United Nations
Commission on Sustainable Development

Background Paper



                            DRAFT UNEDITED TEXT


                    INFORMATION NOTE ON PROGRAMME ELEMENT II.d (7)


              FUTURE SUPPLY AND DEMAND OF WOOD AND NON-WOOD FOREST PRODUCTS


This is a non-official document, for information only, prepared by the
UNITED NATIONS FOOD AND AGRICULTURAL ORGANISATION as Lead Agency on this
Programme Element within the informal, high level Interagency Task Force on
Forests (ITFF). It provides additional background information to delegations
attending the second session of the Intergovernmental Forum on Forests (Geneva,
24 August-4 September 1998). Published in English only.

  TABLE OF CONTENTS                                            Page
  Executive Summary

  INTRODUCTION

  INTERGOVERNMENTAL PANEL ON FORESTS - CONCLUSIONS AND PROPOSALS FOR ACTION

  MAJOR ISSUES IN SUPPLY AND DEMAND

      Recent Studies
      Demand
      Population
      DP/Income
      Other Factors
      Supply
      Other Forest Uses: Wood Fuels
      Other Forest Uses: Non-Wood Forest products and Services
      Land Use Change: Trends in Protected Areas
      Land Use Change: Deforestation and Forest Degradation
      Sustainable Forest Management
      Planted Forest: Afforestation Rate
      Planted Forest: Development Gains
      Alternative Fibres: Paper Recovery Rate
      Alternative Fibres: Non-Wood Fibre Pulping Capacity
      Material Efficiency
      Other Issues

PREPARATIONS FOR SUBSTANTIVE DISCUSSION

NOTES

Table .1: Recent Supply and Demand Studies
[DUE TO FORMATTING CONSTRAINTS THIS TABLE COULD NOT BE REPRODUCED ON THE GOPHER]

This document is meant to be a document in evolution.  Any comments on this
document are appreciated and can be forwarded to the IFF Secretariat,
attention:
               Elisabeth Barsk-Rundquist, Economic Affairs Officer
               Room: DC2-1264  IFF Secretariat
               Division for Sustainable Development/DESA
               United Nations, New York, New York 10017, USA


I. INTRODUCTION

1.  This Information Note is prepared as a supporting document to a
background discussion on Future Supply and Demand of Wood Products and Non-
Wood Forest Prod7ucts as a part of Category II.d of the schedule of work
set out in the Report of the Intergovernmental Forum on Forests on its
First Session [E/CN.17/IFF/1997/4].  The first session of the IFF
emphasised the need to build on the positive results achieved by the CSD Ad
hoc, Open -ended  Intergovernmental Panel on Forests (IPF) and to consider
matters left pending and other issues arising from the programme elements
of the IPF process.  This Note, therefore, recalls from the final report of
the IPF  [E/CN.17/IPF/1997/12] the conclusions and proposals for action,
relevant to supply and demand.  The Note also provides a review of recent
reports and work in progress on supply and demand of wood and non-wood
products and summarises some of the main issues and conclusions discussed.
The Note proposes a process to prepare a Background Document as a basis for
the Secretary General■s report and also suggests other preparatory events
to the substantive discussion scheduled for the third session.

II.  INTERGOVERNMENTAL PANEL ON FORESTS - CONCLUSIONS AND PROPOSALS FOR
ACTION

2.  The final report of the IPF recognised :

-■the importance of long-term changes in consumption and production
patterns in different parts of the world, and their positive and negative
effects on the sustainable management of forests.■ And that: -Production
and consumption patterns, land tenure patterns, land speculation and land
markets have a major influence on the access to and use of forest products
goods and services, as well as on deforestation.■

3.  In the context of IPF, the primary analysis of future supply and demand
prospects was provided in a study sponsored by the Government of Norway
titled, Long-term trends and prospects in supply and demand for wood
products, and possible implications for sustainable forest management.  A
substantive discussion of the specific issues and implications arising from
this analysis was, however, beyond the scope of the IPF deliberations. The
Panel, nonetheless, recognised the key importance of fundamental economic
principles in determining the future of  forests.  As a consequence, the
Panel urged countries:

