic rainforest (Mata Atlântica) remained. During the 1960s and 1970s, logging of valuable tree species and the subsequent clearing of the land for cattle grazing rapidly destroyed the area’s forests. In southern Bahia the landscape was dominated by pasture lands converted from the Atlantic rainforest. As the land had been so heavily modified and degraded, in many areas the original vegetation could no longer regenerate naturally. Veracel has set aside around half its land (more than 100,000 hectares) for conservation as part of a mosaic landscape approach that combines eucalyptus plantations with restoration of native Atlantic rainforest. Research and monitoring is a continuous process to understand the long-term impact of the mosaic landscape approach and Atlantic rainforest restoration.

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The New Generation Plantations platform Since plantations use less land to produce a given production of food or fiber than harvesting natural ecosystems, well-planned and well-managed plantations can help maintain the most valuable ecosystems while contributing to economic development and employment. Unfortunately bad plantation practices are still happening in some regions. These are rightly criticized by civil society, including WWF. There are also differing ideological standpoints related to the risks and benefits of plantations that require intensive debate. The New Generation Plantations (NGP) platform brings together WWF, plantations related companies and government agencies to co-develop sustainable solutions for plantation management. Learning, dialogue and insights allow us to better understand and advocate environmentally sound, socially responsible and economically viable planning and management practices. This will help to avoid the risks and optimize the full potential value of plantations (NGP, 2013). High-yield plantations could supply large volumes of food, fiber and biomass for energy. This will help maintain near zero loss of natural forests – assuming plantations are expanded without conversion of natural forests, critical shrub or grasslands with high conservation value. WWF leads the NGP platform to identify and promote better plantation practices, strong policies and legal controls. NGP helps to define sound management around carbon storage and maintenance of water, biodiversity and soils. The NGP concept is aspirational, suggesting plantations can achieve positive environmental and social impacts through continuous improvement. It is based on premises of transparency and cooperation across sectors of society through mutual learning and co-construction of solutions. NGP aspires to an ideal form of plantations that contribute positively to communities and ecosystems, by sharing knowledge and experience.

Box 10.2 NGP concept An ideal form of plantation that maintains ecosystem integrity, protects high conservation values and is developed through effective stakeholder participation, while contributing to economic growth and employment.

The NGP platform is rooted in the field experience of its participants, and advocates better plantation practices in key regions by learning from real-world examples, showing in situ and sharing practical case studies of better plantation management. Also, the theories of social learning resonated deeply within NGP. These clarified, gave reason to and supported our recognition that the social change required for improved plantations

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management depends – at least partly – on learning. Not just any learning, but meaningful, transformative and change-orientated learning: this should be a valuable social process that combines a diversity of opinions, beliefs and ways of doing things and co-constructs solutions to shared problems. Through these realizations and developing a basic understanding of social learning, NGP has evolved into a learning and dialogue platform that may support participants to work with stakeholders in more meaningful ways. With NGP, WWF aspires to obtain consensus among leading public and private sector stakeholders that forest plantations should contribute positively to the welfare of local communities and should not replace natural forests or other ecosystems with high conservation value.

Insights for researchers and policy makers Social forestry The forest sector is frequently criticized by civil society. It needs to find novel ways to improve dialogue and involve society in decision-making processes, for a better understanding of the sector’s benefits and importance for the future, and to obtain the social mandate to operate. Innovation on multi-stakeholder decision-making processes, involving civil society, governments, science and business can deliver important stepping stones towards long-term, stable solutions. In a world of growing population, demand and land competition, conflicts will increase and entrench. Multi-stakeholder decision-making solutions will be critically needed. Social forestry is about all stakeholders participating – from the initial planning through to the sharing of the benefits. “Stakeholder involvement” is one of NGP’s four key principles. It means that we need to do more than just carry out consultation exercises and minimize negative impacts – we should be looking at ways to empower communities to achieve their aspirations, considering communities as an equal partner in moving the sector forward at a meaningful scale. Many of the social problems in plantations landscapes are symptoms of a deeper malaise of poor governance, such as injustice, poverty and unemployment, food insecurity, lack of education, and land tenure systems under stress. NGP need to focus more on how to tackle these issues. One principle is to include communities in plantation design, providing an opening for people to register land titles and gain legal recognition for their customary rights to natural resources (ITTO, 2007). Plantation forestry companies make large (in scale and value), long-term investments into areas. The nature of these large commercial investments is such that they require long-term security of tenure. This view has probably pushed the plantation forestry sector to seek deals that offer as close to full land ownership rights as possible. This often reduces tenure security for others in the short term and possibly for themselves in the long term. In

124 Neves Silva doing so, the sector is missing out on opportunities to make investments that create more resilient local economies and increase shared value or benefits. There is relatively strong evidence that clarity of tenure is beneficial to rights holders, for-profit organizations and governments alike, and that it supports economic development (Elson, 2012). At one of the NGP Social learning sessions, Keith Barney, a Rights and Resources member from the Australian National University, gave examples from Laos of two plantation companies that discovered this the hard way. Both acquired large concessions from the government, but found that local community land tenure systems greatly limited the area available for planting. Oji-LPFL from Japan was able to access only 28,000 hectares out of a target of 75,000 hectares, while the Indian Aditya-Birla Group seems to have reached its “social limits” after planting around 15,000 hectares of a planned 50,000 hectare pulpwood development. In contrast, Keith gave the example of a pulpwood project, also in Laos, run by NGP participant Stora Enso. The development was established through a participatory land-use planning process, and aims to benefit communities in a number of ways – for example, through spacing rows of trees so crops can be grown in between. Although challenges remain, Stora Enso has so far avoided the social unrest that has dogged other projects. Also in South Africa, where land tenure is comparatively clear compared to other countries, at Kranskop, clarified land tenure following a land settlement agreement has opened the way for partnerships and benefit-sharing approaches between Mondi and Siyathokosa and Eyethu community trusts. At SiyaQhubeka, in contrast, unresolved land claims are straining relationships with some groups within neighbouring communities, undermining hard-earned gains, and even posing risks to the safety of staff and plantations. Clarifying land tenure requires bringing together rights holders, for-profit organizations, non-profit organizations and government. This necessitates a government that has willingness and capacity to engage in such a process. It also requires good governance, which is almost more important than the land tenure system or clarity of property rights to tenure security. Property rights alone have little impact on land tenure security without additional conditions of good governance and an effective enabling environment (such as trustworthy land administration, honest and fair enforcement and judicial services, access to finance, affordable access to legal services or macro-economic stability) (Elson, 2012; Garvelink, 2012).

Box 10.3 From land claims to business development Almost half of the land Mondi owns in South Africa (some 125,061 hectares) is claimed by local communities. These land claims stem from a complex legacy of state-led afforestation and forced removals of indigenous peoples, initiated back in 1913. In 1994, the South African government passed the Restitution of Land Act, which gives people

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the right to claim back their land. Restitution takes the form of restoration of land, alternative land where it is not feasible to restore land and financial compensation, or a combination of the three. As a major landowner, Mondi has faced 82 such claims. The company is committed to playing a positive role in meeting land reform targets for the country and the forestry industry. The company has developed a highly successful model for engaging and settling with land claimant communities, and assists them to develop sustainable forestry enterprises. This means communities derive an income from their land, while Mondi retains its wood supply. Mondi has signed an agreement with the government stating that all claims on Mondi land will be settled before the end of the 2014 financial year. Under the agreement, Mondi will work as a strategic partner with its claimant beneficiaries.

Recent years have also brought a shift in the center of the debate, from “forests” to “forests and people.” A challenge today is to find, and explain, the place of forestry in meeting people’s needs, and in sharing the benefits with the people who are sharing their land. Responsible investors take social risks very seriously. Social issues around plantations have a material impact, making companies need to carefully identify and assess all potential social (and environmental) risks to avoid unnecessary surprises, and put in place measures to avoid, minimize and mitigate possible problems. In many remote and rural places, forestry companies may represent the most capacitated organization and entity that that community/area is likely to encounter. This presents a challenge and an opportunity. Forestry companies should recognize the important role they play and the responsibility they have. They need to find ways of working smartly with partners, development agencies, government and local communities to catalyse and enable development. On the whole, private sector investments in plantation forestry follow the conventional “resource-led” paradigm, in which capital seeks natural resources and, as a side-effect, needs some labor. But this often fails to build business partnerships, or create any shared value. A rights-based system could provide a better alternative. Under a rights-based process, local control is of central importance. It recognizes local people’s autonomy and their rights to determine the land’s destiny, and to gain income from its effective management (Elson, 2012). Either of these can have profit as a core objective. The reality for investors is that there are always going to be people in the landscapes in which they operate. In many places, supporting local economies will have long-term benefits for investors too.

126 Neves Silva Land use Human use has already transformed about half of Earth’s land surface. Growing population and demand requires forestry and farming practices that produce more with less land and water. Although desirable, it is often not possible to achieve all ecological, social and economic values, because of incompatibility of interests. So building processes to deal with the inevitable trade-offs is of critical importance. Land-use decision-making is a negotiation process to find a solution between various interests, having all stakeholders participating from the initial planning through to the sharing of the benefits. NGP understands “stakeholder engagement” as a process of empowering communities to achieve their aspirations. The challenge is to build processes which lead to free, prior and informed choices on land-use trade-offs. The work NGP participants are doing, and the skills and knowledge and closer relationships with local communities that they’re acquiring in the process, offer great opportunities for conservation, society and the companies themselves. These include making the leap from local- to landscape-scale planning, making the case for better land use to government and society, motivating others to get involved by building on multistakeholder initiatives that are already under way in certain areas, and tapping into government priorities and funding. The landscape – ecological and socio-economic – is the broader context within which plantation forestry operates. A landscape approach should be a core part of a plantation forestry company’s risk management and of its broader socio-economic relevance. The reality is, however, that sustainability and development challenges need to be addressed within a wider framework of better land-use planning and decision-making. This requires good governance, which is unfortunately often lacking. All of this could influence social, ecological and governance elements of the landscape. This should facilitate integrated planning of more diverse landscapes capable of maintaining a higher degree of ecosystem integrity and supporting more varied job or livelihood opportunities. Maintaining ecosystem integrity and avoiding environmental degradation are naturally elements of the landscape approach. The general perception by those in the forestry sector is that the environmental issues of plantation forestry are largely known and that there are well-developed tools to deal with them. This does not mean that environmental issues are any less important, or require less attention, but that with the tools available for assessing, avoiding, mitigating, and offsetting environmental impacts, there should be little reason for plantation forestry to be an agent of ecosystem degradation. Through precise forestry planning, responsible operators establish plantations in degraded areas, and restore and/or conserve intact areas of ecological sensitivity/integrity or high conservation value.

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Box 10.4 The sustainable forest mosaics initiative Throughout the world, an area of tropical rainforest equal to half the size of Florida is being lost each year. As many as 13 million hectares of forest lands, including six million hectares of primary forest, were lost each year between 2000 and 2005, with South America suffering the worst losses. Forestry industry representatives and environmental organizations in Brazil’s Atlantic rainforest are promoting a new model of rural production and conservation on a landscape scale. The sustainable forest mosaics concept is a response to the complex challenge of producing much needed wood fiber while protecting ecosystems, natural resources and community livelihoods. The mosaic concept aims to fit together different land uses – such as plantations, agriculture and nature reserves – in a way that meets economic and social needs while maintaining ecosystem services and biodiversity. The initiative takes a science-based landscape approach, seeking to guarantee results in an area large enough to benefit a range of species and ecosystems.

Start-up and medium-sized plantation forestry companies are unlikely to use these tools, as they absorb the time and additional cost of expertise to apply them. But the business case for investing upfront in appropriate assessments and utilizing available tools should be clear from the lessons learnt in South Africa, where plantation forestry is more expansive and private companies have had to bear the cost of retro-actively addressing environmental issues of plantation forestry. So, while plantation forestry can be a major driver of ecosystem change, we also know that plantation forestry is not the only driver in landscapes. There are often multiple drivers, with social causes such as unsustainable natural resource use and livelihood strategies, which seriously undermine ecosystem functioning. A major driver of deforestation in Africa is charcoal production. Although there are other places in Africa where plantation forestry might be in grassland areas, it more typically takes place in forested or woodland areas where deforestation is a major problem.

Box 10.5 Sustainable charcoal to protect Virunga National Park Virunga National Park, established in 1925, is one of the most remarkable places on the planet. It has the greatest variety of wildlife found anywhere in Africa, with more than 200 species of mammals including elephants, chimpanzees and gorillas.

128 Neves Silva But in the last two decades, the park has come under huge pressure. The Rwandan genocide in 1994 and the civil wars that have raged across the region since 1996 brought an influx of refugees and widespread migration from rural areas to urban centers. The growing population has meant a massive rise in demand for wood fuel – which accounts for more than 91 percent of energy consumption in DRC, as access to electricity is very limited. Outside the park, the area is almost completely deforested. In 2007 WWF set up a large-scale reforestation project, called Ecomakala, in order to prevent further loss and degradation of forests within the park. In alignment with NGP principles, the project has brought social, environmental and economic benefits to the area. Plantation forestry offers an alternative, sustainable source of supply for charcoal production in a manner that takes pressure off remaining natural forests in Africa. WWF’s Ecomakala project supports people living in the surroundings of the Virunga National Park, to plant trees in woodlots, providing a sustainable source of energy.

Key “take-aways” from the New Generation Plantations platform Social change required for improved plantations management depends on transformative and change-orientated learning. NGP has evolved into a learning and dialogue platform that support participants to work with stakeholders, sharing knowledge and practical examples of better plantation management. Plantations are only an asset to society if associated with environmentally sound, socially responsible and economically viable forest management, and land-use decision-making. This means plantations increasingly need to demonstrate to society and investors their benefits. The NGP platform shows how existing tools and standards can help plantations contribute positively to communities and ecosystems.

References Elson, D. (2012). Guide to Investing in Locally Controlled Forestry. London, UK: Growing Forest Partnerships in association with FAO, IIED, IUCN, The Forests Dialogue and the World Bank. FAO (2010a). Global Forest Resources Assessment 2010: Main Report. FAO Forestry Paper 163, FAO, Rome ——. (2010b). Global Forest Resource Assessment 2010, Key Findings. Retrieved on March 15, 2014 from: http://foris.fao.org/static/data/fra2010/KeyFindings-en.pdf. Garvelink, W. (2012). Land Tenure, Property Rights, and Rural Economic Development in Africa. Retrieved October 7, 2012 from Center for Strategic and International Studies: http://csis.org/print/35319.

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Indufor (2014). Strategic Review on the Future of Forest Plantations. Forest Stewardship Council, Bonn. International Tropical Timber Organization (ITTO) (2007). Community-based Forest Enterprises. Their Status and Potential in Tropical Countries. October 2007. ITTO, Yokohama, Japan. New Generation Plantations platform (2013). New Generations Platform. Retrieved on March 12, 2014 from: http://newgenerationplantations.com. Rights and Resources (2012). Respecting Rights, Delivering Development: Forest Tenure reform since Rio 1992. May 2012, Rights and Resources Initiative, Washington D.C. United Nations (2000). Millennium Declaration. Retrieved on March 8, 2014 from: www.un.org/en/ga/search/view_doc.asp?symbol=A/RES/55/2. WWF (2011). Living Forests Report. Chapter 1. Forests for a living planet. WWF, Gland, Switzerland. ——. (2012a). Living Forests Report. Chapter 4. Forests and wood products. WWF, Gland, Switzerland. ——. (2012b). Living Planet Report 2012. WWF, Gland, Switzerland.

11 Commercialization of forestry genetic research From promise to practice Mike May and Stanley Hirsch

Introduction: R&D, landscapes and mosaics. New frameworks for considering tree improvement To prevent natural resources from becoming binding constraints for development, the world economy must be better reconciled within the finite global ecosystem. With limited scope for sustainable throughput of resources, ensuring wellbeing within planetary boundaries will require enhanced resource use efficiency, and an increasing emphasis on international cooperation. To achieve this, a large-scale transition to a low-carbon, green economy and this will require fundamental changes in patterns of consumption and production, such as described by David Cohen in his chapter. In the absence of realistic strategies to reduce consumption, conserving today’s resources for tomorrow means that sustainability must be built on productivity intensification. The social, economic and environmental dimensions of forests and forestry will permeate every aspect of this transformation – from driving new energy solutions and providing for rural development, to mitigating climate change and safe guarding the ecosystem services on which future generations will depend. In practical terms this will require step changes in productivity and process efficiency and an expansion of the quality, scope and scale of products and services derived from forests. Scientific and technological innovations for improving forest genetics have the potential to contribute significantly to forest productivity intensification and product diversity (Fenning and Gershenzon, 2002). Over the last 40 years, the ways in which the Brazilian planted forestry model has evolved to tackle productivity challenges provide many valuable examples of how research on genetic improvement of trees can achieve multiple economic, environmental and social gains. The model also serves as a basis for considering future diversification of forest products and services – the bio-economy – and how aspects of resilience, and adaptation to future environmental shocks and stresses can be built into plans for the future. This experience also provides a wealth of knowledge and lessons learned on how communities and consumers need to be involved in the

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debate on the development and deployment of new technological advances. Far more ambitious implications for this model can be envisaged if one considers how the dimensions of forests and forestry permeate almost every aspect of the future Post-2015 Development Agenda. In the world of 2050, if the overarching objective is to achieve wellbeing within planetary boundaries, the concept of landscapes and mosaics of interacting land-uses is emerging as a target model that strikes an optimum balance for natural resource use efficiency between environmental and developmental aspirations (Havlík et al., 2011). Within this, is a place for sustainably managed plantations and a responsible private sector functioning within healthy, productive and resilient landscapes so that commercial pressure is taken off forests without displacing it elsewhere. If this model is to be established, a critical step is to establish a sound framework for dialogue on the development and deployment of advances in tree genetics. In this chapter, we explore how forest genetic research could contribute to this global challenge, drawing on examples, particularly from the experiences of FuturaGene-Suzano (www.futuragene.com) in the development of yieldenhanced Eucalyptus in Brazil. We also consider how advances in science would be needed to shape a forest biomass-based bio-economy. We then turn to the fundamental priority of how international cooperation, multistakeholder dialogue and appropriate governance frameworks will be needed to guide research priorities in the right directions, to address societal concerns over new technologies, and to ensure that the flow of innovations reaches those who need them the most. Our conclusion is that the potential for forest genetic research to influence the transition to a green economy will be determined more by the conditions that govern the development and deployment of innovation, rather than scientific and technological challenges. The outputs and outcomes of the Post-2015 Development Agenda will be central in determining how quickly and effectively the necessary advances in forest productivity can be deployed and shared by providing a vehicle for mainstreaming issues related to forest productivity into the global political agenda.

Why invest in genetic improvement of trees? The example of the Brazilian planted forest sector Breeding for productivity With meager profit margins, and operating under the volatility of commodity markets, forest product companies are constantly exploring ways to reduce operating costs – most notably through reducing wastage in mills and processing facilities, wood cost and transport. For those companies that produce their own wood, further cost reductions can be made through increasing yield via genetic improvement of the trees

132 May and Hirsch (Campinhos Jr., 1999). The latter approach lends itself best to short cycle plantations of semi-domesticated species such as Eucalyptus, Pinus and Populus, and the results have been most dramatically seen in Brazil and other Latin American countries such as Chile. From the 1970s, breeding strategies to reduce growth cycle, clonal development (that ensures more uniform wood fiber and yield) and productivity gains drove down investment risk and allowed for more predictable supply by directly addressing the highly cyclical nature of the pulp industry (Greaves et al., 1997). The experience from the Brazilian planted forest sector provides a number of good examples of how advances in tree genetics and breeding can be deployed to meet social, economic and environmental objectives. The productivity of Brazilian Eucalyptus plantations has more than doubled through an incremental series of improvements in yield to present day averages of 44 m3 ha–1 yr–1. Much of this can be attributed to breakthroughs in genetics through breeding, clonal propagation techniques and improved land management and silviculture. The vision for investments in tree breeding and genetics came from the understanding that yield enhancement will bring significant gains in plantation management efficiency and effectiveness and bring down costs. Brazilian Eucalyptus plantations are the most productive in the world – requiring 12 times less land than a European managed natural forest to produce the same amount of pulp. Data available from 2000 to 2008 shows that by increasing plantation productivity from 31 to 44 m3 ha–1 yr–1, and coupled with parallel advances in processing technology, it has been possible to reduce the amount of land required to produce 500,000 tons of pulp from 66,000 to 50,000 hectares.1 Because the logistic radius required to source the wood is reduced, so are the inputs required for transportation and road infrastructure and the emissions in terms of fossil fuel consumption. With higher yields, and lower production costs, margins can remain competitive. However, yield also affects costs in other ways – because it affects how effectively the system consumes land, water and other resources. The higher the yield of a given area, the more effective the use of resources. Production costs are also a measure of how efficiently these resources are consumed – the lower the production cost, the more efficient the use of the resources – and consequently, the lower the waste of resources, and the lower the level of pollution. The need to produce as much wood (pulp) as possible out of the land and water available, and at the minimum possible cost is best achieved when forestry practices achieve efficient use of the land, water, fertilizers, pesticides, and the minimization of roads and other infrastructure for wood extraction and transportation. The forestry production system with the maximum yield and the minimum unit cost should have the most environmentally-friendly forestry practice when externalities are costed in – because the system uses resources in the most effective and efficient way.

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Carbon sequestration In terms of carbon sequestration, the fastest rate of carbon sequestration occurs during the growth phase of a tree i.e. its first ten to fifteen years of life. Afterwards, as the growth rate diminishes, so does its carbon sequestration. In the Scandinavian countries and Canada the average growth is 5 m3 ha–1 yr–1 whilst in Brazil, a rate of growth of up to 44 m3 ha–1 yr–1 means sequestering 13 tCe of CO2 ha–1 yr–1. It is estimated that the seven million hectares of planted Eucalyptus and pine in Brazil absorb 224 million metric tons of CO2 every year.2 This is seven times the CO2 that would be sequestered by the same area of managed semi-natural forest in Sweden or Finland. Recent research also confirms that the conversion of degraded pastures to Eucalyptus plantations improves the soil carbon status (Cook et al., 2014). Biodiversity and ecosystem impacts Under the Federal Forestry Law of 1965, companies are required to preserve in reservations 80 percent of the land in the Amazon; 35 percent of the land in the Cerrados region; and 20 percent of the land in the rest of Brazil. This means that the Brazilian pulp and paper industry, by establishing plantations on degraded pastures, have actually created over three million hectares of legally protected forest. Indeed it is far easier to plant on degraded land – the economics of plantations favor the purchase of degraded agricultural land. By planting in mosaics, comprising plantations interspersed with protected and restored areas, the impact of monoculture planting is also reduced and it is in the interest of the industry to maintain healthy plantations and use their water resources in the most effective way. To achieve this, present day practices are to cultivate the most water efficient species and to maximize in-plantation tree diversity through an alternate clonal mix of genetic varieties of Eucalyptus. By embedding plantations in a matrix of natural forest it can create islands of natural forests for wildlife and a mosaic of clonal varieties, hence a variety of habitats are established. For instance, Suzano’s clonal stands average only 20–50 hectares each which minimizes the risks of pest and disease infections, and also reduces the risk of fire. To date, several hundred different hybrid clones have been planted, specifically adapted to local climate and soil conditions. Suzano has a clonal germplasm collection of over 15,000 clones that have been tested in over 600 field experiments on over 4,000 hectares around the country to identify the best yielding, most resource efficient combinations for different agro-ecological conditions. Because the industry has grown under conditions of resource constraints, maximizing resource use efficiency has been a priority in the yield improvement programs. What this means is that environmental sustainability is embedded in forest operations by necessity, and this has been a determining factor in growth of the sector (Fox, 2000). A large number of studies over the years have shown that yield intensification does not adversely affect key

134 May and Hirsch sustainability indicators when careful planning and management practices are applied. Water use efficiency in modern Eucalyptus plantations compares well with other forms of land use – even forest biomes – and with a root system that only descends 2.5 m, Eucalyptus does not penetrate the water table and perturb groundwater recharge. Compared with other crops grown in similar soils, Eucalyptus is also efficient in its use of soil nutrients – and both soil hydrology and nutrient composition are benefited by no-till planting and harvesting techniques that return 34 percent of all biomass to the soil.3

Innovation for sustainable intensification of productivity The plantation model Finding appropriate solutions for the dual need to protect remaining forests whilst providing for increasing demand could represent one of the most accessible routes to resolving some of the most intractable problems of our time. An action plan to sustainably enhance forest productivity could have catalytic and indirect spillover effects on multiple other areas of concern because of the systemic interlinkages connecting forests and forest products to economic, environmental and social cohesion. Embedded in the business practices of the Brazilian planted forest sector and the industries it supports are working examples of what decision makers in other sectors are struggling to define: business operating under natural resource constraints, climate change mitigation strategies, mechanisms to address food security concerns, certification, social license to operate, internalization of environmental externalities, scientific and technological innovation (STI) for development, ecosystem service protection, biodiversity conservation, and others. This has not always been a smooth transition, and is not only the result of legislation or better business practice, but has also been reached after conflict resolution and interventions from civil rights and environmental action groups and the permanent scrutiny of the world’s press. There remains much scope for improvement, but as the chapter by Luis Neves Silva highlights, the New Generation Plantations (NGP) Platform (www.newgenerationplantations.org) shows that well-placed and sustainably managed plantations based on a diverse genetic foundation of exotic, semi-domesticated tree species can support rural development and reduce the pressure to bring natural forest areas into production and reduce levels of illegal logging (see for example the case study of Sustainable Charcoal to Protect Virunga National Park at www. newgenerationplantations.org). In 2006, whilst tree plantations comprised only 7 per cent of total forest area, they provided 50 per cent of industrial roundwood (Jagels, 2006) (of which Intensively Managed Plantation Forests [IMPF] provided 40 percent [Kanowski and Murray, 2008]), yielding far more wood per hectare than natural forests, especially close to the equator. Improvements in landscape planning, breeding, planting techniques and silviculture through adoption of the NGP models could boost productivity even more.

