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