Chapter 2
Overview of the scope and impact of illegal logging
2.1
This chapter provides an overview of illegal logging across the globe
with focus on Australia. It considers the social, economic and environmental
impacts of illegal logging and worldwide initiatives to combat the trade before
considering initiatives undertaken by Australia in the Asia-Pacific region and
the current domestic self-regulatory approach.
The impact of illegal logging worldwide
2.2
The social, economic and environmental impacts of illegal logging are
recognised as severe.[1]
The Centre for International Economics (CIE) estimated that the social and
environmental costs of illegal logging amounted to US$60.5 billion per annum.[2]
In developing countries, the significance of its impacts on forest degradation,
climate change, habitat loss and community livelihoods are widely recognised.[3]
Estimates suggest that of the US$60.5 billion, the cost of annual greenhouse
gas emissions (based on estimates of global emissions) amounted to US$43 billion.
2.3
In terms of the financial costs of illegal logging, a study by the CIE
estimated that between 20 and 80 per cent of timber was illegally sourced in
high risk countries. In 2006, the World Bank predicted that the financial
losses to the global market from illegal logging was more than US$10 billion a
year and that losses of government revenues amounted to approximately US$5
billion a year. The CIE also estimated that:
traded and non-traded output from those sectors of the global
industry dependent on illegally-sourced timber as being worth US$91 billion per
annum, or 6% of total industry output. This estimate was derived on the basis
of global efforts being effective in stopping illegal logging.[4]
2.4
In terms of the trade impact of illegal logging, the costs of legal log
production have been estimated at between US$63–76 per cubic metre compared to
illegal log production costs of between US$19–29 per cubic metre. Production
costs of illegal logging operations are far cheaper than those for legal
logging because they may only pay the cost of harvesting and transportation,
without internalising the costs of legal and sustainable activities such as
forest management planning and environment protection.[5]
2.5
The social costs of illegal logging are far reaching and may include:
fees and other benefits associated with legal and sustainable
logging, which would normally be returned to the community in various forms of
social benefits beyond some arbitrary payments for harvesting timber, are
foregone due to illegal logging. These include government taxes and charges
which may be transferred to forest-dependent communities, the delivery of
government services, and the social services provided directly to communities
by legal logging companies, such as roads, education and health services, as
part of their logging agreements.[6]
2.6
Other 'intangible' costs associated with illegal logging include a
reduction in the standard of living, erosion of sustainable livelihoods,
destruction of customary and spiritual and heritage values of forest dependent
communities, human rights abuses, use and exploitation of illegal foreign
workers, and a reduction in the quality of the forest environment, including
contamination of food and water sources. The explanatory memorandum notes that
these intangible costs 'extend to the citizens of consumer countries such as
Australia, who place an immeasurable value on the existence of forests and
sustainable use of those resources'.[7]
Costs and benefits involved in stopping illegal logging
2.7
The CIE estimates that putting a stop to illegal logging would benefit
legal producers by US$46 billion per annum in addition to providing social and
environmental benefits amounting to US$60.5 billion per annum. The CIE noted
that:
These total benefits of US$106.5 billion per annum would be
off-set by a decline in the illegal sector of US$91 billion per annum. From
these results, the CIE indicated a benefit: cost ratio of 1.2:1 (106.5/91) from
global action to stop illegal logging. In effect, it demonstrates a global benefit
from eliminating illegal logging.[8]
2.8
The Australian Bureau of Agricultural and Resource Economics (ABARE)
utilised alternative modelling to that of the CIE to establish that the net
global benefit from stopping illegal logging would amount to approximately
US$60.5 billion per annum after industry adjustment and restructuring. It
estimated that global benefits would amount to US$101.3 against the economic
losses of US$34.5 billion per annum.[9]
ABARE also estimated that if the outcome of eliminating illegal logging were
achieved, Australia's GNP would increase by US$155 million per annum.[10]
Global initiatives to combat illegal logging
2.9
The explanatory memorandum notes that whilst progress has been slow and
limited at the multilateral level, significant advances have been made through
bilateral cooperation between countries to reach agreement on processes for
combating illegal logging and associated trade. The United States (US) and the
European Union (EU) have developed policies and regulations to combat illegal
logging and associated trade. Under the 2008 Amendments to the Lacey Act from
H.R.2419, Sec.8204, it is unlawful to import certain timber products into the
US without an import declaration or to import such products in contravention of
the laws of the country where the timber is harvested.[11]
The Council of the EU is currently developing a new regulation aimed at
minimising the risk of placing illegally harvested timber into that market. The
explanatory memorandum notes that a key element of both US and EU approaches is
their focus on capacity building in developing countries to support their
direct domestic policy measures.[12]
2.10
For their part, a number of key producer countries, including Indonesia
and Papua New Guinea (PNG), are developing legality verification, chain of
custody and forest certification schemes in response to mounting pressure from
consumer countries to demonstrate the legality of their timber products.[13]
2.11
The Australian Government is seeking to address the issue of illegal
logging in other countries through non-regulatory measures including capacity
