Transcript Degradation Tresholds

European Commission
Standing Forestry Comittee Ad Hoc Working Group on
Public Procurement of Wood and Wood-Based Products
Brussels, 12 March 2010
IMPACTS OF PUBLIC PROCUREMENT
POLICIES ON COMPETITIVENESS OF
WOOD AND WOOD-BASED PRODUCTS
Markku Simula
Consultant to ITTO
Outline of the Presentation
1.
2.
3.
4.
5.
6.
Introduction
Issues related to procurement policies
Market impacts of demand-side measures
Capacity and cost impacts in developing countries
Competitiveness impacts
Conclusions and recommendations
The presentation is based on an ITTO study (2009) on
DEVELOPMENTS AND PROGRESS IN TIMBER PROCUREMENT POLICIES AS TOOLS
TO PROMOTE SUSTAINABLE MANAGEMENT OF TROPICAL FORESTS
To be shortly published in the ITTO Technical Series and also available at http://www.itto.int/en/technical_report/
International Tropical Timber Organization
• First ITTA in 1983, renegotiated in 1994 and 2006 (not yet in
force); the objective is to ITTO started in 1987achieve exports of
tropical timber from legal and sustainably managed sources
• HQ in Yokohama, 35 staff; regional offices in Africa, Latin America
• Membership covers 90% of world tropical timber trade and 80%
of the world’s tropical forests
• Promoting sustainable development through trade, conservation
and best-practice forest management
– Policy development
– Capacity building
– Market transparency
Objectives and Approach of the ITTO Study
Objectives
1. Identify drivers, trends and impacts of procurement
policies; analyze their differences and commonalities
2. Assess tropical timber producers’ capacity to meet
these emerging market requirements
Approach
i.
Review and analysis of the existing procurement
policies in the public and private sectors
ii. Three country case studies on cost impacts
(Cameroon, Malaysia and Peru)
Demand-side Measures for Promoting Legality and SFM
•
Public Sector
Private Sector
Public procurement
policies
• Individual company
purchasing policies and
actions
• Regulations on
excluding illegal timber
Legal
compliance
and SFM
• Sanctioning illegal
products
• Third-party certification
and verification
• Building standards
• Improvement of market
transparency
• Market promotion of legal
& sustainable products
• Development assistance
• Codes of conduct of
industry and trade
associations
• Communication on
responsible performance
Partnerships and other
actors
Action plans and
projects
•
• Trade networks
• Other support
• Green building standards
• Other voluntary measures
Public Policies Are Not Limited to the EU
Country
Products
Minimum
reqs.
Level of
obligation
Criteria for
proof
Belgium
W
S
M
Yes
Denmark
W/P
L+S
V
Yes
EU
All
L
Guidance
France
W/P
LS
M
Systems
Germany
W/P
LS
M
Systems
Netherlands
W/P
L+S
M
Yes
Norway
W/P
No tropical
V
-
Switzerland
W/P
S (L)
V
Systems
UK
W/P
LS, FLEGT
M
Yes
New Zealand
W/P
L+S
M
Systems
China
W
Labeling
M
Japan
W/P
L+S
M
Systems
Mexico
W/P
L+S
M
Registere
d auditors
Several developing countries are preparing TPPs or in the process (Ghana, Vietnam, etc.).
Local government-level initiatives spreading e.g. in Brazil.
