The Economics of Forest Land Use andManagement: An Introduction to the Special Issue

Sen Wang,1 Brad Stennes2 and G. C. van Kooten3

1Canadian Forest Service, Natural Resources Canada, 580 Booth Street, Ottawa, Ontario,K1A 0E4 (corresponding author: phone: 613-947-8961; fax: 613-947-8863;

e-mail: senwang@nrcan.gc.ca).2Pacific Forestry Centre, Canadian Forest Service, Natural Resources Canada,

506 Burnside Road West, Victoria, BC V8Z 1M5 (phone: 250-298-2331; fax: 250-363-0775;e-mail: bstennes@nrcan.gc.ca).

3Department of Economics, University of Victoria, PO Box 1700 STN CSC, Victoria,BC V8W 2Y2 (phone: 250-721-8539; fax: 250-721-6214; e-mail: kooten@uvic.ca).

INTRODUCTION

Tangible forest products are important to the everyday well-being of people in almost allcountries, providing employment opportunities and economic benefits that are especiallyimportant in rural areas. Harvested timber is used in the construction, paper, and chemicalindustries; forest biomass is an important source of renewable energy; and non timberproducts, which include various plants and animals, are used for food, medicinal, andother purposes. Forest ecosystems are part of the broader land-based agricultural systemand are intimately connected to agriculture in many places, most explicitly in agro-forestry.In this special issue, two articles are devoted to the interaction between the forest andagricultural systems (Toor et al. 2012; Valdivia et al. 2012).

Forest ecosystems constitute a major carbon sink for mitigating climate change,provide habitat for wildlife, store and regulate water flows, absorb and neutralize humanwastes, and provide recreational, cultural, and other values. It is entirely possible that thenonmarket, nontimber values of forest ecosystems exceed their commercial values, butthese benefits are also much more difficult to quantify. Although there are often conflictsbetween timber and nontimber values, there are also many cases where the two types ofbenefits are compatible.

Forests are also affected by random natural events, such as wildfire, disease, and pests,whose functions are not well understood. Indeed, a major challenge of forest managementand economics research remains that of addressing uncertainty, both in modeling forestecosystems and determining optimal strategies for managing forests.

WHAT HAS CHANGED IN THE FOREST SECTOR?

Relative to most other sectors, the global forest sector has steadily declined in terms of itscontribution to the economy and its capacity to generate jobs. According to the Food andAgriculture Organization of the United Nations (FAO 2004, 2011), the forest productssector accounted for nearly 2% of the global economy in the early 1990s, falling to 1.2%by 2000 and declining further to about 1% by 2006. In 2006, the forest sector employed

Canadian Journal of Agricultural Economics 60 (2012) 135–139

DOI: 10.1111/j.1744-7976.2012.01250.x

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some 14 million workers, or 0.4% of the global labor force. Canada experienced a similartrend—in 2010 the forest sector’s contribution to the Canadian economy was $22.5 billion(constant 2002 dollars), representing 1.8% of Canada’s gross domestic product (GDP),down from 3.1% in 2000 (Natural Resources Canada 2011). In 2010, the sector provided222,500 direct jobs, representing 1.3% of the total employment in Canada, down from367,400 in 2000.

Despite the “traditional” forest sector’s declining share of global GDP and employ-ment, forests are being recognized as increasingly valuable over time as an understandingof their overall role in providing benefits expands. Not only are forest resources consid-ered vital to the livelihoods of millions of rural people in developing countries and toregional economic development, they are also affected by global trends and by their role inaddressing the United Nations Framework Convention on Climate Change (UNFCCC)and the United Nations Convention on Biological Diversity (UNCBD), both of whichwere signed at the 1992 Earth Summit in Rio de Janeiro. At the same time, forests havebeen subject to increasing pressure from a variety of factors, including ongoing popula-tion increase in developing countries, rising standards of living, technological advance,and climate change. The linkages between income and deforestation are the topic of an-other paper in this issue. Chiu (2012) uses data from 52 developing countries and recentanalytical methods to examine the Environmental Kuznets Curve relationship betweendeforestation and real income.

In 2008, the world’s urban dwellers surpassed the rural population for the firsttime in human history, and in late 2011 the world’s population surpassed seven billion.Just one decade into the 21st century, advancements in information and communicationtechnologies had greatly reduced the demand for various grades of paper, especiallynewsprint. In developed countries, the trend has been to favor digital over print mediaand this substitution is likely to deepen over time (Hetemaki 2005). As more and morepeople go online for information and use digital devices for communication, includingmany in developing countries (viz., China, India), it is no surprise that the demand forprinting and writing papers continues to decrease, despite population increase.