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The Living Forests Model of WWF (WWF, 2012) predicts that annual wood removals in 2050 will be three times the volume for 2010 (3.4 billion m3), and an expansion of current plantation volumes through an additional 250 million hectares of new tree plantations would be needed. Whilst this model describes what approaches to Zero Net Deforestation and Degradation (ZNDD) by 2020 may look like in practice, it also predicts that to maintain ZNDD after 2030, pressure on forestry and farming practices to produce more with less water and land will increase. IMPF can be part of this solution and their positive productivity benefits can be realized if further expansion of tree plantations is on degraded land, while maintaining or restoring natural ecosystems, safeguarding the rights and livelihoods of local communities and indigenous peoples and promoting greater benefit sharing. However, a recent report from the International Tropical Timber Organization indicates that there will be a considerable shortfall in plantation expansion globally: the total area of industrial fast-growing forest plantations in 2012 was 54.3 million hectares and this area will increase to 91 million hectares by 2050 satisfying only 35 percent of total industrial wood requirements.4 Bridging this gap is an imperative if the dual objectives of meeting consumption demand and ZNDD are to be realised. For plantations, this implies in turn an increased dependence on research, breeding, and deployment of higher yielding and more resilient tree varieties. Nevertheless, increases in yield enhancement through conventional approaches are beginning to plateau and new cycles of innovation are needed at two levels: through step changes in yield, and through new approaches to protection of forests from emerging pests, diseases and degradation, which Liebhold and Wingfield flag in their chapter as an increasing threat because of globalization. For this to happen, three things are needed: • •

•

research and development of new approaches to enhancing yield, yield resistance and resilience; stakeholder dialogue to raise awareness of the social and environmental dimensions of science-based, plantation-driven productivity enhancement; and mainstreaming the role of the forest sector in a future bio-economy into the global economic and development policy debate.

The potential of biotechnology for yield enhancement Biotechnology offers a suite of options to the forest sector to generate yield improvements on a scale and timeframe and with a precision that would not be possible through conventional breeding alone. Additional applications are envisaged for lowering the demand for fertilizers and pesticides, providing the resilience to match future environmental shocks

136 May and Hirsch and stresses, protecting forests and allowing adaptation of feedstocks for lower processing needs and more diverse offtakes. The potential for genetic modification of trees for a number of purposes was recently the subject of a major review by IUFRO and FAO.5 Transgenic approaches to improve woody biomass have received a great deal of attention, because increased biomass yield, as we have seen in Brazil, can significantly impact most downstream applications such as timber, fiber, pulp, paper, and bio-energy production (Dubouzet et al., 2013; Harfouche et al., 2011; Stamm et al., 2012; Wagner and Donaldson, 2014). A highly promising approach to yield enhancement that is in advanced stages of development involves the cis-genic overexpression of an Arabidopsis thaliana endoglucanase that affects cell wall loosening during cell elongation (Shani et al., 1997). What this means is that plants that overexpress this gene grow more quickly, and therefore, in a given period of time, produce more biomass. Field-testing of Eucalyptus clones over expressing this gene has been under way since 2006 at several locations in Brazil. Results from the field show that up to 20 percent increases in yield can be obtained on average without negative impact on a number of biological and physicochemical environmental parameters. The full results of this multi-year, multi-site testing were submitted to the Brazilian Biosafety Authority (CTNBio) in February 2014 as a regulatory dossier for commercial approval. The potential of biotechnology for yield protection Measures to improve the resilience of planted forests to environmental shocks and stresses are needed, since the amplitude and duration of cycles of pest infestation and the severity of abiotic stresses will have increasingly significant impacts as a result of climate change. According to the FAO, more than 20 pests and pathogens have increased in impact on forest productivity as a result of climate change.6 The most notable example so far being the mountain pine beetle.7 Chemical-based strategies for controlling pest outbreaks of increased amplitude and duration are limited and unsustainable; whilst at the same time the risk of serious pest infestations is growing. In addition, because of the use of exotics such as Eucalyptus in plantations, global spread of pests and diseases into new geographies and outside the range of natural predators is expected to have highly disruptive impacts like that discussed generally in the chapter by Liebhold and Wingfield. This is indeed what appears to be happening, and the recent discovery of a number of Eucalyptus pests from Australia in Brazilian plantations is cause for concern. Thus, the question of forest health can only realistically be approached through a GM approach, as alleles for disease and pest resistance may not be found within related species and thus cannot be introduced via conventional crosses and in the timeframes needed. The creation of pest- and disease-resistant trees through the insertion of genes that confer resistance towards the growing list of insect pathogens is

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under way at FuturaGene. A program to develop resistance against Gall Wasp (Leptocybe invasa) and other Eucalyptus pests has been established, and results from the greenhouse suggest that reasonable levels of resistance can be obtained through this approach. Whilst concerns are expressed over the widespread use of transgenic approaches to insect control, we also need to consider that if these approaches are not taken and pest infestations reach epidemic proportions, then where would the wood derived from lost plantations be sourced? The impact of extractions from natural forests would be severe. Elsewhere, there are a large number of field trials established to determine the efficacy of different gene constructs in resistance to drought, salt, soil pollutants (such as heavy metals and a range of organic pollutants), air pollution (such as ozone), high light intensity, cold, heat, insects, bacteria, fungi, viroids and viruses. Plantations and certification When linked to science-based forest management standards and combined with an auditable chain-of-custody system, independent third party certification of plantations has clearly identifiable values and benefits. These include assurance provision for management performance and geographic source within procurement policies and along supply chains, enhancement of solution-oriented dialogues between stakeholders, establishment of markets by recognizing certified products and suppliers and improvement of perceptions of forests. However, it is of concern that according to the FAO, only 10 percent of the world’s forests are certified representing approximately 30 percent of the world’s production forests that generate roughly 27 percent of global annual industrial harvests. There is a clear need for forest owners, downstream industries and the certification systems to find solutions to expanding the reach and impact of third party certification if these benefits and values are to be achieved. Ongoing engagements through, for example, The Forests Dialogue (TFD) and the World Business Council for Sustainable Development (WBCSD) Forest Solutions Group with the certification systems (such as the Leadership Statement on the Value and Future of Forest Certification) to explore mechanisms to achieve these goals are vital.

Innovation for sustainable intensification of resource use efficiency and new uses A forest-based bio-economy Perhaps the most profound example of how biotechnology could be applied to improvements in forest biomass yield and quality would be in the biomassbased bio-economy, where it has the potential to revolutionize product diversification and value chain efficiency (Harfouche et al., 2011). Drawing

138 May and Hirsch on the remarkable evolution of biological science, the concept of the bio-economy provides many scientific and technical solutions to enhance resource use efficiencies. By its dependence on carbon-neutral feedstock, the bio-economy presents one of the most compelling opportunities to break the association of GDP growth with fossil-fuel-based carbon emissions in an inclusive, economically viable and environmentally sensitive manner. As Roberts and Nikolakis highlight, the bio-economy has already begun, since as defined by the OECD,8 the bio-economy refers to “economic activities relating to the invention, development, production and use of biological products and processes …” Estimates indicate that the European bio-economy is worth €2 trillion annually and accounts for some 22 million employees.9 In Europe alone, it is expected by 2030, products of the bioprocessing industry and bio-energy will have 33 percent share, worth €300 billion.10 Other estimates of the economic potential of a forest-based bio-economy concur with the conclusions of these studies.11 Bio-economy models have the potential to directly link advances in planted forest biomass through dedicated biorefineries to a whole range of high-value, low volume products that will transform the carbon-based chemicals market which presently constitutes 66 percent of the $1.3 trillion global chemicals market. The greatest impact of the bio-economy could be in the developing countries, since it is here that biomass productivity is highest. Here, a bio-economy could transform rural development, job creation and poverty alleviation since it opens up the potential for a whole new range of high-value low-volume products that could be created from reduced volumes of feedstock. Reduced volumes mean that smallholders could become stakeholders in the bio-economy. However, to turn this promise into practice, developing countries will need a far greater capacity to absorb new technologies and appropriate governance frameworks to enable their deployment in an inclusive and environmentally sustainable manner. The challenge of tackling comprehensively a large-scale transition to a bio-economy is going to require the scale up and replication of many projects such as that described in the paragraph above, because it is the transition of the total economy, based on fundamental changes in production and consumption across sectors and across borders. This will be achieved by deploying scientific and technological innovation broadly to find new ways to create products and services more efficiently if we are to impact on current patterns of consumption, production and resource use efficiency. In brief, the bio-economy will be a technology-rich, innovation driven and service-focused economy. A present challenge is that because the bio-economy is focused on new end uses for traditional product ranges – communicating the benefits to society and consumers will be a critical aspect of bringing in support. Thus, in the end, the bio-economy will depend on a burst of innovations in many fields and a total redirection of societies’ investments – and a new era in the social acceptance of science (Cooke, 2013).

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Acceptance of tree biotechnology and stakeholder dialogue The debate on genetically modified trees If the true potential of tree biotechnology is to be realized, the first priority is to collectively evaluate the real barriers to implementation, and to find solutions that are acceptable and that work in practice. Despite the promise that tree biotechnology could bring, there remains much controversy. Tackling these controversies and finding more inclusive approaches to stakeholder engagement in the debate on GM trees is vital. The key arguments about GM trees are associated with competing views of ethical and moral imperatives, the future of land use and resource ownership and of the gravity of potential risks compared to the expected benefits. These arguments have been reviewed concisely in a scoping paper prepared for The Forests Dialogue (www.theforestsdialogue.org), and drawn from a substantial body of literature.12 As stated in that paper: the debate about GM technologies and crops is both embedded in and reflects the different values and worldviews of participants, and their different visions of desirable futures; their different understandings of the culture and conduct of contemporary science; and their interpretations of power relations between business, citizens and government in particular societies. At the center of the debate on GM trees is the question that a need to produce more from less demands intensification of production systems – which implies increased dependence on scientific and technological innovation. Intensively managed plantation forests (IMPF) have been a widely adopted and heavily debated response to the need for meeting demand for the 4Fs: Food, Fuel, Fiber and Forests.13 For many, the risk implied here is that if intensification means further intensification of the negative attributes of poorly managed plantations, then, coupled with the legacy of opposition to GM in general, GM trees pose too great a risk to be developed or even tested. However, at a stage where there has been little deployment of GM trees, there is a window of opportunity for open and productive dialogue about substantive issues associated with their development and future use. This debate is being pursued through a number of forums, including The Forests Dialogue (www.theforestsdialogue.org) and the New Generation Plantations Platform (www.newgenerationplantations.org). Designing a framework within which to pursue a productive dialogue on GM trees is not easy, given the legacy of polarity that this subject entails. However, as a guide, to inform on the way GM technologies are used in trees and the processes and standards for governance of GM trees, the conditions cited by Gamborg and Sandøe in 2010 are helpful: “If modern biotechnology is to stand a chance, three main conditions for public acceptance must be met: utility, low risk and an assurance that biotechnology is used in a decent way.”

140 May and Hirsch Utility The development and deployment of biotechnology in the forest sector has the potential to impact five key elements of any future global development agenda: •

•

•

•

•

firstly, stimulating the productivity of planted forests to meet growing demand for forest products would directly reduce pressure on natural forests and illegal logging; secondly, with a stronger scientific and technological innovation focus, the tools, skills and knowledge base for ecosystem restoration and ecosystem protection services would be available; thirdly, any large-scale initiatives that raise primary productivity have long-term benefits for rural development and rural social protection through the generation of incomes and stabilization of rural employment prospects; more efficient primary productivity is a key driver to sustainable forest intensification and more resource efficient value chain creation, providing more environmentally benign consumer products and services in turn; and finally, and perhaps most significantly, the potential for a biomass based industrial development translates into a whole world of opportunities for novel, carbon neutral, sustainable industrial products such as platform chemicals, composite fibers and plastics – the bio-economy, which, because it has its roots in a rural setting could have significant returns for development initiatives – most particularly because such models can be directly applied to some of the most vulnerable communities in the least developed countries.

Applying biotechnology to the forest sector opens up a hitherto unimagined spectrum of possible environmental and developmental impacts not least because the availability of new technologies to both raise plantation yield and to protect yield from environmental shocks and stresses will mean that foresters will be able to produce more from less. This can translate into a lower ecological footprint through lower land use – more being available for other uses or set aside for protected reserves – and more efficient harvesting processes. By minimizing the future potential damage through pest and disease attack, and by increasing the resilience of tree species – allowing planting on marginal land – innovation can serve to reinforce the provision of a broad ecological infrastructure. By reducing the pressure on natural forests, yield enhancement can promote the preservation of ecosystem services, like those discussed by Brand and Singh, and Wunder et al., in their chapters. This coupled with proactive policy – such as is the case in Brazil where a minimum of 30 percent of land acquired for plantations must be set aside for legally protected reserves, and a ban on planting within

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watersheds and riparian zones – means that the forest sector can play a decisive role in the preservation and restoration of ecosystems. The plantation forest sector could thus be an active partner in attempts to achieve zero net deforestation and the global development agenda. This vision is much the same as that envisaged in 1992 in Chapter 16 of Agenda 21: By itself, biotechnology cannot resolve all the fundamental problems of environment and development, but it promises to make a significant contribution in enabling the development of, for example, better health care, enhanced food security through sustainable agricultural practices, improved supplies of potable water, more efficient industrial development processes for transforming raw materials, support for sustainable methods of afforestation and reforestation, and detoxification of hazardous wastes. (United Nations, 1992) If we are to return to this vision in addressing the challenges of a transition towards better process efficiency through the application of biotechnology, decision makers and the public would benefit greatly from a transparent and solution-oriented debate. Risk Within the context of the debate on GM trees, risk can be identified and perceived at three levels: • • •

technical: environmental and human health (biosafety) risks associated with the traits that are engineered; procedural: risks associated with the transparency of the procedures for biosafety assessment; and moral and ethical: risks associated with access to the technology, ownership and benefit sharing, context of its development – vulnerability of farmers to corporate control.

Trait-related risks In principle, the direct, indirect and unintentional risks for the environment and human health associated directly with the traits or technology can be identified, assessed and adequately governed by appropriate regulatory oversight. Potential environmental risks include those relating to transgene spread, increased invasiveness, transfer of the gene to related (vertical gene flow) or unrelated (horizontal gene flow) species; impacts on non-target organisms and ecosystem services, unstable gene expression and unexpected effects of genetic manipulation (Fladung et al., 2010).14

142 May and Hirsch Formal assessment, mitigation and governance of these risks occurs at two levels: •

•

Through experience, accumulated knowledge and significant advances in technical expertise, safeguards can be built into the design of the constructs used to transform the plant species. There is a strong onus on the institution that is developing a novel trait to exert a level of self-discipline over the choice of trait. Ultimately, in the public sector, peer review and in the private sector, market (and public) acceptance of a trait will be significant factors in guiding prudence during experimental design – and although this level of precaution is voluntary, because experiments are long term and uncertain in outcome, it makes little sense to embark on a project that has limited scope for acceptance. Risk assessment is a significant part of modern project management considerations. During the risk assessment procedures employed in the biosafety and regulatory evaluation of the event (see below).

Informal controls on the flow of GM technologies from the bench to the field include the policies of the certification bodies and public acceptance – and the interrelations between them (see below). Risk assessment and management The development, testing and use of GM trees are regulated both internationally and nationally and the Cartagena Protocol on Biosafety15 of the Convention on Biological Diversity provides the principal international framework. Most countries have national regulatory mechanisms, although the extent to which they are developed and capacity for implementation vary. There have been a number of recent reviews of the different national biosafety systems in operation that provide extensive background information on biosafety assessment and management capacities around the world (Häggman et al., 2013).16 In addition, the Institute of Forest Biotechnology has recently released the “Responsible Use initiative” that takes a holistic look at policies and requirements in countries that are most likely to use GM trees and the conditions under which commercial approval would be granted.17 The risk assessment protocols employed to evaluate the biosafety of the trait under development constitute the major formal institutional control over the technology, and therefore their robustness and transparency are a significant point of debate. For example, although over 700 field trials involving GM trees have been reported since 1988 at multiple locations around the world and involving a large number of traits and over 30 genera (Verwer et al., 2010; Walter et al., 2010),18 there are still widespread claims that too little is known about the safety of GM trees for them to be safely tested or deployed.

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The experiences of FuturaGene within the Brazilian regulatory system provide a body of knowledge that is of value in this regard. Since 2006, FuturaGene has been testing GM yield enhanced Eucalyptus in the field at multiple locations in Brazil as part of national biosafety requirements. The risk assessment evaluation follows the requirements of Normative Resolution 5 (NR5), which was developed by CTNBio, the Brazilian National Biosafety Commission according to Brazilian Law 11.105 of March 24, 2005. The principles of Normative Resolution 5 are based on the provisions of the Cartagena Protocol on Biosafety and the Codex Alimentarium. CTNBio is a multidisciplinary collegiate body, created by Law No. 11.105, of March 24, 2005, to provide technical advisory support and advice to the Federal Government in the formulation, implementation and updating of the National Biosafety Policy on GMOs. CTNBio is also mandated with the establishment of technical safety standards and technical advice relating to the protection of human health, living organisms and the environment, for activities involving the construction, testing, cultivation, handling, transporting, marketing, consumption, storage, release and disposal of GMOs and their derivatives. In order to assure that civil society is represented in the decisions regarding commercial use of GMOs in Brazil, CTNBio’s composition as defined by the law is composed of: three specialists in human health, three specialists in animal health, three plant specialists, three environment specialists, one family agriculture specialist, one consumers’ rights specialist, one biotechnology specialist, one workers’ health specialist, one representative each from the Ministries of Science and Technology, Ministry of Agriculture, Ministry of Environment, Ministry of Health, Ministry of Agrarian Development, Ministry of Industry, Ministry of Justice, Ministry of Defence, Ministry of External Relations and the Ministry of Fisheries. All CTNBio members must have a doctorate degree or equivalent and they meet monthly, ten times a year. All CTNBio meetings are recorded and the information is publicly available. Compliance with national biosafety regulations is covered by official audit from the statutory bodies and all field releases are regulated and regularly inspected by the Ministry of Agriculture (MA). The inspection of each specific experiment authorized by CTNBio is made on a yearly basis and samples of materials are collected at random, to check that there is no illegal and unauthorized commercial planting of GM events. Thus biosafety assessment of tree biotechnology in Brazil follows a well-defined process, designed to address all major aspects of human and environmental safety, so that by the time approvals for commercialization are sought, all possible combination of concerns have been addressed in a transparent manner. Elsewhere, efforts have been initiated to update regulations and strategies for the safe use of GM trees: •

In the USA, APHIS conducted a review of its regulatory system, which led to a substantial modification of this framework (www.aphis.usda. gov/publications/biotechnology).

144 May and Hirsch •

In Europe a Cooperation in Science and Technology (COST) action FP0905 (www.cost-action-fp0905.eu) to evaluate and substantiate the scientific knowledge relevant for GM tree biosafety protocols as a basis for future EU policy and regulation for the environmental impact assessment and the safe development and practical use of GM trees.

Decent use Underlying the identifiable technical and procedural risks for which science-based assessment, mitigation and management strategies can be described, are less tangible, ethical and moral considerations related to land use, resource and technology ownership, and how benefits are shared. Although the debate on GM trees is in its early stages, it is heavily influenced by experiences from the debate on GM crops. The underlying issue is that the need to produce more from less will involve an intensification of productivity, and that this will entail a need for increased dependence on scientific and technological innovation – including GM technology. Thus the fundamental question at the center of the debate on “decent use” is: “if intensification means increased dependence on scientific and technological innovation, then what are acceptable or appropriate frameworks for governing the development and deployment of such innovation?” Options on potential courses of action revolve around a responsible and transparent exploration of how to share potential benefits and in what developmental context the technology could be deployed. The debate is therefore heavily influenced by the fact that if the real impact of GM trees will be in further intensification of intensively managed plantation forestry (IMPF), then what are the risks that GM will only enable further entrenchment of the negative aspects of this practice? Clearly, detailed exploration of the implications of this developmental model is needed – and in particular, discussion of appropriate governance frameworks that guide research and development priorities in the right direction and in which corporate social and environmental responsibilities are clearly delineated is a priority. Arriving at the right conclusions on moral acceptability will require parallel exploration between the developers of the technology and civil society and debate on the processes and standards for governance of GM trees. Social engagement processes such as the New Generation Plantations Platform, the emerging consideration of Social License to Operate and the UN Post-2015 development agenda process are timely opportunities to focus these debates towards substantive and actionable outcomes. Collectively, these approaches may begin to engender legitimacy for developmental paths that are driven by an enhanced dependence on advances in scientific and technological innovations – such as GM trees.

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Corporate context of germplasm ownership Understanding how the owners of GM technology view potential deployment scenarios can enable the debate on the potential social and environmental impacts of GM trees because it allows clearer visualization of what outcomes may look like. Drawing on experiences in the GM crop sector in which ownership of germplasm and technology is concentrated in a small number of agro-chemical companies, one of the concerns expressed regarding deployment of GM trees is that this will enable a corporate culture that further exacerbates the negative aspects of plantation forestry. However, because trees as a crop are perennial and long term, there is a strong incentive for companies to integrate environmental and social responsibility into business models, including a widespread adoption of principles such as Free Prior and Informed Consent (FPIC). Secondly, annual audit for certification compliance will reveal whether there are any irregularities in corporate sustainability responsibilities, and would prescribe measures to resolve such issues. Thirdly, many companies rely on small holder contract growers for a percentage of their production, supplying their best germplasm free of charge to these out-growers, which means that issues related to germplasm ownership are dissipated, and the potential for positive impact on rural development is high. Fourthly, plantations are not genetically uniform; Suzano, for example, has a bank of 15,000 different clones available and in use, in any one plantation there are at least four different clones and to maintain genetic diversity in the field, will not plant a single clone on areas larger than 50,000 hectares. The diverse range of geographies and outputs (pulp, paper, fiber board, timber etc.) dictate diversity of germplasm, and the bio-economy will reinforce this trend. Fifthly, the forest sector is highly fragmented, as is germplasm ownership. Thus sustainability is embedded in the business culture of forestry companies – probably more so than in any other sector – and the drive for certification of plantation management practices and value chain processes will reinforce this. Responsible use of yield enhancement – reduction and internalization of environmental cost If the approvals for the commercial deployment of the GM yield enhanced Eucalyptus of FuturaGene-Suzano are granted by the government of Brazil, this will provide a valuable case study in the ways in which questions of land use and technology ownership play out under market conditions. Deployment of yield enhanced trees will happen in some of the poorest and most remote regions of Brazil where rural communities are heavily dependent upon the pulp and paper industry. This will really put to test the relevance of scientific and technological innovation to the fundamental question of improving wellbeing within planetary boundaries.

146 May and Hirsch For Suzano, an increase in yield of 20 percent would mean a significant reduction in operational costs, since the amount of land required to produce a given amount of pulp and therefore the inputs and the radius for transport to the mill will be reduced. At the same time, almost 30 percent of production is by out-growers, who will plant and grow these GM trees. Suzano intends to provide the GM germplasm to these growers on the same terms and conditions as it would for any other improved tree variety, with a guarantee of buy-back. These relationships have been established with local communities over many years, and there is no reason to change them now. Although farmers would be able in principle to propagate from supplied material and grow it on, they would have little incentive to do so, because of the ways in which germplasm is shared with them, and because improved varieties are continuously being introduced for their use at each planting cycle. The land that would be spared could be freed for agricultural use by local communities or could be set aside for ecosystem restoration on top of the existing legal requirement of setting aside up to 30 percent of land as legally protected reserves and biodiversity corridors. Well ahead of any plans for deployment, the company would engage with local communities to seek consent and make arrangements for establishing appropriate local infrastructure – as it does in all the regions it operates already. In the Brazilian forest sector, the evolution of its social engagement programs has been shaped by the fact that communities – aided by civil society – have become increasingly willing and able to challenge things that are unacceptable to them. Social license to operate – internalization of social dimensions The forest sector operates in an era in which social license is as important – if not more important – than economic potential. This is evident, particularly in forestry and associated industries such as pulp and paper, where a major focus of operations is based on use of natural capital and by necessity, demands a high level of engagement with local communities (Gunningham et al., 2004). This is indeed one of the cornerstones of modern development thinking – that environmental and economic challenges can only be fully resolved if adequate attention is paid to the social dimensions of development. The social aspect of natural capital exploitation is one of the most important criteria in deciding on future development models since it will have largescale impacts on rural development. For much of the developing world, this is the first step to inclusive and sustainable development. This can be highly beneficial for business, since in the process of designing social legitimacy of a project, the credibility of the company is called into question and therefore socio-political risk mitigation becomes a primary instrument to minimize project risk. This finally provides a mechanism to navigate the area of public perception in which acceptance of an idea is driven by perceptions of credibility and who to trust (Wynne, 1992).

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Thus the global question of “if the only way of balancing more with less is to improve technical efficiency – how can more democratic controls on technology be exerted to prevent an inappropriate concentration of power?” takes on a local dimension: “How can these controls be implemented at a community level?” This is social license to operate, in which businesses, especially in the sectors related to natural capital exploitation – such as the forest based industries – must seek out fundamental changes in the ways in which they work with and in local communities. In conclusion, we are entering an era in which social license to operate is increasing in importance not only as an integral part of business strategy and as a key performance indicator in which social benefits are as important, if not more important, than economic.

Vehicles for debate: the post-2015 development agenda Despite over four decades of debate on sustainable development19 at all levels, there are still very few areas of consensus on what constitutes priority areas,20 and even less agreement on appropriate actions and solutions. One of the problems is that it is very difficult to picture what solutions actually look like. One area that is recognized as being fundamental, cutting across most priority areas is the need to conserve forests, the carbon and biodiversity they hold, the livelihoods that depend on them, the products they provide and the ecological services they support. Indeed, the plight of the world’s forests and forest-dependent peoples and questions over the ethics of the global forestry industry has long been iconic symbols of the fragility of the planet. Not surprisingly, some of the most intense civil society and political fracture lines of our time are found in the debate on the future of forests and forestry. Intensively Managed Plantation Forests (IMPF), Free Prior and Informed Consent (FPIC), Access and Benefit Sharing (ABS), Indigenous Peoples Rights, Intellectual Property Issues, Genetically Modified Organisms (GMOs), Land Rights, Human Rights, Food, Feed, Fuel and Fiber (4Fs) and, more recently, Social License to Operate are lightning rods for a hostile and politically charged debate. Nevertheless, it is precisely agreement on these issues that will determine how quickly and how effectively the world is able to make a transition towards economic, social and environmental renewal. Over two decades of debate on how to implement the plan for sustainable development put forward in Agenda 21 has left a legacy of tensions over what constitutes an appropriate or acceptable developmental route. The result of this failure is “the anthropocene,” for which the mandate of the Post-2015 Development Agenda is to design an exit plan that will resolve present cycles of inequality, deprivation and degradation. Today, there is mistrust of business and industry and the role of scientific and technological innovation (STI). Expressions of this mistrust are prominent as conflict,

148 May and Hirsch most notably at the Conventions of the Parties to the multilateral frameworks on climate and biodiversity. In the consensus-driven processes of the intergovernmental system, whilst there is agreement on general principles and that the overarching goal must be to achieve wellbeing within planetary boundaries via “green” or low-carbon growth, defining the criteria and indicators that will enable the adoption of solutions is impeded by political inertia. However, new thought is emerging, and that could provide a more conducive environment for solutions-based approaches: •

•

•

•

in particular, the emergence of thought around Social License to Operate is providing a rational framework for conciliation and cooperation between civil society and business and industry; within the multilateral system, there is a recognition that the private sector has a valid role to play in development, and there is an overall urgency to the need for more cohesive actions between different agencies; within business and industry, there is a significant trend towards changing business practices and policies including redesigning the efficiency of production processes, technology transfer and revising procurement strategies as exemplified by the vision 2020 of the World Business Council for Sustainable Development (WBCSD); the experiences of some of the emerging economies in delivering growth under conditions of natural resource constraints, whilst reducing poverty, are providing working examples of the levels of resourcefulness and resilience that will be needed in the Post-2015 Developmental Agenda.

