5 CONCLUSIONS AND RECOMMENDATIONS

This study is the result of a major cooperative effort involving nearly a hundred experts on the team of specialists and as national correspondents, within a formally agreed thematic structure discussed at the intergovernmental level. The aim has been to analyse the past situation and trends and to project those trends in to the future identifying scenarios and options, as a basis for decision making by actors primarily in the forest sector: governments of course, but also industries, forest owners and social and environmental NGOs. The study is certainly not intended to provide a single, authoritative view of the future and what should be done: to attempt to create such a single “correct conclusion” would be counterproductive as EFSOS is intended to generate productive debate, between actors who do not necessarily have the same values or interests, rather than to pre-empt it.

These conclusions and recommendations therefore are the views of the UNECE and FAO secretariats alone, although they have benefited greatly from discussion at numerous fora, notably the team of specialists meetings and at the Joint FAO/UNECE Working Party on Forest Economics and Statistics and the joint session of the UNECE Timber Committee and the FAO European Forestry Commission in October 2004

5.1 Background

Most of Europe is densely populated and rather prosperous compared to other parts of the world. As a result of this, the contribution of the forest sector to European society has changed somewhat over the last few decades.

Starting with the negative trends, the economic importance of the sector is declining in most countries, as it has not grown as fast as other parts of the economy. Indeed, in most European countries, the forest sector now accounts for less than one-half percent of GDP. Currently, about 4 million Europeans work in the forest sector, but this has also declined in the past and is likely to continue to do so in the future.

In addition to these macroeconomic trends, forest products are also no longer indispensable elements of life in Europe. For example, in most cases, they can easily be substituted by other non-wood products. Forest products can only maintain their position in the marketplace by continued investment in skills and technology, development of new markets, competitive pricing, improved performance and a better understanding of customers needs.

On a more positive note, there have also been many successes in the forest sector and some elements of the outlook present great opportunities for the sector. For example, forests cover about one-third of the land area in Europe and have been expanding for 50 years or more. Furthermore, urbanisation is reducing the population pressure on the land, opening up new opportunities for forests to expand. Forest products are also more sustainable than ever before, with a high recycled content, low energy requirements for production and low inputs of roundwood per unit of output.

In addition to these trends, Europe’s forests remain very important for many Europeans, but in a broader social and environmental context. For example, forests are recognised as important parts of the landscape and are valued for the important services that they provide, such as protection and biodiversity conservation and as a setting for recreation. There is also growing recognition of the role that they could play in mitigating climate change.

The importance of forests in Europe is also recognised by governments. Evidence of this is the strong European support given to national and international policy processes related to forests. In addition, there has often been a rapid and strong response to perceived threats to forests, such as the concern over “forest death” in the 1980s or concerns regularly expressed about forest fires.

For many Europeans, particularly in Western Europe, the non-wood benefits of forests are probably now more important than those connected with the supply of wood. This presents some challenges for the sector, because it is still the production of forest products that creates most of the income for forest owners. Many of these other benefits may be valued highly, but this value can not be easily translated to income in the marketplace. The challenge for the sector will be to mobilise the public and political support behind European forestry to ensure that Europe’s strong traditions of high quality forest management can be sustained in the future.

The trends described above reflect the gradual transition in Europe towards a post-industrial society. This is a natural consequence of the historical trends in income, population, urbanisation and economic development. It is against this background that the future role of the forest sector in society needs to be assessed.

5.2 Summary of the main conclusions

The analysis presented in this report has described in great detail the trends in the forest sector over the last few decades and the outlook to 2020. Despite this immense amount of detail, there are four major conclusions that can be drawn from this analysis. They are presented here below, before the remainder of this chapter goes on to describe the conclusions and recommendations of the study in more detail.

Wood production will shift to the East. The forest sector in Europe will continue to develop along different paths, depending on the trends in socio-economic development in the different sub-regions. In Eastern Europe and the CIS sub-region, the rapid and dramatic changes that have occurred over the last decade have placed these countries in a very competitive position in terms of wood supply and production costs. Production of forest products in these two sub-regions is expected to increase dramatically in the future. In contrast, the forest sector in Western Europe is likely to continue to expand to meet a broader set of objectives that will meet the changing needs of society in these countries. The industry in Western Europe will have a competitive advantage in the production of high value-added products and is likely to continue to focus on technology and marketing as part of knowledge-based growth in the future.

Policy developments will continue to have a major impact on all parts of the forest sector. The analysis has shown how historical policy developments have resulted in significant shifts in the sector, in terms of costs, prices, technology and raw material supplies. In particular, it has shown that cross-sectoral policy impacts have a strong influence on the sector. The challenge for the future will be for the forest sector to adapt and evolve to remain competitive in the changing policy environment.

Forests have a huge potential to contribute to sustainable development. To some extent, the forest sector in Europe has been a victim of its own success. Improvements in processing technology, silviculture and recycling have led to a sector that is now more sustainable than ever before. High quality products can now be produced from much lower inputs of wood raw materials and this trend is likely to continue in the future. Forests in Europe are also growing faster than ever before and faster than they are being cut. This presents an opportunity to further broaden the scope of management objectives if the difficulties of financing can be resolved.

