Volume 3, Issue 2 (April/June 2006)

Click here to download in PDF 

In This Issue

Introduction… 
Reforming Cheap-Water Policies: Lessons from Chile
How Long Will the World's Forests Last? 
Websites of Interest

Introduction
Past issues of the Ohio Environment Report have largely focused on Ohio environmental concerns.  This issue broadens out and provides two articles that address global environmental problems. The first article, by Eugenio Figueroa and Douglas Southgate focuses on water allocation.  The availability of clean water in adequate quantity is viewed by many as the most important resource issue confronting a growing world population.  How efficiently the world allocates its water resources in the future will have large implications for all of us.  The article by Figueroa and Southgate takes a close look at how Chile -- one of the world's fastest growing and most dynamic economies -- has addressed water quantity issues.  Their argument is that property rights and markets are ideally suited to allocating water among users, and that equity concerns (i.e., ensuring that all citizens have access to clean water) can be addressed by institutional design and well-functioning legal frameworks.  They make a compelling argument that the developed and developing world has lots to learn form the Chilean experience.

The second article considers world forest sustainability and asks how long the world's forested ecosystems will last?  The article presents data on current rates of agricultural expansion, deforestation, timber harvesting, and other trends that influence forests.  Agricultural expansion clearly has the most important influence on forests world-wide, and with growing population and rising incomes, agriculture will continue to play an important role for the next several decades.  There is strong evidence that forests are sustainably managed in aggregate in temperate, developed countries, but that there are both negative and positive signs in developing, tropical countries.

I hope that these articles will provide useful information to readers of the Ohio Environment Report.  As has been evident in recent discussions about immigration and outsourcing of jobs, we live in a dynamic, constantly changing world.  As important as it is to ensure that we have a strong, growing, and vital economy in Ohio that provides jobs and income, it is also important to recognize what is happening elsewhere in the world in the hope that we can learn something from it.

Reforming Cheap-Water Policies: Lessons from Chile
Eugenio Figueroa, Universidad de Chile (efiguero@cenma.cl) and Douglas Southgate, Ohio State University (southgate.1@osu.edu)

Economics focuses largely on the efficiencies realized if specialization and trade are unencumbered – market functionality, as one might say.  In contrast, the sub-discipline of environmental economics is mainly about market failure, such as the inefficiencies that result if a competitive industry treats its adverse environmental impacts as externalities

To be sure, externalities (both positive and negative) are ubiquitous.  Consider the downstream consequences of natural resource use in the upper reaches of a drainage basin.  If agricultural chemicals are misapplied or if hillsides are over-plowed, then water is contaminated and sediments accumulate at lower elevations.  In contrast, establishing forested strips alongside streams creates hydrological benefits of importance to downstream populations.  As is made clear in any textbook on environmental economics, of which dozens have been published, negative spillovers are excessive because costs are not fully internalized by responsible parties.  By the same token, positive externalities are under-produced because suppliers do not capture all benefits.

While market failure is an important cause of environmental deterioration, one must keep in mind that market allocation of natural resources can be efficient, and indeed often is.  Moreover, non-market allocation does not guarantee desirable outcomes.  On the contrary, the latter approach frequently creates inefficiency, inequity, and damage to the environment.

Non-market allocation of water is an excellent case in point.  In just about every part of the world, the prices that households, farms, and other consumers pay for this essential resource fall short of building, operating, and maintaining the dams, canals, and other infrastructure required for reliable supplies.  High subsidies – or, if one prefers, poor cost-recovery – cause waste and misallocation on a grand scale.  The benefits of this inefficiency do not accrue mainly to poor people, but rather are captured in large measure by people with higher incomes.  Furthermore, poor cost-recovery in potable-water, irrigation, and other systems reduces funding for the protection of water sources and the containment of pollution.  Thus, the environment suffers.

Non-subsidized pricing may not solve all the world’s water problems.  However, supplies of the vital liquid will never be adequate for all humankind in the absence of pricing reform.  Reform has proceeded at least as far in Chile as in any other part of the Western Hemisphere.  A fundamental innovation in that nation has been to establish transferable property rights in water, which has allowed resource allocation to be guided by market forces.

