A FOREST ECONOMY FOR THE FUTURE
Updated: Dec 12, 2022
Generating social and economic dividends from more sustainable, circular sources
By Devang Vussonji, Mokena Makeka, and Fitsum Gelaye Dalberg Advisors CLIMATE & ENVIRONMENT
Forests are both an economic and environmental lifeline. It is possible to both increase use of products derived from them, while at the same time protecting biodiversity and forest cover.
Is the use of forest products likely to maintain forest cover over time, and thus decrease overall environmental impacts? If forest management is sustainable, protects local biodiversity and promotes a polyculture use of forest assets, the answer is yes.
It is possible to simultaneously increase the economic use of forests and the forest cover. The key lies in sustainable approaches that move away from monoculture production and towards investing in more diverse offerings that use the full breadth of forest resources. By expanding the demand, production, and use of sustainable forest products, forest growing stock is stabilized – and the destruction of unsustainable timber sources can be prevented.
In countries like Canada and Colombia, programs are already in place that protect biodiversity, support regeneration, and discourage the cultivation of a single crop in broad swaths of land. Canada’s publicly owned forests, which make up about 91% of the country’s forest land, have been under sustainable forest management for decades. Comprehensive laws, regulations and policies have been put in place to ensure all forest areas that are harvested on public lands are replanted or allowed to naturally regenerate. This has contributed to the declining rate of deforestation in the country over the past three decades.1 Colombia is investing in a scheme for sustainable forest concessions that allow for previously illegal timber businesses to go beyond exploitative practices and invest in sustainable land use management. These programs have shown that when sustainable supply of forest stocks is in place, and that supply is well-regulated, a viable forest economy can exist.
In addition to creating economic value, the use of forest products presents multiple job creation opportunities along the value chain. For instance, in the construction sector, jobs can be created that are related to the harvesting, processing, replanting and regeneration to construction and the actual sale of supplemental forestry services. In Canada, employment is created through regeneration practices, which have opened up job opportunities that complement the forestry industry’s contribution to the country’s GDP, which in 2017 was $24.6 billion dollars. Further, it is estimated that every job created in forestry generates an additional 1.5 to 2.5 jobs in the economy, since a major share of a worker’s income goes to purchasing goods and services.
The forestry sector also presents an opportunity for equitable, community-based development. In Acre, Brazil, government support helped create the Cooperative of Community Forest Producers (COOPERFLORESTA), a community-based forestry management co-op with 200 members who generate income by producing timber on their individual plots, and collectively harvesting and marketing their products to the plywood industry. In addition to timber sales, the co-op’s profits are significantly supplemented by selling profitable forestry services (e.g., preparation of forest management plans) provided to non-members in the forestry industry.
Quantifying the Forest Economy
While impressive, the basic facts about forests are not unexpected: They are home to over 60,000 species of trees globally and provide a safe haven for 80% of amphibian species, 75% of bird species, and 68% of mammal species globally. Forests capture carbon emissions, filter the air, and in tropical places, have roots that serve as nurseries for numerous fish species. Tree roots in marine habitats help trap sediments, protecting the habitats of many more species, including seagrass beds and coral reefs.
What is less apparent is forests’ contributions to social and economic growth around the world. Forest economies support more than 45 million direct and indirect jobs globally and have a total contribution of more than $1.3 trillion to the world economy. The global timber sector alone employs 13.2 million people and is worth $600 billion each year.
The holistic value of forests differs on a country-by-country basis. In the Congo Basin, 80 million people depend on the forest ecosystem for their for livelihood, food, energy, medicine, and water.5 In the Democratic Republic of the Congo, Virunga national park has an annual economic value of $49 million and is the source of more than 45,000 jobs. In Ethiopia, 13% of the national GDP is dependent on forests, with half the country’s population employed in the forest sector. The forest sector employed 209,940 Canadians in 2017 alone. In 2011, the forestry sector contributed $1.8 billion to Colombia’s economy, amounting to 0.6% of the country’s GDP. In Guatemala, the forest economy’s contribution is about 2.5% of the country’s GDP. And timber processing in three African cities Yaoundé, Douala, and Kinshasa — has an annual revenue of about $15 million and employs 5,000 individuals.
