Global Wood Supply Analysis
Sten Nilsson22 and Gary Bull23
Background
From the mid 1990s to the end of 1990s around 15 global wood supply studies were carried out by international organizations, academia and consultant companies (Bazett, 2000; Bull et al., 1998). The studies used different methodologies but all heavily relied on FAO data. Among the studies, the following can be mentioned, e.g., 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), and WRI (1999).
The conventional wisdom resulting from most of these studies is that the global timber harvest has increased over time and will continue to increase in the future, albeit at a lower rate. Most studies concluded that the supply of industrial roundwood will be sufficient up to 2050. Plantations were seen as a secure source of supply for industrial needs.
Some predicted that by 2030, the plantations would be responsible for approximately 45% of the global industrial supply (Whiteman and Brown, 1999). Another assessment concluded that the consumption of fuelwood and charcoal per capita has peaked and that most of the developing countries would change from fuelwood and charcoal to commercial energy―mainly fossil fuel (Arnold et al., 2003). Combining these findings meant that there would be no major competition between industrial roundwood and fuelwood uses. However, in contrast to the conventional wisdom, two of the studies flagged different possible futures. Nilsson (1996) argued that if all of the demands on the services of the forest ecosystems are going to be fulfilled, this will result in substantial competition on the forest resources and may lead to a future deficit of industrial roundwood. The WRI (1999) study stressed that a tight supply/demand balance for coniferous roundwood is foreseen in a number of key regions in the world already around 2010.
Overall, most studies were concluding that there was no industrial roundwood supply problem given the increase in plantation area and the slackening of demand by fuelwood users. As a result, most studies concluded that there was no forecasted real price increase for forest fibers.
Changed Conditions
Nearly 10 years have passed since many of the studies were carried out and some fundamental market and non-market conditions have changed. Among these changed conditions are: booming consumption in emerging economies; increased illegal logging; over harvesting of existing forest capital in important supply countries; over enthusiasm for plantation supply; a downward trend in available supply (in some regions referred to as the annual allowable cut (AAC) or the imposition of a logging ban) in important supply regions; changing demands on the forest where environmental concerns are a significant factor in many wood supply regions; increasing fuelwood consumption in many developing countries; increasing competition for wood fibers between the energy industry and the traditional forest industry; increasing rate of natural disturbances that is reducing the forest capital; rapid technological and biotechnological developments; increased use of recovered paper; improved policies; increased substitution; more efficient industrial processes; etc. Shifts in the number and composition of populations, migration to cities, greater mobility, increased communication and trade, higher consumption and expectations, changes in climate, new technologies, different energy conditions, etc., will create a global landscape that will be much different from today (Poore, 2003). These changed conditions are affecting future wood supply possibilities substantially and these changed conditions will be discussed in some more detail in the following paragraphs.
The objective of this paper is not to carry out any wood supply/demand analysis but rather to flag the changed conditions in the supply/demand equation as a platform for a discussion about the possible need for a revised wood supply/demand analysis.
Booming Consumption in Emerging Economies
The rapid rise in consumption in countries such as China is dramatic and India may well be set to follow. Smaller countries, such as Vietnam, see the manufacturing of wood products as vital to their economic development strategy and wood consumption is also rising dramatically.
China’s forest market has become one of the largest in the world in terms of production, consumption and imports of wood products. The total consumption of industrial roundwood in China is currently around 270 million m3 (Bull and Nilsson, 2004). During the last five years the import of logs has increased from 5 million to 25 million m3. The total import of forest products, expressed in roundwood equivalents (RWE), has skyrocketed from 40 million m3 in 1997 to 120 million m3 in 2004 (Sun et al., 2004). Chunquan et al. (2004) predicted that the RWE deficit in 2010 could be 125 million m3. Since China should be able to sustain an annual economic growth of 7–8 percent for at least another decade (Economist, 2004), the consumption of forest products is bound to increase in the future. We also know that China is already over harvesting substantially―currently some 120 million m3/year (Bull and Nilsson, 2004)―we can conclude that China will be strongly dependent on imports.
