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The forestry industry provides a good illustration of the active roles that industry associations, environmental nongovernmental organizations (NGOs), national governments, and international organizations can play in developing and promoting codes of conduct that are formally sanctioned and certified. It also reflects some of the challenges of disseminating codes of conduct in developing countries and ensuring market benefits from certification. We describe the emergence of forest certification standards, outline current certification schemes, and discuss the role of major corporations in creating demand for certified products. We also discuss the limited success of certification and some of the obstacles to its adoption in developing countries. The current diversity of forest certification programs and ecolabeling schemes has created a costly, less-than-transparent system that has been largely ineffective in terms of the initial goals of reducing tropical deforestation and illegal logging. Some steps have been taken toward harmonization of different certification criteria as well as endorsement and mutual recognition among existing forest certification programs. However, it is unlikely that standardization alone can overcome other, more serious barriers to certification in developing countries.

Governments often use fiscal, exchange rate, monetary policy as well as export promotion tax increases, privatization, and land reform as part of comprehensive adjustments packages for addressing economic imbalances, balance of payments, and structural weaknesses. Such approaches, however, have come under heavy criticism for failing to recognize the social and environmental costs associated with them. Critics have argued that economic growth, trade liberalization, and increased primary product exports increase pressure on many sectors, including the agricultural and forestry land use sectors. This paper examines a number of these types of external shocks. This paper makes two arguments. First, from a theoretical economic perspective, although in many cases structural adjustment programs can be expected to affect the domestic forest sector, in other cases they will not. Second, even when there is an impact on the forest, it need not be detrimental to environmental and ecosystem values. A sustainable forest system needs to provide wood, local environmental products and services, and global ecological services, but individual forests can specialize in some of these.

This paper examines the competitiveness of the US timber industry under different exchange rate policies using a dynamic optimization model of global timber markets. We assume that exchange rates affect the cost structure of harvesting and managing forests and simulate the model for baseline conditions and four additional exchange rate policies. Two policies consider a strengthening United States dollar scenario and two policies examine weak South American currencies. Recently South America has increased its share of global timber production and is shipping increasing quantities of timber to the Unites States. The results indicate that US competitiveness in the forestry sector is sensitive both to strong US $ policies and to the weak currency policies pursued by South American governments. A 20% increase in value of the US $ compared to all other currencies can reduce harvests by 4 7% in the United States over the next 50 years, while a similar reduction in currency values in South America can reduce U.S. production by around 0.4%. In dollar terms, each additional cubic meter of wood produced in South America due to currency policies can reduce producer surplus in the United States by $100.

The responsibility for protecting U.S. agriculture from pests and diseases is assigned by the Federal Plant Pest Act (FPPA) to the Animal and Plant Health Inspection Service (APHIS) of the Department of Agriculture. The Plant Protection Act (Title 7 U.S.C. Sections 7701 et seq.) gives Aphis statutory authority over genetically modified organisms (GMO), in effect assigning to APHIS a related responsibility of determining whether a genetically altered plant, crop, or tree is likely to pose unacceptable risks to the environment. Although APHIS has considerable experience with crop plants, it has only limited experience with trees. Yet the possible benefits of applying genetic engineering to trees are substantial and include industrial wood production and environmental uses, such as toxic remediation and species restoration. This report focuses on the Plant Protection Act (PPA) and related regulations as they have been applied to timber transgenic trees.

The responsibility for protecting U.S. agriculture from pests and diseases is assigned by the Federal Plant Pest Act (FPPA) to the Animal and Plant Health Inspection Service (APHIS) of the Department of Agriculture. The Plant Protection Act (Title 7 U.S.C. Sections 7701 et seq.) gives Aphis statutory authority over genetically modified organisms (GMO), in effect assigning to APHIS a related responsibility of determining whether a genetically altered plant, crop, or tree is likely to pose unacceptable risks to the environment. Although APHIS has considerable experience with crop plants, it has only limited experience with trees. Yet the possible benefits of applying genetic engineering to trees are substantial and include industrial wood production and environmental uses, such as toxic remediation and species restoration. This report focuses on the Plant Protection Act (PPA) and related regulations as they have been applied to timber transgenic trees.

This report compares the approaches of the governments of Japan, Canada, and the European Union member countries toward using carbon sinks to meet their respective Kyoto Protocol carbon reduction targets. Various policies have been proposed by which governments can sequester carbon by promoting afforestation and reforestation, slowing deforestation, and undertaking forest management activities under Articles 3.3 and 3.4. At this time, carbon emissions reduction programs are still under development, both within individual countries and within the context of the protocol. Although some of the details have been worked out, concrete definitions are often still lacking, especially as regards impermanence of forests, additionality, leakage, and socioeconomic and environmental impacts. Japan appears most likely to rely most heavily on forest and biological sinks to meet its Kyoto targets. For Canada, sinks are likely to play a rather modest role. For the EU, the role of sinks is likely to be even smaller, with sinks playing no role for some EU countries (including Sweden, our case study country). However, the final decisions have not yet been made for any of these countries, and the actual role of sinks remains to be determined.

This report compares the approaches of the governments of Japan, Canada, and the European Union member countries toward using carbon sinks to meet their respective Kyoto Protocol carbon reduction targets. Various policies have been proposed by which governments can sequester carbon by promoting afforestation and reforestation, slowing deforestation, and undertaking forest management activities under Articles 3.3 and 3.4. At this time, carbon emissions reduction programs are still under development, both within individual countries and within the context of the protocol. Although some of the details have been worked out, concrete definitions are often still lacking, especially as regards impermanence of forests, additionality, leakage, and socioeconomic and environmental impacts. Japan appears most likely to rely most heavily on forest and biological sinks to meet its Kyoto targets. For Canada, sinks are likely to play a rather modest role. For the EU, the role of sinks is likely to be even smaller, with sinks playing no role for some EU countries (including Sweden, our case study country). However, the final decisions have not yet been made for any of these countries, and the actual role of sinks remains to be determined.