The Link Between Development and Deforestation
Forests are a lifeline to ecological health and the well-being of communities around the world – but their ability to continue to provide these benefits is eroding. Growing populations, rapid urbanization, and poverty levels are contributing to a rise in deforestation. Africa has lost 4 million hectares of forest area per year in 2010–2020 — the highest net loss of forest area amongst all continents. And reports indicate that Africa’s rate of net forest loss has been increasing since 1990.
If not halted, current deforestation patterns can spur environmental change that will have significant effects on the global economy. According to a report by WWF, if the world continues on its current path, environmental degradation can cause a cumulative loss of $9.9 trillion by 2050. The United States alone will lose $83 billion from its economy each year by 2050 due to the continued destruction of natural assets. This economic shift will cause global price hikes in commodities such as timber, cotton, oil seeds, fruits and vegetables, changes which will have the most serious impact for emerging markets across Africa, Asia, and Latin America.
A significant threat to forests stems from individuals and communities looking to find and sustain livelihoods. These individuals and communities include smallholder farmers who make up 70% of the African population and rely on land and farming to make a living. Without other viable options for generating income and growing food, forests will continue to suffer.
The fracturing relationship between humans and the natural world is further depicted in the increase in zoonotic diseases. As a result of extensive forest land conversion, about 70 percent of forests globally are now within one kilometer of a forest edge and are exposed to further fragmentation. The increased contact with nature can expose people to a wide range of animal diseases. In fact, approximately three to four new infectious diseases emerge each year, most of which originate from wildlife. Over the last 30 years, approximately 60-70 percent of the new diseases that emerged in humans had a zoonotic origin.
Research has linked the Ebola outbreaks over the past decade to increased deforestation and the SARS epidemic to human contact with infected palm civets and raccoon dogs due to unsustainable wildlife consumption patterns. Covid-19, linked to a disease prevalent in horseshoe bats, is the latest example of this type of spillover and has demonstrated the grave consequences of unregulated human-wildlife interactions.
The pandemic has also catalyzed an economic crisis that intersects with forest use. The global economy shrank by 4.4% in 2020 alone, the worst decline since the Great Depression of the 1930s and far worse than the global financial crisis of 2008. The associated loss of employment led to a 10% drop in workers’ income by September of 2020, reaching a cumulative loss of over $3.5 trillion. This crisis has made a shift to better forest management even more of an imperative: It is estimated that 20 million people could be looking for new economic opportunities as a result of the pandemic.16 In the absence of viable work, many people may have to resort to subsistence agriculture and using forest firewood to sustain livelihoods, thus accelerating deforestation.
And these numbers are projected to grow: Africa’s population is projected to triple to 1.3 billion by 2050). This jump will come with a greater demand for not only jobs, but also food, agriculture, and a built environment – all threats to the health and sustainability of forests.
A Solution for the Future: Developing Forest-Based, Circular Bioeconomies
By 2030, sustainable management has the potential to curb the effects of deforestation, while creating $230 billion in business opportunities and 16 million jobs. The key lies in realizing the significant opportunities for the development and nurturing of forest-based circular bioeconomies, which can be interpreted as economies that place biological resources in the center of their production cycle. Bioeconomies take into account the well-being and protection of natural assets alongside the potential economic uses of forest resources, and contain pathways to tackle industrial waste, over exploitation and emission challenges.
Africa’s rapidly growing construction sector presents one noteworthy opportunity to build a forest-based, circular bioeconomy. Eighty percent of the buildings needed in Africa by 2050 have not yet been constructed.18 Manufacturing of commonly used building materials such as cement, iron, and steel contributes to 11% of total emissions from construction. As a result, Africa’s upcoming building boom will increase carbon emissions significantly.