Economic conditions are likely to remain challenging in the future. The current trends towards globalisation, competition from low-cost suppliers and greater demands placed on the sector are likely to continue in the future. However, it is expected that the sector will adapt and rise to meet these challenges, as it has done in the past.

5.3 General market outlook

Over the next 20 years, GDP growth rates will decrease in Western Europe in line with historical trends. For example, the baseline projection suggests that annual GDP growth in Western Europe will decrease from 2.4 percent to 1.2 percent over the next 20 years. In the other two sub-regions, GDP growth is expected to increase over the next two decades, due to convergence between these countries and Western Europe. The main risk to this growth is related to whether these countries will continue to progress towards democracy and a market economy as fast as they have in the past.

Based on these economic growth rates, consumption and production of forest products is expected to show stable growth in Western Europe, with growth gradually declining in the later part of the period. Paper consumption will increase most rapidly in the future, while sawnwood will become relatively less important due to a low growth rate of consumption. During the next 20 years, average annual growth in consumption is expected to amount to 2.0 percent for paper and paperboard, 1.9 percent for wood-based panels and 0.9 percent for sawnwood.

Growth rates will be considerably higher in Eastern Europe and the CIS sub-region as per capita consumption levels in these two sub-regions rise towards the level in Western Europe. This is partly due to the relatively high income elasticity of consumption in these countries and the high economic growth expected in the future. A summary of the projected growth rates for all of the sub-regions is given in Table 30

Table 30 Average annual projected growth rates in production and consumption of forest products from 2000 to 2020 under the baseline scenario

The forecasts of production show that the balance of production in the European forest products sector will shift firmly towards the east. For example, annual growth in production in Eastern Europe will be about twice the level of growth in Western Europe across all product categories and growth in the CIS sub-region will be as much as three times higher. Nevertheless, Western Europe will remain the largest producer of all forest products in Europe, accounting for 78 percent of paper production, 63 percent of wood based panel production and 48 percent of sawnwood production in the year 2020.

Likewise, trade patterns will change, with a significant absolute and relative increase in exports from the east. This will occur as the Russian Federation and other countries succeed in redeveloping their forest sectors to supply the world’s expanding markets in Asia as well as the traditional European markets.

5.4 Shifting balance in wood production

The most profound and rapid changes in the forest sector over the next 20 years will take place in the Eastern Europe and CIS sub-regions. The complex process of transition to market economies started in these countries in the early 1990s, but the nature and pace of transition has varied widely. Some “advanced reform” countries have nearly completed the transition process and have entered the EU, while others have only just started to put in place the necessary framework for reforms.

While this process is important for all sectors, the forest sector will be called upon to play a special role in many of these countries for a variety of reasons, such as the following:

• several of the countries have large forest resources with a significant economic potential;

• the forest sector requires relatively little investment to obtain significant revenues from exports of wood raw materials and primary processed products;

• labour forms an important part of the cost structure for harvesting and primary processing and many of these countries have a strong comparative advantage in labour costs;

• per capita consumption levels of forest products are low in many of these countries, chiefly because of the low levels of the housing stock and the historical preference for other materials, so forest products will play a large role in the reconstruction of these countries.

Finally, because of the sheer size of the forest resource in the Russian Federation and the potential to increase exports significantly, developments in that country will strongly influence the global supply and demand balance for forest products. For example, the CIS sub-region’s share of total European production of all forest products (measured in WRME) will increase from 10 percent at present to 20 percent by 2020.

Table 31 Sub-regional shares of total European production and consumption of forest products in 2000 and 2020

Table 32 Net trade by European sub-region in 2000 and 2020 (in millions)

Note: positive values are net exports and negative values are net imports.

Over the next 20 years, it is also expected that production and consumption will increase rapidly in Eastern Europe and even faster in the CIS sub-region, shifting the balance of European forest product production and consumption to the east (see Table 31). Domestic forest products markets will be transformed, with per capita consumption figures in Eastern Europe and the CIS sub-region approaching, but not overtaking, those of Western Europe.

Trade patterns will also change as net exports increase strongly, in particular from the CIS sub-region. Net exports from Eastern Europe will increase less rapidly and even decline in some cases, because the domestic market will grow as fast as or faster than domestic production. The main developments in European net exports in the future will come from the Russian Federation (see Table 32).

According to the trade analysis and econometric projections, the comparative advantage in the Russian Federation will be in sawnwood rather than in the other products. However, exports of all forest products are expected to expand (as in recent years), but not as quickly as sawnwood.

This expansion of production, consumption and trade is, of course, dependent on higher levels of fellings in all countries in Eastern Europe and the CIS sub-region. The ratio of fellings to net annual increment, which is a crude indicator of the sustainability of wood supply, is expected to rise in all of these countries, but it is not expected to exceed 100 percent.