From this gathering momentum is coming the realization that sustainable development can be achieved if elements of both sides of the debate are combined. Major challenges ahead are to build trust between civil society and business and industry that will allow the following: • • •

remove confusion that many solutions are presently defined as problems – define sustainability better; better understanding of how benefits of STI can be shared by countries and stakeholders that need them the most; remove incentives that enable the persistence of unsustainable practices and products and provide incentives for development, uptake and trade of “green products and services.”

The substance of the debate to build trust is therefore a single fundamental question: If the only way to produce more from less is through an intensification of existing practices, and if the route to intensification is through an increased dependence on STI, then how can more democratic controls be placed on the development and deployment of new technologies?

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In other words, the route to opening up the potential of sustainable development is to define appropriate frameworks for the governance of STI for development, that guides research in the right direction and ensures that the results reach the places and people that need them the most. The vision for planetary wellbeing expressed in Rio in 1992 and the blueprint for action detailed in Agenda 21 remain valid. The challenge for implementation is how to deconstruct the ideological barriers that lock global development outside the carrying capacity of the planet, like that described in the Millennium Ecosystem Assessment and discussed by David Cohen in his chapter.

Conclusions and future outlook The systemic and increasingly high risk challenges the world faces derive largely from the escalating imbalance between human activity and the capacities of ecosystems to provide natural capital inputs and absorb waste. In the absence of comprehensive strategies to reduce consumption, and with a finite throughput of renewable natural resources, the fundamental challenge and opportunity of our time is to raise efficiency of production in transformative ways. Forest productivity is an area of interest, since more intense management practices and downstream sophistication of end-uses could have important implications for land-use, carbon balance and greening other sections of the economy. One of the options to achieve this is through sustainable intensification and a biomass-based bio-economy, but this implies an increased dependence on scientific and technological innovation (STI) and this raises concerns for society. The solution for how to resolve this concern will be determined by collective reasoning on the following fundamental question: “If the only way to achieve more by less is to improve technical efficiency – how can more democratic controls on the development and deployment of STI be exerted?” Within answers to this question are significant behavioral challenges for society, business and industry and governments. In the future, a vibrant forest sector based on sustainable, scalable business models is needed if deforestation is to be avoided. Scientific and Technological Innovation, implemented through massive investments in advanced breeding, silviculture, biotechnology and downstream processing technologies will transform the forest sector of the future. These investments will create the foundations for improving and protecting yield so that the plantations of tomorrow produce more biomass with fewer inputs, have the resilience to withstand future environmental shocks and stresses and generate an explosion in the diversity of industrial products available for the needs and benefit of citizens and communities of the future. This will only be possible, however, if the sector can transform itself through closer public–private partnerships, closer and more efficient linkages along the value chains of the future and a world wide web of research cooperations and germplasm exchanges.

150 May and Hirsch The cost of engineering this bold transition which will decouple unsustainable practices from rapid growth in the emerging economies will be enormous, but necessary. This will come from a blend of public and private sector funding, including direct industry investment. However, to enable this, industry and investors will require clear signals from governments as active and permanent partners through implementing stable and predictable policy frameworks that will shape the ultimate structure of this network. Governance – global, national and local – is vital. There are four critical areas where policy will play a vital role in delivering the full scope of this technology-driven change: • • • •

science-based regulatory mechanisms technology development incentives policies to promote payment for environmental services, and policies that stimulate greater public sector funded research – since it is public sector innovation and discovery based research that will provide many of the leads of the future.

Within future governance frameworks, clear Planted Forest Policy will be essential, as will Inclusivity – the design and implementation of this transformation will require the active involvement of the rural communities who will be the stewards of the plantations and forests, the biorefinery workers, and the consumers who will benefit from the more sustainable products and services this network will provide. And finally, the convening power of the United Nations Multilateral system with its mandate for implementation of the Rio Principles, Agenda 21 and now with the Rio+20 commitments to Sustainable Development Goals, the Post-2015 Development Agenda and commitments to providing a coherent and enabling Institutional Infrastructure for Sustainable Development has a key role in implementing this common vision. Research and development remains a cornerstone of this model for the future. The challenge is to guide efforts in the right directions and to ensure that outputs reach those who need them the most.

Notes 1 2 3 4 5

Suzano Pulp and Paper data. Pöyry/Brazilian Foundation for Sustainable development/BRACELPA. Suzano Pulp and Paper data. www.itto.int/direct/topics/topics_pdf…/topics_id=3763&no=1. Forests and Genetically Modified Trees. (2010). IUFRO, FAO. El-Kassaby, YA, and Prado, JA, eds., FAO, Rome Italy. 6 www.fao.org/forestry/54138/en/. 7 www.nature.com/climate/2008/0805/full/climate.2008.35.html.

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8 OECD International futures Programme. (2006). “The bioeconomy to 2030: designing a policy agenda.” 9 A decade of EU-funded GMO research. (2010). Directorate-General for Research and Innovation Biotechnologies, Agriculture, Food EUR 24473 EN (2001–2010). 10 Bloomberg New Energy Finance, “Moving towards a next generation ethanol economy,” 11 January 2012. 11 The Bio-pathways II project. “The new face of the Canadian Forest Industry: the emerging bio-revolution. February 2011. The Forest Products Association of Canada and FP Innovations. www.fpac.ca/bio-pathways. 12 http://tfd.yale.edu/sites/default/files/tfd_gm_trees_scoping_paper_updated.pdf. 13 See for example: environment.yale.edu/tfd/dialogues/intensively-managed-plantedforests/ and environment.yale.edu/tfd/dialogues/food-fuel-fiber-and-forest/. 14 UNEP (2007) The Potential Environmental, Cultural and Socio-Economic Impacts of Genetically Modified Trees (Convention on Biological Diversity) Available at: www.cbd.int/doc/meetings/sbstta/sbstta- /information/sbstta-13-inf-06-en.pdf. 15 bch.cbd.int/protocol/. 16 http://institute.unido.org/biosafety_reports.html. 17 www.forestbiotech.org/biotech_tree_use/. 18 FAO (2004) Preliminary review of biotechnology in forestry, including genetic modification. Forest Genetic Resources Working Paper FGR/59E 9(FAO, Rome). www.fao.org/docrep/008/ae574e/ae574e00.htm. 19 www.unep.org/Documents.Multilingual/Default.asp?documentid=97&artic leid=1503. 20 http://sustainabledevelopment.un.org/content/documents/3276focusareas.pdf.

References Campinhos Jr, E. (1999). Sustainable plantations of high-yield shape Eucalyptus trees for production of fiber: the Aracruz case. New Forests, 17(1–3): 129–143. Cook, R. L., Stape, J. L. and Binkley, D. (2014). Soil carbon dynamics following reforestation of tropical pastures. Soil Science Society of America Journal, 78: 290–296. Cooke, P. (2013). Growth Cultures: The Global Bioeconomy and Its Bioregions. Routledge, London, UK. Dubouzet, J.G., Strabala, T. J. and Wagner, A. (2013). Potential transgenic routes to increase tree biomass. Plant Science, 212: 72–101. Fenning, T. M. and Gershenzon, J. (2002). Where will the wood come from? Plantation forests and the role of biotechnology. TRENDS in Biotechnology, 20(7): 291–296. Fladung, M., Pasonen, H.-L. and Walter, C. (2010) Genetically modified trees and associated environmental concerns. In El-Kassaby, Y. (Ed.) Forests and Genetically Modified Trees. IUFRO and FAO, pp. 177–202. Retrieved on May 27, 2013 from: www.fao.org/docrep/013/i1699e/i1699e00.htm. Fox, T. R. (2000). Sustained productivity in intensively managed forest plantations. Forest Ecology and Management, 138(1): 187–202. Gamborg, C. and Sandøe, P. (2010) Ethical considerations regarding genetically modified trees. In El-Kassaby, Y. (Ed.) Forests and Genetically Modified Trees. IUFRO and FAO, pp. 163–176. Retrieved on May 28, 2013 from: www.fao.org/docrep/013/ i1699e/i1699e00.htm. Greaves, B. L., Borralho, N. M. and Raymond, C. A. (1997). Breeding objective for plantation eucalypts grown for production of kraft pulp. Forest Science, 43(4), 465–472.

152 May and Hirsch Gunningham, N., Kagan, R. A. and Thornton, D. (2004). Social license and environmental protection: why businesses go beyond compliance. Law & Social Inquiry, 29(2): 307–341. Häggman, H., Raybould, A., Borem, A., Fox, T., Handley, L., Hertzberg, M., Lu, M.-Z., Macdonald, P., Oguchi, T., Pasquali, G., Pearson, L., Peter, G., Quemada, H., Seguin, A., Tattersall, K., Ulian, E., Walter, C. and McLean, M. (2013). Genetically engineered trees for plantation forests: key considerations for environmental risk assessment. Plant Biotechnol. J., doi: 10.1111/pbi.12100. Harfouche, A., Meilan, R. and Altman, A. (2011). Tree genetic engineering and applications to sustainable forestry and biomass production. Trends in Biotechnology, 29: 9–17. Havlík, P., Schneider, U. A., Schmid, E., Böttcher, H., Fritz, S., Skalský, R., Obersteiner, M. et al. (2011). Global land-use implications of first and second generation biofuel targets. Energy Policy, 39(10): 5690–5702. Jagels, R. (2006). Management of Wood Properties in Planted Forests: A Paradigm for Global Forest Production. FAO working paper. Retrieved on May 29, 2013 from: ftp://ftp. fao.org/docrep/fao/009/j8298e/j8298e.pdf. Kanowski, P. and Murray, H. (2008). Intensively Managed Planted Forests. Towards Best Practice. TFD review, The Forests Dialogue, New Haven, USA. Shani, Z., Dekel, M., Tsabary, G. and Shoseyov, O. (1997). Cloning and characterization of elongation specific endo-1, 4-ß-glucanase (cel1) from Arabidopsis thaliana. Plant Molecular Biology, 34(6): 837–842. Stamm, P., Verma, V., Ramamoorthy, R. and Kumar, P. P. (2012). Manipulation of plant architecture to enhance lignocellulosic biomass. AoB PLANTS 2012: pls026; doi:10.1093/aobpla/pls026. United Nations (1992). Agenda 21, UN Conference on Environment and Development, New York. Verwer, C., Buiteveld, J., Koelewijn, H., Tolkamp, W. and van der Meer, P. (2010). Genetically Modified Trees. Status, Trends and Potential Environmental Risks. Alterra Wageningen UR, Wageningen. Wagner, A. and Donaldson, L. (2014). Metabolic engineering of wood formation. In: P. Nick and Z. Opatrny (eds) Applied Plant Cell Biology, Plant Cell Monographs 22, 369 DOI 10.1007/978-3-642-41787-0_12, © Springer-Verlag Berlin Heidelberg 2014. Walter, C., Fladung, M. and Boerjan, W. (2010). The 20-year environmental safety record of GM trees. Nat. Biotechnol. 28: 656–658. WWF (2012). Living Forests Report. Retrieved on May 23, 2013 from: http://wwf. panda.org/what_we_do/how_we_work/conservation/forests/publications/ living_forests_report/ 2012. World Wide Fund for Nature, Gland, Switzerland. Wynne, B. (1992). Misunderstood misunderstanding: social identities and public uptake of science. Public Understanding of Science, 1(3): 281–304.

12 Can European forests meet the demands of the bio-economy in the future? Wood supply alongside environmental services Gert-Jan Nabuurs, Mart-Jan Schelhaas, Kees Hendriks and Geerten M. Hengeveld Introduction and aims Access to natural resources, and in this case wood, is of prime importance in a world with a growing population. European forests have many characteristics that make them highly suitable for wood production. Nowadays, the trend is towards managing forests for multiple objectives including nature oriented values, and only to a smaller degree wood production. In addition, for many of the 16 million small private owners in Europe, income from wood production is a small proportion of their total income, whereas income from environmental services receives more and more attention, but is not materializing. These circumstances, plus a sluggish demand for traditional forest products, but a fast increasing demand for biomass for bio-energy and environmental services, may lead to conflicts in reaching all the demands on forests. Several outlook studies have been made for European forests and the forest sector, starting in the 1950s. In this chapter, we provide an overview of the state of European forests and current challenges. We review and analyze outlooks in terms of how they have dealt with supply of traditional forest products and biomass, versus environmental services over time. In the 1990s and early 2000s the environmental services became more and more important, but they were not dynamically included in the outlooks. Nowadays, the attention for the bio-economy and biomass production prevail again, and shortfalls in supply are assumed to be covered by import. The outlooks could be improved a lot. Their methods are very much based on core tools from the 1980s. The use of available data is limited due to differences between countries, or the inability to combine with latest data from, for example, remote sensing, an inability to deal with trend breaks, or the inability to combine with totally different data related to environmental services. We conclude with recommendations on future outlook studies in terms of data, methods and required analyses, and set our predictions for

154 Nabuurs et al. European forests. We also highlight the potential impacts from EU bio-energy strategies with relation to global forests. Background Most European forests (177 million ha of forest and other wooded land in EU27; Forest Europe 2011) are actively managed and show a large diversity in terms of forest types, species and management objectives. The transient distinction between natural and planted forests is apparent and also in terms of the functions they fulfil and how they are managed. In Europe, the multi-functionality is more mainstream than for other world regions as much of the original forest cover was removed already in early medieval times, and active afforestation and management took place thereafter. Since the 1700s a steady afforestation has taken place (Schlüter 1952). The currently still observed increase in forest area in Europe (on average 400,000 ha per year from 2000 to 2010; Forest Europe 2011) results both from the establishment of planted forests as well as from natural colonization of former agricultural land. Over the past decades, the growing stock has increased even faster than the forest area, causing the characteristics of forests of a certain type and age to change. These increasing stocks and areas do not mean that these forests fulfil all required functions in an optimal way. Conflicts may arise at present and in the future because new demands develop with the changing society. Therefore, proper analyses of all functions based on the latest techniques, models and data are urgently required. In this chapter we first outline the current trends and issues in European forests, forest management and socio-economic situations. Then we analyze past outlook studies, which were mostly timber oriented and how they refer to or match with other services provided by European forests. The aim is to gain understanding on the degree to which timber outlooks combine wood production with other services, and whether the outlooks are really able to do this. We conclude on research challenges for the future outlook studies in terms of data, methods and required analyses.

Current trends and issues Resources As indicated above, not only has forest area continuously increased over the past decades, but growing stock has increased even faster. Growing stock in EU27 forests now amounts to 24.1 billion m3 (Forest Europe 2011). This is probably more than ever before since early medieval times. This increase in growing stock is partly caused by an increase in area, but mostly by an increasing increment over time, and a harvest which amounts to some 75 percent of increment. The net annual increment in EU27 forests now

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amounts to 620 million m3/y, while the fellings equal to 469 m3/y (Forest Europe 2011). There are signals that due to the high stocking, European forests are becoming more vulnerable to natural disturbances (Schelhaas et al. 2003; Seidl et al. 2011). Thus, the state of the forest has changed significantly over time. Forests currently at a certain age contain much more wood than a comparably aged forest in the 1950s. Furthermore, the forests of Europe have aged over time as well. Vilén et al. (2012) show an ageing forest since the 1980s, whereas Nabuurs et al. (2013) show that this ageing forest portrays the first signs of a declining increment, and a declining carbon sink. Climate change Even given a high uncertainty, climate change may alter site suitability for species and provenances, influencing the whole forest ecosystem, most severely in the Mediterranean. Up to now however, the impacts seem modest, and have mostly resulted in an increased productivity. In the long term however, climate change may also have large, potentially negative economic impacts on the forest sector (Hanewinkel et al. 2012). Even when projected impacts of climate change vary a lot regionally, forest management needs to support the adaptation process either by increasing the natural adaptive capacity (e.g. by enhancing genetic and species diversity) or through targeted planned adaptation measures (e.g. introducing an adapted management system or other species [Bolte et al. 2009]). Up to now it is highly uncertain how to carry out these adaptation measures, and how to implement them in the field (Lindner et al. 2010; Lindner et al. in press). Socio-economics The future management of European forests and forest sector has to meet a number of challenges, among them coping with the high fragmentation of private forest ownership (16 million forest owners in the EU), the sluggish demand under the current economic crisis, the creation of innovative products and, with it, the optimization of the value-added chain, and the challenge of meeting the expectations for an increasing role of the forestry sector in the bio-economy like that described in the chapter by Roberts and Nikolakis (this volume). The financial crisis which started in autumn 2008 and the subsequent economic consequences have led to a significant decrease in demand for certain wood products, notably some paper commodities (Figure 12.1). The production declined by more than 20 percent, and the long-term recovery, of which the start seemed visible in 2010, was followed by further decline. As Cohen describes in his chapter, this is leading to structural change in forest firms and encouraging them to consider firm transformation.

156 Nabuurs et al. 106 Production (million tonnes/y)

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Figure 12.1 Production of paper and paperboard in Europe 2008–2013 (UNECE FAO 2013)

This downturn, and at the same time the increasing demand for bio-energy, gives rise to a fundamental shift within forestry and the forest industry sectors. Never, since the oil crisis in the 1970s, have the forest products markets experienced such a downturn. In response, some countries have implemented economic stimulus packages to tackle the crisis and to promote a move towards a greener economy. But the challenge here is not to move only in a direction of biomass burning (with carbon debt issues, and little added value), but to achieve a cascading approach with multiple positive effects, and high quality products and employment. Even though the forest industry is very much preparing for this move, the sector currently plays a small role with a share in European GDP of ~2 percent. Figure 12.2 shows that even when a large proportion of land is covered by forests, a national forest sector contributes to GDP only some 3–4 percent. This is partly because of highly fragmented forest ownership with on average the size of a private forest holding of 2.7 ha. However, a wealth of downstream effects emphasizes its importance in the European economy beyond the sectoral boundaries, which leads to a higher share if a broader definition of the forest value chain is adopted (e.g. including construction, transport, packaging, bio-energy). Fulfilling wood demand in a multi-functional forest: balancing with services European forest management is characterized by its multi-functionality. At various scales from stands to landscape and nation, either a more integrated approach is applied, or a more segregated one. Biodiversity conservation, recreation, carbon sequestration, and water protection are functions and services that can be achieved alongside wood production (Farrell et al. 2000; Kraus and Krumm 2013). However, a direction

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Figure 12.2 Relation between land covered by forests nationally (FOWL: Forest and other wooded land), and the contribution of the forest sector to national GDP (data from Forest Europe 2011)

towards segregation of the biodiversity function seems to be becoming mainstream, for example, from 2000–2010, the amount of protected forest areas has increased by 12 percent to around 30 million ha in Europe. Around 22 percent of this protected area falls under rather strict regulation (no or minimum intervention), the rest falls under actively managing biodiversity with minor restrictions on forest management (Forest Europe 2011). The above mentioned biodiversity is only one service that is being provided. A thorough understanding of the mutual influence of forest functions (water, landscape, carbon sequestration), and how they dynamically influence each other under alternative management, does not exist. Rather broad overviews do exist (Maes et al. 2011), as well as many options on how to develop a market, and payment schemes (Landell-Mills and Porras 2002) like those reviewed in the chapters by Brand and Singh, and by Wunder et al. (this volume). The broad overviews usually combine landscape or forest characteristics with knowledge or simple modelling tools for that function, for example, as in Figure 12.3 for air quality (where simple forest area and density at NUTS-3 level is translated to vertical wind velocity). These exist for the total European scale down to detailed landscape analysis. However, very few of these dynamically assess these services against forest management alternatives, the state of the forest, or the trade-offs with wood production, the exceptions being made locally in integrated landscape level models (Nelson et al. 2009, Gulickx 2013) or optimisation tools.

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Legend Deposition High Medium Low

Figure 12.3 One environmental service: air quality regulating service as depicted by dry deposition velocity (from Maes et al. 2011). The darker the shading, the more vertical velocity of pollutants is measured. This vertical velocity is mainly caused by trees

Available outlooks and incorporation of environmental services The UNECE and FAO produce outlook studies on the European forest sector on a regular basis. The first study was published in 1953 and was initiated to gain insight in how a recovery of the European forest after over-exploitation during the two world wars could be reconciled with the anticipated increased demand for roundwood in the post-war reconstruction phase. Since then, outlooks have been produced in a roughly ten-year cycle. Later these were referred to as European Timber Trend Studies, abbreviated as ETTS I to V. Each of these studies had the aim to give an overview on current status and trends in forest resources, consumption of wood products, forest industry and trade; and to provide an outlook for the following decades on how the forest sector would develop, with emphasis on the wood balance: how much wood does the industry need and where

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can we get it? Can the forest produce such quantities, can or should wood be imported, and how should policies influence these developments? Over time, the role of and attention to non-wood goods and services from the forest clearly changed. In ETTS I (UNECE/FAO 1953), a decrease in annual removals from the forest was expected to allow the forest to recover from over-exploitation in the war years before, and because Europe lost about nine million ha of forest land to the USSR. Part of the suggested solution to keep removals on an adequate level was to bring virgin forest into exploitation, although part of those should be reserved for research purposes. Soil protection is mentioned to be an issue only in a very small area of the European forest, in the context of potentially limiting supply. ETTS II (UNECE/FAO 1964) mentions a considerable area in Europe where management objectives are primarily or partly concerned with protection, or amenity facilities or grazing, and where wood production is a secondary objective. This causes the (wood) products from these forests to be much more costly than from forests with timber production as the primary objective. Properly associating the costs to these functions might “lead to a worthwhile contribution from these forests towards meeting the impending European deficit.” Although ETTS III (UNECE/FAO 1976) still lists demand for non-wood functions as one of the factors that limit the supply from the forest, there is more recognition for the other functions that forests fulfil than before: wood as a raw material “serves society in a number of important ways even while being grown.” It mentions a shift during the past decade towards more concern for the environment, and a faster increase in demand for other goods and services the forests provide than for wood itself. It recognizes there are possible conflicts between wood supply and other functions of the forest, but hopes for increased dialogue and education of the general public to “gain public and political acceptance of wood production within a multiple-use framework.” However, in a Delphi-type of enquiry, the majority of national respondents thinks that the general public cannot be convinced that management for wood production is largely consistent with management to provide other functions of the forest, with the perceived result that “clearfelling will be severely restricted, with selective felling the usual practice wherever satisfactory regeneration allows, and emphasis will be given to a broader mixture of tree species, some of which need not be commercially useful, but which ensure the maintenance of site productivity.” This in opposition to a more segregative option where part of the forest is managed on a multiple-use basis, and more intensive forestry management can be practiced in the remaining forest. Furthermore, it is forecast that Nordic countries will see an increase of their unexploitable forest area due to reclassification of forest land for other uses, and the expectation is that this trend will be followed by other countries in Europe, except southern Europe. ETTS IV (UNECE/FAO 1986) (again) notes a change in people’s attitude to the forest and their demands upon it, especially for recreation and nature

160 Nabuurs et al. conservation and the landscape. For the first time, a whole chapter is dedicated to the outlook for non-wood benefits. It notes the difficult situation for the decision makers who have to choose between increasing wood production “from the point of view of the adverse balance of European wood supplies” and “the growing demand for environmental and recreational services from the forest.” It expresses the view that agreement can be reached on areas dedicated to intensive wood production and other forests entirely dedicated to conservation, but does not rule out perhaps intensified conflicts between different interest groups. ETTS V (UNECE/FAO 1996) is dedicated to the supply and demand of roundwood and forest products. It takes into account recycling, energy and trade issues, and the effect of demand for non-wood goods and services on wood supply. It does not cover the outlook for non-wood goods and services, which was announced to be the subject of another study. However, this separate study was never started. The next study was renamed the European Forest Sector Outlook Study, abbreviated as EFSOS (UNECE/FAO 2005), to reflect the development of the study series to include all of the main products and services that are supplied by the forests. It used the modelling tools EFISCEN and EFI-GTM for the first time, but only one iteration is done between the models. It notes an increasing importance of non-wood goods and services and estimates it to be at least as important as wood provisioning. It also states that “the management of forests in Europe has followed a gradual and long-term trend towards management for objectives other than wood production.” With regards to forest services, EFSOS II (UNECE/FAO 2011) mentions protecting and enhancing forest biodiversity; mitigating climate change; and achieving and demonstrating sustainability among the main policy challenges. An additional policy challenge mentioned is supplying renewable energy, instigated by European Union targets in this field. Forest resource projections are evaluated not only in traditional wood resource terms anymore, but include a first attempt to provide indicators on carbon sequestration, biodiversity and recreational value. Also the scenarios laid out in the different studies reflect an increasing role of non-wood goods and services. Except for EFSOS II, all studies have a low and high economic growth scenario (although termed differently in some studies), affecting the demand for wood products. Most studies have only one supply forecast, but ETTS III gives a quantitative estimate of how different developments would influence the supply level. ETTS V includes some qualitative scenarios of which one is a “Deep Green Future,” with up to 20 percent of the forest area managed for biodiversity conservation, severe limitation on clearcuts, increased use of mixtures and indigenous species, and proper accounting of non-market goods and services. EFSOS I qualitatively describes a conservation scenario, featuring an “accelerated shift towards environmental enhancement and conservation of forest resources in the future, driven by an increase in public awareness of and demand for

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environmental benefits and supported by policies.” EFSOS II includes, apart from a Reference scenario, the quantified policy scenarios Maximising biomass carbon, Promoting wood energy, and Priority to Biodiversity. There is an ongoing discussion, how to satisfy increasing demand for wood for energy alongside traditional uses, while addressing multi-functionality. The latest European Forest Sector Outlook Study (EFSOS II 2011) projects a rising share of woody biomass use for energy production, which implies a tightened competition for wood resources. This results in a very delicate balance between undercutting and overcutting of the annual increment. According to the related projections taking into account mobilization of other wood resources and recycling as well (Mantau et al. 2010), already before 2030 there will be an under-supply of domestically produced woody biomass, most likely counteracted by increased imports, or corrections in the market. Thus, visions of ample wood supply versus a very tight balance change in time through the various projections. Nabuurs et al. (2006) combined European scale trends which became apparent in the early 2000s. A rather high demand (for bio-energy) was combined with a forest set aside for nature conservation policy and an unwillingness of owners to harvest (through an assumed carbon payment). This resulted in a predicted shortfall in wood supply of 185 million m3 per year by 2060 (Figure 12.4), mostly in coniferous wood. More recent shortfall estimates are lower, assuming increased mobilization of harvest residues, and recycling (EFSOS II). Especially, coniferous wood will be in shortfall, as the trend in forestry is towards favoring deciduous forests. However, shortfall projections are very sensitive to assumptions in future energy efficiency, and share of wood energy in total renewable energy production. Furthermore, the intense global trade in current times is foreseen to cover any gap, even though demand is also increasing in China. Unless action is undertaken, an increased gap between domestic supply and total demand would likely be filled through imports of biomass, most likely from North America, South America and Russia (Heinimo and Junginger 2009). The ecosystem services seem to be less in the picture again (with payment schemes failing), and the recovery from the economic recession is at the forefront, with the role that the forest sector should play in this. The fast increasing imports are being debated with respect to their side effects on land use and primary forest in the tropics and carbon debt aspects (Zanchi et al. 2011). Trying to minimize additional imports into Europe implies the need for: (a) increased domestic wood mobilization from some forested regions under more rational and commercially interested forest owners; (b) extension of areas for wood production (incl. plantations and short-rotation coppice forests; and/or (c) an optimized cascade use through the value chain. Option (b) was recently tested in the form of a scenario where it was assumed that part of the European forest owners would be interested to convert their deciduous forest (at final felling) to a plantation-like forest.

