0595-B4

Economics of silviculture in the context of sustainable forest management

Sen Wang, Bill Wilson and Brad Stennes ¹

Abstract

The need for sustainable forest management (SFM) has gained worldwide recognition since the mid-1990s amid growing appeals for best practices, including silvicultural ones, in addressing environmental problems. This paper examines several new trends concerning the economics of silviculture in the context of SFM. We begin by highlighting recent global changes that espouse SFM, outlining the main attributes comprising SFM, and pinpointing the role of silviculture. Then, we consider several economic problems in formulating appropriate silvicultural strategies. Finally, we describe the new challenges for silvicultural operations based on experience in British Columbia, Canada.

Introduction

Since the mid 1980s, and especially since the early 1990s, the notion of sustainable forest management (SFM) has emerged in response to a global movement concerned with forest management practices (Soderlund and Pottinger 2001). Significant progress has been made in that public attention has shifted from cynicism-as documented by Heilman (1990) and Dietrich (1992) in the case of the United States Pacific Northwest, and by Nixon (1993) in the case of Clayoquot Sound on Canada's west coast-toward a much more constructive atmosphere where stakeholders collaborate to create a new paradigm of environmentally sound forest conditions and socially responsible management practices (Shindler et al. 2002). It is now widely accepted that natural resource and ecological sustainability, economic vitality, community stability, and industrial competitiveness constitute the most important dimensions of sustainable forest management. Specifically, SFM comprises a host of management regimes to maintain and enhance the long-term health and integrity of forest ecosystems and forest-dependent communities, while providing ecological, economic, social, and cultural opportunities for the benefit of present and future generations (Wilson and Wang 1999). Essentially, the argument put forward by Dawkins (1972) has prevailed; that is, forests ought to be viewed as "... highly valued life support systems, rather than as a specialized suppliers of any one type of product or benefit" (p.335).

Over the past decade or so, silviculture research has advanced on multiple fronts. The findings suggest that silviculture has an important role to play in attaining the principal objectives of SFM. This paper examines several new trends in silviculture economics within the context of SFM. We start by outlining the main attributes of SFM and discussing the contribution of silviculture to SFM. Then, we consider some economic problems in formulating appropriate silvicultural strategies. Finally, we describe a selection of new challenges for silvicultural operations based on experiences in British Columbia, Canada.

Contribution of Silviculture to Sustainable Forest Management

Broadly defined to entail the entire cycle of cutting, regeneration, and tending of forests, contemporary silvicultural systems have evolved over two hundred years of practice, first in Europe, principally Germany, and then elsewhere in the world. The traditional role of silviculture is threefold: (i) enhancing forestland productivity and timber production, (ii) maintaining financial profitability of forest products industries, and (iii) promoting social well-being via employment opportunities which, in turn, help forest-dependent communities maintain stability. Silviculture has gone beyond its original objectives of upgrading devastated forests to embrace the full spectrum of controlling forest establishment, composition, structure, and growth for a wide range of goals (Weetman 2000).

Silviculture has an important place in promoting environmental, economic, social, and community sustainability. Lacaze (2000) notes that the recent contextual changes of SFM call for silviculture practices that prioritize conservation and recreation over timber production, hence, giving rise to an expanded role for silviculture, i.e., to protect ecosystems and preserve biodiversity. Forests can be carbon sources and sinks, depending on their composition and seral stage. The Kyoto Protocol on climate change defines the potential of afforestation in combating global warming in terms of carbon-sequestering ability (IPCC 2000). Select silvicultural practices can also play a large role in maintaining biodiversity and habitat heterogeneity (Ferguson and Archibald 2002). One important trend is that timber harvesting is seen as an activity secondary to the protection of other multiple-use values (Johnson et al. 1999). A case in point is the new American "Healthy Forests" initiative that President George W. Bush announced in August 2002. This plan highlights the role of silviculture, with an emphasis on thinning, in wildfire management on federal forestlands. This is in the wake of one of the worst summer wildfire seasons in American history, during which some 2.5 million hectares of forests burned.²

