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GLOBAL WOOD SUPPLY ANALYSIS

Sten Nilsson and Gary BullIIASA, Austria / UBC, Canada

46th Session of the FAO Advisory Committee on Paper and Wood Products31 May 2005, Vancouver, Canada

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Mid 1990s to the End of 1990sA Number of Studies:

Simons (1994)Apsey and Reed (1995); Jaakko Pöyry (1995); Sedjo and Lyon (1995)Brooks et al. (1996); Nilsson (1996); Zhang and Buongiorno (1996)FAO (1997)Bull et al. (1998)Wood Resources International (1999)

Most of the Studies Concluded:No industrial wood supply problems even in the long-termPlantations would be supplying 45% of industrial roundwood about 2030No competition between wood fuel and industrial wood was foreseen

Some Outliers:Nilsson (1996) stated that if all demands on the services of the forest ecosystem would be fulfilled there would be a deficit of industrial roundwood supplyWRI (1999) assessed a tight supply/demand balance for coniferousroundwood already around 2010

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Objective of This Paper

Act as a platform for a discussion on the changed conditions in the supply/demand equation and the possible need for revised global wood supply analysis

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Booming Consumption in Emerging Economies #1

ChinaDuring the last 5 years the import of logs has increased from 5 to 25 million m3

From 1997 to 2004 the import of forest products (in RWE) has skyrocketed from 40 to 125 million m3

WRI (1999) assessed 40 million m3 in 2010China seems currently to over harvest by some 120 million m3/yearWe do not know the domestic supply possibilities

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Booming Consumption in Emerging Economies #2

IndiaIn 2020 about 1.25 billion people, of which 70% in the age range of 16–65 yearsEconomic growth outlook is 6.5–7%/yearThe total industrial log consumption is 50 million m3

and could grow to 90–120 million m3 by 2020 corresponding to a deficit of 20–70 million m3 by 2020We do not know the domestic supply possibilities

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Booming Consumption in Emerging Economies #3

OthersIndonesia currently has an economic growth of 6% and a doubling of the investmentsPakistan currently has an economic growth of 8%

Latin AmericaThe near-term outlook on economic growth is 4–5%

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Illegal LoggingAdmittedly uncertain assessments but the picture is increasing in extent due to market developments in emerging economies

Literature:China ― the dominating part of the harvest is illegalRussia as a whole 20–35%; 35–40% in Russian Far East and East SiberiaFormer Eastern Europe 10–20%Common in all tropical timber producing countries and very high in countries like Indonesia, Brazilian Amazonas and Cameroon

Impacts:Contribute to leave tropical forests in a state where commercialoperations in the medium-term are not possibleHarvest is “creaming” the most accessible, most profitable stands, high valued speciesA common result in temperate and boreal forests is changed species composition and decreased productivity

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Over Harvesting

The perception is that substantial

and increased over harvesting is

taking place in some important

supply countries

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Additional Examples of Over Harvest #1

IndonesiaCambodiaLaosMyanmarSeveral countries in Africa

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Additional Examples of Over Harvest #2

Will the over harvest stop?

Population growth will take place in the tropics and transformation of forests will be inevitable

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Environmental ConstraintsLiterature:

Russia reduced AAC by nearly 100 million m3

Europe ― new forest management regimesDiffers from traditional economic optimization and less directed towards wood production but enhanced nature conservation valuesLonger rotation periods, species change, more set aside of forestsCase studies show 10–15% less supply in the long-term

Growth ― Increased conflicts on land-use with intensive agriculture and plantation forests and protection of natural forestsClimate ― Conservation management regimes creates the largest carbon sinks and highest carbon stocks in forests

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Changed Harvesting Behavior by Forest Owners

Europe:Changed values and preferences by forest ownersLonger rotation periods for certain owner categoriesThe changed values and preferences determine the long-term supply responses

USA:The assessed future increased supply is assumed to come from non-industrial private forest owners

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Revised AAC PossibilitiesAll of above results in reduced AAC

BCQuebec

AAC is biophysical calculation and is not economic supply

Russia: AAC ― 510 million m3/yearLong-term economic supply about

250 million m3/year

Decline of some 325 million ha (10%) of the industrial wood supply forests by 2030

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EnergyWorld Primary Energy Demand by Fuel

Source: World Energy Outlook 2004, International Energy Agency

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Oil and Gas Liquids

Source: The Association for the Study of Peak Oil and Gas, ASPO News

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Fuelwood and Charcoal

But reality (case studies):In Latin America some 65% of the roundwood consumption is wood fuel and there is no sign of rapid substitution of wood fuel by commercial energyThe predominant use of harvested wood in India is used for wood fuelSubstantial increases assessed in consumption in Africa, China, India and Latin America

Conventional wisdom; developing countries will industrialize andpeople switch from fuelwood and charcoal to commercial forests

With high energy prices there is less transition to commercial energy (China, India)Price Development of EnergyPopulation DevelopmentChanged Land-useTime to revisit the wood fuel issue?