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Figure 12.4 Development of the shortfall in supply over time from European forests under a high demand scenario, and a set aside policy and carbon payment scheme (Nabuurs et al. 2006)

Net annual volume increment (m3/ha.y)

The conversion towards coniferous plantations as implemented was a slow process, and could not keep pace with a high demand scenario. It yielded an additional ~10 million ha of coniferous fast growing forest in 60 years, and an additional coniferous harvest of 88 million m3/y by 2065 (or 18 percent). Only in the longer term will this management change (“plantation” and “plantation+” in Figure 12.5) lead to an increase in average increment for the whole of Europe (Figure 12.5). Only after 2045 did the increment start to increase compared to the reference scenario (BAU). 8 7.5 7 6.5 6 5.5 5 4.5 4 00

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Figure 12.5 Average net annual increment of all forests in 25 EU countries under three scenarios

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Conclusions To achieve the envisaged large role which the European forest sector wants to play in the bio-economy, its socio-economic circumstances need to change drastically. Although the processing industry strives for new and different products, the main trend is currently to burn biomass, stimulated by subsidies as confirmed in the chapter by Roberts and Nikolakis (this volume). These policies have stimulated the demand for wood as an energy source and have led to substantial public and private investments in bio-energy and biofuel production from existing forests. So far, forest owners have hardly responded by e.g. higher harvesting levels. Instead, lower qualities roundwood have increased in price and the bio-energy uses compete with uses like panel industry or paper industry. Any possible future shortages in supply are ignored, or are assumed to be compensated by imports. These imports of pellets are rapidly increasing, and originate mostly from US-South, Canada and Brazil. European criteria on solid biomass, certification, and the EU Timber regulation will have to guarantee that these pellets originate from sustainably managed forests and are from legal origin. However, whether the indirect increased pressure (through leakage) elsewhere on global forests is sustainable remains to be seen. It may be better to concentrate on enhanced European forest management, including choices for areas where to increase forest area, or areas where to intensify (and elsewhere where to set aside for nature conservation). However, with the current fragmentation of forest ownership a trend towards more intensive plantations is not likely, and as given in Figure 12.5 does not yield much in the short to medium term. Also, afforestation of abandoned agricultural lands may help, but only some 15 million ha is likely to be abandoned by 2030 (Keenleyside and Tucker 2010). If all of this would be afforested, it would add 9 percent to the forest area base, and would only start producing at the earliest around 2050. It is clear that a full scale role of the European forest sector in the bio-economy will need a more integrated approach, and a full chain improvement (from resource management to cascading of products, high quality uses, and recycling). The outlooks made for European forests in the past have swung from production oriented post-war, to more environmental services oriented, to now probably swinging back to production. These outlooks can be improved a lot. Currently they use core tools from the 1980s, and fail to really take into account all the functions of the forest. Even just proper market analyses, intensively linked to resource tools, based on highly detailed (harmonized) data, with latest new types of data and cross-sectoral services data, do not exist. Even European wide insights in quality and assortments standing in the forest are lacking. This would be a basic prerequisite for a market to properly function. We seem to be far from a wood and forestry sector that can make a significant contribution towards meeting the green economy objectives.

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Acknowledgements This study was done in preparation for the IUFRO 2014 conference. We thank the University of British Columbia for funding the IUFRO task force meeting in August 2013. We thank Ola Sallnäs for providing the core of the EFISCEN model in 1995. We are also indebted to the data providers of the national forest inventory institutes of the EU countries. We thank Joachim Maes of the Joint Research Centre for providing and helping with Figure 12.3. This chapter was partly funded by FP7-Trees4future project (Grant No 284181), FP7-INTEGRAL (282887) and FP7-SIMWOOD (613762).

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Potential for Changes in Growth and Use of EU Forests. Final report. University of Hamburg, Centre of Wood Science, Hamburg/Germany. Maes, J., Paracchini, M.L. and Zulian, G. (2011). A European Assessment of the Provision of Ecosystem Services. JRC Scientific and Technical Report Series. Joint Research Centre. European Commission. EUR 24750 EN. Nabuurs, G.J., Van Brusselen, J., Pussinen, A. and Schelhaas, M.J. (2006). Future harvesting pressure on European forests. European Journal of Forest Research 126: 391–400. Nabuurs, G.J., Lindner, M., Verkerk, P.J., Gunia, K., Grassi, G., Michalak, R. and Deda, P. (2013). First signs of carbon sink saturation in European forest biomass. Nature Climate Change. DOI: 10.1038/NCLIMATE1853. Nelson, E., Mendoza, G., Regetz, J. et al. (2009). Modelling multiple ecosystem services, biodiversity conservation, commodity production, and trade-offs at landscape scales. Frontiers in Ecology and the Environment 2009; 7(1): 4–11, doi:10.1890/080023. Schelhaas, M.J., Nabuurs, G.J. and Schuck, A. (2003). Natural disturbances in the European forests in the 19th and the 20th centuries. Global Change Biology 9: 1620–1633. Seidl, R., Schelhaas, M.J. and Lexer, M.J. (2011). Unraveling the drivers of intensifying forest disturbance regimes in Europe. Global Change Biology 17: 2842–2852. Schlüter, O. (1952). Die Siedlungsräume Mitteleuropas in Frühgeschichtlicher Zeit: Part 1. Vol. 61 (Forschungen zur Deutschen Landeskunde, 1952). UNECE/FAO (1953). European Timber Trends and Prospects. FAO, Geneva. ——. (1964). European Timber Trends and Prospects: A New Appraisal 1950–1975. FAO, New York. ——. (1976). European Timber Trends and Prospects: 1950–2000. Supplement 3 to Volume XXIX of the Timber Bulletin for Europe. FOA, Geneva. ——. (1986). European Timber Trends and Prospects to the Year 2000 and Beyond. Volume I. United Nations, New York. ——. (1996). European Timber Trends and Prospects: into the 21st Century. United Nations, Geneva. ——. (2005). European Forest Sector Outlook Study: Main Report. United Nations, Geneva, ECE/TIM/SP/20. ——. (2011). The European Forest Sector Outlook Study II (EFSOS II). 2010–2030. UNECE/FAO. Vilén, T., Gunia, K., Verkerk, P.J., Seidl, R., Schelhaas, M.J., Lindner, M. and Bellassen, V. (2012). Reconstructed forest age structure in Europe 1950–2010. Forest Ecology and Management 286: 203–218. Zanchi, G., Pena, N. and Bird, N. (2011). Is woody bioenergy carbon neutral? A comparative assessment of emissions from consumption of woody bioenergy and fossil fuel. GCB Bioenergy. doi: 10.1111/j.1757-1707.2011.01149.x.

13 Bamboo and rattan production and the implications of globalization J. Coosje Hoogendoorn and Andrew Benton

Introduction Globalization has been a driving force behind the development of the world’s bamboo and rattan sectors since the middle of the nineteenth century, when rattan was exported in bulk to the affluent countries of the West to produce high-quality furniture. In the last 30 years or so, the world’s bamboo sector has developed rapidly, driven by increasing demand in large national markets such as China and India, itself partly a result of globalization, and by international demand for “green” products that are less damaging to the environment. Recent legislation by some nations to ensure the legality of wood sources also affects bamboo and rattan, and is likely to affect aspects of their international trade. Bamboo and rattan are primarily resources of forest dwellers and smallholders, and the effects this may have on their livelihoods are unclear. This chapter discusses the role globalization has played in the development of the world’s bamboo and rattan sectors, reviews its current status, and suggests how, given the forces of globalization, there is a strong need for renewable materials, and inclusive and green development, which bamboo and rattan can help support in our increasingly interconnected world.

Globalization of bamboo and rattan in a historical perspective Bamboo and rattan are two of the globe’s most important non-timber forest products. Bamboo has traditionally been important for rural dwellers in Asia, Africa and Latin America for whom it has been a source of poles for subsistence use such as shelters and agricultural implements, as well as being used in specific sectors such as incense sticks, and for cultural artefacts such as musical instruments. Over the past 30 years, bamboo has increasingly become an important source of income generation, and in some locations provides a significant proportion of the local economy, such as in Anji and Lin’an in China (Zhu and Jin, 2013). Rattan is a plant of importance for peri-forest dwellers in parts of tropical Asia and sub-Saharan Africa.

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Bamboos are large, woody, grasses that are grown principally for their long, usually hollow stems (called culms) that can be used as whole or sectioned poles and that yield softwood and fiber on processing. Bamboos are sometimes grown for their emerging shoots which in many species are edible. Bamboos are often found as a component of integrated farming or agro-forestry systems, and the International Network for Bamboo and Rattan (INBAR) estimates that they play a significant role in the livelihoods of about one billion people, yet only a tiny fraction derive income from bamboo (INBAR, 2013). Bamboo has often been overlooked in development as, until recently, it suffered from a reputation of only being suitable for low quality and subsistence products, such as agricultural implements and handicrafts. Some sectors have traditionally been reliant on bamboo, for example the incense sticks and sericulture industries in India (Ramanuja Rao et al., 2009; Adkoli, 2002). Bamboo is effective for reducing soil degradation and rehabilitating degraded lands – bamboos have vigorous underground rhizome systems and can stabilize soil, whilst their evergreen nature ensures that soil erosion due to rainwater impact and groundflow is limited (Ben-Zhi et al. 2005). Hence, bamboo and rattan can provide an important component in payment for ecosystem services projects, like those canvassed in Brand and Singh’s chapter, and the chapter by Wunder et al. Rattans are climbing palms that grow in tropical rainforests, and that yield flexible softwood poles on harvest. Rattans are also sometimes grown for local consumption of their edible shoots and fruits, but are primarily used to produce furniture and household utensils such as baskets and trays. The vast majority of rattans are not cultivated but harvested from the wild, and so supply of rattan suffers from similar pressures as the tropical forests in which they grow. By adding economic value to tropical forests when sustainably harvested, rattans may be able to contribute to reducing deforestation pressure on these tropical forests. Although bamboo species are specific to one particular region of the world, there is at least one species that occurs almost globally. Bambusa vulgaris is one of the earliest known bamboos, having been described in 1808 (Anon, 2013a), a very vigorous growing plant that is easy to propagate and can grow in a wide range of soils, and can be used for a wide variety of subsistence uses, though as its culms are not straight, it is little used in modern semi-automated processing industries. The occurrence of B. vulgaris throughout the bamboo growing regions of the world may be an early example of the “globalization” of bamboo, albeit most likely an inadvertent one. Its country of origin is not known, although claims have been made for it to originate in southern China, Madagascar or tropical Asia (Ohrnberger, 1999; Louppe et al., 2008). Bamboo poles, which are hollow inside, were sometimes used by early sea travelers as vessels in which to store fresh water, as well as for parts of the vessel’s superstructure. China and Indochina are known to have used bamboo rafts for sea voyages,

168 Coosje Hoogendoorn and Benton with a traditional Vietnamese method of sealing the bamboo with tree gum to extend its water resisting capacities (Elegant, 1993). In the Kon-Tiki voyage in 1947, in which Thor Heyerdahl recreated a journey from Peru to Polynesia on a traditional balsa wood raft, the sailors carried their fresh water in bamboo culms slung under the deck whilst, in the traditional manner, the raft’s shelter was also partly made from bamboo, and the deck was partly laid with bamboo (Heyerdahl, 1990). A vigorous bamboo such as B. vulgaris might well have been able to survive such a journey and so grow and propagate on reaching land, or may even have been planted by the ancient travelers to supply their settlement needs in the new lands. The origins of the production of rattan products are obscure, but it is thought that production of rattan furniture originated in Indonesia and then spread to neighboring countries of Southeast Asia, and also to Indochina and tropical parts of southern China. Because of its flexibility, rattan was sometimes used on trading ships to keep goods in place on the high seas, and the discovery of a collection of discarded rattan stems at Boston port in the mid 1800s is credited as the impetus behind the US rattan furniture industry, one that focused in its early days on home-produced furniture, using imported canes (Wall, 1994). In Europe in the nineteenth century, trade in rattan products was dominated by the Dutch and the British from their territories, with production of furniture concentrated in Malaysia, Singapore and Indonesia, but with little production in Europe itself. With severely depleted rattan stocks in Malaysia and none in Singapore, Indonesia is now the world’s main source of rattan furniture, supplying approximately 85 percent of world demand. Rattan also came to be a critical part of some surprising aspects of Western culture. Cricket bat handles, for example, were originally made from wood, but as a result of exploration in South Asia, rattan was found to be a more flexible alternative, and today rattan is still used for handles in all good cricket bats (e.g. Anon, 2013b). Although rattan furniture is probably the first widely traded bamboo or rattan product, some bamboo products also found niche international markets early on. The export of Tonkin cane (Arundinaria amabalis) from China to Europe and the USA for rods was the direct result of the expansion of western influences into China in the nineteenth century. Early fishing rods had been produced from split wood, but they warped easily and their tips became damaged. Production of rods using Calcutta cane (variously used to refer to both Bambusa tulda and Dendrocalamus strictus) from India showed the benefits of using bamboo (Simmonds, 1956), and were pioneered in the UK, using two splits of bamboo wood glued together longitudinally. By 1870 the construction of “split-cane” bamboo fishing rods using six splits of “Calcutta cane” bamboo was the norm. Tonkin cane was brought to the market in the USA by fishing rod pioneer the Charles H. Demarets Co. in 1895, and to Hardy’s Co. Ltd. in the UK in 1912 (Simmonds,

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1956). Its elasticity, lightness and strength were found to be a great improvement over Calcutta cane by rod-makers in the West. Tonkin cane also did not suffer from insect boring holes, and had denser wood and a thicker outer layer that made it preferable for rod-making (Wagner, 2006). Supply has continued uninterrupted except between approximately 1950–1970 when trade with China and the West was interrupted and today, the industry provides about 100 million yuan (15 million USD) per year to the local economy of the areas in which Tonkin cane is grown, approximately 60 percent of the total economy (Liu, 2006).

Drivers of bamboo and rattan globalization Globally, recorded international trade in bamboo and rattan products is approximately 2 billion USD per year. The EU-27 is the world’s largest market for bamboo and rattan products, followed by the USA, Japan and Canada. China is the largest exporter, followed by Indonesia, the EU and Vietnam. Raw bamboo and rattan are only exported in small and low value amounts. A lot of value addition and processing happens within a country before a finalized product is exported. While traditional products such as rattan furniture and baskets are still important, engineered products such as plywood and flooring play a major role as well. Figure 13.1 and Figure 13.2 provide insight into the present status of the global market.

USD million

Bamboo charcoal/ pulp/paper 2%, 36 BR raw materials

World export in 2010: 1964

6%, 110 Bamboo shoots 11%, 222

BR furniture/seats 28%, 557

Rattan mats/ baskets/plaits 12%, 238

Bamboo flooring/plywood 19%, 364

Figure 13.1 Global export trade in bamboo and rattan in 2010

Bamboo mats/ baskets/plaits 22%, 438

170 Coosje Hoogendoorn and Benton

Hong Kong, China

Japan

Indonesia

Canada

South Africa

New Zealand

Thailand

Mexico

Russia

Malaysia

Switzerland

Hong Kong, China

Korea

Thailand

Australia

Singapore

Yemen

USA

Singapore

Philippines

China

Vietnam

Canada

EU-27

Japan USA

China

EU-27 0 200 400 600 800 1000 1200

Indonesia

USD millions

1000

South Africa

500

World import in 2010: 1689 USD million

0

World export in 2010: 1964 USD million

USD millions

Figure 13.2 Main importers and exporters of bamboo and rattan products in 2010

Although international trade in bamboo and rattan has a long history and is growing in importance, local and national use and trade also remains important, and even today probably still accounts for the larger proportion of trade in bamboo and rattan. For example, China’s annual exports of bamboo and rattan products was 1.022 million USD in 2010, but its production of bamboo products was 19 billion USD (117 billion RMB) (J. Q. Wu, 2013, pers. comm.). In addition to the recorded formal trade in bamboo and rattan, such as mentioned for China, in many countries there is local informal trade in bamboo and rattan products, for which no figures are available, but which is likely to be larger than the formal trade. It therefore should be realized that the global trade in bamboo and rattan is in fact the – most visible – tip of the pyramid of the total trade in and use of bamboo and rattan in the world. Over the years, a number of factors have helped drive the increasing acceptance of bamboo and rattan products in the international marketplace, some of which are themselves closely related to the inherent characteristics of the resources. Innovation Bamboo mat boards are the earliest bamboo laminates to have been developed. They are produced by pressing together layers of coarsely woven

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bamboo mats with glues as a bonding agent. The first production of mat board was in China in the mid 1940s, where they were used in the interior of airplanes as an alternative to aircraft-grade plywood. Production continues today, but since the 1950s bamboo mat board has been used mostly for road truck floorings and sides, and as shuttering when pouring concrete. Around the same time, research was initiated in India to develop synthetic resin-bonded bamboo mat board, for which the technology became available in India a decade and a half later (IPIRTI, 2000). Mat boards are of very low value, and are not known to have been exported in any quantity from any of the producing nations, although recently Chinese construction companies have started taking them to various African nations for their work there on roads and buildings (J. H. Fu, 2013, pers. comm.). Other types of production innovations have opened up international markets, and developed new value and production chains for bamboo products. Splitting bamboo into thick, long pieces of wood, and then planing them so they have the same cross-section and are flat-sided so they can be laminated together, has opened erstwhile timber-only markets for pre-shaped bamboo boards. Although innovation with laminated bamboo has been carried out in many Asian countries, including China, India, Indonesia, Japan, Laos, Malaysia, Philippines, Taiwan, Thailand and Vietnam, and by the mid 1990s over 30 types of panel products had been developed, it was in China that production started for export markets, and China continues to lead the field today. The county of Anji, near Hangzhou and Shanghai in eastern China, has been at the forefront of the commercialization of innovations in bamboo products since the 1980s, with production targeted to export markets since its inception (Zhu and Jin, 2013). A relatively new and popular development have been the coiled bamboo products – bamboo strips coiled in various sizes of circles on top of each other to build up round solid shapes – such as bowls, cups and plates. Vietnam is a major producer of coiled products, mostly for national and tourist markets. A very versatile product is bamboo charcoal. Due to its anatomical structure bamboo charcoal is more “activated” than wood-based charcoal, which provides it with a high adsorptivity – therefore the charcoal is sold for use in household deodorizers such as shoe soles, and sometimes used as a purification agent during sugar processing. These products are particularly popular on the Japanese market, and mainly produced in China. In addition to China, other Asian countries also experimented with bamboo charcoal, mainly for household energy purposes in areas where a lack of wood was starting to appear. INBAR supported more recently the use of bamboo charcoal pressed into briquettes for household energy in sub-Saharan Africa, where 90 percent of the population cooks on biofuel, which is a major contributor to deforestation (INBAR, 2013). A profitable new offshoot of bamboo charcoal product development is the rising

172 Coosje Hoogendoorn and Benton Table 13.1 Innovation in bamboo in China and its relevance for globalization Period

Stage

State of the art products in this period

Globalization notes

1980– 1985

Pre-industrial processing

Culms, fresh shoots, brooms, baskets, farm implements, traditionally made paper and furniture, medicines.

The early period of private commercial development in China, first production testing for acceptance in overseas markets.

1985– 1992

Primary industrial processing

Plybamboo, flooring, window blinds, processed shoots, construction boards.

Production geared to overseas markets, taking advantage of “innovation.”

1993– 1998

Rapid industrial processing expansion

Laminated furniture, bamboo-wood composites, bamboo charcoal, bamboo particle board.

Innovation drives market acceptance, production and export.

1999– 2005

Continuing expansion

Pressed bamboo, bamboo veneer, bamboo fiber and textile products.

Global market chooses green bamboo – increasing concern for the environment in consuming countries helps enhance markets for bamboo products.

2005– present

“Green” – production commences

Bamboo biomass fuel pellets, bamboo/plastics composite panels, decorated flooring.

First use of certification, chain of custody. Producers expand the range of flooring products and expand to the more lucrative laminated furniture production.

Source: Zhu and Jin, 2013

popularity of Bamboo hookah charcoal – which reached the market two years ago, and which is now exported from China to, for example, the Middle East and the USA. Rattan has seen less innovation, but laminated rattan, commercially known as “Permacane,” can be treated as if it is timber and for cladding, and is being produced in the Philippines where it was developed (Anon, 2013c). Researchers in Italy have shown that pieces of rattan that have been heated under pressure, during which calcium, carbon and phosphates are added, are excellent artificial bones in trials with sheep, as its structure and porous nature are akin to bone, and it seems to have considerable potential as a bone substitute for accident victims and sufferers of bone degenerative diseases (BBC, 2010).

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Role of awareness Bamboo is native to Asia, Africa and Latin America. Rattan is native to Asia and Africa. In these regions, the familiarity of people with bamboo and rattan is high – people have grown up with them, used them in their daily lives – and new products made from bamboo or rattan that reach the market do not need to explain the background of the resources used. However, in many countries where bamboo and rattan are native and part of normal life, the material also may suffer from being linked to the lives of the poor in society. Anecdotal evidence from, for example, China and India indicate that most rural people prefer houses made out of concrete over houses built with bamboo, because the latter are associated with a traditional and above all poor and rural lifestyle, while a concrete house is a symbol of wealth. Outside of bamboo-growing areas, for example in North America and Europe, products made out of bamboo and rattan are considered exotic, and when used for products which traditionally are made of different resources, consumers need extra background information. For example, a recent study in Switzerland on bamboo clothing revealed that Swiss interviewees wanted a good explanation as to why bamboo should be used in place of the traditionally used resource, in this case cotton. However, when bamboo was used to produce garments with innovative and modern designs, then these products were well received (Seffen et al., 2013). Media reports indicate that general awareness of bamboo seems to be increasing amongst the affluent buying public of the West. Newspapers such as the New York Times and the Guardian have featured stories on bamboo as an agent for sustainable development in the past year, in contrast with reporting in the 1980s, when media attention on bamboo was focused primarily on the Giant Panda eating bamboo. The increasing range of bamboo product types in the affluent markets – particularly flooring boards and kitchen utensils such as laminated bamboo chopping boards, and laminated furniture produced specially for well-known companies such as IKEA – indicate an increasing market acceptance and enthusiasm for bamboo in particular. International attention for sustainable development The Rio conventions of the early 1990s emphasized sustainable development, integrating people, planet and profit. One of the results of the increase in attention for sustainable development was the decision in 1997 to establish the International Network for Bamboo and Rattan (INBAR), as the intergovernmental organization focusing specifically on bamboo and rattan for sustainable development. It was the result of long-term international collaboration that commenced with regional workshops in Asia on rattan (in 1979) and on bamboo (in 1980), organized and supported by the International Development Research Centre (IDRC). As a result of the success of these

174 Coosje Hoogendoorn and Benton workshops and the interest garnered, IDRC continued to invest in research for development on bamboo and rattan under its Asia Forestry Programme throughout the 1980s and into the 1990s. In 1993 the International Network for Bamboo and Rattan was established by IDRC as a time-limited project. In 1995 discussions started to make it an independent intergovernmental organization, and it became so in November 1997, hosted by China. INBAR is dedicated to improving the livelihoods of the producers and users of bamboo and rattan, within the context of a sustainable natural environment. It connects a global network of partners from the government, private and non-profit sectors in over 50 countries to promote sustainable development with bamboo and rattan by consolidating, coordinating and supporting strategic and adaptive research and development. One of INBAR’s major advantages as an international organization is that it is able to share experiences and skills across national boundaries, and across regions of the world, too, thereby enhancing innovation, international cooperation, in particular South–South collaboration, investment and trade in bamboo and rattan throughout the world. INBAR is also the International Commodity Body of the Common Fund for Commodities, an agency established under the auspices of UNCTAD to focus on a value chain approach to the development of the world’s most important agricultural commodities. Policies and programs A number of countries have developed bamboo-specific policies and programs to promote the bamboo sector in their nations, including exports. China has been at the forefront of this in terms of developing its bamboo sector. The most recent National Bamboo Business Development Plan 2011–2020 is an informative example of a national level bamboo program. It includes the following proposed actions and expected results by 2020 (Anon, 2012): • •

• • • • •

Development of bamboo resources. Development of 160,000 ha of new bamboo shoots plantations and conversion of 200,000 ha of existing bamboo plantations to shoots production, using 24 specified species. Development of 340,000 ha of bamboo plantations for pulp, and conversion of 290,000 ha for pulp, using 12 specified species. Development of 200,000 ha of new plantations for culm production, and conversion of 1.5 million ha also for culms, using 11 specified species. Establishment of 411 nurseries to supply planting material, and improvement of 242 existing ones. Development of bamboo processing industries. Processing industries of bamboo shoots processing, pulp, laminated boards, flooring, household items, fibers, drinks, handicrafts, charcoal, to be developed (no further details given).

Bamboo and rattan production • • • • •

175

Enhancing planning and implementation support system. Enhancement of scientific and technological support systems. Enhancement of raw materials and products market support system. Further development of standards and quality control systems. Development of bamboo sector information system.

