IBEC
Irish Foresty and Forest Products Association
Outline Submission
Department of Agriculture Forestry Review Group
On behalf of
Irish Forestry and Forest Products Association
31st March 2010
1Introduction
2Overview of industry
3Remit and focus of review group
4Afforestation levels and raw material supply
5Investment in forestry
6Employment potential of the sector
7Afforestation targets and climate change
8Forestry products for bio energy
9Infrastructure supports for forestry materials supply chain
10.Marketing, promotion and support for wood products
11.Conclusions
1Introduction
The Irish Forestry and Forest Products Association (IFFPA) welcomes the opportunity to input the members’ views for consideration by the Forestry Review Group.
The Irish forestry and forests product sector comprises employers within the growing, harvesting and the processing of forest products. The sector makes a considerable and growing contribution to the Irish economy, its environment and social and rural dimensions.
The Irish Forestry and Forest Products Association (IFFPA) was established to represent the broad forest and forest-based business sector. We are the only industry association that represents the sector as a whole and provides mechanisms for collaboration on a sector-wide basis. The role of the Association is:
- To achieve a vibrant, sustainable, and competitive forestry and forest product industry for Ireland.
- To unite the members of the various sectors of the industry and to co-ordinate their efforts and activities in matters of common concern.
- To serve as a technical resource providing guidance, commentary and advice on regulatory developments of relevance to the sector.
- To communicate the benefits and potential benefits of the industry sector to a wide variety of stakeholders.
- To advise the Government of all matters affecting the welfare and prosperity of the industry and advice on legislation or other measures affecting the industry.
- To distribute among members information on all matters affecting the industry and to publish research and statistical information on the industry.
- To consider and develop long term strategies for the continued success of the forestry and forest products industry.
2Overview of Industry
The Irish forestry and forest products sector employs > 16,000 people and accounts for approximately 1% of GDP. The forest industry, comprising growing, harvesting and processing of forest products makes a significant and growing contribution to the Irish economy. Further benefits which have not been fully economically valued include the environmental, recreational and social value of the sector along with its significant contribution to rural communities. The recreational use of forestry has been valued at €97 million which in turn generates €268 million in economic activities for communities in rural areas. Annual visitor numbers to Irish forests are in excess of 18 million. The contribution is based on the current afforestation levels and greater analysis and projections are needed to show the real potential of the sector if the appropriate afforestation programme were in place.
Based on market potential, environmental cost benefit analysis and employment projections, this sector could surpass the current contribution from the beef industry, if supported and managed correctly with appropriate forest planting and associated supply chain infrastructure in place.
3Remit and Focus of Review Group
The importance of the forestry policy review at this time cannot be underestimated and the nature, depth and scope of the policy review must be as wide and comprehensive as possible.
The policy decisions taken must be based on the best evidence presented on the benefits and opportunities of this important sector and reflect future needs of the Irish economy, its obligations under the Kyoto protocol and the requirements of wood products and wood energy industries
Core to the policy development is the recognition of forestry as an environmentally sustainable investment with wood products as a necessary environmentallyfriendlyand carbon neutral material.
The policy decisions arising from the review will not only impact on the forestry sector but have downstream and lateral effects on a number of different areas including the wider economy, other industry sectors, the environment, climate change, energy policy, social and societal enhancement and not least employment.
With this in mind it is important the review body interact with other government departments and industry associations to ensure that policy decisions taken reflect and complement policies and decisions taken in other areas. The prime focus of the review should be to establish a forestry action programme to secure the future of the forestry and forest products sector as a core and key national industry to achieve maximum gains, benefits and environmental reputation for Ireland
Forestry Policy is integral to policy decision taken in a number of departments
- Finance
- Enterprise Trade and innovation
- Environment, Heritage and Local Government
- Energy, Communications and Natural Resources
- Agriculture, Fisheries and Food
- Transport
- Community, Rural and GaeltachtAffairs.
The importance of cohesive joined up thinking for the forestry and the forest products industry must be recognised with integrated policy decision made to ensure:
- Optimum afforestation levels to achieve carbon sequestration and raw material supply for both timber processing and biomass industry
- Adequate and appropriate financial incentives and promotional schemes to encourage optimum planting levels;
- Suitable infrastructure to allow for optimum harvesting and supply to relevant industry users;
- Support to grow the indigenous processing and biomass industry to supply Irish and export markets;
- Appropriate policy and market analysis to identify demand and identify synergies between different demand streams.
The Association has a number of specific issues and concerns which it would like to raise for detailed review within the group which are covered in the following pages
4Afforestation levels and Raw Material Supply
The current afforestation levels are inadequate and do not reflect the necessary plantings to either achieve the required carbon sequestration levels nor provide adequate raw materials for forest products processing industry or use as energy biomass. There will be a shortfall of material supply vs. demand going forward and the indications are that imported materials will be required to provide for the overcapacity.
