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6/26/2018 » 6/29/2018
2018 National Conference of Private Forest Landowners

6/18/2019 » 6/21/2019
2019 National Conference of Private Forest Landowners


[FOUNDATION] Entire Perc Report on One Page
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Market Access and Forest Stewardship

The Forest Landowner Foundation Commissioned the Property and Environment Research Center (PERC) to conduct a report on how sustainability certification and renewable biomass mandates threaten nonindustrial private forests.

ABSTRACT: This report evaluates the impact of sustainabillity certification and renewable biomass mandates. The first section provides a background on nonindustrial private forests. Section two outlines the economic drivers of private forest conversion. Sections three and four explain how sustainability certification and the renewable fuel standard could reduce the environmental productivity of nonindustrial private forests by reducing their economic profitability. Section five concludes.

Abbreviations: FSC, Forest Stewardship Council; ENGO, Environmental Non Governmental Organization; SFI, Sustainable Forestry Initiative; LEED, Leadership in Energy and Environmental Design; EISA, Energy Independence and Security Act< /p>

Keywords: Forest Sustainability; Forest Stewardship; Nonindustrial Private Forests; Private Forests; Forest Certification; Woody Biomass; Renewable Fuel Standard


Section one: Nonindustrial Private Forest Background

Section two: Economic Drivers of private forest conversion

Section three: Impact of Sustainability Certification 

Section four: Impact of Renewable Biomass Mandates

Section five: Conclusion 

Works Cited» 






Market Access and Forest Stewardship

How Sustainability Certification and Renewable Biomass Mandates Threaten Nonindustrial Private Forests

Commissioned by the Forest Landowner Foundation


Nonindustrial private forests cover about 360 million acres in the United States, or roughly one-half of the nation’s total forested acres.1 These forests produce more than 60 percent of the nation’s annual wood harvest;2 and, in several regions of the country, they are the primary source of pulp, lumber, plywood, and other wood products.3 Nonindustrial private forests also generate a host of.nontimber benefits such as water purification, carbon sequestration, .wildlife habitat, and open space – usually at no cost to surrounding communities.4


Despite their economic and environmental output, nonindustrial private forests are in jeopardy. Since the 1990s, the conversion of forestland to developed uses has exceeded one million acres per year.5 Driving much of this conversion is the demand for residential housing and, more precisely,.the disparity in profits between developing forested land versus keeping it in timber production.6 Ironically, recent initiatives aimed at rewarding environmental stewardship on private forests could accelerate forest.conversion..  


This report evaluates the impact of two such policies: sustainability certification and renewable biomass mandates. The first section.provides a background on nonindustrial private forests.Section two outlines the.economics drivers of private forest conversion. Sections three and four sustainability certification and the renewable fuel standard could reduce.the environmental productivity of nonindustrial private forests by reducing their economic profitability. Section.five concludes.





Market Access and Forest Stewardship:   How Sustainability Certification and Renewable Biomass Mandates Threaten Nonindustrial Private Forests


Nonindustrial Private Forests

Nonindustrial private forests or “NIPFs” are unlike public or industrial forests. Most of these forests are small, family owned, and timber-producing. In terms of size, 95 percent cover less than 100 acres, and 60 percent cover less than 10 acres.7 Due to parcelization, the number of NIPF owners has increased in recent decades, while the average tract size has shrunk.8 Nonetheless, at 360 million cumulative acres, nonindustrial private forests constitute a significant portion. of the nation’s undeveloped land.

 Figure 1: Forest Ownership in the United States            Source: U.S. Forest Service9

 Most nonindustrial private forests are family owned. Title to 250 million acres,. or 70 percent of all NIPFs, is held by individuals, married couples, or family estates and trusts.10 These family owned forests tend to pass from generation to generation. Those that are not family owned are held by partnerships, tribes, .and corporations.