5.5 Cross-sectoral policy impacts

The historical analysis of markets and policy developments has shown how policies outside the forest sector can have a major impact on forest products markets and other developments in the sector. In the future, it is expected that environmental policies will continue to be particularly important in two areas: a greater emphasis on recycling; and development of renewable energy programmes and policies.

5.5.1 Recycling and residue use will continue to expand

In environmental terms, forest products have a distinct advantage in that they can generally be recycled relatively easily. At present, less than half of the wood and fibre used to manufacture forest products in Western Europe comes from trees (the figure for all of Europe is about 60 percent) and the remainder comes from recycled wood and fibre. This trend towards greater use of recycled material has been partly driven by market forces, but a much more pervasive force has been environmental legislation that has encouraged consumers to recycle waste and required producers to use recycled materials. A more recent development has been the imposition of stricter waste controls and landfill taxes that have further increased the incentives to recycle products.

In all future scenarios, it is projected that wood and wood products will be used in an efficient way, resulting in minimum waste and high use of recycled and recovered sources of wood and fibre. This will include wood residues and recovered paper, but it may also include the greater use of recovered solid wood products in the future. Furthermore, there may be a trend towards some exports of residues from the CIS sub-region (with many sawmills) to other countries.

By 2020, it is expected that recovered paper will account for 48 percent of the fibre used to manufacture paper and paperboard in Europe. Furthermore, about 57 percent of the paper and paperboard consumed each year will be recovered. In Western Europe, the collection and use of recovered paper will even be slightly higher than this and will be close to the maximum that is currently technically feasible. In broader terms, the importance of industrial roundwood in the total consumption of wood and fibre will fall slightly to 45 percent in Western Europe (55 percent in Europe as a whole) by 2020.

Furthermore, much of the recycled wood and fibre that can not be used as a raw material for the forest processing sector will probably be used to generate energy. This will make a further contribution to the sustainability of the European economy as whole and reduce the burden of waste disposal.

5.5.2 Renewable energy policies will increase the demand for wood

Over the next 20 years, it is considered very likely that policies will be put in place to promote the production and use of renewable energy. According to the policy analysis, it is expected that renewable energy policies will affect the FOWL area slightly, by encouraging the establishment of short-rotation forest plantations for woodfuel production. Furthermore, the promotion of renewable energy and policies to mitigate climate change are also expected to raise levels of removals, production and trade of forest products in almost all subregions. It is believed that this will occur partly because wood is a renewable energy source, but also because the manufacturing of forest products requires a relatively low level of energy use.

The analysis has not been able to explore the outlook for woodfuel in any depth, due to problems with the statistics for this forest product. However, it is expected that one of the likely consequences of renewable energy promotion could be the creation of a major new market for small-sized roundwood. This could also encourage more active forest management and possibly the reintroduction of coppicing systems, which are well suited to the rapid production of small-sized roundwood.

Concern has been expressed by existing consumers of small-sized roundwood about the effect of higher woodfuel demand on the availability and price of their raw material. Undoubtedly, an increase in demand will tend to lead to an increase in prices. However, this will benefit forest owners, many of whom are facing the lowest roundwood prices they have seen for decades. Furthermore, as shown above, in all three of the future scenarios there is a considerable “biological” margin (at least at the sub-regional level) between future roundwood demand and the potential roundwood supply. This would be increased further if special measures were used to increase the supply of small-sized roundwood for woodfuel production (e.g. short-rotation forest plantations). Thus, it is quite possible that very modest increases in demand could bring forth large increases in supply.

The creation of a dynamic woodfuel market probably will increase prices by creating competition for small-sized roundwood where before there had been little or none. Given the likelihood of these policies being introduced and the complex consequences and interactions that may occur, there is an urgent need to explore this issue further in a rigorous and transparent way, so that appropriate policies can be designed and implemented in the future.

5.6 Contribution to sustainable development

An innovation in this iteration of the outlook for Europe has been a deeper investigation of the outlook for some of the other non-market aspects of European forestry. The following section briefly reviews some of the conclusions about the contribution of the forest sector to sustainable development.

5.6.1 Europe’s expanding forest resource

The total forest area in Europe is expected to increase by around five percent between 2000 and 2020. This will occur due to a mixture of afforestation and natural processes and will occur both on former agricultural land as well as along the tree margin in mountain and boreal areas.

The increase in Western Europe is expected to be higher than the European average, due to policies in agriculture, rural development and land-use shifting slightly in favour of forestry. However, the FAWS area might decrease, due to increasing demands to set-aside forests for other functions, such as: biodiversity conservation; recreation; and protective functions.

Due to the existing age-class structure of European forests, average increment will continue to increase over the next two decades, but this increase will slow down markedly by 2020 (and may reverse thereafter). There are also studies that indicate that the productivity of European forest sites is increasing. While experts link this phenomenon to climate change or nutrient deposition, there is not yet sufficient evidence to support this hypothesis, so it has not been taken into consideration in the outlook for forest resources.

