climate change

Where will the trees come from? How tariffs and new policies mean big changes on federal forests.

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by Brent Sohngen (sohngen.1@osu.edu)

In this post:

  • An assessment of the President’s recent executive order promoting timber harvests from federal lands to replace the 1.5 to 2 billion ft3 we import from Canada if tariffs reduce those flows.
  • Federal harvests provided 2 billion ft3 per year, 15-20% of U.S. timber, until the early 1990s, but were reduced for environmental reasons. Now they provide 0.3 billion ft3 per year.
  • Stocks have since grown significantly on these left-alone lands, and about 100 billion ft3 is reasonably available for harvest in the next few decades.
  • Harvesting levels of 0.9 to 1.3 billion ft3 per year would equal current growth and fire losses on these hectares and would promote thinned and younger stands that would be more resilient in the future.
  • There are environmental risks to building such a program that should be carefully weighed.

Now we know how the Trump administration plans to combat the effect of higher tariffs on wood prices: Harvesting more timber from federal forestlands, predominately in the western U.S. This approach would reverse thirty years of modest harvests from these forests, which began in the 1990s when the Endangered Species Act was invoked to slow down timber production in old growth forests that housed the Northern Spotted Owl (Strix occidentalis caurina).

Throughout their history, federal forests have been a punching bag, swinging back and forth between periods of protection and intensive logging as environmentalists and loggers duked it out in the court of public opinion and in front of judges. In the early 1900s, it was President Roosevelt who worried that lumberman and fires would destroy the great western forests and deprive future generations of habitat and boards. He set-aside millions of acres from the sawyer’s blade and hired forest rangers who tirelessly stood watch over their nation’s investment.

It turns out, back then, that logging was not much of a problem for federal forests. Sure, logging happened, but federal forests were remote and demand for industrial wood was modest in an era when population and income were far lower. Nature was a bigger “problem,” as 41 million acres per year burned before 1945.

Government set about slowing these conflagrations, hiring hearty soles, including servicemen returning from World War II, to put up a fight. Despite serious setbacks, like the Mann Gulch fire in 1949 that took 13 honorable lives, brave hand crews, hotshots, smokejumpers, and the like cut fires to 3 million acres per year by the 1970s.

What happened to all that wood saved from fires? Much of it made its way into houses and other products when the federal government built up a massive timber harvesting operation in western forests to meet growing demand during the post-World War II economic boom. By the 1970s federal harvests constituted 22% of softwood timber production in the U.S. In communities across the western landscape, forestry became a way of life, with booms and busts regulated by the number of housing starts.

But in 1991, all this came to a stop when Judge Dwyer ruled against the Forest Service, requiring changes in logging practices to save endangered species. Practically overnight, logging ceased on federal lands throughout California, Oregon, and Washington. They have remained low ever since as the Forest Service shifted its perspective.

These changes could not have come at a worse time for the American economy, which grew apace in the 1990s. Timber prices soared to new highs but mill towns in Oregon and Washington saw little benefit as log piles diminished. In 1993, President Bill Clinton chaired a timber summit in Portland, Oregon to make good on an election promise, but his words could not mend the obvious: a deep structural adjustment was underway, driven by a new calculation that favored owl habitat over tree cutting on federal lands.

Fortunately, for aspiring homeowners in the US, lumber poured in from Canada. The Canadians had plenty of trees and were keen to sell them. Lumber prices came back down as imports ramped up to 30% of lumber consumption by the early 2000s. The proportion has fluctuated a bit but remained close to this level ever since.

The question now is, what happens if tariffs reduce wood imports from Canada? Will prices stay high or can the US increase wood harvesting enough to counteract the market effects?
Consider federal timber lands, which have more or less been left alone since the early 1990s. These forests come under direct control of the President, who signed an executive order directing agency heads to increase logging on lands they control.

Can the US go back to the industrial-scale logging in federal forests like the 1950s through 1980s when federal harvests routinely hit 2 billion ft3 per year? Let’s look at the numbers.

The US consumes 12-13 billion ft3 of wood per year. Lumber accounts for about 55% of that, or 6.9 billion ft3. In recent years, we have imported around 1.7 billion ft3 per year. This level is down from the early 2000s when a housing boom drove imports to 2.5 billion ft3. Today, federal harvests stand at about 0.3 billion ft3 per year.