Economic Considerations

Despite its fundamentally biological nature, silviculture is, by and large, an economic activity. By treating silvicultural planning and program delivery as a business undertaking, forest managers must confront the question: Is it financially justifiable to undertake a given silvicultural activity? Conventionally, the principal criterion for identifying and selecting silvicultural investment options is to choose from those projects that are capable of yielding positive net present values. The net present values are calculated using the standard discounting technique for comparing alternative scenarios of silviculture regimes that promise positive net present values. This capital budgeting approach is based on the principle of maximizing economic efficiency by comparing the opportunity costs of investment options.

However, the economics of silviculture is by no means an exercise of merely reducing complex investment problems to a simple capital budgeting excercise. The multitude of silvicultural activities involves risk and uncertainty because of the difficulties associated with pre-determining end products and with scheduling specific activities in an intertemporal and spatial framework. Silvicultural planning takes place at the forest level as well as the stand level, with different implications for each level. In new silvicultural regimes-i.e., those that aim for both ecological and economic sustainability-rotation age and retention level of live trees in harvesting units are considered important stand-level components (Hansen et al. 1995). Clearcuts are among the most disputed of silvicultural treatments. The move toward smaller openings has been driven by environmental concerns and changing societal values. However, in the transition, new environmental and social problems-such as short-term timber supply, access management, and forest fragmentation-have emerged. While large openings in forest stands may impact biodiversity and aesthetic values, smaller openings generally result in greater fragmentation of forest habitat and have financial implications regarding timber-harvest volume and economic returns. It is now widely accepted that clearcutting should be used only where it can be demonstrated to be the optimal method for meeting the objectives for the stand and the landscape, and not as the default method (Johnson et al. 1999). The economic implications of alternative harvesting options are significant, but the need to minimize clearcut harvesting is imperative. Within the dictates of "triple bottom-line" forestry, commercial harvesting operates within economic, ecological, and social expectations (Wilson and Wilson 2001).

The latest developments in SFM point to the need for intensive forest management because multiple-objective harvesting (i.e., a reduced ecological footprint) and creation of additional parks and protected areas will reduce access to timber. Intensive forest-management practices include using stock types produced from improved seed; matching species and stock type to soil/site condition; varying initial plantation spacing to maximize the use of available growing space; and undertaking vegetation management, pre-commercial and commercial thinning, stand-improvement cuts, fertilizing, pruning, prescribed burning, and multi-cropping.

Economically viable timber/fibre production requires a financial outcome based on a combination of two conditions-sufficient yields and end-product prices-so as to offset input costs that occur earlier in the rotation. While the former condition is a function of a host of variables on the supply side, the latter condition is principally concerned with the demand side. Despite the demonstrated high yield, the risks and costs of growing short-rotation forest plantations for biomass production outweigh the biomass value in many areas of the world (Weetman 2000). As indicated in Figure 1, profitability of intensive forest management may be obtained in Chile and New Zealand, but not in North America. Essentially, it is the intensity of activities (i.e., cost) and when they occur during the rotation (i.e., the period of discounting) that determine the benefits and costs calculations.

Among the various silvicultural activities listed above, genetic improvement and late-rotation fertilizing are activities that stand a good chance of being economically justifiable. For instance, tree genetics work is confirmed to be capable of yielding a 10-15% gain over unimproved seedlings, and new seed orchards promise to double those gains (DeForest et al. 1991). Wood science and technological advances create new uses and values for low-value trees. In recent years, the use of poplar for oriented strand board and pulp has increased utilization of this former "weed" species. Fast-growing eucalyptus fibre is emerging as a financially attractive plantation investment in large part due to innovative processing technologies. The short rotations also reduce the risk of catastrophic loss due to fire or pest events.

Figure 1. Profitability of intensive forest management: net present value of US$100 invested at 8% real interest rate. Based on various studies compiled by CIBC Wood Gundy.