At the landscape and rural development level, China’s recognition of the need, and long-term commitment, to reduce deforestation and land degradation is illustrated by its long history of regulations and activities that focus on this issue. Since 1949 conversion of steep slope land to agricultural productivity has reduced timber production and caused large-scale erosion. Six million ha of land steeper than 25 percent were deforested between 1949 and the mid 1980s. Along with rapid economic development and increased awareness of the urgency for environmental protection and sustainable development the government of China, at the turn of the twenty-first century, started its investment in forestry for ecosystem protection and rehabilitation, including bamboo. Of the six large national forestry programs that were launched formally by the central government in 2001, four include bamboo: • • •

•

National Programme on Natural Forest Protection. National Programme on Converting Slope Farmland to Forests (farmland retirement scheme). National Programme on Protective Shelterbelt Development in the “Three-north” (northeast, northwest and central north) and along the Upper and Middle Reaches of the Yangtze River. National Programme on Establishing Fast-growing and High Yield Commercial Plantations.

Together, these have encouraged the development of cultivation of bamboo, amongst other wood-producing crops, on significantly increased areas of land. In 2010, China produced 4.1 billion bamboo culms, 1.66 million tonnes of processed bamboo shoots, 3.58 million tonnes of laminated boards, 1.1 million sq meters of laminated floorboards, and earning a total of 117 billion RMB (19.3 billion USD) for the economy (J.Q. Wu, 2013, pers. comm.). There are other countries that have also developed national programs for development with bamboo and/or rattan, including: •

•

Ghana, where the government established the Bamboo and Rattan Development Programme (BARADEP) under the Ministry of Lands and Natural Resources, which now supports bamboo- and rattan-based development in the country. India. The National Bamboo Mission (under the Ministry of Agriculture) and the National Mission on Bamboo Applications (under the Ministry

176 Coosje Hoogendoorn and Benton

•

•

of Environment and Forests) have spearheaded bamboo development in India over the past decade. Ethiopia. The Ministry of Agriculture has developed a Bamboo Sector Strategy Framework that will promote the holistic development of the country’s bamboo sector. The Ministry currently runs its bamboo development through its National Bamboo Development Unit. Kenya, Nepal and Rwanda have also drafted national bamboo policies that are at various stages of discussion with their governments.

Policies such as these will provide frameworks for development with bamboo, and are vital as bamboo often is not included in policies covering trees for timber. As has been shown in China, they can be very effective vehicles for mobilizing investment to develop the sector.

New challenges and opportunities In addition to the drivers of globalization described above – innovation, awareness and perception – and policies and programs, both global and at national level, there are new trends and challenges in the world and the bamboo and rattan sector, which could offer both threats and new opportunities for the sectors. Biofuels As part of the growing interest to reduce fossil fuels and to use more renewable fuels, biofuels have captured the interest of the world. The European Union is one of the leaders in the field, with the expressed interest that by 2020, 20 percent of its energy use should be met by energy from renewable resources (Anon, 2013d). However, as the discussions in both the EU and USA about the use of, for example, maize for ethanol production has shown, in a still food-insecure world this should not happen at the cost of food production. The EU therefore has reduced its original target of 10 percent food-based biofuels to 5 percent. Similarly, biofuel production should not lead to deforestation (World Bank, 2007). This is an important factor in, for example, sub-Saharan Africa, where more than 70 percent of the population, and up to 90 percent in rural areas, uses firewood or charcoal as its primary energy source, which is together with logging a primary cause of deforestation. INBAR has investigated with its partners in Africa and in India whether it is possible to use bamboo for primary energy. Since bamboo is a fast producer of biomass, regrows after being cut and grows well on degraded land, its potential for energy has been recognized. However, because of its normally hollow structure, and slightly different anatomy, it needs a few simple processing steps before being able to replace wood based firewood and charcoal. At the same time, these steps, being briquetting and simple stove improvements, also lead to a cleaner and more

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efficient product, which reduces both indoor pollution and amount of resources used compared with the present situation (Hoogendoorn et al., 2012; INBAR, 2013; see also for further background information on forest bioproducts the chapter of Roberts and Nikolakis). In addition to primary energy, bamboo is being investigated for the pellet market, which is very significant in Europe. In 2010, estimated world production of wood pellets was 14.3 Mt, and consumption was 13.5 Mt. The EU is the primary market, producing 61 percent of world production, and consuming 85 percent, where they are used primarily for residential and district heating, and to fuel power plants. East Asia is expected to become the second largest market in the near future (Cocchi et al., 2013). Climate change Carbon market

Total carbon accumulation (tC/ha)

Due to its fast growth, bamboo has drawn attention for its potential for carbon sequestration. Studies have been carried out in particular in China, and with the most widely used bamboo, Phyllostachus pubescens, or Moso bamboo. Figure 13.3, based on the comparison of growth models, shows that Moso bamboo can outperform comparable woody species such as Chinese fir for carbon sequestration under conditions where it is managed, i.e. with regular selective harvest (Kuehl et al., 2011; Kuehl et al., 2013). Based on these studies, China has accepted a national method for voluntary carbon credits, and work is under way to move from this national standard to an international standard that is applicable to more species and accepted by more countries. 120 100 80 60 40 20 0 0

5

10

15 years

Moso bamboo

20

25

30

Chinese fir

Figure 13.3 Accumulated tC/ha by Bamboo and Chinese Fir during a 60-year period – calculated using growth models developed for field situations in Zhejiang Province, China

178 Coosje Hoogendoorn and Benton REDD+ Reducing Emissions from Deforestation and Degradation (REDD) efforts aim to provide economic incentives to leave forests intact. Although the discussions are very complicated, the principles are very simple: the combination of REDD payments and Sustainable Forest Management (SFM) should be more attractive economically than deforestation for the land owner. Both bamboo and rattan can clearly contribute to REDD. However, in order for that to happen they have to be recognized as parts of forests. Up until now the discussions on REDD tended to concentrate on trees, and pay little attention to NTFPs. For example, a survey done by INBAR of published National REDD programs showed that bamboo was only mentioned in 3 out of 16, being Cambodia, Sri Lanka and Vietnam. That doesn’t necessarily mean that bamboo would not be included in any REDD strategies in the other countries, but it does indicate a lack of recognition of its potential. A second hurdle would be that for many REDD strategies, tree cutting and the removal of biomass from the forest is actually considered a non-sustainable practice. For both bamboo and rattan selective harvesting of the stems doesn’t kill the plant, and fosters regrowth which leaves the total amount of standing biomass and carbon intact. Since sustainable selective harvesting provides income to the farmers, which in addition to the payments for REDD will provide incentives to keep the forest rather than to cut it or let it degrade, sustainable biomass removal has to become included in future REDD strategies for bamboo and rattan to be able to realize their potential to combat deforestation (see a.o. Hein and van der Meer, 2012). Climate change adaptation Apart from mitigation of climate change, adaptation to climate change is considered of major importance. In addition to generally higher temperatures in the world, one of the major challenges is expected to be adjustments to more frequent and more serious climate extremes such as heatwaves, floods and droughts. INBAR and partners are currently investigating the use of bamboo for the construction of more flood resistant housing in Latin America. Guadua angustifolia, the best known bamboo species in the region, is particularly good for construction and is seeing a revival of use, in particular for affordable flood resistant homes for poor families, due to its wide availability and its qualities for construction – its flexibility provides buildings with, for example, wind and earthquake resistance. In Nepal and Ethiopia INBAR is piloting using bamboo as the frame to build affordable water tanks, to provide a coping strategy for droughts (Adhikary et al., 2013).

Certification In today’s world consumers almost expect that quality products have a green label. However, certification has become something of a double-edged sword.

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On the one hand it is relatively easy for a green industry such as forestry to switch to sustainable production methods, on the other hand, often for forestry industries and certainly the bamboo and rattan sector the greatest costs are not so much switching to sustainable practices, but actually the costs of the auditing, while the difference between certified and non-certified in management practices is actually very small. Bamboo forests have been certified, mainly through the Forest Stewardship Council (FSC), since 2006, and certified forests could and can be found in countries such as China, Colombia, Nicaragua and Bolivia. However, expected positive effects on price have not been realized yet, and therefore several certification schemes have been abandoned, most notably the county level FSC certification in Lin’an in China. The bamboo private sector is divided on how to continue at the moment, and much will depend on market forces (Buckingham et al., 2009). Rattan only saw its first certification in 2011, for what is now a 4,000 ha forest in Laos. The strength of this scheme is that there is direct involvement of a major buyer, in this case the global furniture company IKEA (for further background information see also the chapter by Hildeman and Carlsson), which may result in a more reliable value for money scenario for the forest dwellers involved.

FLEGT/LACEY Important developments in the last years have been the introduction of the FLEGT scheme (Forest Law Enforcement, Governance and Trade) (Anon, 2013e) and the EU Timber regulation (EU-TR) by the European Union and the Lacey Act since 2008 by the USA. Both – in their own way – aim to stop illegal trade in forestry products, by putting measures in place to stop the entry of such products into the EU and the USA. Up until now, neither the FLEGT nor the Lacey regulations affect rattan products. Both Lacey and FLEGT do affect trade in bamboo products, as shown in Table 13.2. Since these are products that are among the more popular ones for international Table 13.2 Overview of bamboo products affected by FLEGT and/or Lacey. Countries that have agreed a VPA (Voluntary Partnership Agreement) with the EU do not need to supply separate certificates with export shipments for those products included in the agreement HS Code

Description

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180 Coosje Hoogendoorn and Benton trade, this development is followed with great interest by the private bamboo sector. There is an ongoing discussion with the EU Commission officials about whether bamboo should be included in FLEGT and more in particular in the EU-TR, since FLEGT is officially targeted at timber, and not at NTFPs, and since when discussing paper products within the EU-TR, bamboo based paper and pulp are specifically excluded (Anon, 2013f).

Global policies The global discussions around green production, including forestry, are heating up. The developments described above, on biofuels, climate change, certification, legal requirements by major markets such as the EU and the USA, are all significant indicators that green credentials are becoming more and more important, in line with the discussions that started around global sustainable development in the late twentieth century as mentioned earlier. In general the publication in 1987 of the Brundtland report “Our Common Future,” is regarded as the start of this process. Other important milestones were the adoption of Agenda 21 at the first SD conference in Rio de Janeiro in 1992, which brought forward the three pillars – People, Planet and Profit – of sustainable development. In 2000 the launch of the Millennium Development Goals provided measurable goals for sustainable development. The importance of dealing with the threat of climate change was recognized in 2007 when Al Gore and the IPCC were awarded the Nobel Peace Prize. Twenty years after the first conference in Rio de Janeiro “Rio+20” adopted the report “The future we want” which was an important milestone for the work within the framework of the United Nations towards a new set of Sustainable Development Goals, to be adopted for the post-2015 development agenda, and which will differ from the SDGs because they are envisaged to be focused both on inclusive and green growth, while the MDGs have a strong focus on poverty reduction, and because they will be applicable to all countries of the world, not only to the developing ones, as was the case for the MDGs (Loewe, 2012). While this process is still in progress, it is clear that for forestry in general, and certainly for community friendly and highly renewable bamboo and rattan, this opens up more opportunities – the important issue facing the sector is how to seize these opportunities, taking into account that compared with forestry as a total, both the bamboo and rattan sector are small ones.

Resources for the future We have shown in this chapter that bamboo and rattan have a long history of global trading. While some products that were traded internationally already 100 years ago, such as rattan furniture and Tonkin fishing rods, are still popular and representing a significant trade across the globe, many new products have now also become popular, such as flooring and panels.

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The international trade has served as an engine for the whole sector, inspiring also local markets, and hence we are now seeing value chains that are firmly established, and provide an estimated 30 to 50 million people with employment and many subsistence farmers some additional income. Today’s and tomorrow’s world require a global, inclusive and green economy. As also highlighted by Cohen (this volume), this provides opportunities for forests in general, and in particular for bamboo and rattan, because they are both renewable and available to rural communities in the global south. However, there is a real danger that the potential of bamboo and rattan to make a contribution to inclusive and green development may not be realized. At the moment they are still “fringe” commodities, which are usually clubbed together with timber. While to some extent this is positive, because there are many similarities between bamboo and rattan and timber, and it doesn’t make sense to reinvent the wheel. On the other hand the specific characteristics of bamboo and rattan need to be recognized to allow them to make their full potential contribution, of course in synergy with the contribution that timber can make to green growth and development. A good example of these similarities and differences are the discussions about REDD+. To encourage small farmers and forest dwellers to leave the forests intact, REDD+ payments will need to be combined with sustainable extraction practices, for which bamboo and rattan are optimally suited, but presently in many REDD+ scenarios this would not be acceptable because in many scenarios no biomass is allowed to be removed from a forest under REDD+. We therefore argue that to realize the potential of bamboo and rattan to an inclusive and green economy, a set of special recognitions and policies are needed. INBAR and its partners are working on some of these, such as those related to climate change, and FLEGT and the Lacey Act. So what would the bamboo and rattan forests of the future look like? How will they be different from the forests of yesterday and today? Sustainable rattan extraction could be a significant contributor to income generated from forests that fall under REDD+ in those regions where rattan can be found. Because REDD+ or similar ecosystem service payment systems are likely to become more important, this would help to develop the rattan value chain, since rattan will not be the only source of income from such forests, but can be combined with income from other non-timber resources from the forests, as well as the REDD+ payments. If the supplies of rattan to the processing industry for the national and the global market will not be regulated by export bans, but by requirements for legality and compliance with policies for sustainable forest management, the rattan from these REDD+ forests should find a relatively easy market where the price would be determined by the quality, and not by market distortions. The bamboo forests of the future would probably include more plantations, in particular on degraded land, for carbon sequestration, for restoration, and for large-scale production of woody biomass. This is in the

182 Coosje Hoogendoorn and Benton same way Luis Neves Silva (this volume) conceptualizes New Generation Plantations, which can help achieve goals such as zero net forest loss. To a large extent these plantations will be found outside the forests, and it will be interesting to see whether these plantations would be managed by communities or by large-scale forestry enterprises. If most comparable wood plantations would be grown under some form of certification, these bamboo plantation forests would also be certified, simply to be able to enter the market, not necessarily to attract a premium price. In addition there would be REDD+ bamboo forests, where sustainable bamboo extraction will be one factor contributing to the income generated by communities, in addition to income from other sources, and payment for ecosystem services, in a similar manner as was described for rattan above. These forests will be less likely to be mono-species forests than the earlier mentioned plantations. Such bamboo and/or rattan forests and bamboo plantations will only be economically feasible if there are global and national policies in place, specifically for bamboo and rattan, that recognize and reward their specific strengths as renewable and pro-poor commodities. Since the world is now embarking on setting the SDGs, INBAR and partners have an important task to provide the necessary inputs in the global discussions to ensure that the new policies are bamboo and rattan friendly, and will allow the further inclusive and green development of these value chains, from the local and national level to the global level.

Acknowledgements We thank our many current and past INBAR colleagues who have offered information and advice during the preparation of this chapter, including Jin Wei, Oliver Frith, Wu Junqi, Fu Jinhe, Yannick Kuehl, Li Zhiyong, I. V. Ramanuja Rao, Claire Parfondry, Lou Yiping, Huang Shineng and Alvaro Cabrera.

References Adhikary, N., Ervin, B., Nelson, K., Dahagama, A., Piya, S. and Frith, O.B. (2013). Transporting, Storing, Filtering Water Using Local Resources: A Design Manual. INBAR Working paper 72, INBAR, Beijing. Adkoli, N.S. (2002). Study of the Use of Bamboo in the Sericulture Sector of South India. Working paper 38, INBAR, Beijing. Anon (2012). National Bamboo Development Plan. State Forestry Administration, China. (in Chinese). ——. (2013a). www.tropicos.org/Name/25509331?tab=references. Reviewed 03 September 2013. ——. (2013b). www.handmadebats.co.uk/store/index.php?route=information/ information&information_id=7. Reviewed 14 September 2013. ——. (2013c). www.yrezabal.com. Reviewed 24 September 2013. ——. (2013d). http://ec.europa.eu/energy/renewables/targets_en.htm. Reviewed 22 September 2013.

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——. (2013e). http://wwf.panda.org/what_we_do/where_we_work/greatermekong/ our_solutions/projects/sustainablerattan/news/?208889/EU-market-demandsmore-green-rattan-products-from-Laos. Reviewed 29 October 2013. ——. (2013f). www.nepcon.net/4981/English/Certification/Timber_Legality_ assurance/The_EU_Timber_Regulation/Which_products_are_regulated/ Products_covered_by_the_EU_Timber_Regulation. Reviewed 22 September 2013. BBC (2010). Turning Wood into Bones. http://news.bbc.co.uk/2/hi/8446637.stm. Reviewed 23 August 2013. Ben-zhi Z., Fu Mao-yi, Xie Jin-zhong, Yang Xiao-sheng, Li Zheng-cai. (2005). Ecological functions of bamboo forest: research and application. Journal of Forestry Research, 16(2): 143–147. Buckingham, K.C., Lou, Y.P. and Hoogendoorn, J.C. (2009). How can bamboo certification contribute to sustainable bamboo management? In Buckingham, K. C., Henley, G. and Lou, Y.P (eds), Certification of Commodities: Opportunities and Challenges for the Rural Poor. Proceedings of the ICB-CFC International Certification Workshop, Beijing, China, 2 April 2009. Cocchi, M., Jacobson, J., Ovard, L., Deutmeyer, M., Marchal, D., Thran, D., Hennig, C., Heinimo, J., Nikolaisen, L., Schouwenberg, P.P., Bradley, D., and Hess, R. (2013). Wood pellet market and trade: a global perspective. Biofuels, Bioproducts and Biorefining, 7: 24–42. Elegant, S. (1993). Profile: Tim Severin – Irish explorer sets sail for US on bamboo raft. Far Eastern Economic Review, 156/22: 78. Hein, L. and van der Meer, P.J. (2012). Current Opinion in Environmental Sustainability: 4(6) 604–611. Heyerdahl, T. (1990). Kon Tiki: Across the Pacific by Raft. Simon & Schuster, London. Hoogendoorn, J., Wu, J., Rao, I.V.R., Motukuri, B., Cabrera, A., Lou, Y., Kuehl, Y. and Subramony, T.P. (2012). Bamboo’s contribution to a pro-poor, green economy. In Forests for Sustainability (D.N. Tewari, Ed.), Ocean Books, New Delhi, India, pp. 121–145. INBAR (2013). Annual Report 2012. INBAR, Beijing. IPIRTI (2000). Bamboo Matboard – Transfer of Technology Model. INBAR, Beijing. https://www.google.ca/search?q=Bamboo+Mat+Board+Technology&rlz=1C1 LENP_enCA575CA575&oq=Bamboo+Mat+Board+Technology&aqs=chrome..69i 57.397j0j4&sourceid=chrome&es_sm=93&ie=UTF-8#. Reviewed 10 August 2013. Kuehl, Y., Henley, G. and Lou, Y.P. (2011). The Climate Change Challenge and Bamboo: Mitigation and Adaptation. INBAR Working Paper no 65. INBAR: Beijing. Kuehl, Y., Li, Y., Henley, G. (2013). Impacts of selective harvest on the carbon sequestration potential in Moso bamboo (Phyllostachus pubescens) plantations. Forests, Trees and Livelihoods, 22, 1: 1–18. Liu, S. (2006). Country Agriculture Farmers Magazine (in Chinese), November 7, 2006. Loewe, M. (2012). Post 2015: How to Reconcile the Millennium Development Goals (MDGs) and the Sustainable Development Goals (SDGs)? German Development Institute (DIE) Briefing paper 18/2012. DIE, Bonn: 4pp. Louppe, D., Oteng-Amoako, A.A. and Brink, M. (2008). Timbers (Vol 1), PROTA: 100–103. Ohrnberger, D. (1999). The Bamboos of the World. Elsevier, the Netherlands, pp. 279–280. Ramanuja Rao, I.V., Kumar, A., Reza, S. and Motukuri, B. (2009). A Pathway Out of Poverty – Bamboo Incense Sticks Production as a Livelihood Options for Rural Women in Tripura, India. INBAR, Beijing.

184 Coosje Hoogendoorn and Benton Seffen, D., Marin, A.W. and Muggler, I.R. (2013). Bamboo: A Holistic Approach to a Renewable Fibre for Textile Design. www.academia.edu/3744098/Bamboo_A_Holistic_ Approach_to_a_Renewable_Fibre_for_Textile_Design. Reviewed 19 August 2013. Simmonds, N.W. (1956). Fishing rod botany; a review. Kew Bulletin 11 (1): 135–140. Wagner, J. (2006). www.wagnerrods.com/history.html. Reviewed 12 August 2013. Wall, J. (1994). The Wakefield Rattan Company. www.wakefieldhistory.org/rattan1. html. Reviewed 12 August 2013. World Bank (2007). Biofuels, the promise and the risks. In: World Development Report 2008 – Agriculture for Development, The World Bank, Washington, USA: 70–71. Zhu, Z.H. and Jin, W. (2013). Presentation at the International Workshop on Integrated Mountain Development, Lin’an, China.

14 What is needed to make markets for forest ecosystem services a reality?1 David Brand and Devyani Singh

Introduction The concept that ecosystems provide real and potentially quantifiable benefits to human society has been accepted for at least 20 years. The Earth Summit in 1992 created an international negotiating framework related to climate change, biodiversity conservation and sustainable development. However, the fundamental problem has been to change the price signals and economic market failures that lead to continuing pollution, loss of ecosystems and depletion of natural resources like fresh water. There have been a number of attempts to introduce solutions to this problem via regulatory approaches, market-based systems and voluntary certification schemes. We review some of these efforts, including markets for sulfur dioxide allowances, EU carbon allowances, wetlands, stream and endangered species mitigation banks, water rights, voluntary certification schemes through commodity round tables, reductions in emissions from deforestation and other forms of conservation finance. Finally, we consider how to ultimately achieve a form of end game where both conservation functions and production functions have economic value, become stable in landscapes and support a truly sustainable economy.

Background to the concept of ecosystem services and pricing of ecosystem services It is well accepted that damage to ecosystems can have negative impacts on human health and social development (Millennium Ecosystem Assessment, 2005). Ecosystems are integral to regulating many global systems including the carbon cycle, climatic conditions, water purification and flow regulation, soil formation, decomposition of waste, and nutrient cycling and storage. Ecosystems also provide the source of food, materials and culture in human society. However, the human population is increasing towards nine or ten billion in this century. The Gross World Product (GWP) reached $80 trillion in 2012 dollars and is doubling in real terms every 25 years. If the world were able to largely eradicate poverty and achieve a global per capita income

186 Brand and Singh of $30,000 by 2050, then we would collectively create a $270–$300 trillion GWP. Impacts on ecosystems and the services that they provide are rising as a result of this inexorable expansion of human society. In the 1990s, the idea emerged in the scientific community that the services provided by ecosystems to human society could be described, quantified and even valued in economic terms. In a 1997 book, Gretchen Daily brought together leading researchers to document the services provided by a range of ecosystems from marine systems to wetlands, grasslands and forests. Costanza et al. (1997) published the first article estimating the commercial value of ecosystems to human society. In this somewhat controversial article the value of all ecosystem services was $33 trillion per annum (against a GWP in 1997 of $18 trillion). Of that, $20.9 trillion was from marine and $12.3 trillion was from terrestrial ecosystem services. Forests represented about 38 percent of the value of terrestrial ecosystem services, primarily via their role in nutrient cycling, climate regulation, raw materials and food production, erosion control, waste treatment and recreation. The Millennium Ecosystem Assessment further considered ecosystem services as including “provisioning,” such as food and fiber; “regulating,” such as climate and fresh water; “supporting,” such as soil formation and nutrient cycling; and “cultural,” such as aesthetics and spiritual values. The report makes some compelling points that human society is not very good at recognizing the negative externalities created as we clear away natural ecosystems and convert them to dedicated production systems. Examples like clearing mangrove forests for prawn farming or destruction of coral reefs have huge costs to wider society, yet occur because of market failures. A further initiative called The Economics of Ecosystems and Biodiversity (TEEB) established under the United Nations Environment Program (UNEP) was presented at the 9th Conference of the Parties to the UN Biodiversity Convention. It continued as an initiative to develop both theoretical and practical mechanisms to incorporate the value of ecosystem services into government and corporate policies (TEEB, 2013). One finding of this work was that the hypothetical net present value of natural forest ecosystems under sustainable management is greater than that of the timber plantations or agricultural systems that they are often converted to (TEEB, 2010). These studies raise important issues. Because our current economic system largely does not incorporate the value of ecosystem services – in other words, the costs of negative environmental externalities are not internalized through regulations correcting market failures – rational economic actors, such as agribusiness or timber interests, will systematically seek to convert natural forests to high production agriculture and forestry plantations. For example, lowland dipterocarp forests in Borneo which have been logged of the most valuable timber species will still hold extraordinary biodiversity value, but will be sold for prices in the order of $500 per hectare for continued timber production. If the same area were

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approved for conversion to oil palm plantation its value would immediately rise to between $2,500 and $5,000 per hectare. Once planted to oil palm and producing crude palm oil, the plantation would potentially be worth $25,000 per hectare. These are the realities of our current economic system and reflect the fact that ecosystems and the services that they provide do not have a commercial value, and therefore they are used wastefully or even treated as having no value. In this chapter we consider the problem of introducing a price for ecosystem services that may lead to some stabilization of the forest frontier or rehabilitation of natural ecosystems. Ultimately, the end game must be some form of landscape-scale integration between production systems such as agriculture and timber plantations and conservation functions represented by natural and semi-natural ecosystems.

Economic foundation of natural resource and ecosystem services pricing In exploiting natural resources, governments usually sell property rights such as private ownership of forest land or forms of forest land rental or leasing arrangements. The buyer then seeks to maximize their return by efficiently harvesting timber or converting the land to higher uses such as an oil palm plantation, soy bean farm or timber plantation. So long as the owner of the land rights can make a profit in excess of the input costs, he or she will continue to produce the optimal amount of timber or agricultural crops. Externalities arise when the maximization or optimization of profit causes negative costs on others (for example, if an upstream landowner who clears forests causes erosion and affects the water quality of a downstream landowner). Under the seminal paper by Coase (1960), the two parties would be expected to bargain, and either the upstream landowner would reduce water pollution by re-establishing riparian zones or other measures, or would pay compensation to the downstream user for the decline in water quality – whichever was more economically efficient. One way or another, this would add costs to the upstream landowner, which would potentially change his or her optimal timber harvest or grazing level. One well known real world example was the decision by New York City to pay landowners in the Catskills to reduce runoff, pollution and sediment as a lower cost way of improving the quality of the water supply, rather than building substantial secondary water treatment facilities (Appleton, 2002). Another frequently cited case is that of a private program in north-eastern France by Vittel (Nestlé Waters). The company financed farmers in the catchment to change their farming practices and technology to avoid nitrate contamination of ground water that was being used for bottling mineral water (Perrot-Maitre, 2006). These forms of payment schemes appear to demonstrate efficient ways to maintain or improve water quality, but have not yet been implemented widely. Many impacts on ecosystem services

188 Brand and Singh however, are not easily solved by bi-lateral negotiation, as they may be caused by myriads of impacts and with costs dispersed over countless individuals. The most difficult problems occur where negative externalities are distributed to a society at large, or even to the international community (for example, the emission of greenhouse gases, the emission of ozone destroying gases, the extinction of endangered species, the creation of anoxic zones from coastal run-off, and so on). In these cases the government often regulates to limit or prevent actions which cause these externalities or makes direct payments to restrict the rights to pollute or cause ecological impacts. Regulation or direct payments to achieve reductions in externalities can be highly inefficient from an economic standpoint. Some sources of air pollution can be reduced much more cheaply than others, and some parties may be better able to conserve endangered species habitat than others (for example, on remote low value properties, rather than in high value exurban land). This has led to a specific class of regulatory instruments that address negative externalities by using market-based mechanisms. We have seen markets for sulfur dioxide emissions trading in the United States, and markets for greenhouse gas emissions, and even markets for mitigating development impacts on endangered species and wetlands. Many of these markets are based on regulating to support the continued provision of ecosystem services. The interesting implication of these market-based regulations is that they also begin to establish price signals for ecosystem services. For example, we can see the emergence of prices for carbon storage in forests, the value of conserving wetlands, and the value of enhancing and protecting riparian zones. The UN-REDD+ (Reducing Emissions from Deforestation and Degradation) policy initiative is an example of an area of concerted effort in recent years (UN-REDD, 2012). The program aims to reduce emissions in developing countries by promoting forest conservation, sustainable forest management and enhancing forest carbon stocks.

