Sustainable Forest Management

Sustainable Forest Management

The area for the most effective action in promoting sustainable forestry management is at the concession level. However, sustainable management implies additional costs on concessionaires, namely lower yield due to low impact harvesting, higher costs resulting from stricter standards, and reduced revenue from a different distribution of costs and revenues over time.

The problem of lower timber yields in the short run under sustainable forest management is offset in the long run by a greater overall volume since the resource is replenished. Under standard forest management, the timber resource is not effectively replenished in a reasonable time frame due to damage to the resource base (the forest) and poor utilization.

A more difficult problem is the time horizon, or distribution of costs and revenues over time, under sustainable forest management. When rainforest is clear-cut, little time elapses between agreeing to harvest a concession and bringing the timber to market. Conversely, under sustainable forest management, there are substantial initial costs including planning, training, assessment, and inventory. Revenue from the harvest is spread out over a number to years due to harvest restrictions in place to ensure sustainability. When interest rates are high - as they often are in developing countries - sustainable forest management is particularly unattractive as the more drawn out the revenue stream the lower the present value of the harvest.

To address this time horizon problem, either low interest rates are needed (nearly an impossibility because inflation is an exceedingly complex factor in monetary policy) or compensation for concessionaires that participate in such sustainable forest management schemes. Direct payments to participating concessionaires has advantages over the trade measures mentioned earlier when it comes to economic efficiency, conformity with international trade rules (especially important in light of the recent "banana wars" between the U.S. and Europe), transparency, and ease of administration.

To sponsor such direct payments, the governments of tropical timber exporting countries could shift some subsidies away from conventional logging and plantations and towards sustainable forest management and levy taxes on all timber products. Although output taxes are more efficient and can be applied for both domestic and foreign timber use, export taxes are probably a more likely choice because they are easy to monitor. Bach and Gram (1996) compute that a 1-2% tax on all internationally traded timber products would cover the entire cost of the direct payments program.

Of course, such a program would require the formation of some bureaucracy for implementation and monitoring. Bach and Gram (1996) suggest a partnership between the International Tropical Timber Organization (ITTO) and IUCN to carry out inspections on concessions.

Source: Bach and Gram 1996.