Around 2020, the Indian population will be about 1.25 billion people, of which nearly 70% will be in the age range of 16–65 years―this means the world’s largest working and consuming population. The outlook on economic growth is in the range of 6.5–7%/year. Combining these forecasts with the predicted continued rise in income per person in India and the growth of the middle class, we expect to see significant increases in global consumption. Looking 15–20 years ahead, India will probably overtake China in growth status because its population is younger and is growing faster, so its work force will continue to expand when China’s ageing population will start to slow down (Economist, 2004).
Muthoo (2004) estimated that the total industrial log consumption is currently 50 million m3 and could grow to 90–120 million m3 in 2020. Given the available information on the domestic wood supply, which is admittedly very uncertain, there could be a deficit of 20–70 million m3 by 2020. In Latin America, the earlier region of concern for economic sustainability, there is currently a stable phase of economic growth. The near-term outlook on economic growth is 4–5% for the region. The driving force for economic growth is the demand on raw material and increasing domestic consumption. Contrary to earlier, the inflation is low and the trade balance for the region is positive. Brazil, together with China and India, is among the fastest growing emerging economies. Foreign industrial investments are growing substantially. Goldman Sachs (2005) assesses that Brazil may have a larger economic growth status than Germany in 25–30 years.
The consumption of industrial roundwood in the region of Latin America was about 120 million m3 in 1990 and is predicted to increase to 200 million m3 in 2020. But with the current economic conditions in the region and a maintained and sustainable growth over time, this is probably an under estimate. The production of industrial roundwood was similarly assessed to be around 220 million m3 in 2020.
The difficulty with analysis of the emerging economies is the lack of transparent information and a lot of contradictory information at hand.
Increased Illegal Logging
With booming consumption in emerging economies, we can also see an increase of illegal logging in important supply regions. The World Bank (2002) assess that global illegal logging robs producer countries of at least 15 billion US$ per year. Sheingauz (2004) assesses illegal logging in the Russian Far East and Southeastern Siberia to be 35–40% of all logging. Although illegal logging in Russia is mainly linked to domestic economic, institutional and social ills, Sheingauz (2004) concludes that areas with larger export have a high extent of illegal logging.
For the Russian Federation as a whole, the illegal logging is assessed to be between 20–36% (Greenpeace, 2000; Brukhanov et al., 2003; Lopina et al., 2003). In many of the former Eastern European countries the illegal logging is assessed to be 10–20% (Ivanov, 2004; WWF Latvia, 2003; WWF, 2004). Ottitsch et al. (2005) conclude that illegal logging is an issue of concern in the Baltics, Balkans, Russia and in Central Eastern European countries.
Currey et al. (2001) state that illegal logging is common in all tropical timber producing countries and that 70% of the log production in Indonesia is illegal (50 million m3), 80% in the Brazilian Amazonas and 50% of the harvest in Cameroon are illegally logged. Contreras-Hermosilla (2002) states that 15% of global timber trade is connected with illegalities. A study commissioned by AFPA (2004) suggests that illegal forest activities represent between 5–10% of the global industrial roundwood production. EIA (2005) assess that China’s import of forest products, stemming from illegally logged timber and expressed in RWE, was over 18 million m3 in 2004. Bull and Nilsson (2004) estimate that nearly two-thirds of the reported industrial wood supply harvested in China is illegal. Brack (2005) points out that illegal logging distorts global markets, undermines incentives for sustainable forest management and reduces the long-term sustainable wood supply. The scale and speed of the illegal logging seem to be crucial with respect to the impacts on the wood supply in short and medium terms. Illegal logging has contributed to leave tropical forests in a state where useful commercial operations are just not economical in the short and medium term (Poore, 2003).