Market-based mechanisms – successes and failures In the following section we provide a brief review of a variety of marketbased instruments that range across air pollution, biodiversity and waterrelated issues, and include government regulation, property rights and private sector initiatives. The US Acid Rain Program The United States has been at the forefront of using market-based approaches to regulating environmental impacts. One of the earliest largescale efforts related to the need for reduction in sulfur dioxide pollution. In the 1970s and 1980s the US electricity generation industry was largely based on high sulfur coal, and created widespread sulfur dioxide emissions, which

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ultimately led to the acidification of clouds and rainfall. This in turn caused declining pH in water bodies and direct impacts on higher elevation forests (Bormann and Likens, 1987). The United States Congress passed the 1990 Amendments to the Clean Air Act which aimed to reduce sulfur dioxide emissions from 18.9 million tons per annum to 8.9 million tons per annum in 2010. The program operated by issuing a declining number of allowances to pollute to power plants over time, and these allowances could be traded or banked by those plants who could reduce their emissions below their statutory level more cheaply than the market price. At the start of the program it was thought that the marginal cost of reducing sulfur dioxide emissions would be set by the cost of installing scrubbers, which was estimated at $650–$700 per ton. In fact the market price proved to be lower than estimated because there was a substantial switch from the use of high sulfur coal to low sulfur coal, which was a lower cost solution not foreseen by economists. This highlights the potential benefits of marketbased solutions rather than fixed priced taxes on pollution, as it is thought that market-based systems will find lower or optimal cost solutions to a given policy objective than the government setting a fixed tax rate. The Acid Rain program was initially considered a success, as it led to relatively stable low cost reductions in sulfur dioxide pollution and acid rain from 1994 to 2004. However, it ultimately collapsed as the Bush administration promulgated a Clean Air Interstate Rule (CAIR) to reduce the cap in 2005, which was subject to a successful Supreme Court challenge in 2008, which vacated the scheme (Schmalensee and Stavins, 2012). By 2010, the Obama administration moved to state-based caps as a replacement to the CAIR, which ended the national trading of SO2 (sulfur dioxide) allowances.

Figure 14.1 SO2 Allowance prices and the regulatory environment, 1994–2012. Source: Schmalensee and Stavins, 2012

190 Brand and Singh US wetland, stream, and species mitigation banking Under the Clean Water Act and Endangered Species Act of the United States, public and private developers of land must avoid or minimize impacts to wetlands, streams and endangered species and their habitat. Anyone who ultimately impacts wetlands, streams or endangered species habitat must compensate for those impacts by either enhancing or restoring the ecological function of other areas on the same site; paying in lieu fees to a conservation organization; or by buying credits from third parties who have already restored or enhanced wetlands, streams or species habitat in the same region (known colloquially as mitigation banking) (Madsen et al., 2011). Over the past three decades, government policy has increasingly favored the use of third party mitigation banking as the primary source of compensation for impacts due to its environmental efficacy. This has steadily led to the emergence of a mitigation banking industry in the United States that has established approximately 1700 mitigation banks and which has over $1 billion per annum in credit sales.2 The industry is now sufficiently mature that at least three institutional investment funds with capital commitments of over $300 million have been raised to acquire or develop mitigation banks.3 The mitigation banking industry is interesting because it is regionalized, and mitigation for wetlands and streams impacts must occur within Hydrologic Unit Codes set by the US Army Corps of Engineers, and for species within defined ecological regions. This creates supply and demand dynamics, where scarce ecosystems in areas of high development pressure can become highly valuable. For example, in 2007, prior to the housing crisis, credits for vernal pools in California sold for up to $280,000 per acre.4 Wetlands credits range in value from $3,000 per acre up to $650,000 or more per acre.5 14,000 12,000

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The mitigation banking industry creates significant option value to areas and there have been cases where developers realized that converting a property into a mitigation bank was more valuable than the originally intended development (and its cost of mitigation). This is ultimately the goal of this type of regulation – the market should determine a price for mitigation, and in so doing provide incentives to avoid or reduce the impact in the first place. If ultimately extended to tropical forests under pressure for conversion to agribusiness, then investors would begin to focus on improving productivity of existing plantations rather than clearing more land as the preferred method of increasing production. Privatization of Australian Water Rights Australia is a dry continent, but has developed an extensive irrigation industry with its limited fresh water resources, particularly in the Murray Darling Basin of eastern Australia. The historical allocation of water for agriculture was a problem in Australia. Water was made available via licenses to withdraw water from the various river systems. The licenses were over-allocated leading to excessive withdrawal of water, increasing salinization and insufficient flows for the downstream users. Ultimately the Murray River ceased reaching the ocean in South Australia. This created a series of conflicts between upstream and downstream users, between irrigators and environmentalists who wanted to ensure sufficient water flows to meet ecological needs, and among state governments who shared the Basin resources. The decision was taken to reduce the available water to agricultural producers, but to strengthen the entitlements such that the water licenses became tradable property rights. This was described at the time as “downloading a $10 billion property right onto the balance sheets of farmers.” The results were dramatic. Inefficient users of water, such as irrigators of wheat or rice, were better off selling their water rights, and producers of highly valuable crops such as viticulture and horticulture purchased more water rights. The water rights were divided between high security water, which was strongly guaranteed even in periods of drought, and general security water that floated in its proportional allocation from year to year depending on a share in the actual available water. Markets sprung up to sell water on a spot basis (e.g. megaliter by megaliter), or to lease water rights, or to sell the water rights. As the rights were traded within individual river systems, on-line markets quoted prices by river, by form of water right and by term of sale. Investors entered the market with water funds to acquire water rights in bulk and lease them back to farmers. The result has been a rationalization of agriculture, emphasis on value adding per unit of water, and the creation of conditions that attract investment in water use efficiency and infrastructure. The underlying value of the water rights in the Murray Darling Basin is estimated to have increased over the past decade (Figure 14.3), as increasing efficiency occurs and water

192 Brand and Singh 1,200

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becomes more valuable. The Government has also been able to enter the market and buy water rights which will be used to enhance downstream ecological function, and ensure minimum flow levels are achieved. While there still remain criticisms of the system, it has demonstrated that clear property rights and markets can dramatically increase the efficiency and value of a natural resource. The price of Murray River water licenses doubled from 2000 to 2006 as the region faced drought years, and water became more valuable. However, the trend over the past decade has been an increase in prices even when there has been a good year of rainfall, such as in 2010 where there was plentiful rainfall, yet prices were a lot higher than in 2000. This overall increase in price is attributable to the market becoming more efficient (e.g. the water rights are being increasingly transferred to higher value uses), and to the intervention of the Australian government which has been acquiring substantial water rights to provide for environment flows in the river systems. The European Union Emissions Trading System The Kyoto Protocol, established under the United Nations Framework Convention on Climate Change in 1997, was a landmark agreement to guide and coordinate international efforts to reduce greenhouse gas emissions. The Protocol was particularly notable for the introduction of “flexibility mechanisms” including emissions trading, joint implementation and the Clean Development Mechanism (CDM)6 to reduce costs and incorporate market-based solutions to reducing the cost of greenhouse gas emissions reductions. The European Union Emissions Trading System (EU ETS) is the

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Figure 14.4 Annual volume and price for EU ETS market. Source: ICE Futures Europe, 2010. Note: figure reprinted from Schmalensee and Stavins (2012). CAIR is Clean Air Interstate Rule; CATR is Clean Air Transport Rule; CSAPR is Cross-State Air Pollution Rule

dominant regional policy instrument established to implement the Kyoto Protocol flexibility mechanisms via a cap and trade regime linked with the Kyoto mechanisms. The EU ETS is a large and comprehensive system covering 45 percent of EU emissions from 12,000 installations (European Commission, 2013). The goal is for the EU to reduce greenhouse gas emissions by 21 percent from 2005 levels by 2020. The EU ETS was launched in 2005, and led to a surge of private sector interest, and billions of dollars invested into private funds to secure carbon credits, primarily from the Clean Development Mechanism (CDM). A host of companies were established to operate in the market including asset management firms, consultancies, brokers, project developers, certifiers as well as tax, legal and accounting advisors. However, the market proved highly volatile, and regulators misjudged the supply–demand dynamics. Millions of CDM credits poured into the market just as the economy was hit with the financial crisis and flow-on Eurozone crisis. As the credit pricing plummeted, investment funds lost most of their value, project credit demand dried up, and the entire carbon industry was downsized and almost rationalized out of existence. The EU emissions are largely on track to meet the 2020 target (European Commission, 2013) largely because of the economic collapse and a series of parallel regulatory measures introduced. However, the EU ETS has been a disappointment. The theory of a market-based system like the EU ETS is that it should efficiently find the lowest price for any given level of carbon

194 Brand and Singh emissions reductions. Ultimately the market should become deep, liquid and linked with futures and derivatives, so that market participants can plan their business, hedge market volatility and transfer risk. However, the EU ETS became excessively volatile, was flooded with low cost credits, for example from huge industrial gas projects in China, and proved unable to adjust to reduced demand from the economic crisis. Certification schemes and round tables – commodity differentiation All of the examples we have discussed above have been in developed countries with robust regulatory capacity, legal systems and business norms. In developing countries it can be more difficult to establish complex regulatory systems. However, some of the most acute issues related to externalities are found in tropical regions, where forest degradation and conversion can cause significant social and environmental externalities. At the same time developing countries may feel that they are being pressured to give up the capacity to fully develop their agricultural potential, and even forced to carry the cost of managing biodiversity resources for the benefit of the rest of the world. In the absence of a solution to this problem, the result is international campaigns by NGOs, often targeted at the ultimate consumers of the product (e.g. crude palm oil, soy, beef, timber). This led to the concept of certifying sustainable production systems and allowing products from sustainably managed sources to be labeled. The first such system was the Forest Stewardship Council, launched in 1992, and now widely accepted in timber markets around the world. From this initial system has emerged a set of commodity round tables including the Marine Stewardship Council for seafood, Roundtable on Sustainable Palm Oil, Round Table on Responsible Soy, and BonSucro.7 The idea is for corporations and consumers to be able to choose products that meet a defined standard of practice, effectively reducing, eliminating or mitigating externalities such as conversion of high conservation value tropical forests. These certification initiatives would normally be expected to produce differentiated goods that would sell at a premium over those with unmitigated externalities. However, while the market has paid premiums for certified goods in some instances, the general rule has been that demand has not been strong enough and so buyers have been able to pay the same price for the certified product, effectively pushing the additional costs of reducing or mitigating the externalities onto the producer. This lack of price premium has caused conflict between producers and consumers, and between producers, consumers and NGOs. Major corporations have set targets to buy only sustainably produced, certified products by a certain date, but producers have been reluctant to agree to standards or change their behavior without some clear financial benefit. In some ways the central question is whether the cost of mitigating externalities is the obligation of the consumer or the producer.

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Reducing emissions from deforestation and degradation (REDD+) Degradation of land and deforestation from destructive logging practices in developing countries, mainly for agricultural expansion and infrastructure development, accounts for nearly 20 percent of the global GHG emissions (IGES, 2012). Thus, “Reducing deforestation is the single largest opportunity for cost-effective and immediate reductions of carbon emissions” (Stern, 2007). The UN REDD program hopes to correct the problem of deforestation and the failure of markets to correctly value ecosystem services by putting a financial value on the role of forests in climate mitigation. REDD+ promotes conservation, poverty alleviation, and enhancement of forest carbon stocks by providing financial incentives for sustainable management of forests as a mitigation strategy to climate change (UN REDD, 2012). Various predictions put the potential financial flows from REDD+ to be about $30 billion a year (IGES, 2012). These funds aim to support new low impact development, sustainable forest management, as well as other socioeconomic benefits to the communities receiving the REDD+ concession payments. However, to maintain these ecosystems and the multiple benefits, there is a need to engage local communities and indigenous groups (IGES, 2012). Failure of existing programs to do so has been one of the major criticisms of the program thus far, while resolution of conflicts over indigenous community land rights and proper compensation to local peoples for forest conservation has been an ongoing challenge for forest governance. The UN Framework Convention on Climate Change (UN FCCC) has been slow to determine how REDD+ will work in practice. It has placed little emphasis on market-based approaches, and has rejected standalone projects in favor of larger scale initiatives with carbon emission accounting conducted at the national level to avoid the risk that discrete projects simply displace emissions to neighboring areas (termed “leakage”). As a result donor funded REDD+ initiatives have focused on capacity building to support protocols for MRV (Measurement, Reporting, and Verification) and critical evaluation of forest carbon stock changes. Various organizations, including international aid agencies, government forestry departments, NGOs and research organizations such as CIFOR,8 have taken an active role in REDD+. However, these programs are proving slow to develop measurable reductions in emissions, with the focus being on stakeholder capacity building related to improved forest governance and MRV protocols. Whether REDD+ will ever create a meaningful price signal for forest conservation is still uncertain.

Policy goals, potential end game, and how do we get there? The impacts of acid rain, climate change, and loss of wetlands, species and natural ecosystems are highly dispersed across regional or even global communities. Therefore, the organization of some form of market or price

196 Brand and Singh signal related to these impacts does not occur naturally, and must be mediated either by government, or by new entities like the commodity round tables. Developing these market-based pricing systems for externalities is not easy, because the industry causing the impacts has a vested interest to protect the status quo of a free right to pollute or damage ecosystems. Therefore, action only occurs when political or consumer pressure reaches the point where the cost of inaction exceeds the cost of regulation by government or quasi-regulation by industry or consumer organizations. What we have seen from the examples above is that the regulation or certification process can be based on either steadily reducing the allowable level of industry-wide impact (such as with Acid Rain or Greenhouse Gas Emissions), or introducing a “no net loss” standard where any impact must be mitigated or offset (e.g. wetlands mitigation, forest conversion for agriculture). In practice some schemes (e.g. EU ETS) include both caps on impacts as well as provisions to use offsets to meet some or all of the cap. Once these systems are implemented investor and business behavior can shift rapidly and significantly. The EU ETS drew billions of dollars of investments into carbon funds; the mitigation banking industry in the USA is now a multi-billion dollar business; and the privatization of water rights in Australia has driven a restructure of commercial agriculture in that country. The success of these schemes in shifting capital allocation is dependent on the ability of business and investors to become confident that the changes are likely to be enduring and that the new price signals such as for carbon, water or biodiversity impacts will be sufficient to support alternative business models or investment strategies. The role of governments in designing, regulating and managing many of these market-based instruments creates sovereign risks – for example, if a change in government leads to a change in public policy. In some cases, such as in greenhouse gas emissions regulation, market-based systems have become highly politicized, leading business and investors to be cautious about changing behavior or investing in new technology lest they find that the pricing of the externality is removed with a change in government. Another risk is that market design will prove flawed and governments will lack the capacity to effectively manage revisions to rules to maintain stability in the market. The collapse of the EU ETS, for example, has destroyed billions of dollars of capital invested in low-carbon project funds. Market design flaws can also lead to sub-optimal outcomes or gaming of market rules. There have been legitimate concerns expressed about wetlands mitigation and conservation banking programs, for example. Burgin (2008) suggests that outcomes from biodiversity banking schemes in Australia may be limited by the inability of science to truly define what needs to be mitigated; by the inability of governments to effectively regulate these complex markets; and by insufficient resources for monitoring of outcomes. Fleischer and Fox (2008) raise similar questions about wetlands and conservation banking in the United States and note that many banking

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projects have failed to produce acceptable ecological outcomes, have lacked monitoring and have been underfunded. It has also been noted, however, that the area of conservation banking has grown rapidly in recent years, as has the sophistication of regulators and mitigation bank operators (New Forests, 2013). The important regulatory philosophy is that mitigation is only the last option after attempts to avoid and minimize the ecological impact have been exhausted. The implications of creating stable pricing for ecosystem services in the forest sector could be transformative. For example, forests have an important role in climate change mitigation. Studies (such as McKinsey & Company, 2010), suggest that the world should be aiming to reduce greenhouse gas emissions relative to the business as usual case by five or six billion tons of carbon dioxide equivalent,9 by 2030. Further, it was suggested that about 20 percent of this reduction should come from action in the forest sector, whether via reducing deforestation or undertaking reforestation and improved forest management. If a price signal of $20 per ton of CO2-e were to be established, and approximately one billion tons per annum of offsets were generated from the forestry sector, that would represent a cash flow of $20 billion per annum. If we consider that investors would buy forests at a 10 percent running cash yield to capture that cash flow, it would effectively create an asset with a $200 billion value. This could be compared with the current estimates of the total investible universe of timberland assets of $125–$200 billion (Anon, 2013). It could be expected that the value of forested systems in watershed regulation or biodiversity conservation would be similar or greater and this takes us full circle to the introduction of this chapter and the early work of Costanza, Daily, the Millennium Ecosystem Assessment and TEEB. The gulf between the hypothetical value of ecosystem services and the actual value of ecosystems is still large. Land is invariably worth more if it is converted to agriculture. So long as that gulf remains ecosystems will be mispriced, mismanaged, and used wastefully. The main question is what have we learned about introducing price signals for externalities, and how might it guide future policy efforts to address climate change, fresh water resources and biodiversity conservation? Successful systems appear to require strong public demand for action combined with real market demand and an ability for producers to pass costs on to their customers. Win-win type outcomes are the key to successfully implementing the pricing of externalities. For example, New York was successful with paying upstream landowners to reduce pollution because the cost of changing landowner behavior was less than the cost to the city of secondary water quality treatment. Owners of tropical forest concessions will be more likely to conserve their forest if they are paid an attractive price for carbon storage or biodiversity management, rather than being forced to maintain the forest as an economically sub-optimal asset at their own cost.

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Recommendations and conclusions Making changes to existing property rights, or establishing new property rights, is always challenging for governments. Telling a private landowner who wishes to clear a forest that he/she cannot do so because of the presence of a new downstream water user, or the presence of habitat for newly listed endangered species, is considered akin to expropriation of that right. For this reason successful introduction of new market-based instruments, regulations or certification procedures will often include “grandfathering” provisions, or free distribution of initial permits, or even direct compensation. For example, as part of its emissions trading regime, New Zealand introduced the concept that clearing of timber plantations established prior to 1990 would incur a carbon liability for the emissions from removing the carbon stock. However, the New Zealand government also gave all landowners 39 carbon permits per hectare of pre-1990 timber plantation. So while a timber plantation owner would still be liable for hundreds of tons of emissions if he or she cleared the plantation, if they maintained the plantation they would incur a gain of say, $700–$800 per hectare for behaving in a business as usual fashion, but with their right to clear the forest now restricted. One of the other challenges has been that many of these externalities are either operating in parallel in multiple jurisdictions or having impacts beyond borders and even globally. Industry often argues that higher levels of regulation of environmental or social factors will increase costs and will reduce competitiveness relative to jurisdictions with lower or no costs related to impacts on ecosystems. For example, it might be argued that the costs of protecting the forested habitat of the orangutan are imposed on companies in Malaysia and Indonesia where the species exists, but the presence of the species benefits everyone around the world. This is why the often frustrating and slow-moving international processes of environmental conventions, trade rule negotiation and treaties can be necessary. However, without alignment between these international processes, domestic level regulation and even corporate policies and certification procedures, the system breaks down, free riders emerge and the status quo ultimately remains in place. On the other hand, there is growing evidence that aligned efforts at an inter-governmental level, domestic level and via supply chain certification are collectively slowing deforestation in Southeast Asia and in Latin America (The International Sustainability Unit, 2012). For this progress to happen, however, it has taken significant international financial assistance including major direct investments by countries like Norway, as well as concerted pressure by environmental groups on key points in supply chains. There is a kind of “crossing of the Rubicon” point, where market prices incorporate externalities and a new status quo emerges in the market based on expectations of higher environmental performance and greater benefits from compliance. As new industries or improved practices emerge, the size of the lobby in favor of the new status quo becomes dominant. For example,

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hundreds of renewable energy companies who are dependent on renewable energy subsidies, tradable Renewable Energy Certificates (REC), Renewable Obligation Certificates (ROC), Feed-in Tariffs (FIT) and other instruments become vested interests – equally as resistant to policy change as the energy industry they replaced. This also appears to be the case resulting from the US Clean Water Act, Endangered Species Act and Clean Air Act and subsequent court decisions, and the costs of mitigating air pollutions, wetlands and species impacts are now largely engrained in business. The world is not short of capital to conserve ecosystems and to support ecosystem services. The problem is that capital is misallocated to activities that create a profit by damaging ecosystem services. As we have sought to demonstrate in this chapter there are now ample examples that the right allocation of property rights, price signals and regulatory instruments will quickly redirect capital flows into more sustainable investment strategies. However, as has been pointed out by The Economist (Vaitheeswaran, 2002), we are effectively in a race between the growing impacts of investment in unsustainable activities and the growth of sustainable investment in assets and businesses that are managed with all costs included.

Acknowledgements The authors thank Radha Kuppalli and Darius Sarshar for comments on earlier versions of this chapter.

Notes 1 Paper Presented at the IUFRO Resources for the Future Conference, Faculty of Forestry, University of British Columbia, Vancouver, British Columbia, August 27–29, 2013. 2 For an overview of wetlands mitigation credit prices see: www.ecosystemmarketplace. com/pages/dynamic/web.page.php?section=biodiversity_market&page_name= uswet_market 3 New Forests data. 4 Market information from the authors. 5 www.ecosystemmarketplace.com/pages/dynamic/web.page.php?section= biodiversity_market&page_name=uswet_market. 6 For an overview of Clean Development Mechanism (CDM) see: UNFCCC-CDM (2013). 7 For more information see: Marine Stewardship Council for seafood: www.msc. org/?set_language=en; Roundtable on Sustainable Palm Oil: www.rspo.org/; Round Table on Responsible Soy: www.responsiblesoy.org/; BonSucro: http:// bonsucro.com/site/production-standard/; www.agrimoney.com/news/brazilland-prices-up-18percent-in-a-year-slc-data-show--4848.html. 8 Center for International Forestry research, Indonesia: www.cifor.org/; WWF & REDD: http://wwf.panda.org/what_we_do/where_we_work/greatermekong/our_ solutions/redd/. 9 For the greenhouse gas (GHG) abatement cost curves see Version 2.1: www.mckinsey. com/client_service/sustainability/latest_thinking/greenhouse_gas_abatement_ cost_curves.

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References Anon (2013). New Forests Timberland Investment Outlook 2013–2107. New Forests Pty Ltd retrieved on August 12, 2013 from: www.newforests.com.au. Appleton, A. (2002). How New York City used an ecosystem services strategy carried out through an urban-rural partnership to preserve the pristine quality of its drinking water and save billions of dollars. Forest Trends, Tokyo, retrieved on March 1, 2013 from: http://ecosystemmarketplace.com/documents/cms_documents/NYC_H2O_ Ecosystem_Services.pdf. Bormann, F.H. and Likens, G.E. (1987). Changing perspectives on air-pollution stress. BioScience, 37: 370. Burgin, S. (2008). BioBanking: an environmental scientist’s view of the role of biodiversity banking offsets in conservation. Biodiv. Conserv. 17: 807–816. Coase, R.H. (1960). The problem of social cost. Jl. Econ., 3, 1. Costanza, R., d’Arge, R., De Groot, R., Farber, S., Grasso, M., Hannon, B., Paruelo, J. et al. (1997). The value of the world’s ecosystem services and natural capital. Nature, 387(6630): 253–260. Daily, G.C. (1997). Nature’s Services: Societal Dependence on Natural Ecosystems. Washington DC: Island Press. European Commission (2013). EU Greenhouse Gas Emissions and Targets. The EU ETS Climate Action. Retrieved July 13, 2013 from: http://ec.europa.eu/clima/policies/ ets/index_en.htm. Fleischer, D. and Fox, J. (2008). The pitfalls and challenges. In Bayon, R., Fox, J., and Carroll, N. (eds). Conservation and Biodiversity Banking: A Guide to Setting Up and Running Biodiversity Credit Trading Systems. London, UK: Earthscan. IGES Natural Resources Management Group (2012). Community-based Forest Monitoring for REDD+. IGES Policy Brief. Rep. 22 October. Retrieved May 13, 2013 from: http:// pub.iges.or.jp/modules/envirolib/upload/4124/attach/PB_22_E_final.pdf. Madsen, B., Carroll, N., Kandy, D., and Bennett, G. (2011). Update: State of Biodiversity Markets. Ecosystem Marketplace. Washington, DC: Forest Trends, 2011. Retrieved July 19, 2013 from: www.ecosystemmarketplace.com/reports/2011_update_sbdm McKinsey & Company (2010). Impact of the Financial Crisis on Carbon Economics: Version 2.1 of the Global Greenhouse Gas Abatement Cost Curve (No. 2.1). New York: McKinsey & Company. Millennium Ecosystem Assessment (2005). Millennium Ecosystem Assessment Synthesis Report. Millennium Ecosystem Assessment. Washington DC: Island Press. New Forests (2013). Mitigation & Conservation Banking in the United States: An Emerging Biodiversity-based Asset Class. Retrieved December 10, 2013 from: www.newforests. com.au/news/pdf/articles/MarketOutlookUSMitBanking.pdf. Perrot-Maitre, D. (2006). The Vittel Payments For Ecosystem Services: A “Perfect” PES Case. IIED, Department for International Development. Retrieved May 10, 2013 from:http://pubs.iied.org/pdfs/G00388.pdf. Schmalensee, R. and Stavins, R. (2012). The SO2 Allowance Trading System: The Ironic History of a Grand Policy Experiment. National Bureau of Economic Research. Retrieved May 10, 2013 from: http://dspace.mit.edu/bitstream/handle/1721.1/72007/2012012.pdf?sequence=1. Stern, N.N.H. (Ed.). (2007). The Economics of Climate Change: The Stern Review. Cambridge UK: Cambridge University Press.

