General overview of the forest plantation resource
Forest plantations account for only a very small proportion of the global forest area. It is estimated that, in 1995, the global area of forest plantations was about 123.7 million hectares, or approximately 3.5 percent of the global forest area.
A handful of countries accounts for the majority of the total forest plantation area. China, Russian Federation, United States of America, India and Japan have each established more than 10 million hectares of forest plantations. These five countries collectively account for 64.7 percent of the global forest plantation resource. Only in 18 countries does the area of plantation forest exceed one million hectares.
Tropical and subtropical forest plantation resources constitute 44.7 percent of the global resource. Tropical hardwood species occupy 56.7 percent of tropical forest plantation area. Tropical forest plantation areas are dominated by two genera: Eucalyptus and Pinus. Forest plantations in temperate and boreal countries constitute 55.3 percent of the global forest plantation resource. Softwood species dominate temperate and boreal forest plantations. The most important species fall into the Spruce-Pine-Fir (SPF) category.
Annual rates of forest plantation establishment in tropical and subtropical countries are reported to be slightly more than 4 million hectares per annum. Aggregated global statistics on historical trends in forest plantation establishment in temperate and boreal countries are not available, particularly because of definitional difficulties in European countries where classifying planted forests as forest plantations is a recent concept.
Forest plantations by type, location and age-class structure
If all forest plantations in Europe, the United States of America and countries of the former USSR are assumed to be ultimately for industrial purposes, then it is estimated that the global area of industrial forest plantations in 1995 was around 103.3 million hectares. This paper derives representative global age-class structure for industrial and non-industrial forest plantations. The most notable features of industrial forest plantation age structures are the preponderance of forest plantations in Asia compared with the other regions and the very high proportion of forest plantations aged less than 15 years (in 1995), particularly in developing countries.
Non-industrial forest plantations are chiefly grown for wood fuel, or for soil and water protection, although some may be planted for recreational purposes or as a source of non-wood forest products. Globally, non-industrial forest plantations are estimated to total 20.4 million hectares (16.6 percent of the total forest plantation area) in 1995. The preponderance of forest plantations in Asia compared with the other regions and the dominance of plantations aged less than 15 years, evident for industrial plantations, are even more pronounced for non-industrial forest plantations. Almost all (98 percent) of the forest plantations identified as being for non-industrial purposes are in developing countries1.
Asia contains by far the largest forest plantation resource of any region, although the bulk of the resource is concentrated in a handful of countries. Asia's three largest plantation countries, China, India and Japan, account for 78 percent of forest plantations in the region. The largest areas of plantations in Africa have been established in either South Africa, or in the Mediterranean countries of North Africa. Australia and New Zealand account for almost 95 percent of forest plantations in the Oceania region. The United States of America overwhelmingly dominates total forest plantation areas in North and Central America. Three countries: Brazil, Chile and Argentina comprise 82 percent of the South American plantation resource. Nonetheless, forest plantations are probably most evenly distributed between countries in this region. Spain, the United Kingdom, Bulgaria, France and Portugal are the largest European plantation countries. These five countries account for two-thirds of European forest plantations. The Russian Federation and the Ukraine have the largest forest plantation resources of the countries of the former USSR.
Forest plantation yields and current production
Tropical forest plantation species are likely to have greater potential for increased yields than temperate forest plantation species. As a rule, cooler climates (all other things equal), will result in lower overall yields from a basket of appropriate species. At present, it is rare that in-the-field mean annual increment (MAI) at harvest, for any species, exceeds 30 cubic metres per hectare. Based on current plot trial results, however, significant advances may well be achieved in the not too distant future.
Current forest plantation harvests may be supplying around 12 percent of the world's total roundwood harvest. Industrial forest plantations are estimated to contribute 22.2 percent of global industrial roundwood production, compared with non-industrial forest plantations' 4.4 percent share of wood fuel production.
Development of forest plantations
Competitive and comparative advantages will determine a country's long run success in producing roundwood. National competitive advantage is the ability to achieve higher rates of growth and profit and larger market share in a sector than can another country. Comparative advantage is held by countries with the lowest opportunity costs of production. Financial criteria, especially Discounted Cash Flow analysis, are probably the most important quantitative tools used to assess forest plantation competitiveness as an investment. Public domain information on comparative forest plantation costs between countries is, however, scattered and very difficult to standardise. The most significant forest plantation costs are likely to be land, labour and harvesting costs, as well as finance costs (e.g. interest paid on project loans). In certain instances, other costs, for example, water charges, may be important.
Forest plantation establishment is also guided by expectations of future price levels. Revenues from forest plantations can be strongly skewed by taxation regimes and payment of incentives. There is considerable variation in both tax rates and availability of incentives between countries. Issues relating to risk in forest plantation investment should also be properly accounted for in pre-project assessments.
Government planting policies are less susceptible to market forces, compared with private sector actions and thus may skew the distribution of forest plantation establishment. A number of governments, including those of China and India, remain active participants in forest plantation establishment and management. In several countries, however, governments have devolved their commercial forestry interests by privatising forest plantations. Other policies such as those relating to sustainable forest management and carbon sequestration may also affect future forest plantation establishment.
The outlook for forest plantation areas and roundwood production
Quantitative modelling of future potential roundwood production from forest plantations shows that, regardless of future rates of afforestation, production will increase substantially. Currently, the annual industrial roundwood harvest from forest plantations is estimated to be 331 million cubic metres. Wood fuel production is estimated to be 86 million cubic metres. Under a medium growth scenario, which assumes that annual afforestation is carried out at 1 percent of the current forest plantation area, global potential industrial roundwood production from forest plantations is estimated to reach a local maximum in 2045 of 906 million cubic metres per year. Under the same scenario, potential wood fuel production is estimated to increase to 248 million cubic metres by 2050.
The paper models a further two alternative scenarios. A low growth scenario, assuming no new afforestation, results in a projection of only a modest increase in potential roundwood production. This increase results from the current forest plantation age-class distribution being heavily skewed toward immature forests. A high growth scenario, assuming a gradual reduction from current actual afforestation rates, results in the area of the global industrial forest plantation estate increasing to 234 million hectares by 2050. Potential industrial roundwood production from forest plantations under this scenario reaches 1,5000 million cubic metres by 2050.
A qualitative assessment of the scenarios suggests that the medium scenario (Scenario 2) is most likely to be broadly representative of the future. Scarcity of suitable land for forest plantation development, for example, could physically constrain forest plantation development in some countries below the level modelled in the high scenario (Scenario 3). Similarly, the economic law of diminishing returns may also play a role in slowing afforestation rates. Current trends suggest, however, that some new forest plantations will continue to be established, so the low growth scenario is most unlikely.
The paper concludes that, at present, the emergence of true competitive advantage in the forest plantation sector is masked by a number of forestry policies and incentives. Currently, policy is at least as important as economics in determining forest plantation patterns. Consequently, forest plantation establishment is widely dispersed, with significant areas of industrial forest plantations being established in many countries.
1 Though this statistic is somewhat misleading since, unless their purpose is clearly specified as being non-industrial, forest plantations in developed countries are assumed to be for industrial purposes.