Over Harvesting
There is a substantial over harvesting of forest (natural) capital taking place in some supply regions. Bull and Nilsson (2004), for example, illustrate that a serious over harvesting is taking place in China. Serious over harvesting has taken place and continues to take place in countries like Cambodia, PNG, Indonesia, Laos, Myanmar and in several countries in tropical Africa (Pulkki, 1997; Bull et al., 1998). As illustrated by Pulkki (1997) this will seriously hamper the future sustainable supply of industrial roundwood in these countries. Wardle et al. (2003) point out that the degradation and deforestation of the forests in the South seems to be difficult to stop. Poore (2003) points out that nearly all of expected population growth will take place in tropical areas and this will inevitably lead to the transformation of forests. He also points out that many kinds of sustainable forest management have been shown to be technically possible in the tropics but has rarely been implemented due to the fact that it is rarely profitable to do so. Arrow et al. (2004) find that several nations of the globe have been failing in meeting a sustainable criterion and that their investments are not sufficient to offset the depletion of the natural capital.
Environmental Constraints
The implementation of new policies with respect to the protection of environmental services is bringing significant constraints on the supply situation. For example, during a 10-year period the Russian AAC has been reduced by some 100 million m3 mainly due to environmental constraints.
Nabuurs et al. (2003a) have made a wide literature review showing a Europe-wide change in forest management regimes towards nature-oriented management. This new management includes a variety of regimes generally aiming at enhanced nature conservation values and differs from traditional economic optimization in forest management and is less directed towards wood production. The authors (Nabuurs et al., 2003a) claim that this is a long-term trend and have summarized the changed management regimes in terms as longer rotation periods, species change towards more natural/indigenous species, and set aside more forests. They also claim that this trend is promoted in international policies like the Ministerial Conference on Protection of Forests in Europe and by forest owners. This conclusion is supported by Rametsteiner and Kraxner (2003), who investigated the European’s attitudes to forest management. They conclude that the European public disapproves of forest management concepts that disregard natural dynamics and regard forests just as production units for raw material. This trend is expected to continue and will affect the future wood supply in the region.
Poore (2003) pointed out that the overall trend in forestry of the South is an increased polarization of land-use towards intensive agriculture and plantation forests on the one hand and protection on the other hand.
The UNECE (2005) has recently tried to assess what this would mean for wood supply in Europe in the future. The baseline scenario for 2020 is assessing a sustainable wood supply of 430 million m3/year at an annual increment of some 700 million m3/year but, taking into account the increased conservation demands, the supply would be only 380 million m3. Thus, there is a difference of some 10–15%.
In many regions of Canada the managing for biodiversity, aesthetics, First Nations Cultural issues, and soil and water conservation could reduce the harvest in several areas by as much as 50%. In many tropical forest countries, the adoption of reduced impact logging will reduce the harvest levels in the first cutting cycle (Pulkki, 1997).
If the climate change issue requires the consideration of carbon management in the forests, there will also be a further constrained future on wood supply. Boettcher (2005) and Bull et al. (2004) have demonstrated that a conservation management regime creates the largest short-term carbon sink and highest carbon stocks in forests. It is also a generally held view that there will be additional other environmental constraints in the future on the traditional wood supply.
Changed Harvesting Behavior by Forest Owners
Trömborg and Solberg (1998) show that there is a huge variation of opinions between the European forest owners and that they have very different goals with respect to the management of forests. Other studies show that the general tendency for non-industrial private forest owners and state owners in Europe is that they have become less price-elastic (Lönnstedt, 1989; Bolkesjø and Baardsen, 2002). The changed values and preferences of forest owners in Europe affect the forest management decisions, harvesting and investment behavior and hence determine the long-term supply responses (Nabuurs et al., 2003b). To reflect this development, Nabuurs et al. (2003a) have in their wood supply analysis for Europe extended the rotation periods for certain owner categories. The changed behavior by owners to a more conservative forest management is expected to follow in other parts of the world. In many important supply countries the assessed future increased supply is assumed to come from non-industrial private forest owners, e.g., USA (Haynes, 2003).
Revised AAC Possibilities
Illegal logging, over harvest, environmental constraints and connected restrictive policies are all leading to reduced AAC possibilities. In North America, we have seen a reduction of the AAC in the British Columbia (BC) Coast and there is clearly going to be downward revisions in the BC Interior AAC after harvesting the beetle kill wood. Quebec has also just reduced its AAC by 20% and Ontario is currently analyzing the wood supply situation.