The Evolution of Water Institutions in Chile
In some respects, current Chilean policies are consistent with centuries-old traditions in the country and other parts of Latin America.  Before independence was achieved, local associations of private farmers were building, operating, and maintaining irrigation canals.  With subsequent legal development, however, the central government’s role expanded.  Chile’s first Water Code, adopted in 1951, allowed state authorities to grant concessions to private parties.  However, these concessions were transferable only if water was not put to a different use, which meant that all decisions about resource reallocation were in the hands of the state.

Governmental prerogatives were reinforced and extended in a revamped Water Code, which was promulgated in 1967.  Under this regime, all private rights were “administrative” – granted by the state for particular uses and entirely subject to public regulation.  Moreover, use-rights were subject to expiration and water reallocation was determined by regional plans developed by the government.  With the public sector exercising ultimate control over hydrological resources, uncompensated expropriation of water rights (and land) took place during the latter part of Eduardo Frei’s administration (1964 to 1970) and accelerated while Salvador Allende was President (1970 to 1973).[1]

Needless to say, the 1967 Water Code, which closely resembled contemporaneous legislation adopted elsewhere in Latin America, was at odds with the free-market orientation that the military government adopted about a year and a half after the 1973 coup d’etat.  Repudiation of the Frei-Allende approach to water resource development is clear in Article 19 of the Political Constitution of 1980, which established that “the rights of individuals over waters, reserved or established in agreement with the law, will grant to their holders the property over them.”  This principle was put into practice the very next year, when a new water law was adopted.

The 1981 Water Code established that individual prerogatives in hydrological resources are property rights in every sense of the term, provided that ownership has been officially adjudicated by the General Water Directorate (DGA).  In addition to being permanent, water rights are transferable, with sales either between a pair of farmers or between an irrigator and a non-agricultural user allowed.  Chilean water rights, which are enforced by the DGA, can also be mortgaged, just as real estate can.  Furthermore, they cannot be expropriated without due compensation.

Significantly, the DGA cannot refuse to grant new rights if the resource being claimed is un-owned.[2]  Hydroelectricity producers and other non-consumptive users are entitled to legal recognition and protection of their diversions from streams and rivers, provided that equal volumes are returned to the same channel.  For consumptive uses, including irrigation, individual owners are entitled to withdraw a specific volume per time-period, although proportional reductions occur when stream-flow is unusually low.[3]

The 1981 Code mandated formal water rights for historical users – mainly irrigators (including small farmers who had benefited from the agrarian reforms of the Frei and Allende administrations), potable-water companies, and mines.  Once this category of ownership had been recognized, the DGA could create new rights in response to petitions submitted by resource users.  The procedure governing the latter sort of adjudication begins with publication of proposed water rights in the Diario Oficial (i.e., the official journal of the country).  If there are rival claimants, then the directorate organizes an auction, with ownership ending up in the hands of the highest bidder.

Water Users’ Reactions to Market-Friendly Policies
Throughout Chile, water users have responded to the 1981 Code by winning formal recognition of their historical rights and by acquiring resources claimed by no one else.  But commercial water transactions, which the same law makes possible, have been less widespread.  Such transactions are particularly rare where hydrological resources are abundant – in those parts of southern Chile with elevated precipitation, for example.

One part of the country with regular purchases and sales of water is the Limarí Valley, north of Santiago, where irrigated production of wine-grapes and other high-valued crops has shot up in recent years.[4]  From 1980 through 2000, nearly 28 percent of all water rights exchanged in the watershed were bought and sold independently of land transferences, with old and new owners making use of a market for permanent transactions created for exactly this purpose.  In addition, a spot market exists in the Limarí Valley for resources used during a single growing season.  In 1999-2000, for example, approximately 14 percent of the volume allotted to water users’ associations in the region was exchanged in this market.  During the 1995-1996 season, which was unusually dry, this share was 21 percent.[5]

These transactions could not occur without an enabling legal framework, of the kind created by the 1981 Water Code.  In addition, water markets function well in the Limarí Valley because buyers and sellers have confidence in water users’ associations, which maintain records of purchases and sales.[6]  Another factor of great importance for the spot market is infrastructural – to be specific, the Paloma Irrigation System, which is the largest in Chile and the second largest in Latin America.  Comprising three dams – Paloma (750 million m³ of storage capacity), Cogotí (150 million m³), and Recoleta (97 million m³) – as well as an extensive network of canals, this System regularizes the supply of water and constitutes a guarantee to buyers that spot-market purchases will actually be delivered.