building and bilateral and multilateral engagement. Highlights of this action
include:
-
the Asia Pacific Forestry Skills and Capacity Building Program
which provides institutional and technical support to developing countries to
combat illegal logging and promote better forest management;
-
bilateral cooperation agreements with China, Indonesia and PNG
including cooperation arrangements for combating illegal logging and promoting
sustainable forest management;
-
Australia as a signatory to a number of multilateral agreements
and processes including the United Nations Forum on Forests, Asia Pacific
Forestry Commission of the Food and Agriculture Organisation, and International
Tropical Timber Organization.[14]
2.12
According to the explanatory memorandum, complementary regulatory and
non-regulatory measures have now reached a point of development where a new
international policy environment has been established. It noted further that:
These efforts create an environment which enables individual
nations, such as Australia, to more effectively combat illegal logging and
associated trade by establishing domestic policy settings to allow a
differentiation of legally and illegally-sourced timber products. The
effectiveness and costs of these domestic policy settings will be strongly
influenced by the government's commensurate investment in regional capacity
building and bilateral and multilateral engagement.[15]
Impact of illegal logging on Australia
2.13
Australia imports approximately $4.4 billion worth of timber and wood
products (excluding furniture) annually. According to the explanatory
memorandum, Australia's proportion of illegally sourced timber products has
been estimated at 9 per cent of total worldwide imports or around $400 million
(US$340 million) which is the equivalent of 0.034 per cent of global
production. However, as many processing mills supply their manufactured
products for domestic consumption and export to other countries, the illegal
logging problem for consumer countries such as Australia extends beyond the
impacts associated with just the traded products. Australia's share of the
problem is, therefore, estimated at US$21 million per annum.[16]
2.14
According to the explanatory memorandum, whilst domestic timber
harvesting is controlled through a comprehensive framework of laws, regulations
and policies, timber is imported into Australian without any requirement for
verifying its legality, other than through voluntary industry measures. Where a
regulation exists, such as under the Convention on International Trade in
Endangered Species of Wild Fauna and Flora (CITES) management, 'only a limited
number of timber products would need to comply and therefore indirectly meet
the government's election commitment to restrict illegally logged timber
imports'.[17]
2.15
The explanatory memorandum details the impact of illegal imports into
Australia:
Illegal imports, because of their lower prices, create unfair
competition for Australian producers and suppliers who source their products
from legally and sustainably managed forests. As a consequence domestic market
prices are undercut, impacting on business decisions, industry investment,
business profitability and jobs.[18]
2.16
Concerns regarding the impact on local industry have also been raised by
those within the industry. The Australian Forest Growers, for example, noted in
2009 that whilst the impact has not been clearly measured, the import of
illegally logged timber creates an 'artificially low market price that undercuts
Australian products and consequently negatively distorts the Australian timber
market'.[19]
Current self-regulatory approach
2.17
Under the current self-regulatory scheme, there is no national approach
or consistent use of measures that provide industry-wide assurance of legality
for timber products imported or sold in Australia. The explanatory memorandum
notes that only a small number of businesses and industry associations have
implemented legality assurance measures. Moreover, some within the industry
take the view that no action should be taken because the cost of any
governmental action would be prohibitive and generate negligible benefits.[20]
2.18
Amongst the concerns raised in relation to the self-regulatory approach
is that industry is uncertain as to what constitutes an adequate level of
legality verification for timber products and that not all business enterprises
undertake equivalent levels of legality verification. The explanatory
memorandum explains further:
Industry is concerned that some businesses undertake no
legality verification of their products (free-riders) and may obtain an unfair
market advantage from sourcing cheap, potentially illegal, timber as well as
the impacts that illegally-sourced timber products can have on market prices.
This provides an economic benefit over companies which seek to ensure the
legality of their products, thereby creating distortions in the market place.[21]
2.19
Self-regulation by way of voluntary measures is currently implemented
through a mix of guidelines, codes of conduct and procurement policies for the
purchase and sale of legally sourced timber. According to the RIS, there is
limited independent auditing or monitoring of performance against such schemes
and system requirements making the effectiveness of such measures in excluding
imports of illegal timber difficult to determine.[22]
2.20
In terms of impact of the current approach, the CIE, which authored the
RIS, concluded that the voluntary arrangements were 90 per cent effective on
the basis that an estimated 10 per cent of Australia's timber imports are
suspected of being derived from illegally-logged timber. The removal of the
self-regulatory scheme would see illegal imports increase to an estimated 20
per cent of Australia's total imports.[23]
2.21
As for the costs associated with combating illegal logging, such efforts
currently cost the government US$5 million per annum and include capacity
building, bilateral cooperation and multilateral engagement, as well as ongoing
work on the part of the Department of Agriculture, Fisheries and Forestry.[24]
Navigation: Previous Page | Contents | Next Page