A New Climate for the Forest Products Industry

The forest products sector holds an enormous stake in the coming economy defined by resource constraints, climate change policies, and shifting consumer values. What was once a simple business of turning trees into lumber and paper is now uniquely positioned---or exposed to---political and economic forces that are reshaping regulatory and market landscapes.

Less than five percent of the world's forests are plantations, yet this five percent provides 50 percent of all wood supply and fiber. Efforts to control climate change and deforestation will likely make plantations and other managed forests increasingly important for the forest products industry. If done sustainably, this could be a real opportunity for the industry to help protect native forests in areas such as southeast Asia, while meeting the growing global demand for wood and paper.

Another issue is found in the mounting questions regarding bioenergy. While a forest-based source of bioenergy that wouldn't significantly affect food prices might be attractive, the environmental and social impacts are still unknown. Whether or not forests can sustainably provide wood, paper and transportation fuel is an unanswered question, and this uncertainty makes for real business risk.

Increasing demand for low-carbon construction materials is also important to consider. Construction materials from sustainably produced wood are far less carbon-intensive than steel or concrete. On average, using wood products save two tons of carbon dioxide per cubic meter over other construction materials. It is clear the wood products industry could be a major provider of low-carbon materials, but what strategies will be most advantageous?

Trees in the Greenhouse: Why Climate Change Is Transforming the Forest Products Business, a new report by WRI, looks at the industry's exposure to climate change risks and opportunities. The report finds that while risks exist, climate change presents a potentially game-changing opportunity for the industry through:

• new markets and products for forest goods and services,
• competitive advantages in relation to carbon-intensive substitute materials,
• enhanced forest productivity,
• increased demand for sustainable forest management, and
• green consumer preferences.

Climate change policies will be vital to realizing this opportunity. Forest products will need to be produced and consumed in a sustainable manner for the industry to create long-term value through contributions to global climate change solutions.

The report also finds that a clear, long-term international policy framework could benefit the industry by:

• lessening uncertainty around the physical impacts of climate change on forests,
• spurring an increase in the amount of sustainably managed forest in new regions, particularly in developing countries where illegal logging drives down prices, and
• creating incentives to substitute sustainable forest products for more carbon-intensive alternatives.

When it comes to regulation, the industry is fragmented, and in many cases divided over what represents appropriate climate policies. Nonetheless, with the right regulatory frameworks in place, both internationally and nationally, the forest products industry could be a major solutions provider to climate change while seizing some of the greatest market opportunities of the 21st century.