The organizational and institutional conditions that facilitate the spot market in the Limarí Valley are not fully satisfied in many other parts of Chile.  As a result, exchanges of longer-term water rights have been the national norm, with these rights usually reallocated from irrigated farming to higher-valued non-agricultural uses.  Illustrative in this regard is the Upper Mapocho Basin, near the Chilean capital, where sales to potable-water providers and real-estate developers accounted for 76 percent of the water rights traded from 1993 through 1999.[7]

Current Issues
Notwithstanding that policy reform is making it possible for water resource development to be guided by market forces, new issues have arisen since promulgation of the 1981 Water Code.  One of these issues is the monopolization of natural resources, especially in the hydroelectricity sector.

Taking advantage of its mountainous terrain and the abundance of water in many settings, Chile generates most of its electricity from hydro sources.  Energy demand having risen substantially since the middle 1980s, as the national economy has expanded at a rapid pace, the 1981 Water Code fomented hydroelectricity generation by creating property rights for non-consumptive uses of water, as mentioned above.  More than four-fifths of all such rights have been acquired by ENDESA, a Spanish firm that has invested heavily in the Chilean energy sector.

That ENDESA owns such a large portion of the resources that lend themselves well to hydroelectricity production raises obvious monopoly concerns.  Similar concerns have been expressed about other categories of water rights, although the concentration of resource ownership resulting from the adjudication of historical ownership and new claims has been less extreme.  At the urging of the antimonopoly commission, the DGA has responded to ENDESA’s dominance of hydroelectricity by refusing to grant new non-consumptive rights.  This move has been supported by the Constitutional Court, which has ruled that the additional conditions (including those meant to curb monopolization) can be placed on petitions for new water rights by reformulating the 1981 Code.  Exactly this change was effected with passage of Law 20.017, on 11 May 2005.

This same piece of legislation created another tool for dealing with the concentration of hydrological resources in few hands.  As of 1 January 2006, non-consumptive rights that are not being used, which according to the Ministry of Public Works exceed 80 percent of all such rights adjudicated by the DGA,[8] will be subject to a tax (or patent).  According to one consulting firm, ENDESA’s payments for 2006 will be about $2.6 million.[9]

These recent modifications of the 1981 Water Code do not represent a repudiation of the approach to water resource development that Chile has followed for 25 years.  With appropriate correction of the law to deal with excessive concentration of resource ownership, water rights remain secure and transferable, which means that allocation will continue to be guided by market forces.  This is highly advantageous in a country that has experienced rapid economic expansion in recent decades, with direct consequences for water demand in agriculture, mining, and other part of the economy.[10] [11]  It is highly doubtful that the competition over water resources that economic expansion inevitably has created could have been resolved as effectively in the absence of policies that stress ownership and markets.

Summary and Conclusions
Where water has grown scarce, due to demographic and economic expansion, markets have proven to be an effective tool for resource allocation, including in developing nations.  Markets require an enabling legal framework, which the Chilean Water Code provides.  In addition, the commercial exchange of water and resource rights is particularly active both where demand is driven by high-valued uses and where transactions costs have been lowered by institutional and infrastructural development, of the sort that has taken place in the Limarí Valley.

Replication of the Chilean approach has been attempted in other Latin American nations.  Mexico’s Water Law of 1992 resembles the 1981 Code in that it provides for the registration and transference of water rights.  During the 1990s, Peru tried to adopt a water law that was consistent with the country’s pro-market policies.[12]

But for the most part, the Chilean approach remains exceptional in the region.  An objection that the opponents of reform frequently make is that “privatizing” water disenfranchises indigenous peoples.  This is an unfair criticism of the Chilean regime since the combination of the 1981 Water Code and legislation subsequently adopted to protect such groups has given their rights precedence over other resource claims.[13]

Moreover, failure to convert limited concessions for water use, of the sort that Chile had while the 1967 code was in force and still exist in much of Latin America, into full-fledged water rights prevents everyone, including concession-holders, from capturing the gains created when markets are allowed to direct all resources to their highest and best uses.  An advantage enjoyed by those whose historical claims are formally adjudicated is that they can benefit from the efficient reallocation of hydrological resources, simply by taking their rights to market.  For example, irrigators selling their rights to potable-water providers capture some of the value created when water is distributed to households rather than being applied to crops.  But beyond this specific benefit, efficient markets for water and other factors of production, which can exist only if resource rights are permanent and transferable, are every bit as critical for across-the-board economic growth, which raises everyone’s living standards, as liberalized international trade in finished goods and services.