It should also be noted that the AAC in virtually all countries where it is used, is a biophysical calculation and does not represent the economic wood supply to the industry. For example, in Russia they have currently set the AAC at approximately 510 million m3/year but the long-term economic harvesting level seems to be around 250 million m3/year (Nilsson, 2004a).
Many of the most recent supply analysis just make a comparison with theAAC or the annual growth and the actual harvest and conclude that there is lots of room for expanded harvest (e.g., Häggblom, 2004; Roberts et al., 2005). However, a temporary short-term overcut of the AAC in a country will probably not have any impacts on the long-term sustainable wood supply.
Natural Disturbances
The natural disturbances of the forest resources have increased significantly during the last 5–10 years. In the boreal zone, this seems to be linked to a warmer and drier climate in combination with human activities. For example, the forest fires in Russia during 1970–1985 were on average 3–4 million ha/year, but for 1997–2003 the average was 9–10 million ha/year. The outbreaks of insects in Russia show a similar development with affected areas of about 12 million ha/year during the most recent years (Shvidenko et al., 2005). Similar developments of insect outbreaks have been observed in Canada. The foreseen long-term climate change impact is assumed to increase the numbers and intensities of storms, hurricanes, droughts, etc. All of this will affect the capital of forest resources in a negative direction. Recent reports (e.g., Stokstad, 2005) hint that severe droughts will cause a grim future for the rain forests. At a global scale, WRI (1999) predicted for 2030 that the area of productive, closed, non-reserved forest is expected, for different reasons, to decline in the world by at most 325 million ha or about 11% of the industrial wood supply forests.
Fuelwood and Charcoal
Currently, the world uses about 1.8 billion m3 of fuelwood and charcoal (FAO, 2005) and, as stated earlier, the common view (FAO, 2001a) is that the developing regions have industrialized, resulting in people switching from fuelwood and charcoal to fossil fuels. But FAO (2005) also assess that the used wood fuel in 1997 was 53% of the total roundwood production and points out that the most important source of energy for more than two billion people is wood fuel and that wood energy is also likely to gain in use in developed countries during the next 20 years. Arnold et al. (2003) conclude that the overall fuelwood demand will probably decrease in the future. The same authors claim that the existing fuelwood gap has not become a factor for deforestation and is not threatening the industrial wood supply due to the fact that part of the fuelwood consumption is stemming from coppicing shrubs and branches and not from whole trees.
With respect to charcoal, the situation is somewhat different. The consumption of charcoal has doubled from 1975 to 2000 and is expected to continue to grow (Girard, 2002). Charcoal consumption is causing increased pressure on wood supply because it is produced from solid wood.
It should be pointed out that FAO (Whiteman et al., 2004) has recently revised its consumption figures for fuelwood and charcoal substantially upwards. The earlier statistics were regarded as weak and were supplemented with new data and model analysis.
However, the above information is contrasted by other statistics. In India (ITTO, 2003), the current fuelwood consumption of some 280 million m3 is estimated to be 400 million m3 in 2020. Muthoo (2004) points out that the predominant use of the roundwood harvested in India is for wood fuel use. The current fuelwood consumption in Africa of some 600 million m3 is assessed to be 820 million m3 in 2020. The current fuelwood consumption in Latin America of some 250 million m3 is assessed to be 320 million m3 in 2020. Wardle et al. (2003) conclude that 66% of the roundwood consumption in Latin America is wood fuel and there is no sign of a rapid substitution of wood fuel by other sorts of energy. Fuelwood accounts for about 50% of the total fuel consumption in rural India (Pandey, 2002). The fuelwood consumption varies with relative availability and is high in forested areas. In urban areas during the last 20 years, there has been a substantial switch in the energy consumption. The use of so-called traditional fuels has halved in relative terms and been replaced by commercial energy sources.