Over the past 30 years, industrial plantation forests have become a major supplier of industrial wood. There are several reasons for this, including the improved economics of planted forests due to biotechnological innovations, the increases in natural forest wood costs due to increasing inaccessibility, and rising wood costs from natural forests due to new environmental restrictions related to logging. Forestry today is on the threshold of the widespread introduction of biotechnology into its operational practices. In many cases, the biotechnology likely to be introduced is simply an extension of that being utilized in agriculture, such as herbicide-tolerant genes. However, biotechnology in forestry also is developing applications unique to forestry, including genes for fiber modification, lignin reduction and extraction, and for the promotion of straight stems and reduced branching.

A major problem being faced by human society is that the global temperature is believed to be rising due to human activity that releases carbon dioxide to the atmosphere, i.e., global warming. The major culprit is thought to be fossil fuel burning, which is releasing increasing amounts of carbon dioxide in the atmosphere. The problem of increasing atmospheric carbon dioxide can be addressed a number of ways. One of these is forestry and forest management. This paper examines a number of current issues related to mitigating the global warming problem through forestry. First, the overall carbon cycle is described, and the potential impact of forests on the buildup of atmospheric carbon is examined. A major focus is the means by which forests and forest management can contribute to the sequestration of carbon. The potential role of forests and forestry in sequestrating carbon to reduce the buildup of greenhouse gases in the atmosphere is now well recognized. A number of alternative approaches to utilizing forestry and forest management for carbon sequestration are examined. These include forest protection; the management of forests for carbon for joint products, i.e., the management of forests to generate both carbon and timber as products; the establishment of plantation forests dedicated to carbon sequestration; and increased production of wood products. Replacing other materials with wood will sequester carbon while reducing energy requirements, thereby reducing carbon emissions. Studies examining the costs of carbon sequestration using forestry are also discussed. The recent Kyoto Protocol (K.P.) explicitly recognizes certain forestry activities as “certifiable” for sequestration credits. But some definitions and aspects of carbon sequestration through forestry were left incomplete or inadequately defined by the Protocol. Furthermore, the KP has changed due to the recent withdrawal of the US for the Protocol (although not from the Kyoto Process). Nevertheless, further clarification is necessary to understand the full potential and set of opportunities from forestry both within the framework of the Protocol and more generally. Alternative types of vehicles for sequestration credits are discussed below,m both within and outside the context of the KP , and their advantages and disadvantages in terms of periods covered and liability are also examined. Finally, some ongoing real-world activities utilizing forestry specifically to sequester carbon are discussed.

An RFF Workshop brought together experts from around the world to assess the feasibility of using biological sinks to sequester carbon as part of a global atmospheric mitigation effort. The chapters of this proceeding are a result of that effort. Although the intent of the workshop was not to generate a consensus, a number of studies suggest that sinks could be a relatively inexpensive and effective carbon management tool. The chapters cover a variety of aspects and topics related to the monitoring and measurement of carbon in biological systems. They tend to support the view the carbon sequestration using biological systems is technically feasible with relatively good precision and at relatively low cost. Thus carbon sinks can be operational.

This study develops cumulative carbon “supply curves” for global forests utilizing an dynamic timber supply model for sequestration of forest carbon. Because the period of concern is the next century, and particular time points within that century, the curves are not traditional Marshallian supply curves or steady-state supply curves. Rather, the focus is on cumulative carbon cost curves (quasi-supply curves) at various points in time over the next 100 years. The research estimates a number of long-term, cumulative, carbon quasi-supply curves under different price scenarios and for different time periods. The curves trace out the relationship between an intertemporal price path for carbon, as given by carbon shadow prices, and the cumulative carbon sequestered from the initiation of the shadow prices, set at 2000, to a selected future year (2010, 2050, 2100). The timber supply model demonstrates that cumulative carbon quasi-supply curves that can be generated through forestry significantly depend on initial carbon prices and expectations regarding the time profile of future carbon prices. Furthermore, long-run quasi-supply curves generated from a constant price will have somewhat different characteristics from quasi-supply curves generated with an expectation of rising carbon prices through time. The “least-cost” curves vary the time periods under consideration and the time profile of carbon prices. The quasi-supply curves suggest that a policy of gradually increasing carbon prices will generate the least costly supply curves in the shorter periods of a decade or so. Over longer periods of time, however, such as 50 or 100 years, these advantages appear to dissipate.

An RFF Workshop brought together experts from around the world to assess the feasibility of using biological sinks to sequester carbon as part of a global atmospheric mitigation effort. The chapters of this proceeding are a result of that effort. Although the intent of the workshop was not to generate a consensus, a number of studies suggest that sinks could be a relatively inexpensive and effective carbon management tool. The chapters cover a variety of aspects and topics related to the monitoring and measurement of carbon in biological systems. They tend to support the view the carbon sequestration using biological systems is technically feasible with relatively good precision and at relatively low cost. Thus carbon sinks can be operational.

Over the past 30 years, industrial plantation forests have become a major supplier of industrial wood. There are several reasons for this, including the improved economics of planted forests due to biotechnological innovations, the increases in natural forest wood costs due to increasing inaccessibility, and rising wood costs from natural forests due to new environmental restrictions related to logging. Forestry today is on the threshold of the widespread introduction of biotechnology into its operational practices. In many cases, the biotechnology likely to be introduced is simply an extension of that being utilized in agriculture, such as herbicide-tolerant genes. However, biotechnology in forestry also is developing applications unique to forestry, including genes for fiber modification, lignin reduction and extraction, and for the promotion of straight stems and reduced branching.