5.6.2 Fellings and annual increment in Europe

At the moment, about 60 percent of the annual increment on FOWL is harvested in Europe. Together with the future development of increment, this will cause the growing stock volume to increase significantly over the next two decades. This expected difference between fellings and increment presents a range of opportunities to increase fellings and/or set-aside forest areas for purposes other than roundwood production. In general, forest damage does not appear to be increasing at the European level, but constant vigilance will be required to ensure that potential risks to the sustainable development of forest resources are kept under control (see Box 9).

Box 9 Forest fires threaten long-term sustainable forest management in some areas

The roundwood supply potential in the CIS sub-region is much higher than in Western and Eastern Europe. Currently in the CIS sub-region, only 25 percent of annual increment is removed during felling. However, based on various literature sources, unrecorded and unregulated felling may be as much as 15 percent to 30 percent of recorded fellings in some places. This poses a threat to sustainable development in some areas and in for some tree species.

The projected increases in production of wood products in Europe can be covered by the potential roundwood supply, without threatening the sustainability of forest resources. However, increasing supply efficiently will depend on future costs and prices and the behaviour of forest owners. For example, there is tremendous scope for the utilisation of new, highly efficient harvesting technologies. In some countries the use of these technologies might increase, if the problems associated with small-scale forest ownership could be overcome (see Box 10). Further migration from rural to urban areas, as well as restitution or privatisation of forests in countries in transition, will also pose new challenges in many countries.

In all of the alternative scenarios examined in the analysis, the level of fellings required to meet derived raw material raw demands are lower than the potential roundwood supply at the European level, although the levels of felling and potential supply will become close to each other in some countries (especially in Eastern Europe). The ratio of fellings to net annual increment, which is a crude but robust indicator of the sustainability of wood supply, is currently around 45 percent for Europe as a whole. In the baseline scenario this ratio would rise by 2020 to 60 percent and in the “integration” scenario, which assumes the highest level of demand for forest products, it would rise to 70 percent.

5.6.3 Biodiversity and nature conservation

There is widespread consensus that significant areas of forest and other wooded land should be managed for the conservation of biodiversity and that other forest areas, to varying degrees, should also be managed for this objective. At the Ministerial Conference in Helsinki in 1993, the ministers for forestry committed themselves to conserving and maintaining biodiversity, including the establishment “at national or regional levels (of) a coherent ecological network of climax, primary and other special forests aimed at maintaining or re-establishing ecosystems that are representative or threatened”. However, concern has been expressed, notably by forest owners and forest industries, that these measures would constrain potential wood supply in Europe and increase the costs of silviculture to levels that are not economically viable.

The contribution of the EFSOS to this debate can only be limited, because operational decisions on conservation and the maintenance of biodiversity must be local and specific in nature (although they should also be established within in a broader framework). Forests have different biodiversity values and different financial values. For example, in many cases, forests with high biodiversity values are remote or stocked with tree species that are commercially unattractive, so the financial costs of devoting these forests to biodiversity conservation are small. However, this is not always the case. For example, it has recently been noted that the most threatened natural forest ecosystems in Europe are those on fertile land and near potential markets, precisely because these forests have high potential to generate income from the harvesting of forest products.

The smallest geographical unit examined in the EFSOS analysis is a country, so the EFSOS cannot be used to answer these detailed operational questions of whether a particular forest should or should not be managed for conservation, roundwood production or a combination of objectives. However, the EFSOS can indicate, in a very general way, what might be the possible consequences of a conservation oriented policy for the production and consumption of forest products in the future.

The conservation scenario developed in the EFSOS was used to produce projections of future forest product production and consumption, under an assumption that more emphasis would be placed on the management of forests for conservation. Unfortunately, the tools available to model forest products supply and demand are driven by projections of economic growth and forest product prices, so they are not able to account for all of the subtle developments that might occur under a scenario of more forest conservation in the future. However, the results can be used to give some indications about what might happen if more conservation were to lead to a reduction in FAWS area and roundwood fellings in the future.

Table 33 shows the projections for production of forest products in the three European sub-regions under the baseline and conservation scenarios, along with the GDP and price projections used to produce these results.

For Western Europe, the results indicate that, compared with the baseline projection for 2020, the conservation scenario would show an 11 percent decrease in industrial roundwood supply with a six percent decrease in sawnwood production, an 11 percent decrease in wood based panel and paper and paperboard production and 11 percent increase in forest product prices. The effect of a reduction in supply on sawnwood production is much less than the other products, because of the use of imported industrial roundwood for sawnwood production in Europe.

For Eastern Europe, the results are quite similar, although the effect on sawnwood production would be much greater. However, in the CIS sub-region, the conservation scenario results in much lower production of industrial roundwood (about 32 percent) and even greater falls in production of the other processed forest products (38 percent to 42 percent).