Leiwen and O’Neill (2003) concluded that 70–75% of the rural households in China rely on biomass for energy use and that the consumption of biomass for energy will continue to grow. The future consumption of charcoal shows an even stronger increase than fuelwood consumption, since charcoal consumption seems to increase with increased urbanization (Whiteman et al., 2004).
Pandey (2002) has done detailed studies on fuelwood consumption in India, admittedly based on weak statistics. He concluded that the fuel consumption pattern has not changed much during 20 years in the rural areas with biomass and dung still accounting for about 90% of the energy consumption. The most plausible explanation of the contrasting views on fuelwood use is that due to the high prices for commercial energy there is less transition to commercial energy sources. Leiwen and O’Neill (2003) conclude that incomes have to rise substantially in order to see a reduction in biomass use for energy For India, Pandey (2002) concludes that about 55% of India’s households belong to the low income group and cannot spend much money on energy. If the price of commercial energy is high the consumer will keep using traditional fuels and given the expected increase in real prices for commercial energy (IEA, 2004), there is no reason to expect any dramatic energy switch in rural developing countries.
Given the expected relative future high prices on commercial energy there seems to be a reason to revisit the issue of competition between fuelwood and industrial wood in the mid-term.
Commercial Wood for Energy
The IEA (2004) suggests a rapid growth in energy demand from 2000 to 2020. The world’s energy use will increase by nearly 60% to 14.4 billion TOE in 2020. Oil will remain the single largest fuel in the global primary energy mix. Fossil fuels will constitute some 85% of the increased demand. The IEA (2004) is of the opinion that the world’s energy resources are adequate to meet the energy demand in 2020―natural gas and coal will be abundant, the physical potential for renewable energy will be very large and there is no lack of uranium. But, oil resources need to be made accessible in order to meet the increased oil demand. About US$ 3 trillion will be needed to be invested in the oil sector up to 2020. First, it will be a challenge to find the financial resources for these investments. Second, needed investments of this magnitude will have a strong impact on the price mechanism of energy. However, there is a core of informed analysts challenging IEA’s view on a stable future energy balance. These analysts (e.g., ASPO, 2004) assess an irreversible decline in oil production by around 2010. If the latter are right, the development of renewable solutions will be requested. However, whichever of the two scenarios will be materialized the effect will be the same―substantially increased energy prices. This is of concern for the traditional forest industry―there will be strong competition between the energy sector and the traditional forest industry with respect to the raw material.
A study by Nabuurs et al. (2003a), commissioned by CEPI, addresses the conflict between energy policies under discussion in Europe and the traditional forest industry. The study identifies a shortfall of wood raw material for the traditional forest industry of some 50 million m3/year in 2020 due to more nature oriented forest management, changed ownership behavior with respect to harvesting regimes and mainly due to increased demand on wood for energy with current EU policy. Another study trying to assess the impacts of the EU policy that renewable energies should reach 12% of the total energy consumption by 2010 is carried out by CEI-Bois et al. (2000). This study concludes that to reach this goal the contribution of wood and wood residues would be equivalent to 163 million m3 of wood, which would have a serious impact on the supply of wood to the forest industry. A sharp penciled economic analysis, although theoretical, by Lundmark (2003) with respect to the allocation of wood to the energy sector versus the traditional forest industry shows that, based on the economic conditions in 2002, about 10 million m3 of the yearly pulp log harvest in Sweden should be allocated to the energy sector. If the energy prices increase by 25% compared to the price level in 2002 the volume will increase to 16 million m3.
The climate change issue may also drive to a changed allocation of wood raw material between the energy and forest industry sectors. Some people see bioenergy as the only realistic way to tackle the climate issue in the short/medium term, e.g., the Head of UNEP, Klaus Töpfer (Die Presse, 2005). If this will be materialized it may not only influence the price of wood for energy but also lead to a priori policy-settings with respect to the allocation of wood fibers.
With increased real energy prices the competition between these two sectors with respect to raw material will increase substantially.