References 

How Long Will the World's Forests Last?
Brent Sohngen, Agr., Env., and Dev. Economics, Ohio State University (Sohngen.1@osu.edu)

Forests are important regulators of global climate, they host large reservoirs of biodiversity, and they regulate water supply, however, there is widespread concern that large losses of forests could imperil valuable ecosystems, that industrial timber harvesting could degrade forests and reduce their ecological productivity, and that conversion from forest to agriculture could affect global climate.  How sustainable is our use of forests? How long will they last?  While these issues will continue to be debated for some time, this brief paper takes a look at some of existing data, and provides an overview of several issues surrounding the sustainability of global forest use. 

So how much forestland does the world have, and how fast is it disappearing?  The United Nations Food and Agricultural Organization pools data from worldwide sources every 5 years (Table 1).  The results of this analysis indicate that the world has around 3.9 billion hectares of forestland (9.6 billion acres), but that around 7.3 million hectares are lost each year.  The rate of deforestation is about 0.19% per year.

There is substantial variation across regions.  Africa and South America have the largest area of forests lost each year. The rate of deforestation appears to be slowing in Africa, although it is speeding in South America.  Asia and Europe both are gaining forestland, while North America is staying about even.  Most of the gain in Asia occurs in temperate regions, while tropical areas in Asia are still experiencing deforestation.

Table 1: Area of forestland and change in forestland area (United Nations, Food and Agriculture Organization, 2005)

Agricultural Influences on Sustainability of Forests
The main reason for deforestation is expansion of agriculture.  Other factors, such as timber harvesting, the expansion of home-sites, and mineral extraction, potentially also lead to deforestation, but agriculture has the largest impact on the area of forests.  Timber harvesting alone, for example, typically does not lead to losses in forestland area, since most forests naturally regenerate unless they are converted to some other use.

According to FAO, there are around 5.0 billion hectares of agricultural land globally, including arable land for crops and pastures (Figure 1). Since 1961, the total area of agricultural land has increased by 486 million hectares, or around 0.2% per year.  As with total forestland area, the trends differ depending on the region.  The area of agricultural land in North America decreased by 0.2% per year since 1961, while the area of agricultural land in South America increased by 0.6% per year over that period. 

Of the land classified as agricultural, around 1.5 billion hectares are arable cropland, while 3.5 billion hectares are pasture.  Given a global population of around 6 billion people, that's 0.25 hectares per person to produce crops, or 0.83 hectares per person to produce crops and meat.  Fischer et al. (2002) indicate that we may be able to expand rainfed cropland by up to 2.0 billion hectares, with around 1.0 billion of these hectares being suitable for wheat, grains, and rice (the three major crops).  Ignoring land that is currently forested, or otherwise protected globally, Fischer et al. (2002) find that there are around 0.8 billion hectares of land suitable for wheat, grain, or rice production.

Figure 1: Global area of arable land and pasture land (FAOSTAT - Agriculture, 2006)

The work by Fischer et al. (2002) suggests that cropland expansion could occur mostly on non-forested land, thus having little influence on the sustainability of forests.  Recent data, however, indicates that the area of agricultural land (arable land and pastures) increased by approximately 91 million hectares between 1990 and 2000 while forestland decreased by 89 million hectares (Table 2).  As expected, where agricultural land is decreasing, forests are increasing (e.g., North America), and vice-versa.  Forestry losses need not equal agricultural gains because not all agricultural land is derived from forests (e.g., irrigated agricultural land is typically not suitable for forestland because of the rainfall deficit), but recent historical data indicates that agriculture, and in particular grazing, prefers forestland for expansion.  Perhaps forests indicate that the site will be naturally productive, without substantial additional inputs.

Table 2: Change in Agricultural Land and Forest Land for the World and three selected regions:
North America, South America, and Africa (FAOSTAT - Agriculture, 2006; UN FAO, 2005).

 While any economist will admit that predicting the future is impossible, it is possible to consider how different economic and demographic trends that will affect how much land will be needed for agriculture in the future.  The area of agricultural expansion is a function of population growth, income growth, and technological change in agriculture.  Over the next 50 years, population is expected to increase to around 9.5 billion people and then stabilize (United Nations Population Division, 2005). 