Table 33 Comparison of baseline and conservation scenarios (production in millions)

5.7 Future economic conditions in the forest sector

5.7.1 Forest products trade

Trade flows are projected to change significantly, continuing recent European trends in this area. In particular, intensified trade is expected between Western Europe and the other two sub-regions. This changing trade pattern is expected to have a significant impact on removals in Western and Eastern Europe and possibly also on production of lower value forest products, which might be relocated to Eastern Europe due to lower production costs there.

Trade, both within Europe and between Europe and the rest of the world, is expected to increase. Some countries in Western Europe will remain major world exporters, although the sub-region will remain a net importer of many forest products. The level of net imports of industrial roundwood into Western Europe is expected to remain about the same in the future, as are net exports from the CIS sub-region net. However, net exports from Eastern Europe are expected to decline. This is because production of products such as sawnwood or panels in Eastern Europe is projected to grow faster than production. of industrial roundwood

In line with historical trends, the European forest sector is also expected to face increasing competition from producers outside the region. In this respect, the main competition is likely to come from the expansion of the forest sectors in countries with extensive areas of fast-growing forest plantations (mostly in the Southern Hemisphere). On the other hand, foreign export markets will also increase dramatically in some countries (e.g. China, India and Southeast Asia). These markets will present opportunities for export growth that are likely to be exploited by some of the European countries with large forest sectors (e.g. high value-added products from Nordic countries, wood based panels from Western Europe and a broad range of forest products from the Russian Federation).

5.7.2 Economic viability of forest management

Over the last few years there has been increasing concern expressed about the economic viability of forest management in Europe. Recent downward trends in prices and the generally low harvesting intensities in much of Europe all indicate that the income from forest operations is declining at the same time that costs may be rising (e.g. upward pressure on costs may come from rising labour costs, new developments such as forest certification and requirements to pursue non-wood management objectives).

As income from the sale of wood is, in most areas, the only significant revenue for forest owners, their ability to manage their forest for all of the multiple functions expected by society is constrained. The analysis suggests that the outlook for forest products prices is stable (i.e. there is little expectation that prices will rise in the future) and the options for reducing the costs of forest management seem limited. In fact, even this may be an optimistic view of the future. The competitive conditions in the global markets for most forest products (e.g. the availability of extremely productive and cheap sources of wood fibre outside Europe) indicate that there may be downward pressure on prices in the future. Furthermore, the outlook for population and employment in the sector suggests that the real level of wages in the sector may also rise.

There are possibilities to reduce costs by increasing efficiency in the sector (e.g. following the example of the Nordic countries, which have expensive labour and raw material costs, but remain competitive through system optimisation), but these are limited. There is also the potential to develop markets for previously non-marketed goods and services (protection, water supply, some forms of recreation etc.), or to develop systems whereby the state substitutes for the market by paying the costs of supplying certain public goods. Therefore, it appears that, without appropriate policy intervention to correct the situation, the economic viability of European forest management will remain threatened.

5.7.3 Forest sector institutions will continue to evolve rapidly

Forest sector institutions and legal frameworks have adapted to changing circumstances, notably increases in the number of stakeholders and the complexity of forestry issues, financial pressures arising from reduced profitability of forest management and the need to control government expenditure, emerging new ownership patterns in the transition countries (see Box 10) and, in some countries, decentralisation of decision making.

Management of public forests has often been separated institutionally from administration of the forest law and laws have changed to allow more freedom of choice to owners. Extension campaigns have been carried out to influence forest owners’ behaviour instead of setting up legal requirements to be enforced by administrative means. National forest programmes have been drawn up in a participatory and holistic framework to achieve consensus from all stakeholders as to broad goals and frameworks.

The continuing increase in the demand for forest services, the likely developments for energy, climate change, trade and environmental policy, as well as the reduced economic viability of forest management, will continue to place a strain on forest sector institutions and policies. This will force them to adapt to ever-changing circumstances, as well as opening the decision processes to many specialists who are not conventionally trained foresters (e.g. ecologists, sociologists, communicators, etc.).

Box 10 Development of a private forestry co-operative network in Lithuania - benefits to forest owners from better market organisation

Source: Forest Owners Association of Lithuania.

5.8 Are European forests sustainable in the long term?

Ultimately the major question which EFSOS, like its predecessors, is designed to answer is: “what are the threats to the long-term sustainable development of European forests and what can be done to reduce them?” What is the required contribution of forest management to sustainable development of forest resources in Europe and how should Europe be linked to global requirements for sustainable development of forest resources?

The scenarios set out above, although focussed on the use of wood, and thus under-emphasising the non-wood aspects, do describe a number of alternative futures, all of which appear to be sustainable, at least during the next 20 years and from the perspective of roundwood supply. However, this should not lead to complacency: there are some developments that, if unchecked, could threaten sustainable forest management at the European level. These are the aspects that need to be monitored and to be the focus of concern over the forthcoming years.

A preliminary list of threats to sustainable forest management in Europe would include (sorted by the three pillars of sustainable development):

Economic pillar

• Increasing problems with economic viability of forest management, due to rising costs and stagnant prices for roundwood.