In principle, the US is capable of significantly ramping-up wood production on federal lands. With data downloaded from the US Forest Service Forest Inventory and Analysis database, I estimate that federal lands contain over 300 billion ft3 of softwoods, the key wood type imported from Canada.

We cannot access all that wood, though. About 23% is set-aside in wilderness areas and other protected places. An additional 43% is older than 120 years or in locations with slopes greater than 50 degrees. In both these cases, there are good environmental reasons not to cut. An additional 2.5% of the wood is too young to cut, so perhaps only 102 billion ft3 on 33 million acres is actually available for harvesting in a way that may not cause significant environmental damage.

That is a lot of wood. Can we cut it?

One answer is “yes” because we are already losing lots it each year to fires, which have now expanded to 7.5 million acres burned per year. Between fires and pests, 1.4 billion ft3 (1.4%) are killed annually, due in part to simple neglect. More harvesting would reduce fire and pest losses with thinned and younger forests.

How much can we safely cut? Simply cutting what grows every year would amount to 0.9 billion ft3 of wood for markets. Considering that these forests have not been managed for over 30 years, I hypothesize that we can harvest more than 0.9 billion ft3 per year and the effect on long-term volume growth will be positive. Currently, I’m assessing this with the Global Timber Model, so will have some actual analysis on that in the future.

But the current reality is that a significant amount of wood can, and probably should, be cut on public land. Based on the current inventory, growth, and dieback, I estimate that we can access 0.9 to 1.3 billion ft3 per year sustainably in the next two decades. Harvesting would also reduce forest fires.

That said, there are risks. The Forest Service has laid off lots of workers recently, and it is not clear the organization now has the capacity to manage a large and growing timber sale program. Lots of public and private infrastructure, including roads, machinery, and mill capacity, must be developed. Labor in western woodsheds has been scarce for years, so higher output will increase wages and drive-up costs.

There are also environmental risks. Road building and logging will denigrate habitat and water quality. In the haste to log, I worry that these risks will not be weighed carefully.

The carbon effects are not clear. Moving federal forests to shorter rotation ages with more harvesting could have short-term negative consequence for carbon emissions, but if management reduces fire damage and promotes increased growth rates through thinning and reforestation, the effects could be positive.

There is a way to have positive effects on the atmosphere, but it is not obvious that the Forest Service still has the personnel to ensure this outcome. And it is unlikely that the private sector, which will do the logging, has right incentives to do it well. The idea of using federal lands for more timber carries big risks.

One question folks might ask is why not harvest more on private land? Most forests and timber in the U.S. are on private land. Higher prices from tariffs could induce more harvesting there, but the tariffs must remain in place to have an effect. Landowners have inelastic supply, meaning that private wood supply will change modestly in today’s on-again, off-again policy environment.

The wildcard here is the potential federal timber harvesting program proposed through executive action. If private landowners come to believe the administration can actually pull off sustained increases in federal timber supply, logging on private lands in the east will edge up in anticipation. There is a modest overhang of mature logs in eastern forests that could enter the market in the next few years before the federal program gets up and running.

In conclusion, tariffs on wood imports from Canada would raise prices for lumber in the U.S. in the short term. We have plenty of wood available on federal forestlands, especially in the west, to expand our supplies and make up for any losses from Canada. However, it has been decades since most of these public forests have seen large-scale timber harvesting operations. Increases in harvesting can provide environmental benefits in terms of fire control and even long-term carbon storage, but there are also environmental risks to species, habitat, and the atmosphere.

Why the WRI No Harvest Counterfactual is the wrong approach for carbon accounting in forests.

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By Brent Sohngen (sohngen.1@osu.edu)

Have you ever wondered who owns the trees? Historically, of course, most observers would agree the trees belong to the landowner who can do with them what they wish. However, because 50% of the wood dry matter in trees is composed of carbon, the answer to this question is set to become less clear under some new rules proposed by the World Resources Institute for their Greenhouse Gas Measurement Protocol.