-To assess long-term trends in their supply and demand for wood, and to
consider actions to promote the sustainability of their wood supply and
their means for meeting demand, with a special emphasis on investment in
sustainable forest management and the strengthening of institutions for
forest resource and forest plantations management.■

4. The Panel also noted the importance of continuing assessment and
analysis at a global level.

III.  MAJOR ISSUES IN SUPPLY AND DEMAND
A.  Recent Studies

5.  A number of studies of global forest products supply and demand have
been carried out in recent years by the private sector, national agencies
and intergovernmental agencies. Generally, these analyses have focused on
wood products though, more recently, FAO■s Asia-Pacific Forestry Sector
Outlook Study (APFSOS) endeavoured to provide a more holistic outlook. In
Table 1 can be found a listing of some recent supply and demand studies by
thematic area.

6.  The studies provide a variety of views on adequacy of supply relative
to expected demand. For example, in 1995, Jaakko Po"yry Consulting
published assessments of the global fibre situation and concluded that
there is ample wood fibre available on a global basis but with tight
supplies in some regions. In the same year, Sedjo and Lyon, using
an equilibrium approach, predicted that wood supply and demand would
increase at nearly comparable rates, but foresaw the composition of
industrial roundwood production shifting towards smaller logs due to the
shortage of larger logs.  Sedjo and Lyon also forecast a greater importance
of paper/paperboard andcomposite panels in future consumption of  forest
products. Apsey and Reed, in 1995, while recognising that actual
consumption must necessarily equal production, projected that by 2010
demand would significantly exceed availability on a global scale by a
■hypothetical gap■, thus implying price increases.  A year later, Nilsson
similarly had, as his ■mainstream■ result, a situation whereby potential
demand would exceed supply.  Solberg et al., in the Norwegian Study
prepared for IPF, concluded that the world■s forests are biologically
capable of providing industrial wood consistent with consumption
projections of the future. The APFSOS analysis concludes that fibre
supplies in the Asia Pacific region are adequate to meet future demands,
but shortages of large logs will require significant substitution toward
reconstituted wood products and finding new, presently under-utilised,
fibre supplies.  The study made qualitative comments on the increasing
importance of services of forests and some non-wood forest products
(NWFPs).

7.  Most projections of future adequacy of supply fallwithin the same
orders of magnitude, but severalproject supply gaps. Consensus appears,
however, to betending towards a ■non-crisis■ future situation though no
study foresees plentiful supplies. A fulleranalysis of the resources
situation and its prospects will be available upon completion in late 1998
of the FAO Global Fibre Supply Study.

8.  The following analysis attempts to give further insight into the
broader supply and demand issues that will have a significant impact on the
ability of forest policy makers to prescribe appropriate forest policies
and policy frameworks. The analysis places a greater emphasis on the supply
side discussion since generally, issues of supply fall within the purview
of forest policymakers while demand issues are more heavily influenced by
national economic policies. 

9.  The analysis also highlights one of the reasons why the studies
described above provide a variety of views on adequacy of supply relative
to expected demand is that the base statistics on which supply assessments
are founded are, in general, very poor.  National forest inventories are
often non-existent, old, incomplete or poorly designed for current
analytical needs. In addition, utilisation data, especially for non-wood
products and services, is in an even worse state than that for wood for
industrial purposes. To compound the challenges the best information
available is often non-standardised and in a poor statistical reporting
structure for both country level and international reporting.

B.  Demand

10.  The key drivers of demand for forest products are population growth
and increasing wealth (reflected to some extent in GDP).  An exception is
the demand for fuelwood which increases with decreasing wealth.  A range of
other factors also impact significantly on forest products demand
including, the price competitiveness of forest products relative to non-
wood products, technical competitiveness of wood products against
substitute products and consumer preferences for wood vis-a`-vis non-wood
alternatives. 

(i)  Population
11.   The role of population growth in increasing demand for forest products and
other products is recognised and understood. Over the past four decades per
capita consumption of wood (industrial and fuelwood) has changed little but
the global population over the same period has nearly doubled. The latest
population forecasts indicate continued exponential growth in some regions
and thus significant increases in demand pressures, particularly in
developing countries.