A major problem being faced by human society is that the global temperature is believed to be rising due to human activity that releases carbon dioxide to the atmosphere; i.e., global warming. The major culprit is thought to be fossil fuel burning, which is releasing increasing amounts of carbon dioxide in the atmosphere. The problem of increasing atmospheric carbon dioxide can be addressed a number of ways. One of these is forestry and forest management. This paper examines a number of current issues related to mitigating the global warming problem through forestry. First, the overall carbon cycle is described, and the potential impact of forests on the buildup of atmospheric carbon is examined. A major focus is the means by which forests and forest management can contribute to the sequestration of carbon. The potential role of forests and forestry in sequestrating carbon to reduce the buildup of greenhouse gases in the atmosphere is now well recognized. A number of alternative approaches to utilizing forestry and forest management for carbon sequestration are examined. These include forest protection; the management of forests for carbon for joint products, i.e., the management of forests to generate both carbon and timber as products; the establishment of plantation forests dedicated to carbon sequestration; and increased production of wood products. Replacing other materials with wood will sequester carbon while reducing energy requirements, thereby reducing carbon emissions. Studies examining the costs of carbon sequestration using forestry are also discussed. The recent Kyoto Protocol (K.P.) explicitly recognizes certain forestry activities as "certifiable" for sequestration credits. But some definitions and aspects of carbon sequestration through forestry were left incomplete or inadequately defined by the Protocol. Furthermore, the KP has changed due to the recent withdrawal of the US for the Protocol (although not from the Kyoto Process). Nevertheless, further clarification is necessary to understand the full potential and set of opportunities from forestry both within the framework of the Protocol and more generally. Alternative types of vehicles for sequestration credits are discussed below,m both within and outside the context of the KP , and their advantages and disadvantages in terms of periods covered and liability are also examined. Finally, some ongoing real-world activities utilizing forestry specifically to sequester carbon are discussed.

This study develops cumulative carbon 'supply curves' for global forests utilizing an dynamic timber supply model for sequestration of forest carbon. Because the period of concern is the next century, and particular time points within that century, the curves are not traditional Marshallian supply curves or steady-state supply curves. Rather, the focus is on cumulative carbon cost curves (quasi-supply curves) at various points in time over the next 100 years. The research estimates a number of long-term, cumulative, carbon quasi-supply curves under different price scenarios and for different time periods. The curves trace out the relationship between an intertemporal price path for carbon, as given by carbon shadow prices, and the cumulative carbon sequestered from the initiation of the shadow prices, set at 2000, to a selected future year (2010, 2050, 2100). The timber supply model demonstrates that cumulative carbon quasi-supply curves that can be generated through forestry significantly depend on initial carbon prices and expectations regarding the time profile of future carbon prices. Furthermore, long-run quasisupply curves generated from a constant price will have somewhat different characteristics from quasisupply curves generated with an expectation of rising carbon prices through time. The 'least-cost' curves vary the time periods under consideration and the time profile of carbon prices. The quasi-supply curves suggest that a policy of gradually increasing carbon prices will generate the least costly supply curves in the shorter periods of a decade or so. Over longer periods of time, however, such as 50 or 100 years, these advantages appear to dissipate.

Forestry has been considered to have potential in reducing the atmospheric concentration of carbon dioxide by sequestrating carbon in above-ground timber and below-ground roots and soil. This potential has been noted in the Kyoto Protocol, which identified specific forestry activities for which carbon sequestration credits could be obtained. To date, a few forestry efforts have been undertaken for carbon purposes, but most of these efforts have been on a small scale. Proposals have been under discussion, however, that would result in the creation of very large areas of new forest for the purpose of offsetting some of the additional carbon that is being released into the atmosphere. Concerns are expressed, however, that large-scale sequestration operations might have impacts on the world timber market, affecting timber prices and thereby reducing the incentives of traditional suppliers to invest in forest management and new timber production. Such a "crowding out" or "leakage" effect, as it is called in the literature, could negate much or all of the sequestered carbon by the newly created sequestration forests. Accordingly, the purpose of this study is to examine and assess the interactions between carbon sequestration forestry, particularly, newly created carbon forests, and the markets for timber. The approach of this study involves utilizing an existing Dynamic Timber Supply Model (DTSM) to examine the interactions between newly created sequestration forests and the markets for timber. This model has been used to examine global timber supply and, more recently, has been modified to include carbon considerations. This study suggests that even without any specific sequestration efforts, commercial forestry offers the potential to sequester substantial volumes of carbon, approaching ten gigatons (Gt) (or petagrams (Pg)), in vegetation, soils and market products over the next century. At current rates of atmospheric carbon build up this is equal to about three years of net carbon releases into the atmosphere. This volume of carbon sequestration could be increased 50–100% by 50 million hectares (ha) of rapidly growing carbon-sequestering plantation forests, even given the anticipated leakages due to market price effects. Finally, the projections suggest that the amount of crowding out and carbon leakages are likely to be very modest. The 50 million ha of carbon plantations are projected to reduce land areas in industrial plantations, that is, crowd out, only from 0.2 to 7.8 million ha over the 100-year period. The addition of carbon sequestration forests offers the potential to increase the carbon sequestration of the forest system more than 50%, up to 5.7 Gts, above that already captured from market activity. This estimate assumes that crowding out and associated projected leakages will occur. At current rates of atmospheric carbon buildup, about 2.8% of the expected total buildup in atmospheric carbon over the next century could be offset by 50 million ha of carbon plantations.