There are significant existing and potential markets within Europe and the UK for wood materials, products and biomass. To ignore this potential is a lost opportunity which could result in the long term dissolution of a vibrant wood supply chain and industry processing and products sector
Based on the estimated requirement for wood as biomass for energy sector rising from 0.8 millionM3 to 2.7 million m3 by 2020 along with the conventional wood demand rising from 2.8 million M3 to 3.6 million M3 in 2020, the total requirements of 6.3 million M3would not be met by wood supply from Irish forests.
There is a current acute shortage of (14cm +) material for the wood processing sector which is undermining the sustainability of the industry as highlighted at the recent National Forestry Conference. The negative impact of this on the industry will increase substantially over the next decade if the issue of supply security is not addressed as a matter of priority.
This scenario is not acceptable when we have an island ideally suitable for afforestation. The current economic climate could provide a lucrative incentive scheme for land owners and investors to achieve optimum plantation levels and provide a home grown resource for a indigenous industry sector. The goal of self sufficiency in renewable energy provision and home sourced wood for products should be stated and a programme to achieve this outlined and agreed and committed to by Government.
Supply must be brought into balance with demand. A well structured, comprehensive, broad based planned forest planting programme needs to be implemented as soon as possible. It is important to identify synergies between different demand streams for wood resources and agree a policy for sourcing materials to ensure optimum supply, quality, application and efficient use.
It is important to have a real determination of the demand level for round wood, sawmill co-product and harvest resides on the island of Ireland on an annual basis onwards.
The afforestation levels on an ongoing basis must ensure a balanced age structure to deliver an even stream of goods and services over time.
It is also important that a long term supply platform be established to secure long term supply contracts for the processing sector.
5Investment in Forestry
The level of investment needed to achieve the stated Government target of target of 17% Forest Cover by 2030 must be quantified and the source/sources of funding identified.
The low percentage funding allocated under the current Department of Agriculture, Fisheries and Food budget of just 3% indicates a non valued judgment forecast of the industry. Current and future projections indicate that forestry is an economically sustainable investment with greater contribution to achieving targets in differing policy agendas, economic, employment, environment, energy etc.and other industry sectors.
The body should explore the overhaul and enhancement of the current range of programmes and support to ensure the 17% forestry cover target it attended by 2030
Investment presents an opportunity to ultimately return net profits over investment into the future. The sector can create jobs and profits in three distinct areas of the economy: Ireland’s forest sector - through increased nursery, planting and forest management services;Ireland’s renewable energy sector – through increased deployment of biomass solutions;Ireland’s wood processing sector – through increased output and range of timber based products;
In light of the current economic crisis and the lack of available government funding it is important the group review innovative solutions to increasing afforestation; facilitating access to new and additional revenue streams not dependant on current government funding mechanisms.
The predicted increased requirement for raw material from private afforestation must be considered and the effectiveness of the current forestry grant scheme assessed. Private forest owners will require financial incentives to achieve the required planting levels. Consideration should be given to the development of a revenue based scheme as an adjunct to the government support scheme.
A scheme could be developed where some of the monies currently set aside to purchase carbon credits abroad and collected via carbon tax could be directed for forestry investment in Ireland. This would allow monies to allocate to private forest owners to manage land for carbon sequestration. Access to this revenue stream is available to a much broader range of investors; farming community, forestry companies, financial institutions and potentially international investors. Such schemes could run alongside current afforestation schemes and significantly enhance the uptake by participants
The introduction of such measures could change the economics of forestry and open up a new revenue stream providing an annual cash flow at an early stage in the investment cycle rather than have to wait for timber revenues at the end of a 40 year rotation.
It is also important to review the reasons for the non optimum uptake of forestry as an investment opportunity and focus on the inhibitors and inducements to broaden the range of investors and participants in afforestation schemes.
The recent changes announced in the Budget and Finance Bill to raise the effective rate of income tax for high-income earners from 20% to 30% with effect from 1 January 2010 and reduce the entry point at which such rates would apply from €250,000 to €125,000 will have a severe impact on future investment in the forestry sector. This is a gradual erosion of the tax free status of income generated via the occupation of woodlands which is generated from the sale of timber and it needs to be reiterated that the tax free status is one of the key drivers for investment into forestry
6Employment Potential of the Sector
The current unemployment crisis and the need for creation of new jobs along with new job creating sectors is a priority for Government and the forestry and forest products sector is ideally positioned if supported to provide the employment opportunities
The sector can create jobs and profits in three distinct areas of the economy:
- Ireland’s Irish forestry sector - through increased nursery, planting and forest management services;
- Ireland’s renewable energy sector – through increased deployment of biomass solutions;
- Ireland’s wood processing sector – through increased output and range of timber based products;
The production and use of wood fuel has the potential to create a significant number of new jobs in Ireland, many of them in rural areas where few other employment opportunities may exist. A report by EUFORES (2000) estimates that the development of renewable energy sources could result in the creation of over 900,000 new jobs in the EU15 by 2020. 385,000 jobs could be created from the provision of renewable energy, and a further 515,000 from biomass fuel production (including wood). The figures take account of jobs displaced in conventional energy technologies.