(ii)  GDP/Income
12.  Increasing income is a principal factor underlying projections of
increasing demand for forest products. Income growth is projected to be
fastest among some developing countries and relatively slower in developed
countries. Demand for fuelwood is generally inversely related to income
growth, while demand for industrial products and therefore industrial
roundwood is directly related to income. Demand for environmental services
is also directly related to income (Solberg et al 1996).

13.  Mainly three areas■North America, Asia and Europe, geographically
dominate the world■s industrial forest products economy.  These regions
presently account for around 80 percent of world production of roundwood
and sawnwood, and more than 90 percent of panel products, and pulp and
paper commodities. The Pacific Basin countries in Asia, the Americas and
Oceania, account for some two-thirds of world consumption of forest
products, with Asia increasingly approaching North America in total demand. 
 Notwithstanding the present economic difficulties in Asia,  continued
increases in wealth in this most populous region may prove to be the single
largest determinant of future demand growth.

(iii)  Other factors
14.  The use of wood products in the future will continue to be challenged by
substitute products from the metals, plastics, agricultural, sand and
gravel, and chemical industries. A correlation between increasing incomes
and preferences for environmentally friendly products and outcomes suggests
a future of increasingly complex interplay in the demands placed on
forests, and the relative acceptability to consumers of forest products and
competing non-forest substitutes.

C. Supply

15.  Supplies of forest goods and services come from four main sources:
       Natural forest
       Planted forest
       Trees outside forests
       Alternative fibres

16.  These sources provide the resource needs for industrial wood, fuelwood
and non-wood forest products and also for an extremely complex array of
forest services.

17.  Since forests are very dynamic ecological and economic systems,
developing appropriate frameworks for forest policy formulation is a
significant challenge. For example, economic pressures for land use change
to support agricultural and urban development need to be balanced against
environmental objectives such as biodiversity conservation,  carbon
sequestration, watershed management and soil conservation as well as 
contributions of forests to scenic aesthetics and tourism development.  In
addition there are also new sources of supply that provide opportunities
for meeting increasing demands for forest products.

(i)  Other Forest Uses: Wood Fuels
18.  Within the forestry sector, wood fuels enjoy considerable visibility
and are among the key justifications for many large social forestry tree-
planting schemes.  In the context of overall energy priorities, however,
wood fuels tend to be marginalised in priority setting in spite of that its
consumption equals that of industrial wood . Wood tends to be considered a
fuel of the past, a perception that is reinforced by its small share in the
energy profile of most industrialised and rapidly industrialising countries
that are the role models for development. A main reason for wood fuel
issues not being given prominence is that benefits tend to be largely non-
monetised and dispersed over numerous small consumers.  There are,
consequently, few powerful stakeholders to promote the agenda. At the same
time wood fuels have evidently failed to keep up (technologically and
economically) with the modern age, they remain inconvenient and
uncompetitive with the mainstream of industrial energy sources. The policy
marginalisation of wood fuels seems likely to have contributed, to a large
extent, to a lack of research, development and promotional effort needed to
carry wood and other biomass energy to centre-stage alongside conventional
fuels. The fundamental challenge for the future is whether fuel wood will
remain important in social terms, but marginal to economic development
agendas.  There might be some changes of this scenario in the future, the
IPCCC has identified biomass, including wood as a major  contributor to
overall energy use in a low carbon energy scenario to mitigate climate
change.  The implications of such a scenario for forest warrants careful
analysis.

19.  Recent analysis indicates that non-industrial fuel wood and industrial
uses are highly compatible resources uses.  A large proportion of wood
fuels are sourced from trees outside forests and hence supply conflicts
with industrial usage is generally infrequent and, in fact, inefficient
resource use may occur through inaccessibility of industrial wood residues
to wood fuel users.

  (ii)  Other Forest Uses: Non-Wood Forest Products and Services (NWFP)
20.  NWFPs are derived from diverse sources, ranging from large plants
(palms, grasses, herbs, shrubs, trees) and animals (insects, birds,
reptiles, large animals) to micro-flora and micro-fauna.  While some NWFPs
are found only among the biological richness and ecological diversity of
natural forests, others have been domesticated and grown as pure crops or
as mixed crops under agro-forestry systems.  Thus, some NWFPs have become
intensively managed agricultural and horticultural crops, while others
remain grouped as -minor■ products of forests, in spite of their real and
potential value.