Forestry is also becoming an important part of proposed solutions to reduce carbondioxide emissions (Ellison et al. 2011). Carbon sequestration activities earn carbon-offset credits that can be used by large emitters to enable them to achieve CO2-emissionreduction targets (van Kooten 2012). Although forest conservation activities are currentlynot eligible for emission reduction offsets, concerns about tropical deforestation haveled international negotiators to consider the use of forest conservation in developingcountries as a means for addressing global warming. Activities that Reduce Emissionsfrom Deforestation and forest Degradation (REDD) are now proposed as an alternativemeans for earning certified emission reduction credits. Indeed, as a result of negotiationsat Cancun in December 2010, the narrow role of REDD has been expanded to includesustainable management of forests, forest conservation, and the enhancement of forestcarbon stocks, collectively known as REDD+. In this way, it is possible to link theUNFCCC and the UNCBD. Increasingly, therefore, climate negotiators appear willingto accept REDD+ activities as potential emissions offset credits to the extent that theseactivities also enhance biodiversity.

Policies to mitigate climate change and the effect of climate change on forest ecosys-tems provide opportunities and pose challenges for forest jurisdictions in rich and poor

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countries alike. The unprecedented outbreak of the mountain pine beetle (Dendroctonusponderosae Hopkins) in British Columbia illustrates both aspects, as the beetle infesta-tion is thought to be a harbinger of the types of surprise one might expect as a result ofclimate change, while, at the same time, providing an opportunity to benefit from strate-gies to reduce atmospheric CO2. The provincial government has developed policies thatencourage harvests of beetle-damaged timber, much of which is beyond the economicmargin for processing into lumber. This has led to increased interest in other uses forthis timber, particularly as feedstock for the generation of electricity (or other energyproducts). Niquidet et al. (2012) explore this issue in one of the papers included in thiscollection, although they do not address the question of planting these denuded areas forthe purpose of sequestering carbon (see Bogle and van Kooten 2012; van Kooten 2012).The provincial response is designed to promote economic development while contributingand benefitting from incentives to mitigate climate change.

Evidence that the British Columbia response to the mountain pine beetle is partof a global transformation of the forest sector is also seen in other parts of Canada.The recent creation of the Canadian Wood Fibre Centre as a public–private partnershipaugments the newly established FPInnovations, which serves as the hub of Canada’sforest research efforts. In the ongoing transformation of the forest products industry,efforts have been made to use wood fiber for bioenergy production and climate changemitigation. The burgeoning bioeconomy is calling for a better understanding of newdevelopments in clean energy technologies and their applications. For example, worldwidepellet production capacity, currently estimated at some 30 million tons, continues to grow(Bioenergy International 2011). This growth has been driven primarily by strong demandin the European Union underpinned by an array of economic policy instruments suchas feed-in tariffs, selective use of carbon tax policy, and renewable portfolio standards tomeet the goal of 20% of its energy consumption from renewable sources by 2020.

It is expected that the desire for clean energy, green jobs, and solutions to climatechange will continue to create new opportunities for integrating the existing forest prod-ucts industry with the emerging bioeconomy. This increased demand for global woodenergy is the topic of another article in this special issue, which uses the Global ForestProducts Model to examine the impact on the U.S. forest products sector (Ince et al.2012).

Forest management practices constantly change to keep pace with shifting societalvalues, new technologies, and improvements in efficiency. In Canada, changes in the struc-ture of the forest products industry have brought about changes in forest management(Rotherham 2010). While woodland managers now manage their forests for a wide varietyof values, including biodiversity, wildlife habitat, recreation, conservation, and fiber pro-duction, forest economists and policy analysts are obliged to assess the economic impactsof various changes in management practices and examine the effects of alternative man-agement strategies on the industry’s profitability and social well-being, and importantlyon the environment.

PURPOSE AND SCOPE OF THIS SPECIAL ISSUE

The wide array of forest activities and associated values pose a tremendous challengefor forest economics and policy analysis. Forest professionals, land managers, and policy

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makers need to understand the changing nature of forestry, while relying on the mostup-to-date analytical tools (viz., GIS, inventory and growth models, mathematical pro-gramming) to provide guidance in making effective decisions at all levels. In recognitionof these challenges and the important role of forests in society, the Canadian Journal ofAgricultural Economics devotes this special issue to topical papers in contemporary for-est management and economics, with an emphasis on economic methods, mathematicaland computer models, applications, and institutional arrangements relevant to the forestsector in Canada and elsewhere.

