Future Market Consequences of Forest Decline in Europe

The significant and rather widespread decline of European forests is attributed mainly to air pollution. As of today there is no evidence yet of any major market disturbances caused by the decline. Long-term outlooks, however, on the extent of probable future decline indicate that first the local, then the regional, and finally the global markets of forest products may face significant imbalances. Due to forest decline, sanitation fellings will inevitably increase further and various tree species may even vanish from large areas in Europe. In this paper, to assess the extent of some economic consequences of these emerging surpluses and deficits, scenario analysis is used. The scenarios compared here were computed on the basis of a European model of consumption, production and trade in the forest sector (also referred as European Trade Model or ETM). The ETM is a partial equilibrium model cast in a partly non-linear mathematical programming framework, a method originally developed by the Forest Sector Project of IIASA. Side constraints on final-product demand have been set to incorporate assumptions about the future development of demand based on the projection system used by FAO. With no limitations on the structure and volume of timber removals, a base scenario is derived consisting of projections for production, trade and prices for each five-year period up to year 2020. Then several forest-decline scenarios were generated, applying externally given time series of timber removals indicating various intensities of both sanitary fellings and forest decline. In the first section of the paper the problem is exposed. Then the ETM methodology, data, and assumptions are described in some detail. The base scenario is introduced in the next section, followed by the forest-decline scenarios. The final section presents the main conclusions of the exercise