21.  Over centuries, people have discovered innumerable uses for NWFPs.
Therefore, millions of people living near forests, particularly in
developing countries, have become heavily dependent on NWFPs for basic food
and shelter requirements. For example, forest food is estimated to be used
by some 200 million people living inside or in the vicinity of forests. 
The e stimated global value of forest food is about US$20-25 billion. 
Similarly, non-wood construction materials such as thatch grass and bamboo,
used particularly by poorer sections of the community in many developing
economies, is estimated to have a value of US$15-20 billion. An estimated
75-80 percent of people in developing countries depend on traditional
medicines derived from plants, insects and animal products. 

22.  Forests provide a vast range of beneficial non-extractive
environmental services and benefits alongside wood and non-wood forest
products.  What distinguishes services is that their value comes from
performing particular roles rather than producing physical goods. Services
cover a wide range of ecological, economic, social and cultural
considerations and processes. This diversity means management solutions are
necessarily more complex when service needs are incorporated in decision
making. Services of forests can be categorised into two broad types: those
for which a formal market exists or could be developed - examples being
grazing, eco-tourism, recreation, hunting and  gathering;  and functions
that are largely intangible and non-transacted through markets - examples
of this type of service being cultural values, influences on climate, soil, 
water  and biological diversity conservation.

23.  The key issues associated with supply of non-wood forest products are
related to their small scale and lack of development in an industrial
sense.  Economic weakness of NWFP producers, absence of information and a
lack of focus in NWFP programmes are among the difficulties faced in this
sphere.  For forest services, the key issues relate to developing
appropriate pricing methodologies and mechanisms that will ensure the full
economic value of forests is recognised

(iii)  Land Use Change: Trends in Protected Areas
24.  The total area of forests under legal protection and the number of
areas designated Protected Forests has increased substantially in the past
30 years.  From 1970 to 1990 the total global area under protection has
increased by nearly 140 percent. The average area of protected sites has
also increased in size. This rapid rise in the area under protection is a
clear indication of the importance of conservation and preservation issues
in forest policy.

25.  Policy makers will continue to debate the appropriate proportion of forest
resources to be reserved under legally protected status. Increases in the
area under preservation will obviously remove fibre production potential.
The central questions are: How much forest land area should be placed in
legally protected areas? Will the increases of the last three decades
continue and what will be the impact on forest product supplies? Is legally
protecting areas an effective policy mechanism, particular in areas where
resource scarcity is acute?  Can more innovative protection mechanisms be
developed that will enable conservation objectives to be met without
compromising social and economic objectives?  Should criteria and
indicators for sustainable forest management be promoted as a complement to
protected areas?

(iv) Land Use Change: Deforestation and Forest Degradation
26.  Deforestation remains a serious policy issue for some forest regions.
There is considerable variation in deforestation rates between regions with
Central America and the Caribbean reporting the greatest deforestation and
Europe the highest afforestation. Given that the forest area change is
negative in 5 out of 8 regions deforestation can be expected to remain a
prominent issue in the policy debate over forests.

27.  A meaningful analysis of changes in the world■s forests requires a
differentiation between increases or decreases of forest area and the
changes in forest condition. That is, both deforestation and forest
degradation need to be observed and measured. The most frequently reported
parameter is forest cover change. Forest quality, although equally
important for wood supply, is less intensively observed and monitored. 

(v) Sustainable Forest Management (SFM)
28.  The concept of SFM has been broadened in recent years and, therefore,
the objectives of management are shifting emphasis away from predominantly
timber production towards ecological and social sustainability.
Conceptualisation of SFM has outpaced the development of specific on-the-
ground practices that will achieve sustainability, and there are many
knowledge gaps to be filled. Yet there are many active efforts, throughout
the world, to develop and implement SFM approaches.

29.  SFM is primarily a systematic approach to sustaining each component of
the forest ecosystem and sustaining interactions between the components. In
forests available for wood supply, this means combining wood production
with other management objectives. These other broader objectives include,
maintaining the full range of forest values in perpetuity and,
particularly, ecological capacity through the conservation of plant and
animal biological diversity and soil and water conservation. These were not
clearly specified in the traditional sustainable yield management concept.

