The Costs of Overregulating Forest Management

By William F. Shughart II

Forest

(Forest at Larch Mountain, Ore. Photo: CarolSpears/Wikimedia.)

Government agencies regularly interfere with markets in numerous industries, such as finance, housing, health care, and automobiles. Sometimes, however, the negative effects of such interference are not recognized or easily understood by consumers and the general public.

Forest certification, for example, seems at first glance to be an obscure issue with little relevance to the economy. However, misguided policies for certifying timberland management as environmentally friendly threaten a major driver of economic growth in rural communities across the United States.

Forest certification is a system that helps landowners manage their timber tracts sustainably and gives them credibility in "green" markets nationwide. As the president's just-released climate-change action plan states, one of the environmental benefits of sustainable timberland management is that it can help to ensure that our forests continue to remove carbon dioxide from the atmosphere. Product labels from three private organizations -- the Forest Stewardship Council (FSC), the Sustainable Forestry Initiative (SFI), and the American Tree Farm System (ATFS) -- inform consumers that they are buying a product that was procured from an environmentally responsible grower.

For years, certification has been a purely voluntary, free-market process that allows landowners to select the program that best suits their timberland's size, topography, and climate, as well as their own budgets. Over time, an increasing proportion of U.S. forestland has been managed according to these certification standards.

Recently, however, environmental activists and government regulators have pushed for and implemented policies that favor FSC over the other certification programs. For example, the U.S. Green Building Council's "LEED" standard awards wood-use credits to businesses that certify through FSC, but not to businesses that certify elsewhere. And some activists would like to outright mandate compliance with FSC standards.

Numerous studies, as well as the finer details of the FSC standards themselves, should caution governments against imposing FSC-preferential policies.

A study released by EconoSTATS concludes that an FSC monopoly would cost 31,000 jobs in Oregon and another 10,000 in Arkansas, including those of foresters and tree farmers, but also millworkers, truckers, contractors, and suppliers. Millions of dollars in tax revenue would evaporate.

Further, a study published by the American Consumer Institute last year determined that mandating compliance with FSC land-management standards in American forests will cause losses of $10 billion in wood markets and another $24 billion in paper markets.

Activists argue that FSC holds landowners to strict standards, ensuring that only responsibly harvested forest products and building materials find their way into our homes, offices, and other structures. However, the realities of the global timber market tell a different story.

While FSC does hold landowners to high standards in the United States, its rules are much more lenient in many other nations -- where 90 percent of FSC-certified property is located. For example, FSC allows unlimited clear-cutting on timberland constituting more than half of the forests it has certified worldwide.

Since most FSC-certified land is located beyond our borders, a public policy granting a monopoly to the FSC label would be equivalent to favoring foreign timber over U.S. timber. American building markets would be closed to American timber unless landowners here bore the cost of complying with standards that the rest of the world would not necessarily have to satisfy.

And because only a small minority of American landowners and businesses now partner with FSC, that minority stands to benefit at the expense of the majority of American foresters.

A competitive certification market has worked well thus far -- and FSC has not been as successful as the other certification programs. Keeping the certification market open will expand the amount of sustainable timber harvested domestically and save tens of thousands of U.S. jobs.

We should recognize the negative effects of monopolizing forestland certification before it is too late.

William F. Shughart II, a senior fellow of the Independent Institute, is J. Fish Smith Professor in Public Choice at Utah State University's Huntsman School of Business.

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