This new protocol will govern how companies and people who own forestland count the carbon in their forests. WRI is proposing to use an approach that only counts carbon when a stand is cut, ignoring any carbon changes that happen in forests owned by people who do not cut some stands, but instead let them grow. This approach uses what is called a stand-by-stand no-harvesting counterfactual to measure the effect of wood harvesting.

Figure 1 illustrates how the approach works. A growing timber stand is accumulating carbon from time-period 1 to 15 and is then cut. There is a harvest emission, shown by the immediate reduction in carbon. The forest begins to regrow either through planting or natural regeneration. At some point down the road, depending on the species, the new stand will have as much carbon as the original stand would have had if left alone.

The idea of the no-harvest counterfactual is to assume the level of carbon in an unharvested forest follows the hatched line and calculate the emissions associated with the difference between harvesting and not harvesting that stand.

Figure 1: Stand-by-stand no-harvest counterfactual

There are many problems with this no-harvest counterfactual approach. Mostly it is wrong because all wood harvesting is done in mature stands, which only become mature because someone left them alone long enough to get older. The WRI GHG protocol ignores any of this growth (what happens before t=15 in the figure). It focuses solely on the harvesting event, failing to account for the observed fact that landowners hold many trees they do not harvest, plant trees on old farms, let trees regenerate naturally on pastures, hold trees instead of growing crops, grazing, or building subdivisions and box stores. There are real opportunity costs with holding trees, but the WRI GHG Protocol assumes all these activities, and the associated costs, are irrelevant.

So why do they propose this scientifically challenged approach? Here’s my take.

First, WRI doesn’t want to provide carbon-based incentives for companies to grow and cut trees, especially in planted stands. This was clear in an article WRI scientists published in Nature in 2023 and the opinion piece by two of the nation’s most esteemed ecologists in the same issue. The general idea of this approach is that any tree harvesting is bad, including the millions of cubic meters harvested every year for fuelwood uses by folks in developing countries.

This approach – sometimes known as Proforestation – misses fundamental economic realities associated not just with supply and demand for wood, but also with emerging carbon markets. Economic studies have shown that wood market incentives increase carbon in forests (Tian et al. 2018). They have also shown that efficient carbon policies would incentivize lots of avoided deforestation, lots of reforestation and afforestation, lots of avoided old growth harvesting, and lots of improved forest management often coming in the form of extended timber rotations (Sohngen and Mendelsohn, 2003; Austin et al, 2020; Favero et al., 2020).

In these studies, more wood harvesting happens with carbon incentives over time because more carbon in forests means there is also more wood to harvest. Increased supply in turn lowers wood prices. Intensive plantations make up only about 10-15% of the new area in forests, even with high carbon prices. The rest of the carbon gains are predicted to happen in natural forests, where compensation levels for carbon would be large enough to support significant efforts to ward off fires.

Second, WRI has an additionality problem. For decades, people in carbon markets have argued for a strong additionality test, whereby tons of carbon sequestered by companies in the timber business cannot be used to offset fossil carbon emissions because the trees were grown for timber not carbon. The additionality problem arises because WRI and others cannot reconcile an accounting standard that would let a company use tons generated on its own forest as an offset against its own emissions with an approach that does not allow those tons to be sold in carbon markets due to additionality.

Concern about additionality is understandable, but plenty of approaches have been developed to handle it, including following the advice of van Kooten et al. (1995).

Third, WRI is worried that more scientifically appropriate approaches – such as the standard of measuring changes in stocks over time like the US Forest Service does for the US as a whole – will confer benefits on landowners for carbon fertilization and climate change, which have elevated the stock of trees (Davis et al., 2023). It is completely accurate that measuring carbon gains with stock changes over the area owned will credit landowners for carbon gains that are partly attributed to carbon fertilization or climate change. This means that people who hold forests could receive carbon benefits 15-25% larger than otherwise because of carbon fertilization and climate change.

Far from being a liability, as WRI claims, this is exactly what we should want because it means landowners are adapting to climate and market incentives.

Paying for the benefits of carbon fertilization, or in the case of the GHG Protocol, including them in insets generated from a land-based inventory, is the correct approach precisely because it encourages efficient behavior with respect to the atmosphere by landowners.