It is true that people need a certain number of calories to survive, so that slowing population growth should reduce the demand for new agricultural land, but it is also true that people with different incomes eat different things.  Specifically, with higher income, people consume more meat (Reimer and Hertel, 2003).  Greater income in the future will alter the demand for land by changing the product mix consumed.  The work by Reimer and Hertel indicates that increases in demand for meat products will outpace increases in demand for crop products in the future.  Already, animal agriculture uses more land than crop production (i.e., there are 2.3 hectares of pastureland globally for each hectare of cropland), so if the demand for meat products increases rapidly, large areas of additional land could be used for grazing - particularly in regions with the fastest growth in income (Asia and South America).

Technology change makes land more productive, and thus reduces the demand for new land in agriculture.  In the recent past, technology improvements in agriculture have increased productivity of the sector by 0 - 2.5% per year (Nin et al., 2003).  The largest gains have been in crops, with some areas in Europe and the United States achieving productivity increases greater than 2.5% per year.  The livestock sector has lagged behind the crop sector in terms of productivity gains.  Unless the livestock sector can improve productivity by raising more output per unit of land, increases in demand for livestock products augurs potentially large increases in the area of pastureland, and correspondingly large losses in forests.

So, population and income growth will put persistent pressure on forestland, while technology change could reduce this pressure.  With a very simple economic model of world agriculture, I estimate that over the next 50 years if productivity follows historical trends (productivity in the crops sector increases 0.63%/year and in the livestock sector 0.51%/year, both averaged for the world), population expands to 9.5 billion people, and per capita income increases by 3.5% per year, the world will need around 1.0 billion additional hectares in agriculture, pushing the total from the current 5.0 billion hectares to around 6.0 billion.  One billion additional hectares in agriculture over 50 years is a large amount of land. It implies an expansion in agricultural land of around 20 million hectares per year.  By contrast, since 1961, the world's agricultural area expanded by only 11 million hectares per year on average. 

The analysis above assumes that technology changes at historical rates on average.  The development of new technologies and wider diffusion of technologies used in developed countries could reduce the demand for new land.  Suppose for instance that technology worldwide improves at the same rate as in the U.S. and Europe, or around 2.5% per year in the crop sectors, and 1.2% per year in the livestock sectors.  Under these conditions, the area of cropland would only expand by around 250 million hectares over 50 years, or around 5 million hectares per year.  Improvements in technology and better diffusion the technology -- the age-old story in agriculture -- will have important implications on future deforestation.

This simple modeling story illustrates the trade-off society faces: adapt to increasing population and income by intensifying production (i.e., improving technology), by using more land for agriculture, or by following a path that combines both.  Any new land for agriculture will be derived mainly from existing forestland, so even under the optimistic technology assumptions above, large areas of forestland will likely be converted to crops.

A fast-emerging issue that could have large consequence for balance of land use is bio-energy.  Bio-energy includes switchgrass and fast-growing forest plantations in the northern hemisphere used for energy production, and sugar cane in the tropics used for ethanol production.  There is wide-spread belief in the potential for bio-energy (and some countries, like Brazil, already are heavily invested in production), but any substantial increases in bio-energy production and consumption will lead to additional demands on land, and in particular on forestland.

Timber Market Influences on Sustainability of World Forests
This section considers how timber harvesting affects the sustainability of forests by looking at the use of forests for commercial products.  Since the 1960's, the production of forest products has increased by around 1.0% per year globally (Figure 2; FAOSTAT-Forestry, 2006).  In North America, timber production increased by 0.6% per year in the 1990's, in Africa it increased 1.8% per year, and in South America it increased 2.8% per year. 

Figure 2: Global harvesting of timber.  The four regions shown account for 92-95% of world production, depending on the year.  Russia and the Former Soviet Union are contained in Europe for this analysis (FAOSTAT-Forestry, 2006).

Despite these increases in production, timber harvesting has become sustainable world-wide over the past 30 years.  In developed countries, such as the United States, Canada, Europe, Russia, Australia, New Zealand, and Japan, we are replacing forests faster than we are harvesting them (United Nations, Economic Commission for Europe and Food and Agricultural Organization, 2000; Sohngen et al., 1999).  While these countries account for 47% of the total forestland in the world, one concern may be that they are simply exporting their environmental problems by importing wood from other regions.  The data do not support that hypothesis (Table 3).  Europe, North America, and Oceania all produce more wood than they consume.  Asia is the only region that consumes more than it produces (Central America is about even).