There is an opportunity to consider and implement sustainable design and use of alternative building materials such as wood, which not only result in lower carbon emissions but also continue to store carbon. The use of wood products in construction — which mainly utilizes mass timber — can sequester even more carbon than slow-growing mature trees. This practice is becoming popular in the Global North. However, the use of wood remains underleveraged across the African continent, even though Africa produced 54% more wood and had four times more forest area than the European Union in 2019. Still, the export value of EU forest products was 17 times greater than in Africa in the same year – $100 billion compared to $6 billion.
Getting Closer to a Forest-Based, Circular Bioeconomy: Three Fundamental Actions to Consider
With significant biodiversity loss of terrestrial assets looming, understanding opportunities in sustainable forestry — and making targeted investments in the area — will be critical to maintaining biodiversity, combatting the effects of climate change, and meeting human needs. The following actions are building blocks to consider in the quest to nourish forest-based, circular bioeconomies.
Understand the trends in production and consumption patterns: It is crucial to understand trends in the global forest economy, identify the opportunities and gaps around developing a global sustainable forest economy, and develop the investment case for sustainable forest products. This involves conducting in-depth analysis, categorization, and prioritization of forest products across wood and non-wood offerings. Forming an understanding of current and future forest products’ market size, growth, consumption, and production trends is also key to building out a well-rounded understanding of current and future socio-economic impacts of a sustainable forest economy, while also highlighting best practices in establishing and developing a forest-based, circular bioeconomy.
Invest in coalition building among varying stakeholders: The forest economy is made up of a wide range of stakeholders with contrasting interests, such as many indigenous communities that seek to protect a way of life, and large, profit-driven private sector companies looking to share the same forest resources. On another hand, a significant amount of the forestry industry worldwide is informal, and illegal logging and poaching is a dominant aspect of the industry. Governments are increasingly attempting to create formal and regulated markets that contribute to their climate commitments and decrease poaching, creating a wide gap between what has been done in the past and a more transparent and regulated future.20Just and equitable solutions that address land rights and economic interests while addressing environmental degradation are crucial if forest-based, circular economy investments are to succeed. Significant effort must be made to map the stakeholders involved in the global forest economy and their specific interests. Such detailed information is a first, necessary step towards creating space for consensus-building.
Increase financing for sustainable forestry projects: It is crucial to increase financial investments for pilot projects in the sector that can help build a set of demonstrable projects to further catalyze investments. Addressing the demand for food systems, the built environment, and employment cannot continue in its current trajectory, otherwise, it will exacerbate the world’s existing vulnerability to the effects of climate change. The business case for the restoration and regeneration of forests across the globe is rising, as can be seen from a recent report by World Resources Institute. Companies like BioCarbon Engineering and Land Life Company are developing and deploying technology to facilitate restoration with more efficiency and at lower costs. Businesses are also investing in the restoration, management and harvesting of trees for timber and wood fibers on previously degraded land. Some companies are beginning to invest in restored land to produce commercial goods or offset their carbon footprint.Guyaki, a beverage company, uses the land it restores in the Atlantic forests to produce its goods. Tentree – an apparel company and Ecosia – an online search engine, leverage their sales to fund their restoration activities. Organizations like Brinkman and Associates and Fresh Coast Capital are earning profits from managing restoration projects from start to finish on behalf of their clients.21 The carbon credit market can also be tapped to subsidize and promote regenerative practices and green construction. For instance, Hudson Carbon, an organic farm focused on regenerative agriculture in upstate New York, aims to sell carbon offsets directly from farms to interested bodies and use these sales to cross-subsidize its operations.
Forest-based, circular bioeconomies have the potential to help reverse the biodiversity loss our world is experiencing today. All actors involved in the forest economy need to make significant investments by supporting the transition of production and consumption trends towards sustainable outcomes, building coalitions for equitable use, and increasing overall financing for sustainable forest-based initiatives. Such efforts can pave the way for us to use our forest assets both as economic pillars and as environmental safeguards.