Rather than leading to more emissions, incentives that embody carbon fertilization values would reduce deforestation, increase afforestation, increase reforestation, reduce fire risks, and increase forest rotation ages. A recent US EPA report found that carbon sequestration would be 28% greater under policy incentives when carbon fertilization benefits are part of the incentives rather than ignored (USEPA, 2024).

In conclusion, WRI’s proposed GHG Protocol approach is the wrong policy approach. If the approach were correct, it could be extended to all forests for carbon accounting, but it makes no more sense in aggregate than it does as applied to a specific forest operation. Ultimately, it aims to reduce the value of carbon embedded in forests, constituting a legal “taking” of a resource in the United States that is worth billions.

WRI seems to have concocted this no-harvest counterfactual approach simply to limit how forest-owning companies count the carbon gains they provide. But it doesn’t work. In contrast, the economic literature illustrates that carbon incentives based on IPCC carbon accounting will lead to more of all forests. WRI should use this far more efficient, and environmentally sound, approach.

 

Reversing Deforestation: How Market Forces and Local Ownership are Saving Forests in Latin America

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My colleague Doug Southgate and I released our book titled Reversing Deforestation: How Market Forces and Local Ownership are Saving Forests in Latin America through Stanford University Press in late 2024. We of course invite all of you to have a look. It can be obtained through Stanford University Press, or Amazon. Additionally, Doug and I will be presenting a webinar on January 22, 2025.

We argue that forests in Latin America (and elsewhere) are at an inflection point because of trends in population, technology, and local ownership. All are bending in the right direction. For instance, growth in demand for food is slowing at the same time food production per hectare is hitting all-time highs. A key reason that food production has risen so much in Latin America is local ownership of farmland, which encourages investments in new technologies and higher yields. Local ownership – which includes individual ownership as well as community and Indigenous ownership – has also been expanding across the region’s forests, providing new opportunities for protection, planting, and natural regeneration.

In the book, we describe how we got to the point of converting 350 million treed hectares in Latin America (0.9 billion acres) to food production over the last 170 years. Population growth was the key driver. Human numbers increased from around 30 million in Latin America in 1850 to over 650 million today. Most of this increase happened because death rates fell as nutrition improved, medical advances occurred (including vaccines and antibiotics) and sanitation got better, among other things.

Today, population growth is slowing rapidly, not because calamity is upon us, as the authors of The Limits to Growth predicted in the early 1970s, but instead because people are controlling themselves. Just as birth rates fell years ago in Europe, North America, and other wealthy countries, they are now down across Latin America. As a result, the total fertility rate – the average number of children per woman – has fallen to 1.9, lower than the replacement rate. Population will continue to grow for a while in the region but is expected fall back nearly to today’s levels of 650 million by the end of the century.

Other factors contribute to deforestation, including government policies like open access, road building, and subsidies meant to expand agriculture and increase population in the hinterlands. Mining and logging play a role, but modestly in comparison.

As Nobel Prize winner Norman Borlaug showed us, adding land is not the only way to enhance food production. Increasing yields also works. Fittingly, the roots of the Green Revolution, which raised crop yields in developing countries last century, lie in Latin America.

Yes, nearly half of all tropical deforestation last century happened in Latin America, however, intensification reduced it. Since 1961, Brazil added 48 million hectares to corn and soybean production, an area bigger than the U.S. state of California. Yet if corn yields had not risen 268% and soybean yields 191%, Brazil would have needed 2.5 times that much land to produce the same quantity.

Because of intensification, real commodity prices for corn, soybeans, wheat, and rice have fallen since the 1960s. They are likely to fall further as slowing population growth meets new technology for food production.

As helpful as these trends are for slowing deforestation, they may not reverse it for the simple fact that government owns most of the forests in Latin America. In North America and Europe, governments do a great job of controlling access to public forests, although their management leaves substantial room for improvement. Through large swaths of government owned forests in Latin America, government agencies have trouble discouraging conversion to agriculture.