Market Access and Forest Stewardship:   How Sustainability Certification and Renewable Biomass Mandates Threaten Nonindustrial Private Forests 

Most nonindustrial private forests harvest timber. In fact, NIPFs contribute between 50 and 60 percent of the annual harvest volume in the United States.11 The U.S. Forest Service’s National Woodland Owners Survey (NWOS) reports that 50 percent of family forest owners have harvested trees at some point during their tenure, and that these owners control 71 percent of the total family forest acreage.12


Current harvesting rates, it should be noted, have not reduced total forest coverage or the environmental benefits that flow from our nation’s forests. Indeed, timber growth in the United States has exceeded the harvests since 1952, resulting in 39 percent increase in domestic growing stock volume between 1953 and 2002.13 During this time period, the domestic forest inventory accrued more volume than it lost to mortality and harvest by more than one-third.14  According to researchers at the USDA Forest Service, Forest Products Laboratory, “the lowest rates of deforestation and net forest carbon emissions (change in forest stock) occur in global regions with the highest rates of industrial wood harvest and forest product output.”15


Size, ownership, and harvesting aside, the truly distinguishing characteristic of nonindustrial private forests is their environmental productivity. They provide a “wealth of nontimber benefits that extend from tangible benefits of clean water, wildlife, and biodiversity to less tangible but equally valuable benefits of recreational enjoyment, scenic beauty, and cultural ideas of place.”16


Of the public goods generated on private forests, water purification and wildlife habitat are perhaps the most significant. Private nonindustrial forests protect water quality by slowing runoff, stabilizing soils, preventing erosion and floods, and filtering pollutants. And their contribution to water purification is significant; an estimated 25 percent of all the water flow in the United States comes from or is filtered by nonindustrial private forests.17  Converting private forests to developed uses increases the amount of impervious surfaces and, consequently, reduces the lands’ water cleaning capacity.18





Market Access and Forest Stewardship:   How Sustainability Certification and Renewable Biomass Mandates Threaten Nonindustrial Private Forests


 Table 1: Developing Watersheds Source: U.S. Forest Service19

In addition to water purification, private nonindustrial forests “furnish diverse habitats for fish and wildlife, providing the key to the conservation of many species.”20 Unlike industrial forests, which usually consist of planted stands of even-aged, monoculture trees, most nonindustrial private forests contain naturally regenerating, uneven-aged stands more capable of supporting a variety of plant and animal species.21


Water purification and wildlife habitat are just two of the many nontimber outputs produced on nonindustrial private forests. These forests are engines of environmental and amenity values. According to Nobel Laureate Elinor Ostrom, “individuals who live near a forest as well as individual resource users and those who live at some distance all benefit from the ‘public good’ of protecting forested land owned by private nonindustrial owners.”22





Market Access and Forest Stewardship:   How Sustainability Certification and Renewable Biomass Mandates Threaten Nonindustrial Private Forests 

The Economics of Forest Conversion

The environmental goods produced on nonindustrial private forests are not guaranteed, they depend on stewardship practices of forest landowners. This stewardship, in part, depends on the ability of forest landowners to access markets for wood products and to earn enough money to stay in forestry.23


Forest Conversion Trends:

Conversion has reduced domestic forest coverage and, by consequence, the environmental productivity of private nonindustrial forestland.24  “From 1982 to 1997, 10.3 million acres of nonfederal forest land, most of which is private, were converted to developed uses and urban areas.”25 Although conversion has slowed somewhat since the 1900s, the overall trend has remained the same and will likely continue. Forecasting models indicate that 19 million forested acres will be lost to urbanization between 2020 and 2040.26  And those not converted to developed uses could face fragmentation, that is, the division and disconnection of previously contiguous forested acres to the detriment of their biological processes.27  In fact, the Forest Service predicts 44.2 million acres (more than11 percent) of private forest across the coterminous United States could experience substantial increases in housing density by 2030.28


Incentives to Sell

There is no mystery about the economic drivers of forest conversion. According to forest economists. Eric White and Rhonda Mazza, everything boils down to the incentives of the forest landowner:

"As the demand for developed land uses increase, so do the incentives to sell land for development. The financial incentive to convert lands now in traditional rural uses (e.g., timber or agricultural production) to developed uses becomes greater as the value of the land in rural uses declines relative to the value of the land for developed uses (such as residential or commercial use). For forest land, decreases in the demand for timber, as a result of changing market conditions in the forest products sectors and other factors, can reduce the value of the land for timber production.29"