Table 3: Global production and consumption of industrial roundwood (FAOSTAT-Forestry, 2006)

There is still a vital trade in forest products -- about 30% of the total production of end products is traded among the regions in Table 3 annually.  Countries have specialized in certain types of products and they trade these products with other countries to enhance their own welfare.  But these data confirm that the developed world is sustainable in its production and consumption of wood products. 

The story in developing countries is more difficult to assess.  There is a large amount of deforestation each year, and most of that deforestation occurs in essentially old-growth forests.  Some of the wood available from deforestation probably makes it way into markets and other local uses, but for the most part, wood available when land is converted to agriculture is burned.  Using the same measures discussed above (harvests versus annual growth), forests there do not appear to be managed sustainably in an overall sense. 

One of the most important issues in tropical countries is evidence of substantial damage in forests due to forest harvesting practices. Barreto et al. (1998) indicate that only 3 - 8 trees may be extracted per hectare in many areas of Brazil due to their commercial value, however, up to 50% of the canopy of the forest may be lost during this extraction process. Nepstad et al. (1999) suggest that these types of logging practices can have large impacts across large areas of forests. 

To address this and other issues, efforts have been undertaken to increase the area of certified sustainable forestry practices, and there are currently more than 80 million hectares of land certified (United Nations, Food and Agriculture Organization, 2001). Most of this land (76 million hectares), however, lies in temperate regions of Europe and North America.  It has been a slower process getting sustainable forest management in place in tropical regions.

Set-asides have also been employed in tropical regions to help conserve biological diversity.  Estimates indicate that nearly 100 million hectares have been set-aside globally over the past 15 years (United Nations, Food and Agriculture Organization, 2005).  Most of this has been in South America, nearly 50 million hectares, while around 14 million hectares have been set-aside in Asia and Africa.  Set-asides have the advantage of protecting specific types of forests, particularly areas that have important biological resources. However, they do not reduce overall levels of deforestation or logging because these practices will be offset elsewhere (Sohngen and Brown, 2004). 

Many developing countries are quickly expanding forest plantations.  There are, for example, around 12 million hectares of fast-growing forest plantations in South America (ABARE, 1999) that supply around 50 million m³ of wood per year (Sohngen et al., 1999).  Right now, these fast-growing plantations supply 6% of the world's industrial wood each year.  Why the expansion of plantations when there is so much potential supply of wood from deforestation, and when growth rates exceed harvesting in temperate regions?  Plantations provide a more consistent product for markets, and they can be established closer to mills or transportation corridors, thus reducing the transportation costs associated with accessing forests.  Industrial plantations are anticipated to continue expanding from around 75 million hectares around the world today to 115 million hectares by 2050, accounting for around 22% of the supply of wood in 2050 (Sohngen et al., 1999).  Sedjo and Botkin (1997) argue that these plantations will help conserve natural forests in the future.

Conclusions
The data and discussion above suggests several important points about the sustainability of forests globally:

(1) Agriculture-- no surprise-- will continue to be the primary driver of deforestation.  According to studies reviewed above, the area of cropland could expand by 1.0 - 2.0 billion hectares, with about 0.8 billion hectares available in non-forested areas.  Recent trends, however, indicate that most agricultural expansion is occurring on forestland.  Grazing appears to constitute a large proportion of this expansion.  Grazing currently uses more land than crops, and likely would continue to use more land than crops unless it becomes more intensive (i.e. more animals per hectare).

(2) Growing income across a larger population will increase the demand for food. Demand growth is likely to be stronger for livestock products, which will further put pressure on forestland because of the relatively larger land intensity of the livestock sector.

(3) Technology change in agriculture will have important influences on land use.  Intensification of crops and livestock sectors can help limit the use of forestland for agricultural purposes.

(4) An important unknown is the role of bio-energy crops.  Increasing real prices for energy could increase the demand for land to be devoted to bio-energy crops and could cause additional deforestation.  Expansion of the bio-energy sector would also raise the value of investments in agriculture, thereby spurring intensification.

(5) Developed countries are largely sustainable with respect to harvesting timber and they consume about what they produce. 

(6) In developing countries, large potential flows of timber are possible from land converted to agriculture, but most of this timber does not make it to markets.  Tropical developing countries use few trees per hectare when harvests occur, but the harvests lead to potentially large damages to forest ecosystems.  While efforts to promote sustainable forestry practices have been successful in developed countries, they are more slowly taking root in developing countries. 