• Loss of end-use market shares to other regions’ forest products and to competing materials, through reduced competitiveness and weak marketing and product development, threatening the European forest industry and forest owners.

• Constraints on public budgets, reducing governments’ ability to counteract the problems of economic viability mentioned above.

• In CIS sub-region, the weakness of many institutions and the resulting governance problems that could prevent these countries achieving their full economic potential.

Social pillar

• The labour force may become too old, insufficiently skilled, too numerous to carry out the necessary tasks effectively and efficiently. There is a need to reduce numbers and train and recruit younger staff.

• Foresters and forest administrations lack skills for new participatory forest management: this could lead to policies and decisions that do not properly take into account some aspects of forestry development.

• Occupational safety and health of forest workers are still inadequate in many countries.

• Because of economic problems and declining forest sector employment, forests may not contribute properly to rural development.

• Need for improved forest law enforcement and governance where “illegal logging” is a serious problem, leading to erosion of state authority, loss of revenue and unfair competition.

• Inability to prevent forest fires (this threat concerns all 3 pillars).

Environmental pillar

• Network of protected and protective forests not yet complete. Remaining uncertainty about how much is and should be “protected” and in what way.

• Need to protect endangered forest types (including those in fertile, used areas).

• Need to improve protection of biodiversity in managed forests.

• Local damages from pollution, pests and game etc.

5.9 Policy recommendations

This section presents, on the responsibility of the secretariat, some recommendations for policy, based on the EFSOS analysis as well as other relevant documents, such as reports by the Timber Committee the European Forestry Commission and the MCPFE. Each conclusion indicates clearly to whom it is addressed (in brackets after the title). It is suggested that these should be discussed by all stakeholders at the European level as a follow-up action to this study.

5.9.1 Need for policies to stimulate the sound use of wood (governments, forest industries, forest owners)

Wood is an ecologically friendly and renewable raw material. Governments and EU institutions should develop a policy and legislative framework to support and promote the sound use of wood as an integral part of overall sustainable development considering long-term sustainable development of forest resources. All major forest sector stakeholders should identify and implement new financial mechanisms to support these actions.

This is particularly necessary in those countries where the “wood culture” is weak, which is the case in many countries in Eastern Europe at present (where changes to historical traditions in wooden house construction and the use of wood for energy generation could significantly contribute to this issue).

Policies and resources should be devoted to stimulating and facilitating the creation of multi-stakeholder partnerships to promote the sound use of wood. Wood procurement policies that encourage the sustainable management of forests, without creating barriers to trade, should be developed. Governments should provide information on, and promote the use of, environmentally friendly consumer products, energy supplies, and building construction products and systems derived from forest resources and encourage research into the sound and innovative use of wood (e.g. life cycle inventory and analysis) and take this information into account when formulating policy.

5.9.2 Urgent need to address threats to sustainability in south-east Europe and the CIS sub-region (governments, donors)

While there are few urgent problems threatening the sustainability of forest management in most countries of western, central and northern Europe, this is not the case in some of the countries of the Balkan region, the western CIS, the Caucasus and central Asia. Although the situation in these countries is not well understood by the international community (indeed some of them are not covered in a quantitative way in the present study, because of lack of data), it is clear that poverty, civil disturbance or war, with weak institutions, have put these countries in an unsustainable situation with excessive forest fires, increasing wood demand, notably for fuel wood, overgrazing, illegal logging leading to forest depletion, shortages of forest products, erosion and deforestation, even desertification. A special problem concerns the management of forests contaminated by radioactivity, notably, but not exclusively, as a result of the Chernobyl catastrophe.

In addition to these pressing threats to the forest, some of the countries (e.g. those with significant forest resources) are not using the potential of the forest sector to contribute to their development. Experience in the Baltic countries and others in Eastern Europe has shown to what extent the sector can contribute to economic development.

The countries themselves should give sufficient political priority to forest issues in their development programmes and the international community should help them. A first step would be to understand the issues better and bring these countries into closer contact with the international community so that feasible national forest programmes are developed and then implemented. The FAO and UNECE structures could play a major role in this effort.

5.9.3 Need to devote policy attention to the consequences of the dynamic developments in Eastern Europe and the CIS sub-region (governments)

The likely developments outlined above for Eastern Europe and the CIS sub-region will have a significant impact on forest products trade and production in Western Europe and Asian markets. The depth and duration of these developments will depend on the level of investment in the forest sector. Further policy analysis is needed of the consequences of these trends, and the dialogue between East and West should be intensified in order to assist with the sustainable development of the forest sector and to avoid any undesirable outcomes. Governments and other stakeholders in Eastern Europe and the CIS sub-region need be adequately involved in the international and global policy dialogue. Mutual economic opportunities and challenges should be analysed more consistently, in order to provide a basis for reliable strategic decision making.