New Challenges in Silvicultural Operations

Silviculture is an important component of Canada's forestry sector, especially in British Columbia, due to the relative size of the harvest and higher potential growth rates. Prompt reforestation of harvested sites to free-growing status is compulsory on British Columbia's public forestland. Given the commitment to SFM, is it necessary to expand investment beyond the stage of basic silviculture to include incremental silviculture? In the Canadian context, basic silviculture is defined to include all the silvicultural practices required to achieve a free-growing regeneration of desired species at specified densities and stocking. Incremental silviculture refers to the silvicultural prescriptions and practices in stands that are past free-growing conditions for the purposes of enhancing stand value and yield. Advocates of basic silviculture present their arguments based on Canada's low forest productivity, as measured by mean annual increment, relative to other major forest jurisdictions (Benson 1988). Given Canada's extensive forest resource base, low population density, and slow rates of tree growth (due to its northern location), it appears advantageous to practice basic silviculture. Measures include relying on natural regeneration and avoiding activities that involve a high labour requirement.

Figure 2. Silvicultural activities on British Columbia's public forestland. Based on various editions of British Columbia Ministry of Forests annual reports.

The past two decades have witnessed an expansion in both scope and scale of silvicultural operations in British Columbia (Figure 2). However, results of empirical research on the profitability of incremental silviculture projects in British Columbia are not robust. Thompson et al. (1992) found that in British Columbia virtually no silvicultural activity pays. Forest tenure also plays a role in that silvicultural expenditures tend to be higher on forestlands in private ownership or on those that are under relatively secure tenure arrangements (Zhang and Pearse 1996). Binkley (1997) urges British Columbia to adopt forestland zonation, arguing that such an approach will yield several public benefits: (a) maintaining a non-declining level of timber supply, (b) satisfying environmentalist demands for parks and protected areas, and (c) helping sustain employment levels in forest-dependent communities. The essential premise of Binkley's argument is that investors should focus their investment on sites that are above average in biological productivity. This approach involves higher costs, but increased growth rates and eventual dividend prospects are expected to offset the higher costs. In addition, incremental silviculture is more likely to be viable from a financial perspective on smaller, more concentrated sites, especially when financial returns are considered together with socio-political motivations.

There are many challenges in undertaking silvicultural operations, including the use of herbicides and the impact of silvicultural activities on wildlife and biodiversity. One interesting trend is the adoption of environmentally friendly approaches like site preparation and brushing. Table 1 shows the decline in the use of chemicals and the rise in the use of new treatment approaches such as sheep grazing. While forest productivity may be improved by the application of fertilizer, its use is believed to reduce diversity of plant species (Rajaniemi 2002).

Table 1. Selected silvicultural activities on British Columbia's public forestland ^a

^a Source: British Columbia Ministry of Forests (2000).
^b British Columbia's fiscal year begins April 1 and ends March 31 of the following year.

In addition to biophysical constraints, policy issues, planning issues, and knowledge gaps, are some of the major hurdles involved in silvicultural planning and program delivery. Obviously, further inquiry will lead to a call for changes in government policy regarding institutional framework and policy instruments.

Conclusion

Due to a growing public acceptance of SFM and the widening participation of an increasing number of stakeholders in forest management, silvicultural practices will continue moving toward multiple-use resource management, and ecosystem or landscape management. The global demand for forest products (both consumptive and non-consumptive) will continue to grow as incomes and populations increase. SFM and silviculture investment are key elements to meeting this increased demand. Life-cycle analysis does signal the relative merit of timber versus competing products in meeting this demand. As a result, silviculture investment is a central ingredient to sustainable development, in terms of ecological, social, and economic dimensions.

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¹ Natural Resources Canada, Canadian Forest Service, Pacific Forestry Centre, 506 West Burnside Road, Victoria, BC, V8Z 1M5, Canada. [email protected]; Website: www.pfc.cfs.nrcan.gc.ca

² "Bush unveils `Healthy Forests' plan-President says thinning necessary to reduce fire threat", article posted at www.cnn.com on August 22, 2002, http://www.cnn.com/2002/ALLPOLITICS/08/22/bush.timber/index.html