30.  Even though a shift from sustained yield to SFM, could mean a
corresponding shift from forest management to ecosystem management, the
implications for timber supply can be very significant. From a production
perspective, the central question is whether a transition to SFM will
create unacceptable levels of economic hardship during the adjustment
phase.  Given that forest resources and pressures on resources are
distributed unevenly, it is evident that the burdens of adjustment will
also fall unevenly across countries.  A key issue is whether the trend
towards preservation-oriented forestry will continue and whether it
will transform the policies of key producer countries, particularly in
North America, Europe and Asia, causing them to restrict harvesting over
large areas of production forests. This may also apply to South American
forest resources. An additional potential brake on global flows of forest
products would occur if large areas of natural forests in South America
become inaccessible (for policy reasons) as a source of industrial forest
products. 

(vi) Planted Forest- Afforestation Rate
31.  The planned afforestation rates reported by countries in terms of area
and percent is increasing. There is, however, frequently a significant
difference between planned and actual afforestation rates.  Recent
performances of countries should be reviewed to determine the reliability
of these rates for policy-making purposes. 

32.  The availability of wood from plantations is increasing rapidly in
Oceania  and South America and will eventually do so in other regions. 
Since the growth on plantations is much higher than in natural forests,
policy developments that promote the use of plantations will have a
significant impact on fibre supplies, as well as in easing the pressures on
natural forests.

(vii)  Planted Forests: Development Gains
33. In general, it can be concluded that good tree improvement programmes
(starting with species/provenance matching to site) can result in
considerable gains in wood yields from tropical and non-tropical forest
plantations. Optimal nursery and silvicultural practices (including seed
pre-treatment, application of nitrogen-fixing soil micro-organisms, optimal
spacing for defined end use, selection of adequate site, fertilisation, and
irrigation) can further increase such gains.

34.  Quantification of possible increases in plantation yield for
particular sites, species or provenances is difficult. Percentage gains as
a result of silviculture and tree improvement operations are widely
variable. Incorporating the wide range of such data into a model for
prediction of future gains is a challenging task. Despite these cautions it
is, nonetheless, worthwhile considering the results in a policy exercise. 

(viii) Alternative Fibres: Wastepaper Recovery Rate
35.  All regions except North America are consuming more wastepaper than
they are recovering. The North American region has consistently been the
largest supplier of this material, and maintains a dominant player status
in world exports of wastepaper. Of the other regions, the Asia-Pacific has
the largest demand for wastepaper . Europe, Africa, Latin America and the
Former USSR each has a lower level of demand that probably could be
serviced through reserves of wastepaper from previous years or from slight
increases in national recovery levels in the countries of these regions.

(viii)  Alternative Fibres: Non-wood Fibre Pulping Capacity
36.  Currently, wood is the major raw material input to the global pulp and
paper industry. Significant levels of non-wood fibres are used in a handful
of countries, most notably in the People■s Republic of China, India, and
several other Asian countries. At present, the most common non-wood fibres
are straw, bagasse and bamboo. Other non-wood fibres, such as cotton, hemp,
sisal, and kenaf, are also becoming more important in the manufacture of
pulp and paper.


37.  Non-wood species currently used only sporadically in the pulp and paper
industry are likely to become more important, as collection and targeted
production of non-wood fibre expands beyond the present focus in East Asia,
to a more global scale.

38.  In the pulp and paper field, any shortages or restrictions to access
of forest raw materials might tend to encourage greater use of non-wood
fibre. The transport economics of using non-forest fibres, such as straw,
generally militate against large mills. A consequence would therefore be
perpetuation of small pulpmills frequently unable to afford
pollution abatement technology. The already well-known pollution problems
of this sector, caused by small-scale operation, would then worsen.
Policies need to recognise and respond to the fact that, in attempting to
preserve forests for environmental reasons, the pulp and paper industry may
be driven to greater reliance on a polluting non-wood based
alternative which could damage the environment even more. 