Put simply, a private forest landowner has an incentive to develop when the land’s developed value grossly exceeds its undeveloped value. Absent a zoning ordinance or conservation easement restricting development, the land’s developed value is determined by its location and amenities, as well as the drivers of housing demand such as population and personal income growth.30





Market Access and Forest Stewardship:   How Sustainability Certification and Renewable Biomass Mandates Threaten Nonindustrial Private Forests

Figure 2: Development Pressure on PrivateForests Source: U.S. Forest Service31

The undeveloped value of private forestland likewise depends on a multitude of factors. For NIPF owners who do not harvest timber, the most relevant factors are likely their own subjective valuation of forest amenities. Conversely, as White and Mazza explain, the undeveloped value of timber producing private forestland largely depends on changing market conditions in the forest products sector.


With the above background on nonindustrial private forests and forest conversion, the remainder of this report explores two policies affecting the forest products sector and, consequently, the undeveloped value of nonindustrial private forests.





Market Access and Forest Stewardship:   How Sustainability Certification and Renewable Biomass Mandates Threaten Nonindustrial Private Forests

Sustainable without the Certification

Forest certification is a voluntary process in which a professional forester gives written assurance that the forest management practices of a particular manager or group comply with some specified sustainability standard.32  Chain of custody verification and product labeling allow consumers to recognize and preferentially purchase the certified forest products.33 The purported aim of forest certification is thus to “link market demands for forest products produced to high environmental and social standards, with producers who can meet such demands.”34


In the United States, the predominant certification systems are the Forest Stewardship Council (FSC), Sustainable Forestry Initiative (SFI), and the American Tree Farm System.35 Environmental groups such as the Natural Resource Defense Council have portrayed FSC as the only credible certification scheme, and claimed that other certification schemes are “backed by timber interests and set weak standards for forest management that allow destructive and business-as-usual forestry practices.”36 Regardless of whether such claims are merited, FSC has become the most accepted certification standard in the market37 and the only standard approved by the United States Green Building Council Leadership in Energy and Environmental Design (LEED) accreditation program.


Certification Costs:  

Sustainability certification entails direct and indirect costs to forest owners. Direct costs are the cost of the auditor’s site visit, travel, report writing, and the certifying organization’s oversight.38 On a per acre or output basis, the direct costs are relatively low for large operations but can be prohibitively high for small producers.39 According to Hansen, et al., direct costs for FSC certification costs could exceed $5,000 annually,40 an amount which prices out most small forestland owners and detracts from actual stewardship expenditures.41


Indirect costs are the costs incurred to meet the sustainable forestry standards.42 These can include the development or enhancement of a forest management plan, investment in infrastructure and machinery in order to be able to harvest more efficiently with lower impacts, establishing chain of custody procedures, and the opportunity costs of harvesting less timber.43 Indirect costs vary significantly from one forest owner to the next, and can easily exceed direct certification costs.44





Market Access and Forest Stewardship:   How Sustainability Certification and Renewable Biomass Mandates Threaten Nonindustrial Private Forests

Unrealized Price Premiums:

Purportedly offsetting these costs are price premiums for certified products and improved marketing opportunities for certified producers. 45 According to the Forest Stewardship Council’s (FSC) website ,

FSC certification offers forest managers rewards for managing their forests the FSC way –following the highest social and environmental criteria there are. In some instances rewards can be in the form of price premiums. But increasingly, FSC certification is rewarded with improved access to environmentally sensitive markets. Also, more and more governments and leading businesses specify FSC certified materials in their purchasing programs. 46

Gullison explains that “[c]ertification provides a means by which consumers can reward producers who provide the greatest environmental and social benefits from their production process, either by paying a price premium, or by preferential purchasing.”47


Unfortunately, the theorized price premiums have not materialized. The evidence suggests that buyers are unwilling to pay more for certified products,48 or only a very small premium49 for a short lived period.50 Mark Rickenbach explains, “[p]rice premiums were an early allure of forest certification; however, they have yet to emerge on a consistent or widespread basis. Some producers have been able to achieve limited premiums (5 to 10 percent) on some sales. However, at this point there is no assured payoff for the additional cost of becoming certified.”51