Plantations
The conventional wisdom is, as stated above, that the plantations will play a more important role in the global wood supply in the future. The forest plantations reported in 2000 is 187 million ha, although all of these plantations are not directed towards the production of industrial roundwood. According to FAO (2001b) the plantations were only about 5% of the global forest cover but they provided some 35% of the global roundwood in 2000. This latter number is assessed to reach some 45% by 2020 (FAO, 2001b) or by 2030 (WRI, 1999). It is also assumed that the plantation growth rates and qualities are going to improve by each rotation due to improved biotechnology and management. With this development there will be a substantial transition of the center of gravity of the industrial wood production from the North to the South.
But there is also another side of the coin. Enters and Durst (2004) have analyzed the forest plantation development in the Asia-Pacific region. For Australia, the annual planting rate has decreased from about 137500 ha per year in 2000 to 42300 ha in 2003. In Australia, there is now a major concern with respect to the water issue and this has put a cap on the 2020 plantation vision (Australian Senate, 2004). For China, recent statistics show that the plantation rate has picked up pace. The latest forest inventory (released in January 2005) reports 53 million ha of plantations, but the fast growing plantations are only reported to be 3.7 million ha. This is a reduction of earlier reported inventory numbers for the fast growing plantations, which were 6.5–8 million ha (Nilsson, 2005).
Enters and Durst (2004) report that the annual planting rate has dropped slightly in India since the 1990s; in Indonesia the planting rate has dropped from 230000 ha in 1997 to the current 78000 ha; in New Zealand plantings peaked in 1995 when nearly 100000 ha were planted and is now 14900 ha; in the Philippines most of the plantations were planted in 1980s and early 1990s and there has hardly been any planting since 1997; in Sabah the plantations averaged 10000 ha/year in the 1990s and is currently about 2000; in Thailand there was a short-lived plantation period between 1986 and 1997, which has now faded away.
WRI (2003) has studied the development of softwood plantations in Chile and Brazil. It is concluded that the majority of pine plantations were established during 1974–1994, when the government offered fiscal incentives. The annual rate of plantations was 66000 ha/year during 1978–1988 and has declined to less than 19000 ha during the last 10 year period. The majority of the pine plantations in Brazil were planted between 1966 and 1986 when the government had a tax incentive program.
One can also conclude that the productivity of the plantations in many cases are not in line with what is expected. Bull and Nilsson (2004) illustrate this with respect to China, where the official estimates for the fast growing plantations is 8–18 m3/ha/year (depending on species and sites) but the real average productivity is reported to be 3–3.5 m3/ha/year for the fast growing plantations.
In a similar way, the quality of the wood produced in the plantations is not as expected. This can be illustrated by a current industrial case for India. A company was offered access to substantial plantations of eucalyptus but found after investigations that only 3–5 m3/ha could be used for industrial purposes. Similar evidence is reported for China where significant areas of plantations are of low quality (Bull and Nilsson, 2004).
In addition to environmental, productivity and quality issues there are other challenges ahead for the forest plantation industry. The establishment of plantations has taken substantial subsidies as illustrated above, in one form or another and the question is whether these subsidies will continue and whether plantations will be established to a larger extent without any subsidies (Bull et al., 2005). In addition, serious land-use conflicts are foreseen by a substantially increased global plantation program (Anon, 2003; Poore, 2003) and that stimulated rates of plantations have sometimes led to inappropriate land-use (Cossalter and Pye-Smith, 2003).
Even if these negative trends could be dismissed, the FAO (2001c) concludes that the present plantation development is not sufficient to offset growing consumption, deforestation and declining harvest from natural forests.
But it is not all doom and gloom. There are a number of very significant success stories with respect to plantations, which have been developed using required expertise, good science, efficient management and hard work. Häggblom (2004) assesses that 88 million ha of successful fast growing plantations of Brazilian type (mean annual increment 20–25 m3/ha/year) would take care of the total supply for the global consumption of industrial hard wood in 2015.