5.9.4 Improve the economic viability of forest management in Europe (governments, forest industries, research community)

The EFSOS analysis confirms the perception that there is a significant structural threat to the economic viability of forest management, arising from falling revenues from wood sales, constantly rising management costs and the inability to transform the multiple services and non-wood goods provided by the forest into secure revenue streams. This is now widely recognised and at the Vienna Ministerial conference the ministers committed to implement a series of measures, including to:

• support sound enabling conditions for sustainable forest management that encourage investment and economic activity in the forest sector;

• promote the use of wood from sustainably managed forests;

• work towards common approaches to the practical application of the valuation of the full range of goods and services provided by forests;

• enhance the competitiveness of the forest sector by promoting innovation and entrepreneurship among all relevant stakeholders;

• support research as well as mechanisms for the dissemination of generated knowledge, enhance the quality of education, training, extension and skills;

• strengthen the support of institutions concerned with workforce safety and education as well as related research;

• enhance inter-sectoral co-ordination and collaboration, promote the incorporation of sustainable forest management into rural development policies and strategies;

• promote the use of innovative economic instruments for achieving forest related goals and targets, encourage the voluntary co-operation of forest owners in particular of small-scale forest holdings; and

• promote the development of and encourage the participation in associations of forest owners, of the forest workforce and of forest entrepreneurs, in particular in central and eastern European countries.

Governments should attach sufficient political priority to implementing the commitments made in Vienna.

5.9.5 Balanced implementation of wood energy policies (governments)

Given the likely policies to promote renewable energies and the desirability of developing new markets for roundwood, governments should promote wood energy production and use notably by acting to raise prices for fossil energies, considering a broader context of overall sustainable development. Governments should fund research and development into wood energies and create the necessary infrastructure for a modern and competitive wood energy sector (technical and economic measures, such as standards, transparent market information, standard contracts, demonstration plants).

In these circumstances, pulpwood using industries and their suppliers would probably see an increase in their raw material costs, but would also have a major commercial opportunity, to transform themselves into wood energy suppliers (in addition to their traditional activities). These policies should be developed through widespread consultation of all stakeholders to maximise wood energy’s contribution to the energy economy while minimising damage to existing industries or biodiversity (e.g. through energy plantations). Energy issues should be given high importance in developing forest sector strategies and policies and the possible interactions examined in depth.

5.9.6 Forestry, wood and climate change (governments, research institutions)

Given the complexities of the climate change policy debate, and the potential for significant change in the sector, forest sector institutions should be proactive in analysing the consequences of climate change policy decisions for the sector, and urgently take measures to reconcile provisions of climate and energy policies, strategies and commitments with national forest programmes and other forest sector planning documents. These should cover not only the Kyoto Protocol provisions for land use land use change and forestry and the possibility for offsetting carbon emissions by measures in this field, but also the role of wood products as a carbon store as well as the possibility for mitigating consequences for European forest ecosystems of climate change, such as higher average temperatures, less precipitation, more “extreme events” (e.g. storms, floods) as forecast by global climate change models.

5.9.7 Forest law enforcement and governance (governments, all stakeholders)

Bad law enforcement and governance pose a threat to forests. It has a negative impact on economic development, as taxes are not provided to the public budgets. Governments should work together, first to ensure that domestic forest law enforcement and governance are at an acceptable level, and then to help other countries, inside and outside the region, to improve the situation in this respect. Another goal here is not to lose competitiveness on environmentally oriented wood markets. It should be stressed that sustainable forest management in all countries is threatened by bad governance in a few, because of the damage done to the image of wood and forest products (which may be only partially corrected by certification measures), as well as the downward pressure on prices and reduced economic viability resulting from competition from illegally logged timber and its products, on markets all over the world.

5.9.8 Institutional change in countries in transition (governments, international institutions)

There have been profound and rapid changes in the forest sector institutions of many of the advanced reform countries in Eastern Europe, which have left them much better equipped than in the past to face the challenges of the future. Examples of the areas where there have been profound changes are: restitution and privatisation of forests; help to new private forest owners; and effective law enforcement. Yet many countries are only just starting on the complex processes, and could benefit from the experience accumulated up to now. There is also considerable interest in monitoring progress in these policy and institutional developments, as witnessed by the participation in the FAO-UNECE team of specialists working in this area. A network focused on transition issues might be created to exchange opinion and experience on forest sector institutions in Europe and monitor changes, possibly based on previous FAO-UNECE work.

5.9.9 Monitoring environmental and social benefits from forests and forestry (governments, international organisations, research institutions)

Although the importance of environmental and social benefits of the forest in Europe is widely recognised, there are still rather few reliable quantitative and policy relevant data available to policy makers. The situation in this respect has improved notably over recent years, especially since the putting in place of criteria and indicators of sustainable forest management at the national and international levels, but is still not satisfactory.

If trends are to be monitored and the correct decisions taken, there is a need for a continuing monitoring network for these aspects, of comparable quality to that for wood and forest products, integrated with that for other related sectors, and preferably generating internationally comparable information, all at an acceptable cost.

