Pertinence of Public Financial Support for Forestry Activities

Jean-Pierre Dansereau 1


Many unsustainable forestry practices are explained by the difference between private and public interests. Economic issues play a very major role in this difference. For private owners, giving up timber harvesting is not an attractive option, given the lack of markets for forestry's other roles and functions. The challenge of sustainable forest development is to ensure that the next harvest is financially more attractive than the previous one. Whilst we could use regulation and the markets to ensure that sustainable practices are adopted, we are aware of the limits of these two approaches. Public financial support is another pertinent avenue, best illustrated by comparing the private forest programmes of two Canadian provinces. To conclude, a parallel is drawn with the situation in countries which depend on their forest assets for their development. Given the absence of markets for the environmentally-friendly services they are asked to provide, the opportunity costs seem too high for these countries. As there is no supranational authority able to provide trade-offs, it is suggested that an international protocol on the maintenance and integrity of the wolrd's forests be drawn up. This should provide economic benefits for the individuals and communities whose livelihoods depend on forestry resource production.


Human activities can jeopardise the integrity of forest ecosystems and compromise present and future users' ability to enjoy the use of those systems. Ways must therefore be found to resolve usage disputes and to promote the adoption of sustainable forestry practices. Public financial support must be one of these tools. This will be shown by examining certain facts about privately-owned Canadian forests and reviewing forest resource use in developing countries.

Difference between private and public interests

Many unsustainable forestry practices are explained by the difference between private and public interests. Private interests, i.e. those of individuals or small groups of individuals often focus on short-term returns, whereas public interests cover longer timeframes and a wider range of benefits. Environmental concerns are increasingly dominant, as is the concept of sustainability. Economic viability, and current private uses and interests conflict with the need for resource protection and the multiplicity of uses and interests of future generations.

This difference between private and public interests is easily determined when one examines the situation of Canada's privately-owned forests. Most are family-owned and are small in size - 45 ha on average (Rotherham 2003). Respect for ownership rights and their relative importance - they account for only 11% of Canada's productive forests - have long shielded them from the public interest. However, this is no longer the case. These forests are increasingly considered as a public asset and the communities do not hesitate to involve themselves in their management, which is a source of great irritation for their owners.

The economic interests at stake

Economic issues play a particularly determining role in the difference between public and private interests. Whilst financial interests and markets are not the be-all and end-all, they greatly influence the practices adopted by most individuals and companies. Markets exist when it is possible to provide tangible goods and services to consumers who are prepared to pay for them. Traditional forest products, lumber and pulp wood, are still highly sought-after goods for which there are highly developed markets. In Canada and in many parts of the world, these markets are characterised by prices that continue to reflect an unlimited supply of wood from forests that have existed from time immemorial. These prices do not take sufficient account of environmental concerns, especially when these require that timber harvesting in some forests should not take place. In the case of private interests, to delay or forego the harvesting of timber is not an economically attractive option, as there are no markets for the forests' other roles and functions (Rice et al. 2001). As long as it is more profitable to harvest the timber quickly and to reinvest the profits elsewhere than in the forest, can a forest owner, entrepreneur or enterprise be expected to do otherwise?

In pursuit of convergence

The difference between private and public interests is not new. Neither is the will to put an end to it. Government authorities' first reaction is to resort to regulation and to place obligations and constraints on private activities. If it is to work, regulation needs to be accompanied by an efficient monitoring system, which is costly to run and to make effective. Whilst it is doubtful that regulation is really effective (Tollefson et al. 1998), the fairness of its application is also questionable, especially when it is applied to private lands (White 2002). Consideration could be given to private owners bearing the costs incurred in responding to public requirements. This would be the contrary of private owners' current practice which usually targets profits.

Rather than taking a regulatory approach, one could try to narrow the difference by using a market approach (Tollefson et al. 1998). This would involve incorporating all the costs of sustainable practices into the sale transactions or into schemes for capitalising on non-market roles and functions. Incorporating the costs of sustainable practices into the price of processed products has been shown to be particularly difficult, especially in a global market context. The share of the income that the resource producers manage to secure, be they private forest owners, forest entrepreneurs or timber exporting countries, is usually small, and is what remains after all the other players in the production chain have been paid for their work and their capital. In their struggle for a fairer share of the income, the resource producers have to confront powerful economic players (Harrison et al. 2002), who control the markets and have greater de facto legitimacy. After all, who would have the temerity to suggest that the processing companies' shareholders should reimburse small private forest owners their mangement costs?