Supply-Side Benefits
The above discussed changed conditions may be seen by some as alarmist views. There are of course also a number of developments, which may influence the future supply in a positive direction. One of the most dramatic possible changes is the rapid development of biotechnology. Bio-engineered forests may offer many opportunities for forestry. It will probably result in increased forest productivity, lower production costs, improved wood characteristics, higher yield in the industrial process, etc. All of this will affect the supply side in a positive direction. But the ecological risks with bioengineered forests are complex. The addition of genes from distant species and alternatives to native or homologous genes, respectively, produce novel properties that can have significant social or ecological consequences (Strauss and Bradshaw, 2004).
Over time there will be investments in and learning effects, as discussed above, in all steps of the management of plantations. This will result in higher productivity, better quality and lower costs that will positively contribute to the future wood supply situation.
There is also a large potential in increased specialized forest management in general for increased future supply.
The forest sectors of the world can develop substantially by sufficient investments, implementation of efficient policies and establishment of adequate institutions in a broad sense (Nilsson, 2004c). Auty (2003) points out that the policies required for sustainable economic development are known but difficulties surround their implementation. This deficit causes over mining of renewable resources and depletion of natural resources. All of these measures have the potential to substantially increase the future wood supply.
Structural Change in Demand
To understand the implications of a possibly changing supply of fibers there is also a need to understand the development of the future demand. Maybe this is the most difficult component of the supply/demand equation. Earlier studies, discussed above, seem to have over estimated the future demand on industrial fibers substantially. Instead of growth in the consumption of industrial wood fibers the global consumption has been rather stable during the last 5–10 years. This can be explained, among other factors, by the collapse of the former USSR, as well as by an increased forest product substitution by metals and plastics (e.g., Zhang et al. 1997). This product substitution is expected to continue in the future (e.g., Haynes, 2003) unless the sector is investing substantially in innovations for the development in transformational products―products with brand new functions.
As stated earlier, technological development is going fast. This will influence the industrial production with more efficient processes with less input of raw material per produced unit. These developments will decrease the use of fibers. The technological development has also made it possible to develop attractive products for the market of so-called agri-products (e.g., bamboo, rubber plants, etc.). This trend can be expected to grow in the future. Most studies see a substantial increase in the use of recovered paper in the future (e.g., UNECE, 2005). This will affect the future use of wood fiber substantially. But, as pointed out earlier, high energy prices are expected and high energy prices will have a dampening effect on the use of recovered paper.
Some are also concerned on how the future recovered paper market will clear in the future―will the supply satisfy the demand? (e.g., Roberts, 2004; Häggblom, 2004). For example, Haynes (2003) assumes that the recovery rate of paper will only grow gradually to 50% by 2010 in the USA and stay at this level through the period to 2050. There are substantial signs that other structural changes are also taking place in the markets. In a forthcoming study on the impacts of Information and Communication Technologies (ICT) on the forest sector (Hetemäki and Nilsson, 2005), it can be concluded that the growth in electronic media is already shaking the traditional paper, especially communication paper grades, sector in high ICT, high GDP countries. Ince et al. (in Hetemäki and Nilsson, 2005) are making the conclusion that the same development will probably happen with respect to paperboard. Between 1995 and 2003 newspaper circulation fell by 5% in America, 3% in Europe and 2% in Japan (Economist, 2005). Meyer (2004) predicts that if this trend continues the last newspaper will be recycled in 2040. Rupert Murdoch (Financial Times, 2005) stated recently: “I hoped that this thing called the digital revolution would just limp along. Well, it hasn’t… it won’t… and it’s a fast-developing reality we have to grasp”. These developments will influence the future demand on fibre.
The development of new technologies (in addition to ICT), like material technologies, nanotechnologies and biotechnologies, is going rapidly and will develop exponentially in the future and will have a major impact on the production of future forest products and the future use of wood (Nilsson, 2004b).
