Freedom Line Blog

Excessive regulation has come under increased scrutiny at all levels of government, and rightfully so.  Overregulation cuts into job growth and economic dynamism, sapping American vitality at a time when we simply cannot afford it.  As CFIF has highlighted numerous times, that is particularly true in the wood products industry.  Specifically, the manner in which bureaucratic building codes categorize lumber ends up excluding many domestic businesses from participating in critical government projects.

As one prominent example, every year, more and more cities needlessly make Leadership in Energy and Environmental Design (“LEED”) certification mandatory in their buildings.

The U.S. Green Building Council (USGBC) developed the LEED standards, which are in turn biased in favor of wood certified by something called the Forest Stewardship Council (FSC).  That disadvantages the majority of American businesses in the forest products industry by potentially blocking them from city, state and federal projects.  That’s because most domestic tree farmers, suppliers and retailers utilize wood recognized by the Sustainable Forestry Initiative (SFI) or the American Tree Farm System (ATFS) rather than the FSC.

In recent years, numerous elected officials have petitioned the USGBC, urging a more rational and inclusive approach to American timber.  Absent such a course correction, American wood products will remain unfairly excluded from public construction projects, as authorities give market access to timber used by a small minority of American businesses.  Such a framework decreases private sector revenues and jobs.

Now, new research by Forisk Consulting, prepared for EconoSTATS at George Mason University, provides further evidence of the economic costs that FSC imposes on American landowners and consumers.  Their study evaluated the way in which forest certification standards affect how timber management in the South and Pacific Northwest, comparing the impact of FSC, SFI and ATFS standards on land managers in Oregon and Arkansas.

The results were striking.  In Oregon, according to the study, statewide implementation of FSC could result in 31,000 job losses.  And in Arkansas, forcing land managers to abide by the FSC standard could reduce state timber employment by up to 10,000 jobs.

Those results should not come as a surprise, given the structure of FSC.

Although FSC certification is more costly than alternative certification standards, paying more for FSC does not guarantee that consumers are getting an environmentally superior product.  Among other things, FSC audits take weeks longer to complete than other certification programs, which diverts resources from land management for foresters.  FSC land restrictions also reduce the amount of timber harvested per acre, which lowers the supply of lumber and raises prices for consumers.  Furthermore, as Forisk Consulting has previously documented, FSC written standards don’t always correspond to what auditors enforce.  As a result, landowners are often confused.  As one auditor noted, “most companies are leaving clumps of unmerchantable trees in scattered areas, usually in riparian areas, draws and inaccessible corners.”

Thus, the accumulating empirical data shows the detrimental effects of making FSC certification a requirement for land management and building requirements.   As the number of LEED projects increases, so do the costs of the current forestry certification framework.

Fortunately, policymakers can neutralize that trend by treating ATFS, FSC and SFI wood equally, rather than mandating the use of FSC timber in our buildings.  That will give more American businesses access to new markets, and encourage a competitive certification process that will result in more landowners seeking certification.  Ultimately, that will benefit both the economy and the environment.

Understandably, “forest certification” remains a rather obscure issue to most Americans.  Its regulation, however, significantly impacts the price consumers pay for wood products, not to mention the struggling domestic timber industry.

So what is “forest certification?”  It simply refers to formal recognition from organizations like the Sustainable Forestry Initiative (SFI), the American Tree Farming System (ATFS) or the Forestry Stewardship Council (FSC) that a particular business responsibly manages its property in a way that promotes sustainability.  Those three certification groups set different benchmarks, some more achievable for various landowners than others.  A free and open certification market that allows businesses to choose the system that best fits their profile, and allows consumers to choose, has resulted in a larger amount of “green” products in consumer and building markets.  Additionally, the number of acres of certified land grows by millions of acres each year.

A vocal group of environmental activists, however, only endorses FSC certification and seeks to make it a monopoly while demonizing the competing forest certification systems.  Those activists successfully bullied Fortune 500 companies into accepting the exclusive use of FSC-certified products, and many government and rating agencies only recognize and award green “credits” to forest products recognized by FSC.  As a result, the market becomes distorted, with real costs for producers of wood and the environment, and fewer choices for consumers.  And in an unfortunate turn of events, recent government overreach prevents a majority of American businesses who took the time and invested their resources to achieve certification from entering green markets.  The U.S. Green Building Council’s (USGBC) LEED rating system only recognizes FSC-certified wood as sustainable, which means SFI or ATFS timber cannot enter LEED projects.  Even though the USGBC is a nonprofit group, many government agencies now accept its word as gospel, and make its standards binding for receiving contracts.

That weakens the incentives for landowners to certify their land, because if they cannot market their goods in LEED markets, why bother to absorb the real costs (financial, time, compliance) associated with certification?  If SFI and ATFS goods are blocked from green markets, and the cost of FSC-certification is too steep, many businesses will opt out altogether.

The better policy is to encourage sustainable development of our nation’s forests by recognizing all credible forest certification program options.

Whether having arrived at these policies out of ignorance or simply succumbing to outside pressure, policymakers should accordingly reverse the policy that amounts to a de facto FSC monopoly in certain markets.  A recent study by the American Consumer Institute estimated the costs of carrying that policy to its endpoint.  Namely, if FSC-certification was made a binding requirement for American forests, consumer welfare losses would occur in a number of markets, totaling $10 billion for wood products and $24 billion for paper products markets each year.

It is therefore incumbent that the government stop picking certification monopoly winners and losers in this market.  The timber industry, small businesses and consumers deserve much better.

In an interview with CFIF, Steve Pociask, President of the American Consumer Institute Center for Citizen Research, discusses his organization’s new study, “The Monopolization of Forest Certification” and the consequences of “green certification” monopolies on consumer welfare.

Listen to the interview here.