(7) The area of timber plantations has expanded dramatically, and will continue to account for a large share of industrial timber in the future.  This is likely to reduce pressure on natural and old-growth forests. 

So, let's return to the original questions posed in the introduction-- how sustainable is our use of forests, and how long will they last?  The discussion above suggests that forestry itself is largely a sustainable endeavor in most of the world's forests.  There is widespread evidence of non-sustainable practices in tropical countries, but efforts to promote sustainable forestry management are starting to take root, and there appears to be a market for sustainably harvested wood.  Further, intensification in wood production in plantations is sustainable, and will reduce the amount of timber harvested from old growth forests in tropical regions. 

The largest area of concern relates to deforestation, and there the picture is more clouded.  While doomsday scenarios of complete loss of tropical forest cover are not likely, forest ecosystems will be under pressure from agricultural expansion at least through the middle of this century.  The world could see an increase in agricultural area by up to 1.0 billion hectares, and most of this is likely to come from forests.  Losses of biodiversity and carbon from these ecosystems could be substantial.  The exact strategy for reducing deforestation is not yet clear, although it is important for world bodies to take a more comprehensive and long-term look at how we promote sustainability and preserve our global forest resource.

References
ABARE – Jaako Poyry.  1999.  Global Outlook for Plantations.  ABARE Research Report 99.9.  Canberra, Australia.

Barreto, P.; P. Amaral; E. Vidal; and C. Uhl.  1998. Costs and Benefits of Forest Management for Timber Production in Eastern Amazonia.  Forest Ecology and Management. Forest Ecology and Management.  108: 9-26.

FAOSTAT - Forestry.  2006: http://www.fao.org/waicent/portal/statistics_en.asp

FAOSTAT - Agriculture.  2006: http://www.fao.org/waicent/portal/statistics_en.asp

Fischer, G., H. van Velthuizen, M. Shah, F. Nachtergaele.  2002.  Global Agro-ecological Assessment for Agriculture in the 21st Century: Methodology and Results.  International Institute for Applied Systems Analysis (IIASA).  Research Report RR-02-02. Vienna, Austria.

Nepstad, D.C., A. Verissimo, A. Alencar, C. Nobre, E. Lima, P. Lefebvre, P. Schelesinger, C. Potter, P. Moutinho, E. Mendoza, M. Cochrane, and V. Brooks, 1999: Large-scale impoverishment of Amazonian forests by logging and fire. Nature, 398, 505-508.

Nin, A., T.C. Arndt, T.W. Hertel and P.V. Preckel, 2003. Bridging the Gap between Partial and Total Factor Productivity Measures using Directional Distance Functions. American Journal of Agricultural Economics.  85(4):928-942.

Reimer, J.J., and T. Hertel. 2003.  International Cross Section Estimates of Demand for Use in the GTAP Model.  GTAP Working Paper No. 22.  Purdue University.

Sedjo, R.A., and D. Botkin.  1997.  Using Forest Plantations to Spare Natural Forests. Environment.  39: 14-20.

Sohngen, B. and S. Brown.  2004.  Measuring Leakage from Carbon Projects in Open Economies: A Stop Timber Harvesting Project as a Case Study. Canadian Journal of Forest Research. 34: 829-839

Sohngen, B., R. Mendelsohn, R. Sedjo. 1999. Forest Management, Conservation, and Global Timber Markets. American Journal of Agricultural Economics. 81(1): 1-13.

United Nations, Economic Commission for Europe and Food and Agricultural Organization.  2000.  Forest Resources of Europe, CIS, North America, Australia, Japan, and New Zealand.  Geneva Timber and Forest Study Papers, No. 17.  Geneva, Switzerland.

United Nations, Food and Agriculture Organization.  2005.  Global Forest Resources Assessment 2005. Progress towards sustainable forest management.  FAO Forestry Paper 147.  Rome, Italy (www.fao.org)

United Nations, Food and Agriculture Organization.  2001. Global forest resources assessment 2000 – Main Report. FAO Forestry Paper No. 140. Rome, Italy(www.fao.org/forestry/site/7949/en).

United Nations, Population Division.  2005.  World Population Prospects: The 2004 Revision. Highlights.   Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat. New York: United Nations

Websites of Interest

Return to Home Page