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TEEB (2010). The Economics of Ecosystems and Biodiversity: Mainstreaming the Economics of Nature: A Synthesis of the Approach, Conclusions and Recommendations of TEEB. A synthesis report. October 2010. Progress Press, Malta. Retrieved on March 12, 2013 from: www.teebweb.org/. ——. (2013). The Economics of Ecosystems and Biodiversity. Retrieved on July 13, 2013 from: www.teebweb.org/. The International Sustainability Unit (2012). REDD+ and the Agricultural Drivers of Deforestation: Key Findings from Three Studies in Brazil, Ghana and Indonesia. London, UK: The Princes Charities, Rep. 1. UNFCCC – CDM (2013). Clean Development Mechanism (CDM). Retrieved June 24, 2013 from: http://cdm.unfccc.int/. UN-REDD (2012). UN-REDD Program News. Retrieved November 7, 2012 from: www.un-redd.org/ Vaitheeswaran, V. (2002). The great race. The Economist, July 4.

15 Lessons in the design of payments for environmental services Theory and experience Sven Wunder, Harry Nelson and William Nikolakis Introduction One of the most pressing natural resource challenges facing society is how best to manage forests to retain and sustain the services on which people and communities rely on. Traditional approaches have not been sufficiently effective, as discussed by David Cohen in his chapter. The Millennium Ecosystem Assessment (MEA) in 2003 identified a number of ecosystems in many regions of the world where degradation was significant and where stresses were increasing. The MEA raised the issue to a higher political level, from which it began to expand fast (Gómez-Baggethun et al. 2010). During the last 15 years, economic incentives have become gradually more prominent in environmental management. In some cases, as Brand and Singh discuss in their chapter of this book, this has occurred in the form of so-called market-based mechanisms to trade ecosystem services (ES), with the objective of achieving environmental goals (Bayon 2004). The United Nations (1997) described economic instruments for environmental management as fiscal and other incentives and disincentives designed to incorporate environmental costs and benefits into the budgets of households and enterprises.1 They aim to encourage environmentally sound and efficient production and consumption through full-cost pricing such as taxes or charges on pollutants and waste, deposit-refund systems and tradable pollution permits. One of the promises of economic instruments is that they can provide more efficient and equitable ways of meeting environmental objectives than command and control style regulation and enforcement (Stavins 2001). One of the policy innovations showing particular promise is financial incentives to provide environmental services or to maintain environmental amenities, collectively known as Payment for Environmental Services (PES) schemes (Muradian et al. 2013; Wunder 2013). The use of PES schemes to address environmental degradation and maintain and restore ecosystems and their functions is now receiving considerable attention from policy makers, civic organizations, and governments. This is particularly true where other approaches, such as establishing protected areas or mandating

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practices or regulations, have not been able to yield the desired outcomes (Engel et al. 2008). Today, hundreds of PES initiatives are working across the world around water supply, carbon sequestration, landscape aesthetics and biodiversity, involving a wide diversity of actors, including public agencies, local governments, international institutions, NGOs, companies, urban communities, farmers, indigenous communities and rural landowners (Kemkes et al. 2010). The results of these initiatives have been equally diverse, counting successes and failures (Pagiola et al. 2005; Landell-Mills and Porras 2002; Porras et al. 2008; Wunder et al. 2008). The purpose of this chapter is to synthesize what we do know from at least a preliminary assessment about where PES can work and what characteristics seem to be important in designing an effective PES scheme. We first describe how PES work in practice, and discuss conditionality as the key design element. We then consider the socio-economic impacts of PES schemes and discuss implications for design. We then review two PES schemes to illustrate different design elements: Costa Rica’s government financed Pago por Servicios Ambientales or Payment for Environmental Services (PSA) and the user-financed Pimampiro scheme in Ecuador. We end the chapter pointing to three key PES design elements: degree of conditionality (monitoring, sanctions), spatial targeting (vis-à-vis service intensity, threats), and differentiated payments.

Environmental services and PES The MEA defined environmental (or “ecosystem”) services as “benefits that people obtain from ecosystems,” and establishes four general categories: (a) provisioning services, such as food or water; (b) regulation services such as flood control or carbon sequestration; (c) cultural services like spiritual or recreational benefits; and (d) essential or supportive services like nutrient cycling (Montes and Sala 2007). The MEA “provisioning services” are really products not services (examples include fuelwood and NTFPs), for which markets already exist. PES would focus instead on the genuine services, and in particular on those that occur off-farm as externalities, for which traditionally no market, incentive or compensation mechanism has existed. For instance, there is little argument for using PES to pay a landholder for planting trees for soil fertility enhancement, a benefit which the landowner is bound to reap the full benefits of in terms of increased agricultural production. However, if the same tree planting also reduces soil erosion that limits watershed sedimentation and thus benefits downstream users of drinking water, then a positive “externality” and a market failure exist, providing an argument for using PES to align incentives. The most commonly accepted definition of what constitutes a PES scheme defined PES as a voluntary transaction where a well-defined environmental service (ES) or a land-use likely to secure that ES: (a) is being “bought” by a minimum of one ES buyer; (b) from at least one ES

204 Wunder et al. provider; or (c) if and only if the ES provider continuously secures ES provision (conditionality) (Wunder 2005). A series of other, broader PES definitions have recently been proposed to include “PES-like” initiatives that do not conform to all of these criteria (Shelley 2011). As the most innovative feature of PES, payments are thus contingent upon either certain actions being performed, or certain changes being abstained from so as to maintain service provision. Wunder also notes that there are two predominant types of PES program: a user pays and a government financed PES. Each of these types has a different effect and distinct institutional needs. The most common applications for PES have been in carbon and watershed protection, and to a lesser degree in biodiversity conservation and landscape beauty. The mechanism by which a PES scheme works seems straightforward. The provider (typically a landowner) in theory receives a payment equal or greater to the opportunity cost of continuing their current business plan (in which the service is not being provided). The private benefits now align with the public benefits (Engel et al. 2008). Underlying this mechanism is the principle that the “beneficiary pays” (and “provider gets”), rather than the “polluter pays” (Kemkes et al. 2010; Engel et al. 2008). This choice reflects the circumstances under which PES are most commonly employed – where land is held privately and the associated property rights (de jure and/or de facto) allow them to engage in the activities causing harm or degradation. In this case, the payment is designed to internalize the positive externalities resulting from these activities. This is in contrast to other schemes with negative externalities where the landowner does not have the “entitlement to pollute,” and would then be regulated, either in the sense of being prohibited from such activity, or by internalizing the costs financial disincentives (such as penalties or taxes) impose (Kemkes et al. 2010).

Conditionality: the key PES feature It is these elements, the provision of payments linked to the voluntary decision to elect into the scheme that makes PES schemes more politically palatable as they are not seen as coercive. But first, the context of PES implementation matters: some basic economic and institutional preconditions on the buyer and seller sides have to be met (Wunder 2013). Second, the effectiveness of such schemes then depends on several important related factors: first, the level of participation (and who participates); second, what actions are being paid for (and how directly tied those are to the desired outcomes); and third, the degree of conditionality. Engel et al. (2008) provide an overview of PES design characteristics, their effectiveness, and the distributional implications. Inequities could potentially occur especially vis-à-vis poor and landless peoples that are excluded from participation, which can reduce the legitimacy of these schemes.

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The next issue is then establishing mechanisms to control moral hazard and to ensure conditionality. Absent mechanism to monitor and enforce actions, there is the risk that the PES contracted actions will not be undertaken. In other words, if weakly monitored and sanctioned PES recipients may cash in on payments while making no adjustments to “business as usual,” for example continuing to deforest in areas stipulated to be conserved under the PES contract. There are key PES elements to reduce this type of adverse behavior: monitoring to detect non-compliance; sanctions to increase the cost from not adhering to the scheme, and even changing timing of the payments, ex ante vs. ex post, i.e. to keep more leverage vs. frontloading the benefits. Yet, these can raise the transaction costs of the scheme, and may reduce the perceived net benefits for providers, since opportunity costs become real. This will also affect socioe-conomic outcomes, which we will consider in our next section.

Socio-economic impacts Literature about PES has differentiated aspects concerning economic efficiency and social equity, by explicitly suggesting that PES schemes should be considered a tool to improve efficiency in the management of environmental outcomes, and only in secondary terms for addressing poverty (Ferraro and Kiss 2002). Therefore, the positive effects of PES programs on poverty, while likely to occur given the two-sided voluntary participation, would essentially be a collateral consequence that can be tested for separately (Pagiola et al. 2005; Wunder 2008). Extending the analysis to cover social impacts raises additional issues. While there is potential interest in both environmental and welfare impacts of PES, few hard-data PES evaluations exist, for any of the two (Pattanayak et al. 2010). Nevertheless, the same limitation applies to other conservation interventions (e.g. ICDP, ES certification) – only for protected areas more evidence exists (Miteva et al. 2012). FAO (2004) points out that PES program impacts on poverty depend on the system design (incentives, targeting, requirements, etc.), and the social organization of small landowners. The magnitude of the benefits for participants, and in especial for the poorest, depends on other factors, such as land availability (farm size) and distribution, the capacity of poor people to influence in the design and development of PES schemes (participation), and market fluctuations influencing the opportunity and transaction costs of farmers (Corbera et al. 2007; Van Hecken and Bastiansen 2010). Hence, some PES programs seem to contribute significantly to poverty reduction, but evidence about such positive impacts at more aggregate scales remains scarce (Pattanayak et al. 2010). In many areas, where a large share of landowners lives below the poverty line, a PES initiative has the potential of improving the economic condition of participating families, but at the extreme could harm those without

206 Wunder et al. access to land, or formal land tenure, who tend to be excluded (Corbera et al. 2007). As Corriveau-Bourque et al. discuss in their chapter, weak tenure rights, particularly around forests, constrain livelihoods and could sometimes stimulate deforestation. Payments can be oriented around either restricting the use of ecosystems by locals, which may limit opportunities or affect local livelihoods; or, by contrast, payments would involve people working to restore ecosystems. Both scenarios are very different in terms of their development implications, where the second one has greater potential to reduce poverty through employment creation (Wunder 2008). Some PES initiatives, and many of those implemented by the public sector, have also pursued explicit or implicit goals of poverty reduction, though past experiences also show that both as simultaneous objectives are not always fully compatible. The literature shows that poor local communities that increase their incomes may often also cause higher environmental degradation (Henrich 1997; Coomes et al. 2000). PES can still be effective in achieving both environmental and social goals when three conditions fully or partially coincide: (a) the poorest are highly PES eligible (e.g. because they live in ES prioritized areas); (b) they have lower opportunity and transaction costs than non-poor ES providers; and (c) they have secure land tenure (in terms of effective rights of exclusion) (Pagiola et al. 2005; Wunder 2008). However, many poor people also cannot participate in PES initiatives because of land tenure problems, the small size of their plots, or simply because they are not in prioritized areas. Poor people will participate in a PES initiative as long as they can get benefits that at least exceed their provision costs (typically, opportunity, transaction and protection costs combined). Trust also influences this decision: fear of eventually losing lands by initially agreeing to land use caps have been particularly important (Rosa et al. 2003). Ability and competitiveness are the last factors affecting participation. Potential participants in a PES program could have difficulties in participating, due to a lack of financial capital, skills, workforce, etc. Further, some of them could be non-competitive, since there may be other actors whose characteristics or conditions (such that they may have lower opportunity and transaction costs) can better access the scheme. Finally, the impacts on non-participants also have to be considered. For programs that restrict the use of ecosystems (for example, set-aside biodiversity conservation), poor landless people employed in capped environmentally degrading activities (timber harvesting, charcoal making, etc.) could come to lose their jobs. Conversely, if PES induces large-scale reforestation on degraded lands, this may imply a regional economic stimulus, and thus also employment options for unskilled labor. In the following, we briefly introduce two PES schemes: one governmentfinanced (Costa Rica’s PSA) and one user-financed PES (Pimampiro), so as to illustrate some key linkages between design elements and environmental and socio-economic impacts.

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Cases Costa Rica’s PSA Since 1997, Costa Rica’s national program of Payment for Environmental Services (PSA, in Spanish) has confronted the challenge of deforestation and environmental degradation that the country had been facing from the 1960s. This was the first larger-scale PES experience in the developing world, and has become the most studied. It was primarily designed for environmental objectives, such as the conservation of unique forest types, but with socio-economic side-objectives. It promoted tools to induce a wide participation of different kinds of landowners, including contracts for smallholders and indigenous peoples (Ortiz et al. 2003). The PSA Program focuses on four environmental services: carbon sequestration, water protection, biodiversity conservation and scenic values. This gave rise to the PSA Protection, PSA Reforestation and PSA Forest Management subprograms. The funding comes from public and private sources (fossil fuel tax and international institutions), which have been managed by an independent institution; the National Forestry Financing Fund (FONAFIFO). This is a semi-autonomous agency, which has permitted it to be more independent from the political level (Ortiz et al. 2003). Between 1998 and 2005 (first phase), 270,000 hectares participated, with a mean project area of 102 hectares; 91 percent of this area was classified as “PSA Protection,” and 5 percent and 4 percent respectively as “PSA Reforestation” and “PSA Forest Management.” In 2004, a new component was introduced to promote agroforestry schemes, and in 2006 another one to promote natural regeneration (Pagiola 2008). In the case of PSA Protection, FONAFIFO paid US$42 ha/year during a period of five years (duration of the contract, which can be extended). In the cases of PSA Reforestation and PSA Forest Management the amounts were US$107 and US$65 ha/year, only for the first five years, and under the condition of maintaining the plantation and the forest management plan for a period of 15 years. In these cases the money is paid gradually: 50 percent the first year, 20 percent the second year, and 10 percent during the last three years (Sanchez-Azofeifa et al. 2007). From that money, landowners must pay professional assistance (management plan), monitoring and some investments (firebreaks, signposting, etc.), which reduce the net amounts by at least 15 percent. In 2006, some payments were increased, and the period to receive the money for reforestation projects was extended from five to ten years (Pagiola 2008). Ortiz et al. (2003) pointed out that 81 percent of landowners involved in the first phase of PSA Protection were not reliant economically on their farms, and neither on PES incomes. During the first phase of the program large landowners were well represented (Kosoy et al. 2007; Sanchez-Azofeifa et al. 2007). Pagiola (2008) poses that informal land tenure has been the main factor inhibiting the participation of small landowners, which is why

208 Wunder et al. this criterion was modified in 2006. Beyond the fairly low PSA cash amounts, a high proportion of the beneficiaries declared that the program has improved their life quality in terms of non-monetary values: healthy environment, spiritual joy, etc. (Ortiz et al. 2003). When small producers were well organized, and had the support of strong NGOs, they achieved a higher participation in the program (FAO 2004). Ortiz et al. (2003) note that when people were asked about why they are participating in the program, a large proportion declared; “because I like the forests” (84 percent), or “because I contribute to protect biodiversity” (91 percent). When asked about what they would do if the PSA program finished, 67 percent answered that they would still maintain their forests. Hence, low-profitable, low-threat lands may have been dominant beneficiaries of the program (Sanchez-Azofeifa et al. 2007; Pagiola 2008). In addition, the deforestation rate was already low in 1997 when the program started. This put an additional ceiling on what additional impact the PSA could have (Sanchez-Azofeifa et al. 2007). Some studies claim that the second phase of PSA reduced deforestation was more significantly due to better spatial targeting (Sierra and Russman 2006; Tattenbach et al. 2006). At least, PSA conditionality on deforestation and forest degradation has been working properly (Pagiola 2008), although little monitoring of the program’s service delivery (rather than the forest cover impacts) have been done. Finally, a somewhat broader view of the PSA impacts on Costa Rica’s forests is probably in place, going beyond the “average treatment effects on the treated” with a single bottom line (deforestation avoided). This starts by including possible additional forest cover impact of accelerating reforestation (Pattanayak et al. 2010), but also includes effects of lower forest degradation (through PES-imposed limits on timber harvesting), and general society-wide impacts of a benefit package to the forest sector that could make other policies (e.g. expansion of protected area network, improved forest law enforcement) politically more viable (Daniels et al. 2010). In spite of the considerable literature on PSA impacts, it would seem as if the final word on the issue has not yet been spoken. Unlike in Costa Rica, historically Ecuador had not relied on a government-led PES scheme, but rather on various user-financed schemes with strong civil society involvement, such as in Pimampiro. Pimampiro This Programa Face de Forestación del Ecuador S.A scheme in northern Ecuador has, since 2000, supported forest conservation in a micro watershed, aimed at protecting quantity and quality of water supplies for the small town of Pimampiro. The PES scheme was designed by an Ecuadorian NGO (CEDERENA) and is implemented continuously by the Municipality of Pimampiro. The service sellers are 19 households from an agricultural

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cooperative in the upper watershed, and the service buyers are 1,350 families in Pimampiro town. The first contract lasted five years (2000–2005) and the second one is perpetual. The total area under contract was 550 hectares in 2005, with a mean of 29 hectares per contract, and payments of US$6–12 dollar/ha/year (Wunder and Alban 2008). The monitoring activities are focused on land use changes, more than water supply itself. Initially, some enrolled landowners continued to deforest or extract timber, and were suspended from the program temporarily or permanently. Conditionality in the PES scheme has thus been working. Moreover, the program shows a positive effect on forest cover, compared to what would have been the most likely counterfactual (Wunder and Alban 2008). The program has been targeted in space, and payments are differentiated according to the type of land cover being protected, and its alleged importance for hydrological services (primary forests getting the highest reward). Two-third of the participants are under the extreme poverty line. The PES program has apparently had a positive livelihood effect, despite the small amount of money involved (on average US$216 per family annually). It seems that PES income exceeds the opportunity costs of cutting forest, although there is no specific information for the latter (Wunder and Alban 2008). Rodríguez de Francisco et al. (2013) highlight that the Pimampiro scheme has equity imbalances by favoring a particular subgroup of landowners. Still, participation in the scheme remains voluntary, and should thus per se not make any landholders worse off. Lacking a baseline of pre-PES water quality and quantity flows, and thus also a core element for a proper impact evaluation of services provided through PES, it has instead been attempted to model a counterfactual “no PES” scenario using an adapted version of the Soil & Water Assessment Tool (SWAT) (Quintero et al. 2009). Over a decade of PES operation, about 100 hectares more might have been cleared, which would likely have raised average annual sediments by 53 percent, and reduced dry-season flows modestly (0.5 percent). Avoided sedimentation of more than 25,000 t over a decade is thus the dominating and likely service outcome from PES. Furthermore, SWAT identified erosion-sensitive areas currently not included in the PES scheme, which still produce high sediments. Over the eight years analyzed, the PES scheme cost US$77,800 (US$37,500 startup plus US$5,037.50 average annual running costs). Thus, implicitly PES-avoided sedimentation have cost US$3.1/ton of sediment. Since start-up costs were donor-subsidized, the Municipality paid US$40,300, or US$1.6/ton, which can be considered a competitive price.

Conclusions and discussion When we link PES design to practical experiences, two different types of monitoring become relevant. First is the monitoring of compliance of service

210 Wunder et al. providers with the conditionality that is the most innovative element in PES – and, conversely, the compliance of service users to pay if/when providers have complied with their contractual obligations. Second is the broader monitoring of whether the entire PES intervention has made a difference – on the land-use proxy that was being targeted (e.g. forest-cover conservation) and eventually on the underlying service that motivated the payments (e.g. avoided stream sedimentation or biodiversity conserved). The second type of monitoring requires some sort of baseline of a “without PES” counterfactual, which is challenging but also quite important. The two types of monitoring are causally connected: if none of the service providers in the PES scheme complied with their contracts, then it is probably also unlikely that the intervention as such has delivered effectively on its stated environmental objectives. Generally, we know very little in solid terms about the second type of monitoring, i.e. about what conservation tools have which type of impacts in different contexts – perhaps with the sole exception of protected areas (Miteva et al. 2012). Payments for environmental services (PES) are certainly no different from this general pattern: little rigorous evidence exists for both the environmental and socio-economic impacts of PES implementation (Pattanayak et al. 2010). Few programs have ex ante built in impact evaluation measures. However, PES is often, especially at smaller program scales, implemented as only one element in a broader policy mix, thus making it difficult to isolate which of the integrated components have had what particular attributable effect (e.g. Börner et al. 2013). These shortcomings and the dearth of “vigorous” impact evaluations have led some observers to caution against a too rapid expansion of PES, as long as we do not have a solid knowledge base about what works and what doesn’t (Ferraro 2011). There is at least some prima facie evidence that well-designed PES programs have the necessary components to potentially become effective in providing desired environmental and socio-economic impacts: voluntary, performance-based, direct and negotiated tools should have a relatively good chance of becoming welfare-improving, fair and participatory – at least as long as the right stakeholders get involved in the transaction, e.g. avoiding the dangers of adverse selection biases in voluntary schemes, resulting in potentially excessive participation of non-additional service providers delivering “hot air.” In addition, PES are institutionally demanding. For instance, lack of clear exclusion rights on behalf of land stewards, or lack of trust between service providers and users, can both make PES very expensive, and in the worst of cases impossible to implement (Wunder 2013). The two examples of a government-financed (PSA Costa Rica) and a user-financed (Pimampiro) PES scheme, both of considerable duration of implementation (since 1996 and 2000, respectively), serve to illustrate some basic features. If conditionality is the key describing feature of PES, then clarity in the conditional design, and monitored adherence to sanctioned rules, are also quintessential for PES to function: too many PES schemes under-invest in compliance monitoring and/or, perhaps even more

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frequently, are reluctant to cut payments to non-compliant landholders out of fears for the political consequences. Spatial targeting is a second design feature that seems crucial to PES success. In the Costa Rican example, it seemed that increased spatial targeting (including higher per-area payments in critical watersheds) was one factor that over time contributed to higher environmental efficiency. In Pimampiro, clear delimitation of the watershed, and differential payments for different vegetation types, seemed desirable features. However, some highly erodible areas with large sedimentation potential remained outside the PES program, and should perhaps have been specially targeted for inclusion – e.g. by offering a higher per-hectare compensation for them. Spatial heterogeneity in PES occurs in three dimensions: service level, leverage/threat and provision costs. To the extent that a PES scheme can effectively overlay these dimensions so as to target the action simultaneously to high-service, high-threat and low-cost areas, cost efficiency of PES can rise dramatically (Wünscher et al. 2008). Third, differentiated payments vis-à-vis different opportunity costs and/ or service levels provided is a tool that was actively used in Pimampiro; the Costa Rican PSA started out with uniform per-hectare payments, but later on introduced some incipient differentiation. Paying different amounts per land unit is administratively less easy, and raises fears about perceived unfairness -- but proves in reality to be readily accepted in most cases. Varying payments may be a powerful tool to reduce excessive rents when providers are heterogeneous. Since this is often the case in developing countries, even rudimentary payment differentiation (e.g. 3–4 levels) can be key to PES cost effectiveness. Finally, a word of caution is required regarding the drive for environmental efficiency. Through the amount of payments to landowners, and the requirements to them of effectively assuming opportunity costs of provision, there is a natural trade-off between the economic interests of service providers versus users. While most real-world PES schemes today probably err on the side of too high landowner compensation (compared to their real costs of provision) and too low environmental efficiency, falling into the opposite extreme can also become a danger. If only truly additional landowners (i.e. the “bad guys turned good through PES”) are included, then more leakage to the seemingly non-additional stewards (“imminently good turned bad”) landowners could occur, overruling the first static assessment of threat/leverage. More importantly, by excluding all already compliant landowners from payment, the offered incentive may be widely perceived as unfair. This can become a systemic danger to PES threatening its local acceptance, and introducing perverse incentives that also become a boomerang for the long-run efficiency of the intervention. Every PES scheme has to strike a reasonable balance between on the one hand the short-run focus on additionality at the cheapest cost, and on the other perceptions of fairness that affect the longer-term political viability of PES.