Forestry has been considered to have potential in reducing the atmospheric concentration of carbon dioxide by sequestrating carbon in above-ground timber and below-ground roots and soil. This potential has been noted in the Kyoto Protocol, which identified specific forestry activities for which carbon sequestration credits could be obtained. To date, a few forestry efforts have been undertaken for carbon purposes, but most of these efforts have been on a small scale. Proposals have been under discussion, however, that would result in the creation of very large areas of new forest for the purpose of offsetting some of the additional carbon that is being released into the atmosphere. Concerns are expressed, however, that large-scale sequestration operations might have impacts on the world timber market, affecting timber prices and thereby reducing the incentives of traditional suppliers to invest in forest management and new timber production. Such a "crowding out" or "leakage" effect, as it is called in the literature, could negate much or all of the sequestered carbon by the newly created sequestration forests. Accordingly, the purpose of this study is to examine and assess the interactions between carbon sequestration forestry, particularly, newly created carbon forests, and the markets for timber. The approach of this study involves utilizing an existing Dynamic Timber Supply Model (DTSM) to examine the interactions between newly created sequestration forests and the markets for timber. This model has been used to examine global timber supply and, more recently, has been modified to include carbon considerations. This study suggests that even without any specific sequestration efforts, commercial forestry offers the potential to sequester substantial volumes of carbon, approaching ten gigatons (Gt) (or petagrams (Pg)), in vegetation, soils and market products over the next century. At current rates of atmospheric carbon build up this is equal to about three years of net carbon releases into the atmosphere. This volume of carbon sequestration could be increased 50-100% by 50 million hectares (ha) of rapidly growing carbon-sequestering plantation forests, even given the anticipated leakages due to market price effects. Finally, the projections suggest that the amount of crowding out and carbon leakages are likely to be very modest. The 50 million ha of carbon plantations are projected to reduce land areas in industrial plantations, that is, crowd out, only from 0.2 to 7.8 million ha over the 100-year period. The addition of carbon sequestration forests offers the potential to increase the carbon sequestration of the forest system more than 50%, up to 5.7 Gts, above that already captured from market activity. This estimate assumes that crowding out and associated projected leakages will occur. At current rates of atmospheric carbon buildup, about 2.8% of the expected total buildup in atmospheric carbon over the next century could be offset by 50 million ha of carbon plantations.

This paper addresses the potential impact of the introduction and development of biotechnology on planted forests. It includes a description of some recent innovations in forestry including the use of traditional breeding, and also more recent innovations involving biotechnology, including the development of clonal propagation and the use of modern molecular biology techniques. In addition to describing these innovations, the paper undertakes an assessment of their probable impact on future production of the forest industry, on the global timber supply, and on future markets for timber and wood products. The paper offers a description of recent innovations in tree breeding and biotechnology, including a discussion of innovations in agriculture that have promise for forestry. This is followed by a discussion of the current role of biotechnology in forestry and an assessment of the various types of biotechnological innovations that could be forthcoming in the next decade and beyond. Additionally, the paper examines the likely effects of biotechnology on the economics of forestry. An estimate is provided for the potential cost savings and/or value increases expected from the various innovations. Using these estimates, a quantitative assessment is made of global potential economic returns to the most immediate and major innovation, the herbicide tolerant trait. Additionally, estimates are made of the potential impact of cost savings realized from this type of biotechnology on future timber supplies in the global timber market.

International environmental and government organizations propose eco-labeling as a market incentive to cause industry to operate in an ecologically sustainable and biodiversity-friendly manner. A microeconomic analysis questions whether eco-labeling will cause producer profits in a competitive industry to decline, even under a voluntary system, and whether eco-labeling will necessarily generate different prices for labeled and unlabeled product. Using wood product as an example, results identify conditions that may exist when firms lose profits, even under a voluntary system, and where existing production constraints may lead to a single price, regardless of labeling.

Extreme weather events such as the ice storm that affected eastern Canada and the Northeastern US in January of 1998 have significant impacts on both human populations and forests. One of the questions currently facing climate scientists is whether or not better forecasting of such events would lessen the economic impacts borne by households, industry, agricultural producers and the public sector when such weather events occur. This case study examines the economic impacts of the ice storm on the residential market for fuelwood. It is hypothesized that demand for fuelwood will increase due to the failure of non-wood heating sources during the ice storm. In addition, damage to trees in the region should increase the supply of fuelwood; the net effect of these outward shifts of supply and demand on price is not known. A household level survey administered to over one thousand households indicates that less than half of the households in the affected region currently rely on wood burning technologies as a source of heat for their homes. However, those households with wood burning technologies were better able to manage during the ice storm. The main policy implication of better forecasting of extreme weather events is the ability of households to alter or substitute home heating strategies and technologies in addition to other mitigative strategies such as storing food etc. In addition, forest managers or forest product producers who have information regarding extreme weather events have the option to undertake various management strategies to lessen the economic and biophysical impacts of ice storms on forests. Forest managers and woodlot owners may also enter or expand into the market for residential fuelwood when the production of other forest produce such as maple syrup and veneer are hindered by ice storm damage.

