Forests and Economic Development

UNECE report outlines how forests contribute to economic development in the ECE region

Despite the efforts that have been put into communication by the forest sector, the public is generally not aware of how essential forests are in terms of services and products for their daily life. Likewise, not much is generally known about the contribution of forests to economic development, especially in rural areas. Even forest specialists may underestimate this contribution when they just look at one part of the picture. The value of services is often hidden by wood production, which remains in most cases the main economic driver. However, it is important to note that as societies place more demands on forests, the true value of forests lies now more in the services they provide than in the wood they produce.

It is widely recognized that a forest that has value for conservation, production, protection or recreation, and one that has clear user rights attached to it, is a forest that will be protected, a forest that will be taken care of. As such, better recognition of the full value of forests is crucial. Significantly, from the economic point of view, this can result in better profitability of forest management, which in turn becomes an incentive for public and private investments in the forest sector. Aiming to bring some clarity to the contribution of forests, UNECE/FAO has released a publication that builds on several recent studies, mobilizing all the knowledge and expertise of ECE/FAO and especially those contained in the State of Europe's Forests, the Forest Sector Outlook Studies and the Forest Products Annual Market Reviews.

The study reviews the many ways in which forests contribute to economic development in the ECE region, and analyses, on the basis of recent ECE/FAO studies, the outlook and main challenges for the forest sector in the region: wood energy, sustainability of wood supply, the forest sector workforce, payment for forest ecosystem services, innovation, and demonstrating and communicating the sustainability of forest management. It concludes that the way forward is to establish forests and the goods and services they provide as an integrated part of the green economy. This is a major opportunity for the ECE region forest sector, which must not be missed. The Action Plan for the ECE region forest sector in a green economy maps out how the sector could rise to the challenges. Some of the key findings are outlined below.

Overview

The ECE region is made up of three sub-regions: Europe, North America and the Commonwealth of Independent States (CIS). It stretches from Canada and the United States of America in the west through Europe to the Russian Federation and to the Caucasus and Central Asian republics in the east. It covers almost the entire boreal and temperate forests of the northern hemisphere - about 1.7 billion hectares - just under half of the world's forest area and almost 38 percent of the land area of the UNECE region.

According to the report, the ratio between forests and people influences the role forests play in society and the economy. A society with abundant forests and relatively few people will manage its forests differently from a society centered on cities where an important human population exerts constant pressure on the forest resource. The ECE region contains many remote regions with extensive forests but relatively few people, for instance in Russia, Northern Europe and North America, but also many densely populated regions such as Western Europe or the eastern seaboard of the USA. On average each European has 0.3 hectares (ha) of forest, each North American 1.8 ha, while each Russian has nearly 6 ha. In comparison, the global average is 0.6 ha of forest per person.

How do forests contribute to economic development in the ECE region?

Forests, with the industries that depend on them, create wealth and income, and provide employment and livelihoods. Wood is an important part of the modern economy: it is especially attractive as a raw material and fuel because its supply is often sustainable and it can be used and re-used in a highly efficient low-waste fashion. Through trade, the ECE region supplies other regions' needs for wood and forest products. However, many of the goods and services provided by the forests of the region are not marketed, or indeed assigned monetary value, leading to distorted perceptions of the relative importance of different functions, as well as to economic problems for forest owners.

Today, the ECE region forest sector contributes about USD 300 billion to the economy of the region, which is approximately 1 percent of GDP, but this share reaches 3-6 percent in a few countries. Nearly 5.4 million people work in the forest sector as formally defined, which represents about 1 percent of the economically active population. This does not include the many people whose jobs are classified in other sectors but depend, at least in part, on forests. However, the number of people working in forestry and the wood processing industries has been shrinking steadily as a result of improved productivity.

The inhabitants of the ECE region each consume on average forest products for about the equivalent of 1 m³ of wood each year, in addition to about 0.25 m³ of wood for energy extracted directly from forests. In addition, wood harvests are well below the physical potential of forests all over the region, so the natural physical capital is growing steadily. Significantly, there is practically no wastage of wood, as the sector puts almost all harvest and industry residues and recovered paper and wood to good use. Landscape care wood (from urban forests, orchards, roadsides etc.) and recovered wood (e.g. pallets, demolition wood) are also becoming significant sources of raw material and fuel.

All three parts of the ECE region are net exporters in an increasingly complex and competitive global market for forest products. ECE countries exports of forest products are worth about USD 250 billion, much of which is exported to destinations within the region. Forests in the ECE region also provide a wide range of non-wood goods and services, many of which are undervalued, or not valued or marketed. The failure to value some of the forest's main functions, including carbon sequestration, protection and biodiversity functions and the supply of recreation, is at the root of important policy distortions.

Financial institutions have started to make major investments in intensely managed wood production forests, mostly in North America. The total value of this type of investment in forests is estimated at USD 300-500 billion. Of this, about USD 50 billion is held by institutional investors, most of it indirectly via entities established by investment managers specialized in forest investment, and the rest by wealthy individuals and privately held forest products firms. Although most investments are in North America, there are also significant holdings in Australasia and South America, and increasingly in sub-Saharan Africa, and Southeast Asia.

Conclusion

According to the report, the emerging green economy represents a major opportunity for the ECE region forest sector, which must not be missed. The forest sector and economic development come together in the concept of the green economy and the forest sector's role in it. Because of its specific characteristics as a sector dependent on a multifunctional renewable resource that provides many goods and services, which are not marketed in the conventional economy, the forest sector will be profoundly influenced by the emerging green economy and should play a leading role in promoting its establishment.

As such, the ECE/FAO has been mandated to develop an Action Plan for the ECE region forest sector in the green economy, and develop related concepts, which are valid for the region and the global level. This Action Plan for the forest sector in a green economy is being developed, which maps out how the sector could rise to the challenges outlined. However, to achieve the ambitious goals of the Action Plan, business as usual in the forest sector is not sufficient as it would lead to missed opportunities, and a possible decline in the relative importance of the sector.

All actors and stakeholders, public and private, national and international, should work together to address the challenges identified, in a flexible way, sharing resources and experience, developing innovative approaches, and communicating much better inside the sector, with other sectors and with the general public and policy makers. In this way, the ECE region forest sector can truly achieve its potential contribution to the economic development of the region.

* This feature contains information and text from the report "Forest and Economic Development: A Driver for the Green Economy in the ECE Region". The full report can be downloaded from: www.unece.org/fileadmin/DAM/timber/publications/SP-31WebSmall.pdf.

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