(ix) Material Efficiency
39.  Improvements in wood processing technology mean that fibre resources
are generally being processed more efficiently and with less wastage than
in the past.  The development of new reconstituted board products,
recycling systems and optimising technologies, among others, are making
major contributions to better utilisation of forest resources.  Conversely,
a trend toward processing logs in the country of origin means a greater
proportion of wood is being processed in developing countries where less
efficient technology is often in use.  No comprehensive global studies of
changes in conversion efficiencies have been conducted.  From a wood supply
perspective, the important questions in examining the roles of technology
relate to these themes.  

(x) Other Issues
40.  A host of other issues also influences supply and demand for wood and
non-wood products and forest services.  Among these, the role of trade in
alleviating regional and local shortages is of key importance, including
changes in trade regulations and mechanisms.   In this context, it should
be noted that the national, subnational and local situations in many
countries are such that to alleviate supply shortages through trade is not
an option because of lack of capital.  Supplementary wood and fibre source
such as trees outside forests (especially for fuelwood) and agricultural
tree-crops are also important in reducing pressure on forests. 

41.  Trends in individual markets tend to vary across products and markets
and the importance of these differences needs to be recognised. The role of
prices in allocating resources, and price trends in various markets has
provided a foundation for much recent analysis and modelling.  Similarly
considerable analysis has been carried out on the roles and impacts of
factors such as economic accessibility of wood supplies, impacts of
integrated forest management, social dimensions of forest products
supplies, and the roles of institutions and institutional arrangements.


IV. PREPARATIONS FOR SUBSTANTIVE DISCUSSION

42.  The issues listed under Category II.d in the first report of IFF,
including the future for supply and demand of wood and non-wood forest
products and services, are scheduled for substantive discussion at the
third session of the Forum. To inform this discussion, a background
document that describes in greater detail supply and demand dynamics in the
forest sector needs to be prepared.  It is suggested that this document
comprise a distillation and synthesis of the recent major studies of supply
and demand to elaborate on the issues raised in this Information Note and
develop methodologies to address these. The document also needs outline an
agenda for progressing the discussion.

43.  The Forum may wish to encourage the provision of resources or the
organisation of a government led initative to enable the preparation and
expert review of this document. 

                        NOTES


Apsey M. and L. Reed 1995       World timber resources outlook. Current     
                                perceptions. A discussion paper (second  
                                edition). Council of Forest Industries,        
                                Vancouver.

Bull G., J. Williams           Northern temperate and boreal forests. Towards  
and P. Duinker 1996            a sustainable paper cycle: sub-study series     
                               #3. International Institute for Environment     
                               and Development.

CCFM (Canadian Council of      Compendium of Canadian Forestry Statistics. 
Forest Ministers) 1997         Ottawa. Canada.

ECE/FAO 1996a                  European timber trends and prospects: into the  
                               21st century. Geneva Timber and Forest Study    
                               Papers, No. 11. 

ECE/FAO 1996b                  North American timber trends study. Geneva   
                               Timber and Forest Study Papers, No. 9. United   
                               Nations Economic Commission for Europe and Food 
                               and Agriculture Organization of the United      
                               Nations, Timber Section, Geneva.

ECE/FAO 1996c                  European Forests and Timber: scenarios into the 
                               21st century. Geneva Timber and Forest          
                               Discussion Papers.  ECE/TIM/DP/10. United       
                               Nations Economic Commission for Europe and Food 
                               and Agriculture Organization of the United      
                               Nations, Timber Section, Geneva.

FAO 1997                       State of the world■s forests 1997. Food and  
                               Agriculture Organization of the United Nations, 
                               Rome.

FAO 1998                       Asia-Pacific Forestry Sector Outlook Study:  
                               Draft main report. Food and Agriculture   
                               Organization of the United Nations, Regional    
                               Office for Asia and the Pacific, Bangkok and    
                               Forestry Policy and Planning Division, Rome.

Nilsson S. and                 Is Sustainable Development of the Russian
Shvidenko. A. 1998             Forest Sector Possible? Forthcoming Occasional  
                               Paper by IUFRO

Pajuoja H. 1995                The outlook for the European forest resources   
                               and roundwood supply. ETTSV working paper,      
                               ECE/TIM/DP/4. United Nations Economic Commission 
                               for Europe and Food and Agriculture Organization 
                               of the United Nations, Timber Section, Geneva.

 


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Date last posted: 5 December 1999 15:45:34
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