As for creating markets for currently unmarketable functions and uses, the forest owners are facing tough opposition, i.e. the entire population, which has considerable influence on policy development and implementation. Rather than speak about the power of the markets, it would be better to speak about population power and about disputes between rural and urban populations. Since the latter are by far the most dominant, they can denounce practices that do not reflect their expectations. By ensuring that these practices are associated with pollution, it would then be possible to invoke the "polluter pays" principle and to charge the costs to the individuals (OECD, 1994). For urban dwellers, this option would more attractive than creating markets based on the "beneficiary pays" principle.

Sustainability: a major challenge

Increased income from the sale of forest goods and services, whether a result of the creation of new markets or otherwise, would not be a guarantee of sustainable production. Increased prices and profits are more likely to increase harvesting and the destruction of forest stands than to generate investment in future production. The whole challenge of sustainable forest management is how to make the next harvest more financially profitable than the previous one (Rice et al. 2001). One might even think that if future generations had the opportunity to participate in today's markets, they would know how to guarantee future harvests for themselves. However, since there is no one here to present their view, our decisions today to help bring about a profitable harvest in the future is but a utopian dream.

If we can pinpoint the various problems hidden within this challenge, it then becomes possible to devise pertinent solutions. At the risk of simplifying matters, we suggest the following:

This breakdown of precise problems makes it easier to identify the practices that should be used. It is up to each society to decide how to ensure that such practices will be adopted. However, we are convinced that incentives and public financial support are matters that must be addressed. The greater the public demands and the more global the market, the more difficult it will be to obtain from those markets the resources needed to cover those demands.

Incentives and support measures

Financial support measures are seen by many as market distortions. But are they not, in fact, countervailing measures to bolster failing markets? They are certainly ways of sharing forest income equally between the players in the chain of resource utilisation. They may also replace markets that are unable to emerge and help to solve the many disputes surrounding forest use and interests: disputes between the rural and urban people; disputes between rich societies and societies that wish to become rich; disputes about the interests of present-day populations and future populations. Financial support measures can also play a role in risk sharing in the event of natural disasters.

We do not wish to give an exhaustive description here of the various incentives and financial support measures that may be used. Nevertheless, it would be interesting to identify two major categories of measures. On the one hand, measures designed to create an environment promoting sustainable forest management. This category would include education programmes, aimed at raising awareness, and knowledge transfer programmes, aimed at developing knowledge and skills, thereby encouraging individuals to adopt the required practices. These changes could be facilitated by the establishment of a good tax environment (National Round Table on the Environment and the Economy, 2002) especially for private forests. An appropriate tax system should take account of a long timeframe for forest production and seek to make attractive investment in reforestation and sustainable forest management. The second category would cover direct financial support measures: the sharing of expenditure for forest rehabilitation and maintenance, support programmes in the event of natural disasters and financial support to ensure that forests are left to further mature beyond their first economic potential.

Incentives and support measures alone cannot promote sustainable development. They must also be accompanied by a minimum of regulation. Although there are numerous examples of laws and regulations the world over, more efforts need to focus on finding a suitable arrangement for private property. Whilst this usually involves market mechanisms, for private forest owners this would mean constraints rather like regulation. The forest owners would depend on decisions taken by industrialists, who would impose their own choice of certification procedure, and forest owners would have to adhere to it. As it is hardly likely that timber producers would receive a premium for certified timber, certification would be simply a means to ensure that public objectives were met, even if it had the advantage of being voluntary.

Canadian examples

Quebec has forests covering about 74 million hectares, 11% of which is under private ownership. Ontario has forests covering about 51 million hectares, also with 11% under private ownership (Canadian Council of Forest Ministers 2003). Figure 1 shows that from 1990 to 2000, the rate of reforestation on public land in the two provinces was of a similar order of magnitude. During that period, the annual average rate of planting in Quebec was 122million trees. In Ontario, it was 94 million.

Figure 1. Rates of reforestation on public lands, Quebec and Ontario provinces

Source: National database for forests, Canadian Council of Forest Ministers .