7Afforestation Targets and Climate Change
Unlike many other sectors, forestry can contribute both to reducing emission sources and to increasing carbon sinks. Due to the direct link between land-use decisions and sustainable development, forestry plays a key role when addressing the climate change problem in the broader context of global change and sustainable development. Woodlands provide highly cost-effective and achievable abatement ofcarbon emissions both in the utilisation of wood products for energy and in the displacement of energy intensive products.
The creation of new woodlands and the restocking programmes of existing forest present major opportunities for adapting forest to future climate change. With the length of time required for tree crops to mature, the planning horizons for forestry are inherently long and the decisions and appropriate actions taken in the immediate future must be appropriate for the current and future climates.
Ireland has very low forest cover by international standards (10% versus EU-25 average of 36%) – representing a major opportunity. Ireland is currently planting just half the target level of 15k ha/yr as assumed in the National Climate Change Strategy
Clearly the extent to which abatement can be achieved will be directly proportional both to the increases in area over which the new planting takes place and the extent of fossil fuel substitution that can be gained. We depend on forests to contribute at least 4 MtCO2 /yr or about 6% of total green house gas emissions. However if we continue to plant at current levels there will be a loss of 45 MtCO2 between 2035-2055 – worth €2bn (@€45/t). In terms of complying with Kyoto targets the annual contribution from afforestation post-1990 will be around 2.2 million tonnes of carbon dioxide per year, representing a projected annual saving to the taxpayer of €44 million or €220 million over the five years from now to the end of 2012. Irish forests will sequester over 4 MtCO2 in 2020 – between 30% and 60% of Distance to Target (depending on emission scenario used). This totals c.33 MtCO2 in the period 2013-2020 – with a value to Ireland of between €500m and €1bn (@ €15/t - €30/t).
Ireland needs to increase planting to at least 15k ha/ year to ensure a sustainable positive level of carbon sequestration into the future. However we would contend that with adequate and appropriate supports and incentivising programmes this should be increased to 17ha/year. This could be considered as part of the “Green IFSC” concept to become cornerstone of a domestic offset scheme which would build international credibility recognition of Ireland as a carbon neutral economic entity.
8Forestry Products for Bio Energy
Bioenergy resources, supply chains, market development, fuel quality and standards present opportunities and barriers for increased bio energy products.
European demand for wood pellet is expected to rise from its current 10 million tonnes to 100 million tonnes by 2020. The EU commonplace district heating systems present a potential market which would require a regular large scale supply.
The current annual demand is estimated to be 30,000 tonnes of wood pellets and 70,000 tonnes of wood chips as a result of the significant growth in the sector over the previous year mainly into commercial, industrial, households and government operation.
Demand for Wood Fuel
Increasing energy from renewable energy resources is a national policy commitment and the targets for 2020
- 40% of electrical consumption from renewable by 2020
- 12% renewable heat by 2020 (5% by 2010)
- 30% co-firing with biomass at the peat power plant by 2015
- 800MW of CHP by 2020 with emphasis on biomass CHP
Biomass Supply
Achieving these targets necessitates a vital supply of indigenous biomass energy resource to meet renewable energy targets and address security of supply issues. The development of efficient, rapid response and flexible supply chains are essential for growth of the bio energy industry. While forest biomass is a renewable resource, its availability is limited over short time periods by both the amount of land in forests and the rate of forest growth. Therefore, an increased use of forest biomass without replanting for bioenergy, biofuels, or wood and paper products could impact all on other users of the forest resource.
Future requirements to fulfil a supply demand as outlined by Government of 4 million tonnes per annum would be required. At present the forestry sector could not fulfil 50% of this. If this is to be achieved; while securing the wood products sector; afforestation must be increased to >15,000 ha per year. Industry specific investment and incentives should be in place to encourage planting of short rotation coppice which is ideally suited to the wood based biomass market. The recent Government announcement that €20million is being provided to assist Ireland reach its renewable energy target and double the area of willow and miscanthus to be planted in 2012 is helpful.
The forestry industry in Ireland is making significant progress in developing a sustainable supply of quality wood fuels here which will support the further penetration of these fuels in the roll out of renewable energy projects. The increased deployment of wood chip fuelled boilers, supported under the ReHeat scheme, and the use of biomass in combined heat and power applications, supported by the CHP Deployment Programme and the REFIT scheme, as crucial drivers for the roll out of biomass renewable energy in line with the Government’s objectives.