Back of the Envelope
We have done a ‘back of the envelope’ outlook on the wood supply analysis based on current knowledge (Nilsson, 2004b). We divided the world into 14 regions. We used all of the available information we could obtain, not only official data because in many cases those data do not reflect realities with respect to harvest, forest capital, consumption, and harvest potentials. We tried to assess the harvesting potentials taking these data into account as well as the current forest management policies and the economic accessibility. The assessment (or guesswork) was carried out for 2000, 2010 and 2020. These numbers were compared with the assessed industrial consumption in the individual regions for the same time period. The result of the back of the envelope calculation shows a rather grim picture, and the picture is the same for 2010 as well as 2020 although even more so in the latter case. There are 5 out of the 14 regions showing a surplus with respect to the industrial wood supply. These regions are Latin America, Africa, Russia, Australia and New Zealand. All of the other regions are deficit regions. And the deficit in 2020 is about three times higher than the surplus in the surplus regions.
This development will, of course, not happen because if a deficit situation occurs investments will be made in order to increase the supply. And this latter dynamic was not taken into account in our simple ‘back of the envelope’ assessment.
Consistent Data
The picture of the changed conditions in the wood supply/demand equation is confused due to lack of consistent and transparent data on the development of the factors discussed above. Wardle et al. (2003) conclude that “FAO has the mandate to coordinate and compile global forest assessments. Methodological advances have taken place in this work but the validity and reliability of the stock and change data on world forests are still inadequate”. Thus, in order to make advances in the global wood supply/demand equation improved data on many components of the global forest sector is required.
Conclusion
So, does this preliminary discussion indicate that there will be imbalance in the global wood supply/demand balance? We have discussed that there are negative and positive structural changes taking place. Crucial questions are the development over time of the negative versus positive structural changes with respect to the wood balance and whether the positive trends are balancing the negative trends, respectively. Our current assessment is that the structural changes of some components of the supply/demand equation move rapidly and with business-as-usual policies there is a risk that there will be imbalances in the global wood balance.
Recommendation: A Revised Wood Supply/Demand Analysis
Based on the discussion above we would argue that the time is right to make a revision of the global industrial wood/supply demand conditions over time. As outlined above (and we have far from discussed all of the factors influencing the future global wood balance), the future landscape of the global wood balance is complex. We would argue that the future is a complex animal, which is impossible to predict. So the purpose of thinking about the future wood balance would not be to predict it but to prepare for it. One should specifically look for places in the wood balance system where drivers might combine to make change faster and where the drivers conflict with each other and hence slow down or halt change. In these spaces the largest risks and opportunities are to be found (Curry, 2005). Thus, we do not think that approaches/models that only extrapolate existing trends are sufficient.
The revision should have a broad approach taking into account demographic, water, transportation, energy, technological, economic, social, etc., developments. The revision should not be limited to just employing ‘official’ data; rather, the best data available should be applied to generate consistent analysis. The analysis should prepare for an uncertain future by building pictures of possible futures based on best available knowledge in scenario form. These scenarios should not just use different economic growth rates as the driving force, which has been the case in many of the earlier outlook studies; rather, they should build pictures of possible futures that may be very different in character, much in line with the approach used by companies such as Royal Dutch/Shell (Shell, 2003). There may be a need to broaden current existing forest economic models rooted in yield management systems and neo-classical economic frameworks to multiple equilibria, a consumer choice theory that incorporate heterogenous agents, etc. (e.g., Kant, 2003). The analysis should also be undertaken in a collaborative fashion with the international community working alongside industry, government and possibly even a select group of science-based environmental non-governmental organizations (ENGOs).
We think the key questions that need to be addressed are:
• What will the future fiber demand look like?
• Where is the wood fiber raw material going to come from in the medium and long term?
• Which policy actions should be taken to foster sustainable wood supply?
• What should be the role of the international community in addressing wood supply issues?
The wood balance issue should probably be addressed in a broader framework discussing how many forests we need, what kinds of forests there should be, where they should be located, what they should deliver and how they should be managed as earlier proposed by Nilsson (1996) and Poore (2003).
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22 Deputy
Director and Forestry Program Leader, IIASA, Laxenburg, Austria
23 Faculty of Forestry,
University of British Columbia, Vancouver, Canada