Many organisations are working on these issues, but there is a need for political will and resources, over an adequate period, to provide a satisfactory instrument for well informed policy discussions, and for careful coordination of efforts and good communication between all actors. An intermediate goal in the field of monitoring should be improved reporting to the Warsaw Ministerial Conference in 2007, compared to the report to the Vienna Conference in 2003, itself a significant improvement on earlier reports.

5.9.10 Necessity of a cross-sectoral approach (governments, all stakeholders)

Forest sector stakeholders should intensify the policy dialogue, proactively drawing the attention of other policy areas such as agriculture, trade, environment and energy to the social and environmental benefits of sustainable forest management, as one component of the overall sustainable development of society. The Timber Committee, the European Forestry Commission, MCPFE and other national and international forest sector policy bodies, active in the region, can facilitate this dialogue substantially. The goal is to strengthen the position of the forest sector on the national and international policy scene and to increase its policy weight and influence.

The policy dialogue between the forest sector and other parts of society should be strengthened by organising various forums (e.g. “Round tables”) with representatives of all stakeholder groups, whose impact is related to the development of the European forest sector. The UNECE, with its unique sectoral structure, is an appropriate forum for this work, provided that the cooperation of the other UNECE Principal Subsidiary Bodies can be obtained and the necessary resources are made available.

If there is to be a rational discussion of policy issues affecting forests, institutions, inside and outside the forest sector, must be modified so that the cross sectoral approach is incorporated from the beginning, and that the results are transmitted to other policy processes. There has been considerable progress in this direction, noted by the Vienna resolution, but much remains to be done as regards concrete measures, such as institutional adaptations, and change in the mentalities of policy makers and the experts who advise them.

5.9.11 Need to control forest fires, and to intensify international cooperation in this area (governments, forest owners)

The highest political authorities of southern Europe and the Russian Federation should attach sufficient priority to controlling forest fires and to creating the necessary mechanisms and institutions, with sufficient resources, to achieve the desired goals.

There is a deep reservoir of knowledge and experience that can be accessed through international co-operation (e.g. FAO, UNECE, Global Fire Monitoring Centre and others), as well as the potential to share expensive resources (water bombers, highly trained fire crews) between countries. Thus, national strategies for forest fire control should also address international co-operation.

5.9.12 Employment and the work force (governments, employers, unions)

The continued decline in employment in the sector will further reduce the visibility of the sector and partly its direct benefits to society. Rural livelihoods will be most affected as the losses are concentrated in forestry and in small firms in the other sub-sectors. If the forest industry is to make a contribution to rural development in Europe, growth patterns need to be reviewed and altered. Small enterprise development, including of forestry contractors, pursuing a strategy of quality and higher value added in addition to the provision and marketing of non-traditional goods and services will be important elements of any strategy to mitigate the withdrawal of the forest sector from rural areas and the continued shift to capital intensive modes of production. Key players in the forest sector (in particular from Nordic countries) are acting more and more globally, shifting capacities toward eastern Europe because of lower production costs and expected increases in the demand of forest products. This process depends on further stabilization in the policy framework as well as on the economic growth in these countries. This will have an additional impact on employment in the traditional producer countries.

In spite of the decline in employment volumes, the sector is likely to be faced with difficulties in finding adequate employees with relevant qualifications in the future, not least because of demographic trends in Europe. These shortages may only concern the inability to attract new entrants with good qualifications and potential, or could translate into absolute shortages. In some major producer countries, these are expected to limit the potential for growth in output. This issue would appear to merit closer scrutiny at the national and local level. Improvements in employment quality such as wages, training and career prospects, as well as working environment and safety, will be critical to maintain adequate levels of new workers, in particular women.

5.9.13 Developing the region’s comparative advantages (forest industries, governments)

In the increasingly competitive global markets, often dominated by extremely efficient low cost, large scale producers, the European industry and its raw material suppliers, the forest owners of Europe, have been put on the defensive in many areas, partly through a high cost structure and partly through inflexibility and inability to take the radical measures necessary to maintain and improve a competitive edge. There is a need to identify, region by region, what are Europe’s areas of comparative advantage and disadvantage in the forest/timber field, and how they should be developed. Examples of advantages are good infrastructure and closeness to markets, high quality of products and processes, access to capital, ability to optimise processes to reduce costs, good skills in design and marketing. Examples of disadvantages are high costs, slow economic growth, relatively unfavourable growing conditions, inflexibility of wood supply and institutions. Companies should develop their own competitive strategies, but it is almost inevitable that governments should be involved, given the long term nature of the decisions and the fact that many millions of hectares of forest are owned and/or managed by public agencies.

5.9.14 The European forest sector in the global context (all stakeholders)

In a period of general globalisation of companies, NGOs, economic, social and environmental agreements and processes, one of the principal questions is: How can forest policy making - still focused at the national level - respond to the changing global environment? European forest sector stakeholders should strengthen their efforts on an international level. The European experiences in sustainable forest management needs to be promoted more actively on a global level (e.g. in discussions and activities concerning certification of forests and forest products).