El Niño events are likely to affect maple syrup production since it is very sensitive to weather events. A statistically significant direct correlation has not been found in our preliminary analysis, however. This may be because many other factors affect production and because weather anomalies also occur in non-El Niño years. Few defensive activities are available to maple syrup producers to alleviate the negative impacts of weather anomalies on their production. Hence, the value of El Niño-Southern Oscillation (ENSO) forecasts to them is likely to be low, even if a clear correlation between productivity and ENSO events was eventually found. Overall, small welfare impacts of El Niño weather events are expected from their impact on the maple syrup industry, even if a correction is found. This is mainly because the share of maple syrup production in the economy is very small. Also, only a portion of the exploitable trees is under production and hence some excess capacity exists. Furthermore, maple syrup has numerous substitutes (albeit imperfect) as sources of sugar and luxury food items; the impact on consumer welfare is hence likely to be small. The most unique feature of maple syrup production includes cultural and amenity values provided by the springtime sugaring off parties; this appears as the least substitutable characteristic of the maple syrup industry. Indeed, few forest-based activities exist at the time of maple sap harvest. In all likelihood, even if the development of the industry is slowed down because of ENSO events, this springtime ritual will remain as it does not involve great investment like the larger, more sophisticated activities do. The welfare impact, through the lack of substitute, would be greater if this tradition were to disappear altogether.

Marion Clawson passed away in April 1998 at the age of 92. He was a giant in the field of resource and environmental economics who devoted the last decade and one-half of his professional career to forest and forest related issues. He produced over 30 professional books and hundreds of papers. This paper presents a broad overview of his career as an economist, with a focus on his work in and influence on forestry and forest policy. From the early 1970s through to his last professional book in 1983, and his final professional contributions in the mid 1990s, Clawson devoted most of his professional efforts to forest issues. His influence on forests and forest policy was substantial, especially in the context of public policy toward America's publicly owned forested lands. He served as an external critic of the Forest Service, regularly calling for greater attention to be given to issues of economic efficiency in the management of public lands. His influence was probably greatest during the period from the early 1970s, when his service on the President's Advisory Panel on Timber and the Environment stimulated his interest in forestry, through the mid 1980s. During this period he authored several books on forestry and a number of influential articles.

With the advent of the Kyoto Protocol and its recognition of the use of forestry activities and carbon sinks as acceptable tools for addressing the issue of the build-up of atmospheric carbon, the potential role of planted forests as a vehicle for carbon sequestration has taken on a new significance. Additionally, the emergence of tradable emission permits and now tradable carbon offsets provides a vehicle for financially capturing the benefits of carbon emission reductions and carbon offsetting activities. In a world where carbon sequestration has monetary value, investments in planted forests can be made with an eye to revenues to (at least two) joint outputs: timber and the carbon sequestration services. The first section of this paper examines the Patagonia region of Argentina, as an example of an area where carbon sequestration values combined with timber values create financial incentives for creating planted forests, which could not be justified on the bases of timber values alone. The paper uses a present value approach to evaluate the costs and benefits of plantation forestry in a "representative" site in Patagonia. A basic timber harvest scenario is developed and then a number of alternative scenarios are examined. These introduce carbon as an additional product to be produced "jointly" with timber. The scenarios include alternative rotation periods, alternative prices for carbon offsets, and a brief examination of the effect of undertaking a specific silvicultural activity. In the second section of the paper the results of this analysis are considered in the context of a discussion of the various types of institutional arrangements that might be required to provide a market for the carbon sequestration services provided by the planted forests. The paper identifies, examines and discusses a number of potential institutional arrangements that exist or are under discussion for marketing carbon sequestration services. A number of problems that may arise with offset credits and some of the innovative institutions that may be created are identified and discussed.

This paper examines the question of the likely effects on global forests of a further reduction in wood products tariffs including both solid wood products and pulp and paper, as has been proposed to the World Trade Organization (WTO) by the Asia Pacific Economic Community (APEC). The tariff reductions would be an extension of the tariff reductions associated with the Uruguay Round (Federal Register 1999). The questions include both how international trade is likely to change in response to further tariff reduction and also the implications for timber harvests and forests generally of such trade liberalization in the various forest regions. The paper finds that the evidence suggests further reductions in tariffs on forest products are likely to generate only very modest increases in worldwide trade and production, and the increased harvest pressures on forests due to tariff reduction should be quite modest. The major countries likely to experience export and production increases are found largely in the northern hemisphere and are likely to be able to facilitate additional harvests with minimal effects on the forests due to the modest nature of the impact, new forest practices laws, new forest set-asides, and movement toward improved practices designed to achieve multifaceted sustainable forestry. Furthermore, there is little reason to expect that tariff reductions will significantly increase harvests from tropical forests. Earlier tariff reductions appear to have had minimal impacts on tropical harvests or exports. Nevertheless, tropical forests will remain under deforestation pressure due to land conversion objectives, commonly to provide additional agricultural lands.

Extreme weather events such as the ice storm that affected eastern Canada and the Northeastern US in January of 1998 have significant impacts on both human populations and forests. One of the questions currently facing climate scientists is whether or not better forecasting of such events would lessen the economic impacts borne by households, industry, agricultural producers and the public sector when such weather events occur. This case study examines the economic impacts of the ice storm on the residential market for fuelwood. It is hypothesized that demand for fuelwood will increase due to the failure of non-wood heating sources during the ice storm. In addition, damage to trees in the region should increase the supply of fuelwood; the net effect of these outward shifts of supply and demand on price is not known. A household level survey administered to over one thousand households indicates that less than half of the households in the affected region currently rely on wood burning technologies as a source of heat for their homes. However, those households with wood burning technologies were better able to manage during the ice storm. The main policy implication of better forecasting of extreme weather events is the ability of households to alter or substitute home heating strategies and technologies in addition to other mitigative strategies such as storing food etc. In addition, forest managers or forest product producers who have information regarding extreme weather events have the option to undertake various management strategies to lessen the economic and biophysical impacts of ice storms on forests. Forest managers and woodlot owners may also enter or expand into the market for residential fuelwood when the production of other forest produce such as maple syrup and veneer are hindered by ice storm damage.

