Is There a Commercial Case for Tropical Timber Certification?

Abstract

The authors estimate the potential commercial benefits that tropical timber producing countries could enjoy by adopting timber certification schemes. Such benefits are crucial for encouraging the supply of certified timber. Timber certification is a reality: Various countries and organizations have launched initiatives for it. The initial response among producing countries was less than positive, but some have come to realize its potential benefits and have begun to adopt timber certification schemes. Tropical timber trade accounts for only a small fraction of tropical timber production, and most of that trade is concentrated among developing countries in Asia and Japan - markets where demand for certified timber is currently weak. Only a small part of the trade reaches the eco-sensitive markets of Europe and the United States, where there is demand for certified timber. Developing countries can benefit commercially from timber certification in two ways: through the "green premium" ("consumers' willingness to pay a premium for certified timber") and by averting losses of market share in the tropical timber market from not having timber certified. Based on surveys, on discussions with nongovernmental organizations, on market participants and analysts, and on estimates of price elasticity, the authors develop a scenario for estimating the potential commercial benefits from adopting timber certification. Under this scenario, benefits would not exceed US$500 million a year (roughly 4 percent of all tropical-timber-related revenues earned by developing countries). Timber certification is not expected to provide significant commercial benefits to developing countries in the near future. But timber certification could provide significant rents to individual firms that develop market niche strategies. And producing countries that pursue certification may enjoy longer-term social, economic, and environmental benefits by adopting the better forest management practices required for timber certification.