212 Wunder et al.

Note 1 United Nations (1997) Glossary of Environment Statistics, Studies in Methods, Series F, No. 67. New York, USA. http://stats.oecd.org/glossary/detail.asp?ID=723

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Index

Aboriginal peoples 3 see also Indigenous Peoples Access and Benefit Sharing 147 acidification 189 Adat villages 94 Adidas 68 Aditya-Birla Group 124 aerial seeding 107 afforestation 141, 154, 163 Africa 9, 12, 17, 91–93, 127, 166 Agenda 21 141, 147, 149, 150, 180 agricultural expansion 62 Agrilus planipenni 42 air pollution 17, 185, 188–189 indoor 177 alcohol 107 Amyris 27 Anthropocene 147 Arab Spring 8 Arundinaria amabalis 168 ash borer emerald 42 Asia 9, 42, 88, 91–94, 100, 121, 166–168, 171, 173, 177, 198 Asia Pulp and Paper 70 Australia 3 as source of pests 38 dryland salinity 115 exclusion of illegally logged timber 57 Illegal Logging Prohibition Act 49, 58–59 illegally logged timber 48 investment in plantations 112 managed investment schemes 110 Murray Darling Basin 191–192 myrtle rust 43 Pinus radiata 42, 108 plantations 110–116

privatization of plantations 108, 113 procurement policies 52 Queensland 113 radiata pine 42, 108 replacement of natural forest by plantations 109 rural depopulation 111 semi-natural forests 107 shelterbelts 115 South Australia 113 support for plantations 108 Tasmania 111, 113 Victoria 113, 116 Austria pest invasions 38, 39 procurement policies 52 automotive industry 19 B&Q 69 bamboo 5, 166–182 charcoal briquettes 171 clothing 173 increasing diversity of products 173 laminates 170 mat board 171 pellets 177 product commercialization 171 REDD+ 178 Bambusa tulda 168 vulgaris 167 beetle bark 37–38 longhorn 38 Belgium procurement policies 52 big box retailers 66 biocomposites 113 biodiesel 26, 30

216 Index biodiversity conservation 4, 17, 69, 86, 87, 106, 112, 116, 122, 133–134, 146–147, 156–161, 185, 197 biodiversity credits 4, 106 bio-economy 2, 4, 7–8, 20, 25–33, 113, 130, 135, 137, 138, 140, 145, 153, 163 bio-energy 2, 4, 14, 17, 18, 19, 20, 25, 26, 27, 28, 30, 31, 32, 33, 136, 138, 153, 154, 156, 161, 163 biofibrils 31 Biofore 15, 30–31 biofuel 13, 25, 97, 113–114, 176 cellulosic 31 sustainability standards 55 biological control 41 biomass 107, 113, 122, 131, 136, 137, 140, 153, 156 biomaterials 13, 17 bioplastics 13, 17, 107 biopolymers 113 bioproducts, 2, 13, 14, 17, 19, 21, 25, 30 biorefineries 25, 138 biosafety 142, 143 biotechnology 4, 43, 130–150 BioVerno 30 black liquor 30 black swans insect-pathogen interactions 42 blockboard 11 blue gum 116 Bolivia forest tenures 95 BonSucro 194 Borneo lowland dipterocarp forests 186 BP 26 brand campaigns 71 Brazil 8, 10, 11, 17 Amazon 133 Atlantic rainforest 121, 127 Bahia 121 biofuels 25, 26, 27 biotechnology 27 Cerrados 133 certified forests 51 Eucalyptus 43, 108 Federal Forestry Law 133 forest growth rates 133 forest tenures 95–96 Law 11.105 143 Ministry of Agriculture 143 myrtle rust 43

National Biosafety Policy 143 plantations 119–128, 130–150 pulp and paper industry 133 Quilombos communities 96 reserves 140 support for plantations 108 transgenic trees 143 tree genetics 131 Brazilian Biosafety Authority 136 Brazilian National Biosafety Commission 143 BREEAM. See United Kingdom: Building Research Establishment’s Environmental Assessment Method Bretton Woods conference 37 BRIC countries 8 Brundtland Report 180 building design 5, 19 disassembly 20 building regulations 49, 51 building standards 54 Bulgaria procurement policies 52 business transformation 7 Calcutta cane 168, 169 Cambodia REDD+ 178 Cameraria ohridella 38 Cameroon Voluntary Partnership Agreement 55 Camisea gas project 95 Canada 3, 9, 11, 12, 14, 25 Biopathways program 13 contested tenures 100 forest growth rates 133 Forest Industry Transformation program 25 forest tenures 90 industry transformation 19 Montreal 15 Nova Scotia 41 pest invasions 41, 42 Cancun Climate Summit 68 capacity building 195 carbon credits 4, 113, 177, 193 in soils 133 sequestration 20, 106, 114, 116, 133, 157, 160, 177 storage 18 carbon-based chemicals 138 Catchlight 26

Index Central African Republic Voluntary Partnership Agreement 55 Centre for International Forestry Research 195 certification 3, 8, 51, 59, 60, 61, 65, 71, 72, 106, 111, 112, 134, 137, 145, 179, 194 chain-of-custody 62 charcoal 127, 176 bamboo 171 Charles H. Demarets Co. 168 Chatham House 49, 60, 61 chestnut blight 41 Chevron 26 Chile Pinus radiata 42, 108 plantations 132 radiata pine 42, 108 support for plantations 108 China 4, 8, 9, 10, 11, 12, 14, 17, 78 12th Five Year Plan 32 Anji 166, 171 bamboo 166 bamboo and rattan exports 170 bamboo products 171 biomass power 27 biomass utilization 26 certification problems 62 certified forests 51 forest tenures 93, 95 illegally logged timber 48 land aquisitions 98 Lin’an 166, 179 National Bamboo Business Development Plan 174 National Programme on Converting Slope Farmland to Forests 116, 175 National Programme on Establishing Fast-growing and High Yield Commercial Plantations 175 National Programme on Natural Forest Protection 175 National Programme on Protective Shelterbelt Development in the “Three-north” and along the Upper and Middle Reaches of the Yangtze River 175 plantations 17 procurement policies 52 regulation of pollution 18 renewable energy 32 soil erosion control 116

217

support for plantations 108 Tonkin cane exports 169 Walmart supplier 67 chipboard 79 Chrysoporthaceae 43 cis-genic overexpression 136 civil society 56, 66, 98, 99, 122, 123, 144, 147, 148, 208 Clean Development Mechanism 192–193 climate change 20 adaptation 155, 178 impacts 155 mitigation 134, 160 clonal development 132 clonal forestry 133 Coca-Cola 68 Cocoa and deforestation 62 Codex Alimentarium 143 Codexis 27 Colombia extractive industries 95 forest tenures 95 commodity markets 131 commodity prices 2, 8, 12–13, 19, 97 commodity roundtables 65 Common Fund for Commodities 174 community empowerment 123, 126 concessionary agreements 97 Congo Basin forest tenures 93 Consumer Goods Forum 68, 70, 73, 74 consumer purchasing habits 72 consumerism 66 Convention on Biological Diversity 3, 148 Cartagena Protocol on Biosafety 142, 143 Convention on International Trade in Endangered Species 48, 57 Cooperation in Science and Technology action FP0905 144 corporate social responsibility 3, 144 corruption 3, 48, 74, 81, 120 Coryphodema tristis 43 Costa Rica biodiversity conservation 207 carbon sequestration 207 deforestation 208 forest degradation 208 National Forestry Financing Fund 207

218 Index Pago por Servicios Ambientales 207 Payment for Environmental Services 207 scenic values 207 water protection 207 Côte d’Ivoire Voluntary Partnership Agreement 55 cross-laminated timber panels 113 Cryphonectria parasitica 41 CTNBio. See Brazilian National Biosafety Commission Cunninghamia lanceolata 177 Customary rights 123 Cyprus procurement policies 52 Cyzenis albicans 41 Czech Republic procurement policies 52 Daily, Gretchen 186 Declaration on the Rights of Indigenous People 3 deforestation 9, 10, 62–69, 97, 101, 119–120, 167, 171, 175, 178, 195, 206–207 degraded land 176 degraded landscapes 115 Democratic Design 77 Democratic Republic of the Congo 55, 128 forest tenures 90 Dendrocalamus strictus 168 Denmark demand for certified timber 53 procurement policies 52 disclosure initiatives 65 discounted cashflow 115 Domtar 15, 33 Drax 32 Dryocosumus kuriphilus 38 due diligence 59, 60 and illegal logging 58 Dutch elm disease 38, 41 Earth Summit. See United Nations Conference on Environment and Development earthworms 37 eco-labelling 72 ecological footprint 16, 20, 140 Ecomakala 128 economic growth 8 ecosystem integrity 119, 122, 126

ecosystem services 1, 5, 8, 17 global value 186 payments for 185–199, 202–211 Ecuador CEDERENA 208 Pimampiro 208 Programa Face de Forestación del Ecuador 208 education lack of 123 EFI-GTM 160 EFISCEN 160 EFSOS. See European Forest Sector Outlook Study Emissions trading 192 endoglucanase 136 enemy release 41 Engineered Wood Products 13, 19 environmental degradation 2, 8, 18, 19, 126 environmental externalities pricing 8 environmental externalities 134, 186 enzymatic hydrolysis 26 Equator Principles 60 ethanol 18, 25, 113, 176 cellulosic 26 ligno-cellulosic 27 Ethiopia Bamboo Sector Strategy Framework 176 Ministry of Agriculture 176 National Bamboo Development Unit 176 Eucalyptus and water tables 134 biological control 38 diversicola 107 enhancements 131 genetic improvement 132 globulus 116 GM yield enhanced 143 nitens 43 Europe 4, 8, 9, 11, 14 as source of pests 41 bio-economy 153–163 certified roundwood supply 51 forest ownership 155 growing stock 154 industry transformation 19 timber supply shortfalls 163 European Commission procurement policies 52, 53

Index European Forest Sector Outlook Study 160–161 European Timber Trend Studies 158–160 European Union 3 biomass 26, 55 Emissions Trading System 192, 193, 196 exclusion of illegally logged timber 57 Forest Law Enforcement, Governance, and Trade, 18, 49, 50, 55–61, 87, 179 illegally logged timber 48 Renewable Energy Directive 55 renewable energy targets 28, 31 Timber Regulation 49, 50, 56–60, 163, 179 transgenic trees 144 Voluntary Partnership Agreements 56, 57, 61, 87, 101, 179 extreme poverty 10 FAOSTAT 11 farm forestry 115 Faustmann formula 115 Feed-in Tariffs 199 feedstocks 17, 20, 25–28, 31, 138 adaptation 136 fertilizers 135 financial crisis 2008 155, 193 Finland 15, 26 Lappeenranta Biorefinery 30 procurement policies 52 fir Chinese 177 firewood 176 flood resistant homes 178 FONAFIFO. See Costa Rica National Forestry Financing Fund food insecurity 123 food security 134 forest conversion 17 forest degradation 119, 195, 208 Forest Disclosure Project, 69, 71 forest footprint 65–69, 77 forest health 11, 36 forest investment 60, 97, 106, 109, 112, 132 forest landscape degradation 1 forest landscape restoration 1 forest restoration 106, 121 forest risk commodities 67, 69, 70, 75 forest stewardship 120

219

Forest Stewardship Council 49, 51, 54, 59, 60, 70–72, 74, 79, 81, 88, 98, 100, 111–112, 179, 194 forest tenures 3, 120, 124, 206 long-term security 123 rights 88 forestry investment 4 forests and human well-being 20 conversion 20 net present value 186 Fortune Global 500 66 fossil fuels 8 Framework Convention on Climate Change 148 France 78 demand for certified timber 53 procurement policies 52 Strasbourg 30 Free, Prior and Informed Consent 3, 87, 99, 126, 145, 147 furniture production 12 FuturaGene 137, 143 FuturaGene-Suzano 131, 145 G8 Action Programme on Forests 48 Gabon forest tenures 96 Voluntary Partnership Agreement 55 gall wasp 137 Gambia forest tenures 91, 96 gasification 30 GATT. See General Agreement on Tariffs and Trade GDF Suez 32 gene expression 141 gene flow 141 General Agreement on Tariffs and Trade 37 genetic improvement 130 Genetically Modified Trees 4, 79 Geneva International Motor Show 15 Germany 9, 10, 78 demand for certified timber 53 procurement policies 52 reforestation 107 germplasm ownership 145 Gevo 27 Ghana Bamboo and Rattan Development Programme 175

220 Index Ministry of Lands and Natural Resources 175 Voluntary Partnership Agreement 55, 56 Gibson Guitar 59–60 global economic power 9 Global Footprint Network 16 global forest cover 20 global forest governance 74 Global Forest Resources Assessment 10 globalization 2, 7–21, 36–44, 74, 135, 166 GM trees. See transgenic trees Golden Agri 74 Gore, Al 180 governance, 1–2, 120, 123, 124, 126, 131, 144, 149, 150 government incentives 2 governments and plantations 109 Grand Council of the Crees 100 graphic paper 14, 15, 25, 28 green building 54 green economy 2, 4, 130–131, 181 green paradox 31, 33 greenhouse gas emissions 195 Greenpeace International 70 greenwash 72 Gross Domestic Product 10 Gross World Product 185 groundwood paper 30 Guadua angustifolia 178 Guatemala extractive industries 95 Guyana forest tenures 95, 96 Voluntary Partnership Agreement 55 Haldor Topsoe 30 hardboard 79 hardwood lumber 12 Hardy’s Co. Ltd. 168 HDF See high density fiberboard Heyerdahl, Thor 168 High Conservation Value Ecosystems 123 High Conservation Value Forests, 4, 70, 79, 119, 194 high density fiberboard 79 Home Depot 65, 66 Honduras forest tenures 95, 96 Voluntary Partnership Agreement 55 host resistance 41

host switching 43 HSBC 60 human wellbeing 5 IDRC. See International Development Research Centre IKEA 3, 65, 66, 69, 71–73, 77–86, 173 IKEA code of conduct 79 illegal logging 3, 11, 48–63, 134 INBAR. See International Network for Bamboo and Rattan India 8, 9, 10, 11 bamboo 166 bamboo products 171 forest tenures 94, 95, 96 Ministry of Environment and Forests 176 National Bamboo Mission 175 National Mission on Bamboo Applications 175 Indigenous Peoples 87, 88, 89, 93, 94, 95, 98, 99, 100, 101, 121, 147, 195, 207 Indigenous Peoples’ Alliance of the Archipelago 94 Indonesia 70 Acacia 108 bamboo and rattan exports 169 bamboo products 171 Chamber of Commerce 73 forest tenures 90, 94 money laundering 61 oil palm 17 rattan furniture 168 replacement of natural forest by plantations 109 Tropical Forest Alliance 73 V-Legal Document 56 Voluntary Partnership Agreement 55, 56 Indonesian Sustainable Palm Oil Platform 74 industrial roundwood 121 industry transformation 19, 25–33 injustice 123 innovation, 1, 8, 123, 131, 134, 135, 138, 140, 171 Institute of Forest Biotechnology 142 Intact Natural Forests 4, 79 Intensively Managed Plantation Forests 139, 144, 147 Intergovernmental Panel on Climate Change 180

Index International Development Research Centre 173, 174 International Labour Organization 93 International Land Coalition 97 International Network for Bamboo and Rattan 167, 171, 173 International Plant Protection Convention 39 International Standards for Phytosanitary Measures 39 International Tropical Timber Organization 135 invasive species 2 invasiveness 141 investment risk plantations 132 IPCC. See Intergovernmental Panel on Climate Change Italy 78 demand for certified timber 53 procurement policies 52 IUFRO 2010–2014 Strategy 1 task forces 1, 2 Japan 8, 14 activated bamboo charcoal 171 bamboo products 171 illegally logged timber 48 procurement policies 52 job creation 138 Karri forest 107 Kenya national bamboo policy 176 Kingfisher 69 Koala 116 Kon-Tiki 168 Kraft 70 Kyoto Protocol 192, 193 land acquisitions 97, 98 land claims 125 land degradation 175 land tenure systems 123 land titles registration 123 landscape approach to forestry 119, 131, 133 to plantations 126 landscape repair 106 landscape-scale planning 126 land-use change 111, 116

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land-use plans 120 Laos 12 bamboo products 171 certification of rattan production 179 forest tenures 96 plantations 124 Voluntary Partnership Agreement 55 Latin America 88, 91, 94–96, 132, 166, 173, 178, 198 Latvia procurement policies 52 laurel bay 42 layer-glued wood 79 LDF See low density fiberboard Leadership in Energy and Environmental Design 54 leaf miner horse chestnut 38 learning change-oriented 123 transformative 123 LEED. See Leadership in Energy and Environmental Design Leptocybe invasa 137 Liberia forest tenures 93 Sime Darby 99 Voluntary Partnership Agreement 55 lignin 28, 107 Lithuania 78 procurement policies 52 live plant imports and pest invasions 39 livelihoods 121, 147, 166, 167, 206 livestock production and deforestation 62, 65, 67 vs forestry 115 local communities, 87–101, 108, 120–126, 135, 146, 147, 195, 206 log imports 11, 38 log prices 83–84, 106–114 low density fiberboard 79 lumber 12, 14, 19, 38, 82–85 hardwood 12 Luxembourg procurement policies 52 Madagascar rosewood 59 mahogany 80 maize and deforestation 62

222 Index Malaysia bamboo products 171 certified forests 51 forest tenures 94 oil palm 17 rattan furniture 168 replacement of natural forest by plantations 109 Voluntary Partnership Agreement 55 Malta procurement policies 52 managed investment schemes 110 Marine Stewardship Council 194 market failures 114, 186 Marks & Spencer 68 Mattel Barbie doll 70 McDonald’s 65, 68, 70 McKinsey Global Institute Commodity Prices Index 12 MDF. See medium density fiberboard Mediterranean climate change impacts 155 medium density fiberboard 11, 79 Melastomataceae 43 meranti 80 merbau 80 Meridian Institute 74 Mexico 11 forest tenures 95 procurement policies 52 middle class 20 growth 10 Millennium Development Goals 180 Millennium Ecosystem Assessment 7, 16, 186, 197, 202, 203 mitigation banking 190, 191 mixed species planting 106 Mondi 124, 125 money laundering 61 monocultures 106, 108, 133 Moso bamboo 177 moth cossid 43 painted apple 38 winter 41 mountain pine beetle 136 Mozambique forest tenures 92 multiple-use forests 159 multi-stakeholder decision-making 123 multi-stakeholder dialogue 126, 131 Munden Project 98

Myrtaceae 43 Myrtales 43 myrtle rust 43, 44 nanocrystalline cellulose 28 nanotechnology 28 natural capital 16, 17, 20, 146, 147, 149 natural forests 154 nature conservation. See biodiversity conservation NBSK. See Northern Bleached Softwood Kraft Nepal forest tenures 94, 96 national bamboo policy 176 Neste Oil 26 Nestlé 68 Nestlé Waters 187 Netherlands certified wood imports 51 demand for certified timber 53 procurement policies 52, 53 Tropical Forest Alliance 73 New Generation Plantations 4, 119–128, 134, 139, 144, 182 New Zealand Auckland 38 degraded landscapes 116 emissions trading 198 pest invasions 38 Pinus radiata 42, 108 plant import restrictions 40 privatization of plantations 108, 113 procurement policies 52 radiata pine 42, 108 support for plantations 108 Next Generation biofuels 27 NGP. See New Generation Plantations Nike 68, 73 non-wood benefits 160 non-wood forest products 1 Norske Skog 28 North America 9 biomass imports to Europe 161 certified roundwood supply 51 Northern Bleached Softwood Kraft 25 Norway forest investment 198 procurement policies 52 no-till planting 134 nutrient cycling 37 oil and gas concessions 95

Index oil and gas exploration 97 oil and gas reserves 100 oil palms 17 and deforestation 62, 65, 97, 187 and Indigenous Peoples 99 Oji-LPFL 124 Operophtera brumata 41 Ophiostoma ulmi/novo-ulmi 41 organizational change 29 organizational culture 29 OSB 79 P&G 68 palm oil 17, 27, 62, 67–71, 73, 74, 194 see also oil palms Panama extractive industries 95 paper demand for 13, 14, 155 exports 14 recycling 19 Paperlinx 28 Papua New Guinea forest tenures 94, 95 participatory land-use planning 124 Patagonia 73 payment for ecosystem services 5, 98, 116, 167, 185–199, 202–211 see also payments for environmental services Payment for Environmental Services schemes 185–199, 202, 203, 205 payments for environmental services 4, 20, 202–211 pension funds 108 Permacane 172 Persea borbonia 42 Peru Camisea gas project 95 extractive industries 95 forest law enforcement 57 forest tenures 95, 96 trade agreement with USA 56 PES. See Payment for Environmental Services schemes pest introductions 38 pest resistance 137 pesticides 135 Petrobras 26 pharmaceutical products 107 Phascolarctos cinereus 116 Philippines bamboo products 171

223

forest tenures 94, 95, 96 Permacane production 172 Phoracantha semipunctata 38 Phyllostachus pubescens 177 phytosanitary regulations 2, 44 Pinus genetic improvement, 132 radiata 42, 108, 113 plantations 2, 4, 9, 13, 20, 42, 43, 106–117, 119–128, 130–150, 154 Acacia 108 Brazil 130 design 123 environmental impacts 121, 126, 127, 133–134 eucalypt 108, 134 for solid wood 117 future investment 114 government ownership 111 government support 108 hardwood 114 high-yield 122 in Europe 161 Internal Rate of Return 113 land availability 108 on farms 115 privatization 113 radiata pine 108 return on investment 112, 113 Sitka spruce 108 social impacts 121, 125 yield improvements 132 planted forests. See plantations plywood 11, 79 Poland 78 population growth, 8–10, 120, 185 Populus genetic improvement 132 Post-2015 Development Agenda 131, 144, 147–150 poverty alleviation 8, 123, 138, 148, 180, 195, 205 private sector role in development 148 procurement policies 3, 49, 51, 52, 53, 54, 55, 65, 71, 80, 137 productivity increases 121, 130, 132, 135, 148 Programme for the Endorsement of Forest Certification 49, 51, 59, 60, 72, 111, 112 property rights 124 protected areas 146, 157, 202

224 Index public–private partnerships 149 Puccinia psidii 43 pulp industry 6 cyclical nature 132 Puma 68 Purchasing Power Parity 10 pyrolysis 30 quarantine regulations 38 radiata pine 42, 108, 113 Raffaelea lauricola 42 rattan 5, 166–182 laminated. See Permacane medical uses 172 Rayonier 33 recreation 107, 159, 160 recycled timber 54, 79 REDD+ 18, 87, 97, 101, 178, 181, 188, 195 re-engineering 29 renewable energy 20, 160 Renewable Energy Certificates 199 Renewable Obligation Certificates 199 Renmatic 31 Republic of Congo Voluntary Partnership Agreement 55 Republic of Korea 14 research new directions 20 research priorities 131 resilience 130 of forests 20 Resolute Forest Products 100 resource prices 12 return on investment plantations 113 rice and deforestation 62 right sizing 29 rights legal recognition 88 to forest resources 88 to land 87, 88, 99 to resources 87 to tenure 97 Rights and Resources Initiative 88 Rio+20 Sustainable Development Goals 150 Romania 78 Roundtable on Responsible Soy 74, 194 Roundtable on Sustainable Palm Oil 62, 74, 88, 98, 99, 194

Royal Dutch Shell 26, 66 rural development 138, 140, 145, 175 rural transformation 110 Russell 1000 Index 100 Russian Federation 8, 78 biomass imports to Europe 161 certified forest products 51 forest tenures 90 Rwanda national bamboo policy 176 Virunga National Park 127 RWE 32 SCA 33 Scandinavia 25 forest growth rates 133 Scientific and Technological Innovation 147, 148, 149 Scolytus multistriatus 38 semi-natural forests 107 SGS 59 shared value 7 shelterbelts 115 short-rotation coppice 161 silvicultural practices 4 Sime Darby 99 Sinar Mas 70 Singapore rattan furniture 168 Sirex noctilio 42, 43 Slovakia 78 Slovenia procurement policies 52 Smartwood 59 social forestry 123 social learning 122, 124 social license 4, 110, 123, 134, 146, 147 Social License to Operate 144, 147, 148 Socially responsible management 122 softwood lumber 12 Soil & Water Assessment Tool 209 soil degradation 17, 167 Solazyme 27 solid wood packing material 38, 39 South Africa Eucalyptus nitens 43 Eyethu community trust 124 Kranskop 124 radiata pine 108 Restitution of Land Act 124 SiyaQhubeka 124 Siyathokosa community trust 124

Index support for plantations 108 South America 12 biomass exports to Europe 161 soybeans and deforestation 62, 65, 67, 68, 73 Spain procurement policies 52 Sri Lanka REDD+ 178 stakeholder involvement 119, 123, 126, 131, 135, 146 STI. See Scientific and Technological Innovation Stora Enso 26, 98, 99, 124 Sub-Saharan Africa forest tenures 91–92 sugar cane and deforestation 62 sulfur dioxide emissions trading 188 sulphate soap 30 super-critical water 30 supply chains 53, 61, 62, 65, 66, 71, 80, 81, 113, 137 Suriname forest tenures 95 sustainability 7 Sustainable Agriculture Network 62 sustainable biomass removal REDD+ 178 sustainable development 147, 148, 149, 173, 180 Sustainable Development Goals 180 sustainable forest management 4, 36, 112, 131, 178, 195 Sustainable Palm Oil Platform 74 sustainable sourcing 71, 81 Suzano 133, 145, 146 Sweden 78 procurement policies 52 Switzerland pest invasions 39 procurement policies 52 Taiwan bamboo products 171 tall oil 30 Tanzania Forest Act 92 forest tenures 91, 95, 96 Village Land Act 92 tax incentives 110 teak 80

225

TEEB. See The Economics of Ecosystems and Biodiversity Teia anartoides 38 tens rule for alien species 40 tenure reform 87–101 tenure risk 100 Tesco 68 Thailand bamboo products 171 Voluntary Partnership Agreement 55 The Economics of Ecosystems and Biodiversity 186, 197 The Forest Trust 70 The Forests Dialogue 137, 139 Timber Investment Management Organisations 113 Tonkin cane 168, 169 trade in illegal timber 48–63 transgene spread 141 transgenic trees 136, 139, 140, 141, 146 risk assessment 142 tree genetics 131 Tropical Forest Alliance 73, 74 tropical forest governance 74 UNCTAD. See United Nations Conference on Trade and Development unemployment 123 Unilever 65, 67, 68, 70, 73 United Kingdom biomass power 32 Building Research Establishment’s Environmental Assessment Method 54 certified wood imports 51 demand for certified timber 53 pest invasions 39 procurement policies 52, 53, 54 Sitka spruce 108 timber trade 53 Tropical Forest Alliance 73 wood pellets 32 United Nations 10 Conference on Environment and Development 50, 149, 180, 185 Conference on Trade and Development 174 Convention on Biological Diversity 186 Declaration on the Rights of Indigenous People 87, 97

226 Index Economic Commission for Europe 158 Environment Program 186 Food and Agriculture Organization 107, 158 Framework Convention on Climate Change 97, 192 General Assembly 97 Security Council 58 UPM-Kymmene 15, 26, 30, 31, 33 urbanization 20 USA 3, 9, 10, 11, 14 Acid Rain program 188 American Petroleum Institute 27 APHIS 143 biofuels 27 California 38, 190 Catskills 187 Clean Air Act 189 Clean Air Interstate Rule 189 Clean Water Act 190 Endangered Species Act 190 Environmental Protection Authority 31 exclusion of illegally logged timber 57 Federal Regulator 31 Georgia 38 Green Building Council 54 illegally logged timber 48 industry transformation 19 Lacey Act 18, 49, 57, 58, 59, 60, 61, 81, 179 live plant imports 40 New York City 187 pest invasions 38, 39, 42 plant diseases 42 plant import restrictions 40 Renewable Fuels Standard 27, 31 Supreme Court 189 trade agreement with Peru 56 Tropical Forest Alliance 73 US Army Corps of Engineers 190 Valero 26 value chains 82, 83, 140, 145, 161, 171, 174, 181 veneer 79 Veracel 121 Vietnam 11, 12 bamboo and rattan exports 169 bamboo products 171 coiled bamboo products 171 forest tenures 96 REDD+ 178

support for plantations 108 Voluntary Partnership Agreement 55 Virgin Australia 114 Vittel 187 Voluntary Guidelines on the Responsible Governance of Tenure 3, 87 Voluntary Partnership Agreements 50, 55 Walmart 65, 66, 67, 68, 70, 75 wasp chestnut gall 38 water catchments 106 pollution 187 privatization 196 supply management 19 tradable property rights 191, 192 wetlands credits 190 Weyerhaeuser 26, 33 Williams, John 15 Wilmar International 74 wood furniture 11 I-joists 19 pallets 67 pellets 114, 163, 177 recycling 19 wood stoves 17 wooden car 15 woodfuel sustainability standards 55 World Bank 9, 10, 60 World Business Council for Sustainable Development Forest Solutions Group 137 vision 2020 148 world GDP 9 World Heritage Convention 3 World Trade Organization 11, 37 disciplines 51 World War II 37 WTO. See World Trade Organization WWF 4, 81, 119–128 Living Forests Model 135 Xyloborus glabratus 42 yield gains 135, 136, 140 zero net deforestation 3, 65–75, 68, 121 Zero Net Deforestation and Degradation 135