El Nino events are likely to affect maple syrup production since it is very sensitive to weather patterns. A statistically significant direct correlation has not been found in our preliminary analysis, however. This may be because many other factors affect production and because weather anomalies also occur in non-El Nino years. Few defensive activities are available to maple syrup producers to alleviate the negative impacts of weather anomalies on their production. Hence, the value of El Nino-Southern Oscillation (ENSO) forecasts to them is likely to be low, even if a clear correlation between productivity and ENSO events was eventually found. Overall, small welfare impacts of El Nino weather events are expected from their impact on the maple syrup industry, even if a correlation is found. This is mainly because the share of maple syrup production in the economy is very small. Also, only a portion of the exploitable trees is under production and hence some excess capacity exists. Furthermore, maple syrup has numerous substitutes (albeit imperfect) as sources of sugar and luxury food items; the impact on consumer welfare is hence likely to be small. The most unique feature of maple syrup production includes cultural and amenity values provided by the springtime sugaring off parties; this appears as the least substitutable characteristic of the maple syrup industry. Indeed, few forest-based activities exist at the time of maple sap harvest. In all likelihood, even if the development of the industry is slowed down because of ENSO events, this springtime ritual will remain as it does not involve great investment like the larger, more sophisticated activities do. The welfare impact, through the lack of substitute, would be greater if this tradition were to disappear altogether.

This paper addresses the potential impact of the introduction and development of biotechnology on planted forests. It includes a description of some recent innovations in forestry including the use of traditional breeding, and also more recent innovations involving biotechnology, including the development of clonal propagation and the use of modern molecular biology techniques. In addition to describing these innovations, the paper undertakes an assessment of their probable impact on future production of the forest industry, on the global timber supply, and on future markets for timber and wood products. The paper offers a description of recent innovations in tree breeding and biotechnology, including a discussion of innovations in agriculture that have promise for forestry. This is followed by a discussion of the current role of biotechnology in forestry and an assessment of the various types of biotechnological innovations that could be forthcoming in the next decade and beyond. Additionally, the paper examines the likely effects of biotechnology on the economics of forestry. An estimate is provided for the potential cost savings and/or value increases expected from the various innovations. Using these estimates, a quantitative assessment is made of global potential economic returns to the most immediate and major innovation, the herbicide tolerant trait. Additionally, estimates are made of the potential impact of cost savings realized from this type of biotechnology on future timber supplies in the global timber market.

International environmental and government organizations propose eco-labeling as a market incentive to cause industry to operate in an ecologically sustainable and biodiversity-friendly manner. A microeconomic analysis questions whether eco-labeling will cause producer profits in a competitive industry to decline, even under a voluntary system, and whether eco-labeling will necessarily generate different prices for labeled and unlabeled product. Using wood product as an example, results identify conditions that may exist when firms lose profits, even under a voluntary system, and where existing production constraints may lead to a single price, regardless of labeling.

With the advent of the Kyoto Protocol and its recognition of the use of forestry activities and carbon sinks as acceptable tools for addressing the issue of the build-up of atmospheric carbon, the potential role of planted forests as a vehicle for carbon sequestration has taken on a new significance. Additionally, the emergence of tradable emission permits and now tradable carbon offsets provides a vehicle for financially capturing the benefits of carbon emission reductions and carbon offsetting activities. In a world where carbon sequestration has monetary value, investments in planted forests can be made with an eye to revenues to (at least two) joint outputs: timber and the carbon sequestration services. The first section of this paper examines the Patagonia region of Argentina, as an example of an area where carbon sequestration values combined with timber values create financial incentives for creating planted forests, which could not be justified on the bases of timber values alone. The paper uses a present value approach to evaluate the costs and benefits of plantation forestry in a "representative" site in Patagonia. A basic timber harvest scenario is developed and then a number of alternative scenarios are examined. These introduce carbon as an additional product to be produced "jointly" with timber. The scenarios include alternative rotation periods, alternative prices for carbon offsets, and a brief examination of the effect of undertaking a specific silvicultural activity. In the second section of the paper the results of this analysis are considered in the context of a discussion of the various types of institutional arrangements that might be required to provide a market for the carbon sequestration services provided by the planted forests. The paper identifies, examines and discusses a number of potential institutional arrangements that exist or are under discussion for marketing carbon sequestration services. A number of problems that may arise with offset credits and some of the innovative institutions that may be created are identified and discussed.

Marion Clawson passed away in April 1998 at the age of 92. He was a giant in the field of resource and environmental economics who devoted the last decade and one-half of his professional career to forest and forest related issues. He produced over 30 professional books and hundreds of papers. This paper presents a broad overview of his career as an economist, with a focus on his work in and influence on forestry and forest policy. From the early 1970s through to his last professional book in 1983, and his final professional contributions in the mid 1990s, Clawson devoted most of his professional efforts to forest issues. His influence on forests and forest policy was substantial, especially in the context of public policy toward America's publicly owned forested lands. He served as an external critic of the Forest Service, regularly calling for greater attention to be given to issues of economic efficiency in the management of public lands. His influence was probably greatest during the period from the early 1970s, when his service on the President's Advisory Panel on Timber and the Environment stimulated his interest in forestry, through the mid 1980s. During this period he authored several books on forestry and a number of influential articles.