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Commercial Wood for EnergyCase Studies (Literature):

Shortfall in Pan-Europe by 2020 of 50 million m3

for the traditional forest industry due to EU energy policies on renewablesAnother study states a shortfall of some 165 million m3 based on the same energy policiesSweden: based on 2002 economic conditions about 10 million of yearly pulp log harvest should go to the energy sector instead of the pulp industry

High Energy PricesClimate Issue

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PlantationsConventional wisdom; fast growing plantations will be responsible for 45% of the industrial wood supply by 2020–2030

BUT

Real Plantation Rates:

Majority planted between 1966–1986Brazil (pine)

Current: 19000 ha1978–1988: 66000 ha/yearChile (pine)

Short-lived plantation period between 1986–1997Thailand

Current: hardly anything

1980s and 1990s nearly all plantations made

PhilippinesCurrent: 78000 ha1997: 230000 haIndonesiaCurrent: 14900 ha1995: 100000 haNew Zealand

2003: 3.7 million ha1998: 6.5–8 million haChina (inventory of fast growing plantations)

2003: 43200 ha2000: 137500 haAustralia

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PlantationsThe plantations have taken substantial subsidies and with decreased subsidies decreased plantation rates

FAO concludes “that present plantation development is not sufficient to offset growing consumption, deforestation and declining harvest from natural forests”

On the other hand, 88 million ha of Brazilian type would take care of the total supply for global consumption of industrial hard wood

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Supply Side OptionsBiotechnological development

Increased productivityImproved wood characteristicsHigher industrial yield

Improved management of plantations

Specialized forest management (zonation)

Improved policies and institutions

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Structural Change of Demand

Product Substitution

Technological Development

Utilization of Agri-products

Recovered paper (energy prices, tight demand/supply)

Nanotechnologies and material technologies

ICT

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Newsprint Consumption Per Capita and ICT

AUS, CAN DNK, FIN, JPN, NLD, NOR, SWE, UK, USADistance Weighted Least Squares

200 400 600 800 1000 1200 1400 1600 1800 2000 2200 2400 2600 2800 3000

ICTIND

2.7809

2.9555

3.0933

3.2183

3.3389

3.4602

3.5878

3.7084

3.8358

3.9566

4.0781

4.2098

New

sprin

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cap

ita

GER, ITA, FRA, ISR, SPADistance Weighted Least Squares

0 200 400 600 800 1000 1200 1400 1600 1800 2000 2200 2400

ITCIND

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New

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AUS, CAN, DNK, FIN, JPN, NLD, NOR, SWE, UK, USADistance Weighted Least Squares

200 400 600 800 1000 1200 1400 1600 1800 2000 2200 2400 2600 2800 3000

ICTIND

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GER, ITA, FRA, ISR, SPADistance Weighted Least Squares

0 200 400 600 800 1000 1200 1400 1600 1800 2000 2200 2400

ITCIND

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PW Consumption Per Capita and ICT

High-GDP, High-ICT High-GDP, Medium-ICTICT-Index = (Internet users + mobile phones + PCs + TVs) / 1000 people

Is ICT the important cause for the difference?

High-GDP, High-ICT High-GDP, Medium-ICT

What is the role of ICT?

Source: Hetemäki, 2004

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Data Problem

The picture of the changed conditions in the wood supply/demand equation is confused due to lack of consistent and transparent data

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ProposalA revision of global industrial wood supply/demand conditions over time is seriously neededThe future is a complex animal, which is impossible to predictThe thinking about the future wood balance would not be to predict it but to prepare for itEspecially look into the drivers of the wood balance system that will make the wood balance change faster or slow down It does not look sufficient to just extrapolate existing trendsBroad approach taking demographic, energy, technological, economic, social, environmental, etc., factors into accountNot just employing official data but best available data should be usedScenarios illustrating possible futures with respect to the future global supply/demand balance

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Key Questions of the Scenarios

What will the future fiber demand look like?

Where is the wood fiber going to come from in the medium and long term?

What policy actions should be taken to foster the needed supply?

What role should the international community have in addressing future global supply issues?