A well-recognized solution to de facto open access like this is ownership. Places like Chile and Costa Rica have developed land registries and encouraged individual land ownership, so deforestation has already reversed there. But thanks to Nobel Prize winner Elinor Ostrom, we have come to recognize that ownership can happen in lots of different ways, not just the fee simple ownership that many in North America and Europe are used to. When local ownership is considered broadly, it turns out that it is expanding across Latin America.

Early last century, land redistribution in Mexico created community forests called ejidos, which are well managed and resistant to deforestation. As a result, Mexico’s deforestation rate is low. Guatemala established several types of community forests in the Maya Biosphere Reserve in the late 1990s, which have become models for people all over the world. Deforestation rates within the community forests are slower than deforestation rates outside of them, and they are far slower than deforestation rates in some national parks in Guatemala. Brazil has been designating land in the Amazon for Indigenous communities as well, increasing local ownership and with it, opportunities for forest protection.

Ownership provides numerous benefits for forests. Although people do a better job maintaining forests when they have an ownership stake, carbon emissions and biodiversity losses are externalities, so even on locally owned land there will still be too much deforestation and too little afforestation. But private transactions – Payments for Environmental Services (PES) – can be deployed more effectively on private land. Nowadays, lots of companies are seeking opportunities to prevent forest loss or regenerate forests, and they prefer working with private owners than governments.

The evidence is pretty clear that forest planting is far more widespread on private land than public land. Natural regeneration is a perfectly valid way for forest renewal to proceed, but planting results in more stock more quickly. So from a carbon perspective, planting is beneficial.

When we look at the data and trends on people, technology, and ownership, Doug and I are incredibly optimistic about the future of forests in Latin America, and the entire world. Population and technology are heading in the right direction. In many places, the institutions of ownership are also heading in the right direction too, but now is a good time refocus our attention on local ownership, strengthening it where necessary.

Short-Term Carbon Storage

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Brent Sohngen, Department of Agricultural, Environmental and Development Economics, Ohio State University (sohngen.1@osu.edu)

For too many years, scientists and environmentalists have owned the discussion of short-term carbon storage, sowing confusion on an otherwise ordinary economic principle. The economic principle at play is renting versus owning.  Just about any asset, carbon included, can be rented or owned.

Consider this, when you fly to a vacation destination, you don’t have to buy a house because it is quite easy these days to rent one for the week. If you are an aspiring farmer who can’t afford the high price of buying farmland in the United States, you can join other farmers who annually rent about 40% of US farmland to produce crops. Chances are good that the last time you flew commercially, you did so on a leased aircraft just like the rich and famous do on small private jets. Short-term leases are ubiquitous, helping markets allocate goods and services throughout the economy.

Renting stuff works really well for other assets, why shouldn’t it work for the carbon asset stored in forests and agricultural soils?

The concept of renting carbon has been used to evaluate forest and agricultural carbon sequestration since the early 2000s. The economics of renting is straightforward. The price of any asset is determined as the present value of the stream of revenues associated with owning that asset, where the stream of revenues is the rent. In the case of carbon, the market price of carbon is the asset price. The rental value can be determined directly by using the discount rate.

If the price of carbon at time t is PC(t), and the annual rent is R(t), the economic relationship between the two is

R(t) = PC(t) – PC(t)*exp(-r)

Where r is the discount rate. When the carbon price is $50 and the discount rate is 5%, then the rent on that carbon is $2.44 per year.

Renting carbon is like buying it this year and selling it next year. If you buy a ton of carbon today on a market for $50, and sell it in one year (assuming no depreciation) for the same $50, and your discount rate is 5%, your economic costs of buying and selling that ton are exactly the same as the rental rate:

Costs of buying carbon and selling it a year later = $50  – $50*exp(-r) = $50 – $47.56 = $2.44

A recent paper a few colleagues and I wrote shows how storing carbon for one year like this has value, and how carbon stored for only a year can be used by companies to help them become carbon neutral (see Parisa et al., 2022: https://doi.org/10.1016/j.forpol.2022.102840).

In some cases, if a company wants to become carbon neutral, they may be able to purchase an offset credit from another company, based perhaps on renewable energy, nuclear energy, landfill methane capture, or some other method. However, a big source of relatively low-cost offset credits lies in forests and agricultural soils, both of which provide mainly temporary storage. Forests are temporary because they are susceptible to natural disturbance and future harvest, while agricultural soils are temporary because farmers frequently change their land use or management practices.

