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UNECE/FAO Forest Products Annual Market Review, 2014-2015
to enhance silvicultural management, reforestation and afforestation, increase the use of felling residues, and increase the overall contribution of forests to sustainable development. The project is also financed by a grant of $2.74 million from the Global Environment Facility (World Bank, 2015). The Russian Government and the World Bank began implementing a new joint project on forest fire prevention and management in February 2014. Efforts have centred on policy development, institutional strengthening, information and land-use planning systems, and strengthening regional forest inventory and pest management organizations. The project’s development objectives are to improve forest fire prevention and suppression efforts in select forest ecosystems, including targeted protected areas, and to enhance forest management in pilot regions. Forest policy, legislation and silviculture play important roles in the likelihood, extent and severity of forest fire (World Bank, 2014; Rosleshoz, 2014). The Russian Government increased stumpage prices by 5% in 2015, and similar changes are planned for 2016 and 2017 (Rossiyskaya Gazeta, 2014). The percentage increase is much lower than the real inflation in the economy and should not have a significant impact on forest businesses.
2.2.4
Due diligence and legal wood supply
2.2.4.1
EU Forest Law Enforcement, Governance and Trade
As of 2015, the EU Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan has been in force for 12 years (figure 2.2.1). A key output of the FLEGT Action Plan is the signing of voluntary partnership agreements (VPAs) between the EU and tropical timber-supplying countries. As of May 2014, six exporting countries had signed VPAs – Cameroon, the Central African Republic, the Congo, Ghana, Indonesia and Liberia; this number was unchanged as of May 2015. Nine other countries are in negotiation with the EU on VPAs, and 11 countries have expressed interest (EU FLEGT Facility, 2015). VPAs engage partner countries in the development of legality assurance systems for timber exported to the EU. Technical and political challenges, particularly linked to ensuring wide stakeholder acceptance and equitable market access by small and medium-sized enterprises (SMEs), continue to delay the issuance of the first licences. Indonesia is expected to deliver the first FLEGT-licensed timber to the EU in early 2016, followed by Ghana later in the same year. A five-year ITTO project was launched in March 2014 with EU financial support to establish the FLEGT Independent Market Monitoring (IMM) mechanism with the aim of regularly assessing the market influence of the FLEGT process. The EU Timber Regulation (EUTR) has been in effect for two years (figure 2.2.1). By 31 May 2015, 23 of the 28 EU member states had fulfilled their legal obligations to establish “EUTR competent authorities” and sanctions regimes and to begin checks on EU operators. The remaining five member states (Greece, Hungary, Poland, Romania and Spain) were still in the fulfilment process.
Significant efforts have been made to increase the coverage of EUTR monitoring organizations, which reduce the cost of EUTR compliance for small operators by providing group due-diligence systems. The number of EUTR monitoring organizations formally recognized by the EU increased from three in January 2014 to 11 in May 2015. The EU’s first biennial review of EUTR implementation, including a stakeholder consultation process, is underway (European Commission, 2015b). An analysis of EU trade flows for the biennial review did not identify any step-change in trade resulting from the EUTR, but it did note that the regulation is reinforcing existing trends, for example in reducing speculative purchasing and focusing EU imports on a more limited range of operators able to offer reliable legality assurances (IMM, 2015). A recent assessment (Jonsson et al., 2015) reviewed the effectiveness of the FLEGT Action Plan and the EUTR to date and made the following major findings: ❚
The FLEGT/VPA process has resulted in forest governance improvements and could be more successful if it went beyond legality to include socioeconomic development objectives.
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Imports of illegal timber products may have been reduced due to these policies, and prices for legal imports from the same countries of origin have trended higher.
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Stakeholder awareness of illegal logging concerns has increased.
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More research is needed to verify whether illegal logging has been reduced as a result of the policies.
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The assessment further concluded that the implementation of the EUTR remains challenging and inconsistent across EU member states; cooperation with industry is needed for effective implementation;
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China, Japan and the US are notable key partners in the success of the EUTR; and support is needed for broader sustainability considerations beyond legality and to enable SMEs to participate in market opportunities.
The Global Timber Forum held its first annual summit in Shanghai, China, in June 2015. The key focus of the summit was on valuing the timber and forestry resource, with delegates considering how the wood industry worldwide could maximize the commercial potential of legal and sustainable forestry and timber production. Chinese speakers highlighted the need for closer and more consistent international guidance, rules and codes of conduct on legality, due diligence and forest certification, particularly stressing the challenges to SMEs in following the latest international developments. Australian, European and North American delegates indicated that the importing and retailing industries are willing to work with Chinese and other overseas producers to ensure their conformance with the new regulations. Those delegates also stressed the importance of transparency and legal compliance as pre-requisites for building trust with consumers, and for exploiting high-value market opportunities, such as those arising in green building (GTF, 2015b).