Market-based instrument curbs deforestation
Market-based instrument curbs deforestation
Vincent Lingga, Senior Editor, The Jakarta Post, Jakarta
The devastating flash floods at Bahorok, North Sumatra, early
this month that killed more than 150 people, are another strong
reminder of how the traditional approach to protecting forests
through a regulatory system has failed miserably due to a corrupt
system of governance and inadequate institutional capacity.
Indonesia has enacted laws on environmental protection and has
issued myriad regulations and rules to protect forests, and
erected nontariff barriers to prevent trading in illegally felled
timber.
Yet deforestation continues. Interisland trade and export of
illegally felled timber have been going on. The Central Bureau of
Statistics has officially recorded exports of logs, even though
this commodity is banned from export.
As only incremental improvement can, at best, be made in the
system of governance and institutional capacity, it seems more
urgent now to expand forest product certification as a market-
based instrument to supplement the regulatory system for curbing
illegal logging.
The concept of forest certification is designed to use market
forces to control illegal logging through demand-side and supply-
side approaches, mobilizing consumers and traders to shun forest
products that are not certified according to internationally
recognized standards of sustainable forest management.
This virtual boycott forces forest-based companies (producers)
to have their operations and products certified by accredited,
independent forest-certifying bodies.
The demand for forest product certification has escalated
since the early 1990s as a result of the campaign for green
products by consumers, traders and conservation groups in North
America and West Europe, who have been concerned about high rates
of deforestation, especially in developing countries.
The green consumer movement became more organized and better
coordinated after the establishment in 1993 of an international,
independent and nonprofit organization called the Forest
Stewardship Council (FSC), with its headquarters in Bonn.
Grouping representatives from environmental and conservation
groups, the timber industry, forestry professions, forest
certification organizations and forestry communities, FSC has
developed forest certification standards, accredits independent
certifiers and helps develop national and regional forest
management standards.
FSC gets full support from the Global Forest and Trade Network
(GFTN), a group of organizations around the world also committed
to promoting trade in certified forest products as a means of
improving forest management practices.
Latest data shows that GFTN now has more than 18 regional and
national organizations, called forest and trade networks, under
the coordination of the Worldwide Fund for Nature (WWF), with
around 800 members consisting of large timber companies and
retailers (producers and buyers) spread out in more than 30
countries.
Therefore, even though the government does not require forest
certification, more than two dozen Indonesian companies, mostly
furniture, door, panel and frame producers in Java, have
voluntarily sought forest certification for their products from
accredited certifiers to gain access to the American and European
markets.
The term "voluntary" here is not entirely correct because the
companies have effectively been forced to obtain green
certificates; not through regulation, but by the market.
Importers/traders in the two regions simply don't want to
touch uncertified forest products.
Likewise, two of Indonesia's largest pulp and paper producers,
Asia Pulp and Paper Co. Ltd. (APP), with annual capacities of 2.3
million metric tons of pulp and 3.6 million tons of paper, and PT
Riau Andalan Pulp and Paper (RAPP), with two million tons of pulp
and 350,000 tons of paper, are now geared up to comply with the
criteria and standards required for certification.
The companies will not explicitly acknowledge it, but pressure
from their buyers overseas has been responsible partly for their
commitment to having their operations and products certified
according to the principles of sustainable forest management.
APP signed in August an agreement with the WWF for preparing
programs on the sustainability of its forest concessions, the
legality of its pulp materials and the resolution of land
conflicts with communities.
As RAPP environmental general manager Canesio P. Munoz
observes, "even though we have always seen to it that all pulp
inputs entering our mills are legal, we will remain under
suspicion of using illegal wood unless we have our operations and
products independently certified."
RAPP has obtained an ISO 14001 certificate for environmental
management system standards from SGS Yarsley International
Certification Services and is geared up to gain forest
certification next year or 2005.
Without sustainable forest management, these two companies,
which require around 20 million cubic meters of wood fiber inputs
a year, could indeed be a major threat to Indonesian forests.
They have often been accused by non-governmental organizations
(NGOs) of using illegally cut wood, though none of these charges
has ever been proven in court.
The problem is that more than 95 percent of forest-based
companies in Indonesia, especially pulp and paper and plywood
producers, have yet to realize the vital role of certification in
maintaining the principles of good forest management.
Traders and general consumers in Indonesia, like those in
other Asia-Pacific, African and Latin American countries, have
yet to be converted into full supporters of the green product
campaign. This task is quite daunting, not only because of the
need to change attitudes but also because forest certification is
costly and initially time consuming.
Forest certification is based not only on the principles of
sustainable management of forests and wildlife reserves but also
on the maintenance of the legal and customary rights of local
communities and indigenous peoples and long-term social and
economic welfare of forest workers.
Indonesia began to develop standards and criteria for forest-
product certification only in 1999 after the establishment of the
Indonesian Ecolabelling Institute (LEI), an independent
organization, with funding support from the WWF, the U.S.
government and many NGOs in Europe and North America.
LEI is now developing, in cooperation with FSC, standards and
criteria for certification systems for the management of
sustainable natural forest and industrial timber plantations,
community-based forests and a chain of custody (a system of
tracking the source of wood) as well as an accreditation scheme
for certifiers.
According to LEI executive Daru Ascarya, LEI and FSC have thus
far accredited four forest-certifying bodies, namely PT SGS ICS
Indonesia, PT TUV International Indonesia, PT Sucofindo and PT
Mutuagung Lestari.
Indonesia, like most other developing countries, has still a
long way to go before the bulk of its forest-based companies are
capable of complying with the principles of sustainable
management, but expanding forest certification across the timber
industry could speed up the process.
The Nature Conservancy and WWF, in cooperation with many other
NGOs and foreign governments, are sponsoring projects in East
Kalimantan, Java and Riau to develop a cost-effective method of
certifying the legal origins of wood right through the supply
chain, from forest to customers.
The projects are being implemented by Geneva-based SGS, the
world's largest inspection, testing and verification
organization, and URS Forestry environmental services company.
But other major donors affiliated with the Consultative Group
on Indonesia (CGI), who have often expressed grave concern about
extensive damage to the world's second-largest tropical forests
in Indonesia, should contribute more to building up a higher
national capacity for forest certification.
The market for tropical forest products could be damaged if
the global demand for certified products generated by the green-
consumer campaign far outpaced the capacity of forest
certification in Indonesia.
However, the development of the certification system will not
run smoothly unless the Indonesian government itself streamlines
the system of its regulatory procedures in land-use planning,
land rights, forest harvesting permits and wood transport
documentation, which have often left forest-based companies in a
catch-22 situation.
Forest certification, as a market-based instrument, will also
be less effective in saving forests if banks and financial and
securities analysts do not use sustainable forest management as
an investment-screening tool.