The goal of this collection is to bring together some new perspectives on the problemsand proposed solutions relating to forest management. Specifically, this special issuecomprises eight articles covering a wide variety of topics. In addition to the five we havediscussed above, the remaining ones include an econometric analysis of the behavior offorest product prices (Niquidet and Sun 2012), an analysis of the role of political pressureon the Canada–U.S. softwood lumber dispute (Godwin and Zhang 2012), and a casestudy of the benefits of restoring forest cover to protect ridgelines and hillsides in thesouthern United States (Chadourne et al. 2012).

We hope that the papers in this special issue will stimulate continued discussiontoward a better understanding of the contemporary issues that affect forest land use andmanagement. In particular, these papers provide some notion of the new approaches andanalytical tools needed to help advance our understanding of the changing nature offorestry and the linkages between the forest sector and the rest of the economy.

REFERENCES

Bioenergy International. 2011. The Bioenergy International Pellets Map. Stockholm, Sweden:Bioenergi Forlag.Bogle, T. and G. C. van Kooten. 2012. Why mountain pine beetle exacerbates a principal-agentrelationship: Exploring strategic policy responses to beetle attack in a mixed species forest, CanadianJournal of Forest Research 42: 621–30.Chadourne, M. H., S.-H. Cho and R. K. Roberts. 2012. Identifying priority areas for forest land-scape restoration to protect ridgelines and hillsides: A cost-benefit analysis. Canadian Journal ofAgricultural Economics forthcoming, doi: 10.1111/j.1744-7976.2012.01252.x.Chiu, Y.-B. 2012. Deforestation and the environmental Kuznets curve in developing countries: Apanel smooth transition regression approach. Canadian Journal of Agricultural Economics forth-coming, doi: 10.1111/j.1744-7976.2012.01251.x.Ellison, D., M. Lundbald and H. Petersson. 2011. Carbon accounting and the climate politics offorestry. Environmental Science & Policy 14: 1062–78.FAO. 2004. Trends and current status of the contribution of the forestry sector to na-tional economies. Working Paper FSFM/ACC/07. Rome, Italy: UN Food and AgricultureOrganization.FAO. 2011. State of the World’s Forests 2011. Rome, Italy: UN Food and Agriculture Organization.Godwin, J. and D. Zhang. 2012. Political pressure: An examination of U.S. senators’ actions inrestricting Canadian softwood lumber imports. Canadian Journal of Agricultural Economics forth-coming, doi: 10.1111/j.1744-7976.2012.01247.x.Hetemaki, L. 2005. ICT and communication paper markets. In Information Technology and theForest Sector. IUFRO World Series Volume 18, edited by L. Hetemaki and S. Nilsson, pp. 76–104.Vienna: IUFRO.

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Ince, P. J., A. Kramp and K. E. Skog. 2012. Evaluating economic impacts of expanded global woodenergy consumption with the USFPM/GFPM model. Canadian Journal of Agricultural Economicsforthcoming, doi: 10.1111/j.1744-7976.2012.01249.x.Natural Resources Canada. 2011. The State of Canada’s Forests–Annual Report 2011. Ottawa,Canada: Canadian Forest Service, Natural Resources Canada.Niquidet, K., B. Stennes and G. C. van Kooten. 2012. Bioenergy from mountain pine beetle timberand forest residuals: A cost analysis. Canadian Journal of Agricultural Economics forthcoming, doi:10.1111/j.1744-7976.2012.01246.x.Niquidet, K. and L. Sun. 2012. Do forest products prices display long memory? Canadian Journalof Agricultural Economics forthcoming, doi: 10.1111/j.1744-7976.2012.01244.x.Rotherham, T. 2010. Changes in the structure of the Canadian forest products industry shouldprompt changes in forest management. The Forestry Chronicle 86 (5): 560–61.Toor, I. A., E. G. Smith, J. K. Whalen and A. Naseem. 2012. Tree-based intercropping in SouthernOntario, Canada. Canadian Journal of Agricultural Economics forthcoming, doi: 10.1111/j.1744-7976.2012.01245.x.Valdivia, C., C. Barbieri and M. A. Gold. 2012. Between forestry and farming: Policy and envi-ronmental implications of the barriers to agroforestry adoption. Canadian Journal of AgriculturalEconomics forthcoming, doi: 10.1111/j.1744-7976.2012.01248.x.van Kooten, G. C. 2012. Climate Change, Climate Science and Economics: Prospects for an AlternativeEnergy Future. Dordrecht, NL: Springer.