One explanation for why consumers are not paying a price premium for certified sustainable forest products is that end consumers were not the driving force behind sustainable certification. Instead, environmental organizations such as the Sierra Club, Rainforest Action Network, and the World Wildlife Fund organized buyers groups committed to buying only certified products after a particular date.52 Hansen, et al., explain more precisely that the demand for certified products comes from “large corporations that wish to avoid the risk of damaging their brand image” and from “powerful ENGOs which have a history of influencing corporate behavior through protests and other elements of what they call ‘market mechanisms.’”53


Restricted Market Access: 

The promise of enhanced market access is similarly unfulfilled. Mark Rickenbach predicts “it is highly unlikely that wood from certified small ownerships will ever find its way to shelves of large national or regional chain stores without significantly more FSC-certified acres and chain-of-custody certified mill capacity.”54 The requisite economies of scale and chain of custody procedures make it costly, if not prohibitive, for small producers to individually distinguish their product. Rather, the procurement policies of local saw mills and paper mills are more likely to dictate whether certification is a mandatory requirement or an unavailable option.





Market Access and Forest Stewardship:   How Sustainability Certification and Renewable Biomass Mandates Threaten Nonindustrial Private Forests

From an economic perspective, the size and limited growing stock value of most small private forests mean the costs of certification frequently outweigh the potential gains.55 As such, mandating sustainability certification creates an incentive for nonindustrial private foresters to sell their standing stocks quickly, to less discriminating buyers, or to consider selling their property altogether.56 This reality stands in stark contrast to the claims of price premiums and marketability made by certification advocates.


For many nonindustrial private forests, mandatory sustainability certification represents a restriction rather than an enhancement of market access and profitability. Certification adds significant cost to the forestry operations and, in some instances, unacceptable hardships and disincentives for private forest landowners.57 The unfortunate irony is that mandatory sustainability certification could reduce the environmental and amenity values that flow from nonindustrial private forests.

Renewable without the Mandate

In addition to the sustainability certification, renewable biomass mandates pose a hidden threat to nonindustrial private forests and the public goods they produce. In particular, the Energy Independence and Security Act (EISA) creates an unfair advantage for industrial forest owners by excluding most nonindustrial private forest by-products from the government mandated biofuels market. This exclusion undermines the competitiveness of the biofuels market, closes a potentially lucrative revenue stream to private nonindustrial landowners, and discourages forest management practices that enhance a private forest’s environmental and economic value.


Renewable Fuel Standard and Woody Biomass: 

The Renewable Fuel Standard of the EISA mandates an increasing volume of renewable fuel be blended into the nation’s transportation fuel supply.58 The total amount of biofuels that must be added to gasoline by 2022 is 36 billion gallons, of which 21 billion gallons must be derived from non-cornstarch products such as woody biomass.59 





Market Access and Forest Stewardship:   How Sustainability Certification and Renewable Biomass Mandates Threaten Nonindustrial Private Forests


Woody biomass comes from trees and woody plants, and includes “limbs, tops, needles, leaves, and other woody parts, grown in a forest, woodland, or rangeland environment, that are the by-products of forest management.”60 These forest by-products can be used as feedstock for biofuel producers and, because they generally have no other economic use, they tend to compliment rather than compete with conventional timber harvesting.61


Advocates of woody biomass as a substitute for fossil fuels point to its abundance and to the reduced wildfire risk associated with removing this excess biomass from healthy forests. Indeed, forestlands in the contiguous states are capable of producing 368 million dry tons annually.62 Such production is considered sustainable because, according to 2007 data, domestic forest growth exceeded removal by 41 percent across all species.63 As such, removing the excess biomass from the nation’s forests would likely improve their ecological function64


Narrow Definition, Broad Consequences: 

In relevant part, the EISA defines renewable biomass as “[p]lanted trees and tree residue from actively managed tree plantations on non-federal land cleared at any time prior to enactment of this sentence.”65 Renewable biomass from federal public forests and naturally regenerating private forests thus does not qualify as a renewable feedstock regardless of how it was grown or harvested. This arbitrary exclusion creates an indirect subsidy for industrial forest owners and reduces the competitiveness of the biofuels market.