But now, with the study by Parisa et al. (2022), there is a clear pathway to treat short-term carbon storage on an equal basis with carbon emissions. To make sure that short-term storage and carbon emissions have equal value, Parisa et al. show that the straightforward answer is to hold multiple tons of short-term storage to equal 1 ton of carbon emission.

Parisa et al.’s paper works out the exact number of tons that need to be held for 1 year at a given discount rate to equal the value of 1 ton of C emissions from energy combustion. If the interest rate is 5%, then someone has to hold 20.5 tons for one year to have equivalent value as one ton emitted.

This means that a farmer who does conservation tillage this year and stores 41 tons for the year offsets the damages caused by 2 tons of CO2 emitted (20.5 tons for 1 year = 1 ton emitted and 41 tons for 1 year = 2 tons emitted). If the price of carbon is $50 per ton, then the farmer could be paid $100, or $2.44 per ton ($100/41 tons =$2.44 per ton), for their year of storage.

The math would work the same for trees, wetlands, or any other ecosystem warehouse of carbon storage. Under different discount rates, the annual rent for carbon would change, as would the number of tons that have to be held to equal a ton of emissions (see table below)

Table: Number of tons that need to be stored for 1 year to equal the value of 1 ton of CO2 emitted under alternative discount rates.

Discount rate

 Tons stored 1 year

1%

 100.5

2%

50.5

3%

 33.8

4%

 25.5

5%

 20.5
6%

17.2
7%

14.8
8%

13.0
9%

11.6
10%

10.5

 

By these calculations, if you have a farm or forest and you defer a timber harvest, reduce your tillage, or plant a cover crop, you now know exactly how much benefit your action provides society. Specifically, if your discount rate is 5%, and you hold 20.5 tons out of the atmosphere for just one year, you have offset the damages caused by 1 ton of your own or someone else’s emissions. With ecosystem storage (in forests, soils, grasslands, or wetlands) you only have to store the carbon for one year to have that benefit.

With short-term carbon storage, you can choose to adopt the new practice as long as you want, providing benefits the whole time. If you choose to store carbon tons for more than one year, you increase the carbon benefit you provide. Storing the carbon for 2 years provides the same benefit the second year as the first, meaning storing 20.5 tons for a second-year offsets the damages caused by 1 additional ton of your or someone else’s emissions. As a result, you can be paid the second year for the same tons. Similarly, storing it for 5 years means you can be paid the carbon price in each of the 5 years.

Moving towards efficient mechanisms to mitigate climate change with short-term storage like this is critical for solving the climate problem. Studies like Austin et al. (2020: https://www.nature.com/articles/s41467-020-19578-z) have estimated the costs of forest carbon storage assuming that markets properly price short-term storage in forests and agricultural soils. This and other similar studies show that there is quite a bit of potential to ramp up carbon sequestration on the landscape at low prices.

Unfortunately, the main crediting agencies, like Verra, American Carbon Registry (ACR), and the California Air Resources Board, have ignored the rental and short-term carbon storage approach in Austin et al. (2020) and Parisa et al. (2022). Instead, they have implemented approaches that rely on models of carbon rather than actual measured carbon, and approaches that rely on long-term contracts.

Environmental groups often bolster their arguments about the importance of fighting climate change using new estimates of the costs of forest carbon abatement in studies like Austin et al. (2020), and recent compilations of the earlier literature on costs such as in Griscom et al (2017) and Fargione et al. (2018). These studies make climate mitigation look cheap after all, suggesting that society should just get to it. However, many environmental groups then argue for crediting rules in the land-based sector that make land-based options hundreds of times more costly than estimated.

The results in Parisa et al. (2022) provide landowners and carbon markets with the assurance that their efforts to provide atmospheric benefits through short-term storage both work, and have atmospheric value. By providing a clear trade-off between short-term tons stored and carbon emissions, and basing the tradeoff on tons that are readily observed in ecosystems, offset markets can flourish. Ultimately, they can grow in scale to create the level of atmospheric benefits estimated in the many studies that have shown them to be low-cost options for climate mitigation.