Issue of Definitions
Legality
• Both TPPs and regulatory instruments have definitions
•
•
•
Short and long versions, different approaches (legal/illegal) and levels of
detail
Scope and wording of definitions vary (even within the Commission
documents)
Commonalities: compliance with national laws and international
conventions, countries’ sovereign right to specify definition
•
Need for more clarity, consistency and commonality between various
definitions
Sustainability
• Short vs. detailed definitions (incl. prescriptive SFM requirements)
• Commonalities: C&I frameworks, certification standards
•
Acceptability of individual schemes remains a key issue and there are
differences in their recognition and pressures to accept only one (FSC)
Issue of Acceptance of Certification Systems 2009
Country
Belgium
FSC
X
PEFC
a
X
SFI
CSA
ATFS
MTCS
LEI
Other
Chinese eco-labeling
scheme
China
b
Denmark
c
France
d
Germany
X
X
X
X
X
X
X
X
X
Japan
X
X
X
X
X
X
X
X
X
X
X
X
X
e
Netherlands
f
New Zealand
Switzerland
g
UK
X
SGEC (national
scheme)
e
X
X
X
X
X
X
X
Eco-timber
Q-Swiss Quality
g
FSC – Forest Stewardship Council, PEFC - Programme for Endorsement of Certification Systems,
SFI - Sustainable Forest Initiative (US), CSA - Canadian Standards Association,
ATFS - American Tree Farm System, MTCS - Malaysian Timber Certification System,
LEI - Indonesian Ecolabelling Scheme
Market Impacts of Demand-Side Measures
(not only TPPs)
• Demand: 25-45% of the market can be impacted
• Supply: limited availability offers opportunities for early birds
but for others short-term competitive disadvantage
• Price: premiums captured in some market segments; in the
long run increased costs lead to increased prices
• Extent of impacts depends on the speed of eliminating illegal
logging and trade and increasing certified supply
• Winners: countries with low rates of illegal logging and high
degree of certified forests
• Trade impacts: all exporters (directly or indirectly),
dependency on sensitive markets
Country Shares of Total Timber/Timber
Product Export Revenue
(ITTO producers and China)
1%
1%
2%
2%
6%
3%
4%
48 %
8%
10 %
15 %
CHN
MYS
IDN
BRA
THA
PHL
MMR
MEX
IND
GAB
Others
Includes logs, sawnwood, veneer and plywood, other wood-based panels, builders’
woodwork and wooden furniture
Note: Vietnam and Laos are missing in the analysis.
HND
GUY
CAF
COG
PER
SUR
GTM
GHA
GAB
NGA
THA
FJI
ECU
MYS
BOL
CIV
IDN
IND
COD
BRA
CHN
CMR
LBR
MEX
PHL
Share of sensitive market in total exports, %
Tropical Timber Producers’ Dependence on Sensitive Markets
120
100
80
60
40
20
0
BOL
MYS
ECU
FJI
THA
NGA
GAB
GHA
GTM
SUR
PER
COG
CAF
GUY
HND
TGO
PNG
PAN
COL
VEN
TTO
MMR
VUT
KHM
Share of non-sensitive markets in total exports, %
Tropical Timber Producers’ Dependence on Non-Sensitive Markets
120
100
80
60
40
20
0
Capacity of Tropical Timber Producers
Capacity to achieve and demonstrate legality/sustainability:
•
Generally inadequate
Constraints
•
Governance: inadequate legal framework, weak enforcement systems and
institutions, low national priority of the sector, insufficient budget allocations,
corruption
•
Slow progress in achieving SFM but several recent positive signs (e.g.
large concessions in Africa, phased approaches)
•
Capacity to demonstrate: limited SFM-certified/legality-verified areas in the
tropics
•
Uncertain market benefits to compensate added costs; lack of clear
producer strategies, partly due to changing goal posts
•
Capacity of community forests, smallholders, SMEs, and the informal sector

Need for time and external resources to set up information control and
management systems and to address other constraints
Two Parallel Tracks for Developing Countries
1.
•
•
•
•
•
2.
•
•
Government-implemented timber legality assurance
system
Mostly in major producing countries (FLEGT VPA targets)
Complex, time-consuming effort
Level of technology
Cost-efficiency and reliability in demonstration of legal
compliance
Financing of additional costs (often significant)
Private sector-implemented systems
Forest certification and independent legality audits
Costly for SMEs, limited access by community forests
without external support
Cost of Legal Compliance and SFM in Average-Size
Forest Management Units in Cameroon
Type of FMU
Size of
average
FMU
ha
Legal
compliance
Sustainability
Total
Unit cost USD /ha
Legal
compliance
Sustainability
Total
Total cost in the FMU USD
1,000
Concessions
59,000
5.23
1.67
6.90
303.4
98.5
401.9
Municipal
forests
23,000
6.61
2.58
9.19
152.0
59.3
211.3
Community
forests
5,000
4.68
10.03
14.71
16.7
38.6
55.3
Notes:
Legality: costs of compliance with international agreements and conventions signed by Cameroon.