Excluding the nation’s dominant forest ownership categories from the biofuels market will have several consequences. First, the exclusion will increase the price per ton of woody biomass because fewer suppliers will be competing against each other in the marketplace. Indeed, the limitation of renewable biomass to “planted trees” excludes up to 88 percent of private forestland in the South East.66 Outside the South East, where forest plantations are less common, the percentage of private forest owners excluded is likely to be even higher.


Secondly, the narrow definition of “renewable biomass” will concentrate the benefits of thinning and hazardous fuels reduction on industrial private forests. To the extent these forests consist of monoculture, even-aged stands are less likely than federal or nonindustrial private forests to produce





Market Access and Forest Stewardship:   How Sustainability Certification and Renewable Biomass Mandates Threaten Nonindustrial Private Forests 

as many environmental benefits or experience as much wildfire. Whereas profitable woody bioenergy markets would encourage nonindustrial private owners to adopt more formal and frequent silvicultural treatments,67that incentive is reduced or altogether eliminated without a biomass buyer. These foregone environmental improvements are a cost of excluding public and naturally regenerating forests from the biomass market. Not surprisingly, there is widespread support among state foresters and state biomass contacts for expanding the renewable biomass definition to include biomass from naturally regenerated forest stands.68


Third, excluding naturally regenerating forests from the biomass market closes off a potential revenue stream for nonindustrial private forest owners. Many nonindustrial private forests have large quantities of small diameter trees and logging residues marketable for bioenergy production.69 As the Society of American Foresters notes, “this additional revenue stream from renewable biomass for forest landowners can help them keep their forests forested, rather than selling them for development.”70 Moreover, revenue streams from complimentary forest products, like woody biomass, provide opportunities for landowners to “reap more value from their forests while simultaneously enhancing wildlife habitat, water quality, and even scenic beauty.”71


Mandating the use of renewable fuels contradicts free market principles and will undoubtedly raise fuel costs. Combining such a mandate with an arbitrary exclusion of renewable fuels grown on nonindustrial private forests creates a subsidy for industrial forest owners. Without the opportunity to compete on a level playing field with industrial forests, nonindustrial private forest owners are unlikely to invest in renewable biomass production. As one forestry advocate predicts, “the definition’s arbitrary limits on qualifying private forest lands can only exacerbate the land-use conversion pressures faced by our smaller, private working forest landowner.”72





Market Access and Forest Stewardship:   How Sustainability Certification and Renewable Biomass Mandates Threaten Nonindustrial Private Forests




Nonindustrial private forests are a significant source of the nation’s wood products, but they are also engines of environmental goods and services. These lands filter drinking water, supply wildlife habitat, sequester carbon, and provide open space. Many of these benefits spill onto neighboring lands and communities, often at little or no charge. Forest landowners, however, must have access to markets for their wood products if these lands are to remain forested and environmentally productive.


Ironically, two initiatives aimed at enhancing environmental quality could have the opposite effect by limiting the market opportunities for private forest landowners. The first is sustainability certification. What was once a voluntary way to distinguish forest products in the marketplace is becoming an untenable requirement for an increasing number of private forest landowners. Though many NIPFs harvest wood in a way that comports with Best Management Practices, and few consumers are demanding certified products, failure to certify could soon prevent small forest owners from accessing wood markets.


In similar fashion, excluding most nonindustrial private forests from the federally mandated renewable biomass market could reduce the environmental productivity and the stewardship of those forests. By mandating the use of renewable fuels but arbitrarily limiting the suppliers of woody biomass to industrial forests, the Energy Independence and Security Act increases the cost of utilizing woody biomass as an alternative to fossil fuels and it creates a disincentive for private investments in forest thinning and stewardship.


The purported aim of sustainability certification and renewable fuel mandates is to enhance environmental quality. Yet, as applied to nonindustrial private forests, they could have the opposite effect. These policies should be reformed to recognize the existing high level of environmental stewardship of NIPFs. Wood product processors and retailers should exempt nonindustrial private forests from any sustainability certification requirement that imposes unnecessary costs on NIPF owners. And, to the extent that the federal government mandates the use of renewable fuels, such a mandate should not arbitrarily favor one category of renewable fuel producers.







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