Figure 2 provides data on reforestation on privately owned land in Quebec and Ontario provinces over the same period. It shows that the reforestation rate is much higher in Quebec than in Ontario, with annual averages of 48 million and 4 million trees planted respectively. It also shows that since the mid-nineties, reforestation in privately owned forests is no longer monitored by the Ontario authorities. Indeed, in 1993, this province put an end to the Woodlands Improvement Act, under which a direct reforestation support programme was funded (Ontario Ministry of Natural Resources, 2001). With funding since then coming from private initiatives alone, it is no surprise that reforestation has declined.

Figure 2. Reforestation on privately owned lands, Quebec and Ontario provinces

Source: National database for forests, Canadian Council of Forest Ministers.

These data show the different political choices in the two provinces: Quebec, on the one hand, actively supports private forest owners by providing a financial and technical support programme, a land tax reimbursement mechanism and a loan guarantee programme for the purchase of land and equipment. This provincial government also provides plants free of charge for reforestation and runs protection services to deal with insects and disease. For its part, the Ontario govenment has never provided such well organised support to private forest owners, and its support is currently limited to a land tax reduction programme.

All the forestry activity generated by this support, which is not restricted to reforestation, has helped to create thousands of jobs in the forest, often in regions with few job opportunities. The harvested timber has also helped to promote processing activities and has created significant economic benefits for the local communities. An economic analysis (Quebec Ministry of Natural Resources, 1994) showed that timber harvested from privately owned forests in 1992 in Quebec province generated income for the producers amounting to 125 million $CA, wages and salaries for other forestry activities amounted to 127 million $CA, 333 million $CA were generated in factories and 244 million $CA elsewhere in the economy. Whilst producers' income was of the order of $18/m3 solid measure, the tax collected by the provincial governments exceeded $40/ m3 solid measure. A more recent economic analysis (Bouthillier, 2000) showed that in Quebec, private forestry activities supported by public investments rapidly generated tax for the government amounting to or exceeding the amounts invested. Public financial support is therefore a geniune investment there.

The parallel between private forests and international forestry

The arguments presented above can easily be applied to all the countries we would like to see playing a more significant role in forest ecosystem protection, often to the detriment of economic activities. One wonders what right we have to make them accept all the costs of measures that will benefit other countries which have themselves used and reduced their forest resources.

Many concepts exist to help create markets for these environmentally-friendly values. We have already said that we do not believe in the effectiveness of certification as, contrary to expectations, most markets do not provide premiums for the changes in practices that are being demanded. The establishment of a carbon exchange is another initiative which could involve payment for environmentally-friendly services. However, the method of calculating the forests' role in national carbon accounts, plus the questions which remain as to the pertinence of the principle of converting the right to pollute into cash, allow uncertainty to persist over the durability of this scheme. Perhaps we should develop the principle of an index of forest assets, as suggested by the World Commission on Forests and Sustainble Development (1999). If such an index came into general use and made it possible to calculate national contributions to the planet's welfare, we could then begin to think about ways of compensating those countries making positive contributions.


The situation of private forest owners and developing countries with forest resources are similar in many ways. It is in the interest of neither to postpone using forest resources for which there is strong demand and which provide an opportunity for enrichment. It is difficult to force either party to adopt practices that are contrary to their economic interests, either because there are no legal instruments to allow us to do so, or because the legitimacy of such constraints can be easily challenged.

For want of clients, we do not have markets that are able to pay for enironmentally-friendly services or for future harvests (Anderson et al. 2003). If an enlightened government could change the current situation and make funds available to private forest owners through financial support programmes, what kind of supranational authority could we devise to do likewise to encourage countries with forests to give up their real national development potential in order to comply with the wishes of people outwith their territory? Under an international agreement like the Kyoto Protocol, the international community was able to agree on the need to reduce greenhouse gas emissions. Agreement has also been reached on new market approaches, but these, however, mainly benefit the enterprises. It would be worthwhile to exercise the same creativity to ensure the maintenance and integrity of the world's forests. However, care must be taken to ensure that the individuals and communities whose livelihoods depend on forest resource production are able to enjoy the economic advantages which must be linked to the objectives of use diversification and natural resource conservation.


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1 Forest Engineer, Director General, Quebec Wood Producers Federation, 555 boul. Roland-Therrien, Longueuil, Québec, J4H 3Y9 Canada. [email protected]