This paper maintains that the Forest Service (FS), as an institution, is in deep trouble. It argues that the FS today is an agency without a unique mission and without a supporting constituency. For the FS to be viable in the future it needs a distinct well-defined mission and a committed constituency. The distinct mission needs to be generally supported, or at least not opposed, by most of the American people. The constituency needs to be committed to the FS to the extent that it will provide major support in the Congress for FS budgets. The paper identifies some potential candidates for a mission for the National Forest System (NFS), e.g., as a biological reserve or as a provider of forest recreation. Another potential paradigm could be that of the Quincy Library Group, which apparently is going to receive separate Congressional funding and a unique management mandate for a set of national forests in California. This paper examines the feasibility of these missions and paradigms including budget and constituency support. Finally, there is the question of whether the FS has completed its useful life and if society would be better served by merging existing land management agencies into an integrated agency that can better provide for the coordinated management required.

This paper maintains that the Forest Service (FS), as an institution, is in deep trouble. It argues that the FS today is an agency without a unique mission and without a supporting constituency. For the FS to be viable in the future it needs a distinct well-defined mission and a committed constituency. The distinct mission needs to be generally supported, or at least not opposed, by most of the American people. The constituency needs to be committed to the FS to the extent that it will provide major support in the Congress for FS budgets. The paper identifies some potential candidates for a mission for the National Forest System (NFS), e.g., as a biological reserve or as a provider of forest recreation. Another potential paradigm could be that of the Quincy Library Group, which apparently is going to receive separate Congressional funding and a unique management mandate for a set of national forests in California. This paper examines the feasibility of these missions and paradigms including budget and constituency support. Finally, there is the question of whether the FS has completed its useful life and if society would be better served by merging existing land management agencies into an integrated agency that can better provide for the coordinated management required.

Unlike other resources such as petroleum, coal, and copper, forests are renewable. Yet, in many respects forests historically have been treated as a nonrenewable resource in that forest stocks were depleted or "mined" and loggers moved on to exploit other "deposits." The lands were often put to other uses, typically agricultural, or allowed to regenerate naturally. This paper looks at technical change in forest extraction, i.e., logging under a number of different conditions. It finds that, on average, labor productivity has been increasing in recent decades. However, total factor productivity in the US has declined in recent years. In addition, the study examines the tree-growing potential of plantation forestry. It finds that there is underway a substantial shift away from the harvesting of old-growth forests and toward intensive forest plantations. Plantations allow for high productivity in tree growing and are being used to offset decreased wood availability due to the inaccessibility and high costs of many old- and second-growth forests. The decreased accessibility reflects not only the impacts of past logging but, perhaps more importantly, the increase in forests in protected area set-asides. Additionally, natural forests face increasingly stringent regulations on logging and forest management activities. High-yield intensively managed forests, on well located, high productivity sites, offer the potential of obtaining high yields while using relatively small land areas by allowing the near full output potential of practices including species selection, fertilization and pest control. Finally, tree planting creates the opportunity to apply genetic improvements to the tree stock thereby further increasing growth productivity and allowing for control of tree characteristics.

This paper presents a model of global timber markets that captures the evolution of a broad array of forest resources and timber market margins over time. These margins include the inaccessible northern and tropical margins, plantation establishment, and timberland management. A baseline case is presented and discussed. Five alternative scenarios are then presented. These scenarios allow us to consider several important questions about timber market behavior and the future supply of industrial fiber: (1) What happens along the northern and the tropical inaccessible margins? (2) What role do timber plantations play? and (3) How do shifts in management intensity interact with market forces? The baseline case suggests that both prices and harvests rise over the next 150 years, with most of the increased harvest coming from existing and newly established plantations. Future gains in harvests result mainly from intensification of management, through additional plantation establishment and higher levels of management on selected forests rather than higher harvests in currently inaccessible forests. Prices and harvests are most sensitive to alternative demand and plantation establishment scenarios, and less sensitive to costs of accessing extensive forests.

This paper presents a model of global timber markets that captures the evolution of a broad array of forest resources and timber market margins over time. These margins include the inaccessible northern and tropical margins, plantation establishment, and timberland management. A baseline case is presented and discussed. Five alternative scenarios are then presented. These scenarios allow us to consider several important questions about timber market behavior and the future supply of industrial fiber: (1) What happens along the northern and the tropical inaccessible margins? (2) What role do timber plantations play? and (3) How do shifts in management intensity interact with market forces? The baseline case suggests that both prices and harvests rise over the next 150 years, with most of the increased harvest coming from existing and newly established plantations. Future gains in harvests result mainly from intensification of management, through additional plantation establishment and higher levels of management on selected forests rather than higher harvests in currently inaccessible forests. Prices and harvests are most sensitive to alternative demand and plantation establishment scenarios, and less sensitive to costs of accessing extensive forests.

This discussion paper reports on a Workshop on Wood Fiber Supply Modeling held October 3-4, 1996 in Washington, DC. The purpose of this discussion paper is to provide an overview of some of the modeling work being done related to timber supply modeling and some of the issues related to the more useful application of wood fiber supply and projections models. This paper includes brief presentations of three commonly used long-term timber projections and forecasting models: the Timber Assessment Market Model (TAMM) of the Forest Service; the Cintrafor Global Trade Model (CGTM) of the University of Washington; and the Timber Supply Model (TSM) of Resources for the Future. Also, issues related to the useful of the models are addressed as well as a discussion of some applications of other timber or fiber projection models. The usefulness of the models are addressed from both a technical perspective and also from the perspective of their usefulness to various model users.