Sustainability: costs of additional biodiversity studies, environmental impact assessment, additional
social studies on indigenous people, establishment of permanent sample plots, support to community
development, and direct cost of certification.
Cost of Certified Sustainable Forest Management by
Size of Forest Management Unit in Peru
Component
Large (47 580 ha)
Investment
(first year)
Medium (24 372 ha)
Small (8 316 ha)
Annual
operational
Investment
(first year)
Annual
operational
Investment
(first year)
Annual
operational
Compliance costs
- forest and
environmental
management
60 380
27 620
39 680
16 710
20 550
6 620
- social aspects
6 000
3 370
3 500
2 070
3 000
1 570
- management
systems
7 500
1 070
5 850
620
5 600
570
Sub-total
73 880
32 060
49 030
19 400
29 150
8 760
Direct costs of
certification
18 900
6 400
14 900
6 400
5 580
2 060
Grand total
92 780
38 460
63 930
25 800
34 730
10 820
1.95
0.81
2.62
1.06
4.18
1.30
- USD/ha
Notes: Investment cost = first year costs
Operational cost during subsequent four years
Competitiveness Impacts (1/2)
Note: there are few hard facts
Substitution between timber products/producers:
•
Impact on prices are uneven among different types of wood
•
Coniferous wood probably largely neutral; temperate hardwoods a likely
winner and tropical hardwoods a likely loser
•
Plantation wood a likely winner and hardwood from natural tropical forests a
loser
•
Countries with large private smallholder production lagging behind in
certification are likely losers
•
High risk countries are losers; trade diversion
•
Possible price premiums not necessarily shared up to forest management;
integrated companies can be winners
Competitiveness Impacts (2/2)
Substitution between materials:
• Additional costs of wood and wood-based products have a negative
but probably limited impact (more significant in tropical timber)
• Difficulty in purchasing wood products compared to other materials
(additional risks and costs) likely more important than cost impacts
(probably mostly in furniture, joinery products)
• Impact on specifiers (architects, quantity surveyors, etc.) unknown;
risk for exclusion of wood if procurement is problmeatic
• Contribution to the image of wood (possibly for tropical wood as
well)
• Wood is pioneering demonstration of legality and sustainability;
other sectors lagging behind and will have to join (through green
building initiatives), but their issues are less serious
• Lack of agreed methods for life-cycle analysis between materials;
difficulties due to diversity of end uses and individual products
(general comparisons between materials can be challenged)
Forest, Social and Environmental Impacts
• Forest: progress in SFM
– Forest sector: improved legal framework and governance
– Fiscal revenue: depends on timber demand-supply balance
– Forest industry: downsizing, improved supply chain management,
access to new markets and maintenance of existing ones
• Social: short-term impact on poverty and employment often
negative; long-term impact positive
• Informal sector: high risk for drastic impacts on forest
communities and self-employed/SMEs (millions in developing
countries)
• Environment: positive but risk of leakage
Conclusions
• TPPs represent a compromise between market pressures and what
can be achieved in practice
• Free riding of illegal logging and trade cannot continue
• Potential negative market impacts on wood consumption need to be
mitigated (policy consistency)
• Need for harmonisation in definitions/procurement criteria and
improvement in time-schedules and implementation arrangements
• Impacts in developing countries can be drastic and mitigation efforts
need external support
– Impacts on the most vulnerable informal sector, community
forests and SMEs need particular attention
• More information on competitiveness impacts is needed
Recommendations
Governments in Consuming Countries
•
•
•
•
Avoid unecessary proliferation of requirements; promote harmonisation in central govt
TPPs
Promote adoption of common approaches at sub-national and local government
levels
Adequate consideration of the implications of TPP requirements for tropical timber
producing countries and engage them in development/review processes
Expand support to developing countries as the social and economic impacts can be
drastic
Governments in Producing Countries
• Effective participation in various TPP development processes
• Promote certification, legality verification and strengthen TLAS, including modern
technology
• Reduce transaction costs of legal compliance and adjust legislation
• Develop and implement TPPs
• Provide support and incentives to community forests and SMEs
• Proactively integrate the informal sector into the formal sector
Forest Industry and Trade (enterprises and associations)
ITTO
Thank You
and special thanks to
those Member State Specialists
who contributed
to the study
markku.simula(a)ardot.fi