Unlike other resources such as petroleum, coal, and copper, forests are renewable. Yet, in many respects forests historically have been treated as a nonrenewable resource in that forest stocks were depleted or "mined" and loggers moved on to exploit other "deposits." The lands were often put to other uses, typically agricultural, or allowed to regenerate naturally. This paper looks at technical change in forest extraction, i.e., logging under a number of different conditions. It finds that, on average, labor productivity has been increasing in recent decades. However, total factor productivity in the US has declined in recent years. In addition, the study examines the tree-growing potential of plantation forestry. It finds that there is underway a substantial shift away from the harvesting of old-growth forests and toward intensive forest plantations. Plantations allow for high productivity in tree growing and are being used to offset decreased wood availability due to the inaccessibility and high costs of many old- and second-growth forests. The decreased accessibility reflects not only the impacts of past logging but, perhaps more importantly, the increase in forests in protected area set asides. Additionally, natural forests face increasingly stringent regulations on logging and forest management activities. High-yield intensively managed forests, on well located, high productivity sites, offer the potential of obtaining high yields while using relatively small land areas by allowing the near full output potential of practices including species selection, fertilization and pest control. Finally, tree planting creates the opportunity to apply genetic improvements to the tree stock thereby further increasing growth productivity and allowing for control of tree characteristics.

We develop a model of search in which a researcher chooses the size of sequential batches of samples to test. While earlier work has considered similar questions, the contribution of this paper is to use the search model to place a value on the marginal research opportunity. The valuation of such opportunities may be of little interest or relevance in many of the contexts in which search models are employed, but we apply our analysis to an area of considerable societal interest: the valuation of biological diversity for use in new product research. While data from which to make inferences are limited, we find that, using plausible estimates of relevant parameters, the value of biodiversity in these applications is negligible.

This study involves an update of our earlier Timber Supply Model, which was fully developed in our book, The Adequacy Of Global Timber Supply by Sedjo and Lyon (1990), published by Resources for the Future. The new version, called Timber Supply Model 1996 (TSM96), uses an economic market supply/demand approach to project an intertemporal time path of the world's price and output level of industrial wood. As did the original TSM, the TSM96 provides projections of the time path of the equilibrium output levels of the several regions into which the world has been subdivided. A major new feature of TSM96 is that industrial wood, treated as homogeneous in the earlier study, has be subdivided into two different wood types — pulpwood and solidwood. The supply of these two commodities is not independent. Rather they can be viewed as joint products in production. The study develops a base-case projection, which gives the authors' best judgment of the timber situation likely to develop over the next few decades. Over that period total industrial wood production increases from about 1.7 billion cubic meters to 2.3 billion cubic meters, an increase of about 35 percent, while global pulpwood production increases from about 700 million cubic meters in 1995 to about 1.325 billion in 2045. Pulpwood price shows a fairly substantial increase throughout the first one-third of the period, a more modest increase over the second third, and a slight decline during the last third. Solidwood prices are almost the inverse of pulpwood, declining over the first third of the decade, increasing slightly over the next third and increasing in the last third of the decade. Over the whole of the 50-year period overall price increases are 30 percent for pulpwood and only about 8 percent for solidwood.

There is considerable interest in biodiversity prospecting (the search for valuable new products from natural sources) as a conservation strategy. In an earlier paper, we have argued that the value of the marginal species (and, by extension, the incentives for the conservation of the habitat on which it is found) is small. In this paper, we show that investments in biodiversity prospecting are unlikely to increase incentives for conservation by much. If the value of the marginal species were appreciable, researchers ought already to have made investments to exploit it. If it is not, it is doubtful that additional investments will generate any substantial increase. It is important to be clear about our findings: we are not saying that none of the myriad uses of biodiversity is important. Quite to the contrary, we are saying that if biodiversity is important, more effective strategies for its conservation must be found.

In this paper, we compare and contrast two types of timber models that have been used for public policy analysis. These models have been variously used to predict price, inventory and market welfare impacts under different exogenous forces that impact timber markets. The framework and theory for each model type is presented and discussed. We then thoroughly test the two model types across six potential exogenous shocks to timber markets, ranging from instantaneous demand shocks to gradual supply adjustments. Our comparison indicates that these models predict potentially important differences in timber market behavior. These differences are important to consider for those who do public policy analysis.

This study involves an update of our earlier Timber Supply Model, which was fully developed in our book, The Adequacy Of Global Timber Supply by Sedjo and Lyon (1990), published by Resources for the Future. The new version, called Timber Supply Model 1996 (TSM96), uses an economic market supply/demand approach to project an intertemporal time path of the world's price and output level of industrial wood. As did the original TSM, the TSM96 provides projections of the time path of the equilibrium output levels of the several regions into which the world has been subdivided. A major new feature of TSM96 is that industrial wood, treated as homogeneous in the earlier study, has be subdivided into two different wood types -- pulpwood and solidwood. The supply of these two commodities is not independent. Rather they can be viewed as joint products in production. The study develops a base-case projection, which gives the authors' best judgment of the timber situation likely to develop over the next few decades. Over that period total industrial wood production increases from about 1.7 billion cubic meters to 2.3 billion cubic meters, an increase of about 35 percent, while global pulpwood production increases from about 700 million cubic meters in 1995 to about 1.325 billion in 2045. Pulpwood price shows a fairly substantial increase throughout the first one-third of the period, a more modest increase over the second third, and a slight decline during the last third. Solidwood prices are almost the inverse of pulpwood, declining over the first third of the decade, increasing slightly over the next third and increasing in the last third of the decade. Over the whole of the 50-year period overall price increases are 30 percent for pulpwood and only about 8 percent for solidwood.

We develop a model of search in which a researcher chooses the size of sequential batches of samples to test. While earlier work has considered similar questions, the contribution of this paper is to use the search model to place a value on the marginal research opportunity. The valuation of such opportunities may be of little interest or relevance in many of the contexts in which search models are employed, but we apply our analysis to an area of considerable societal interest: the valuation of biological diversity for use in new product research. While data from which to make inferences are limited, we find that, using plausible estimates of relevant parameters, the value of biodiversity in these applications is negligible.