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  • Loss of future employment resulting from exporting raw logs


    David Broadland
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    Logs being loaded onto a ship in Northumberland Channel near the Harmac pulp and paper mill, Vancouver Island

     

    IT HAS LONG BEEN ARGUED IN BC that the export of raw logs should be reduced—or even banned—because the practice amounts to exporting forest-product manufacturing jobs out of BC. In this view, the value of such jobs is seldom questioned and is never measured against the full costs of the required logging. That conventional economic argument is countered with an opposing conventional economic argument that log exports actually raise the value of logs taken from public land, thus conferring some benefit on the public. This view, too, never considers the full costs of the required logging. By “full costs” I mean both economic and environmental costs.

    It’s a mystery why these arguments have gone unchallenged for so long. How can we understand whether log exports are better than a ban on log exports, or vice versa, if we don’t consider the full costs of the logging that’s done in order to meet the demand for log exports. Below, we’ll consider those costs.

    First, however, let’s review the conventional economic arguments as understood by one of BC’s most distinguished resource economists. In a 2019 op-ed in the Vancouver Sun, Peter Pearse argued that restrictions on BC log exports “don’t make a lot of sense.”

    Pearse outlined the two conflicting economic arguments, starting with the argument for jobs: “The often confusing debate usually centres on jobs. Opponents of exports argue foreign buyers of logs reduce the raw material available to our domestic sawmills and pulp mills, and thereby diminish local employment opportunities (as summarized in the slogan “Export logs = Export jobs” on road signs along the Malahat Highway). This view is widely held, especially by those engaged in manufacturing forest products.”

     

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    Pearse then contrasted that with the argument that log exports support jobs and a greater public interest: “Proponents of free trade in logs, however, point out access to foreign markets hikes the demand and value of logs, which increases employment in forestry and timber production. In addition, logs are exported only when they bring prices higher than domestic sales, so exports advance the public interest in the economic return on our forest resources.”

    Which side does Pearse come down on?

    He wrote: “Restrictions on exports obviously constrain the demand for our logs, depress their domestic market price and hence also the quantity produced. So the direct beneficiaries are the local buyers, mainly sawmills and pulp mills and their employees and shareholders. But, for the same reason, those involved in producing logs suffer from the reduced production and value of their product. In effect, the loss suffered by log producers serves as a subsidy to manufacturers.”

    Since a large proportion of BC’s “log producers” are the same companies that manufacture wood products like lumber, pulp and paper, we might ask ourselves why this is a problem. Pearse gives us an answer.

    He says that the real losers created by restrictions on log exports are BC taxpayers: “However, there is another, often forgotten, player in this industry, namely the owners of the timber. In BC, where most of the timber is harvested on public land, the government sells timber to logging companies for a ‘stumpage price,’ calculated as the difference between the market value of the logs and the cost of harvesting them. Export restrictions depress the value of logs, so stumpage revenues are reduced accordingly, shifting the ultimate burden of log export restrictions onto us, the hapless taxpayers.”

    Pearse comes down on the side of unrestricted log exports because, he believes, with restrictions logs would have a lower price and so BC taxpayers would get a lower return from the liquidation and sale of publicly-owned forests. The existence of such a linkage between the level of exports and the stumpage the Province would collect is crucial to the pro-no-restrictions position. This is easy to test by comparing the average stumpage collected in a year that had a high rate of log export to one that had a lower rate of export.

    In 2014, 10.1 percent of the volume cut in BC was exported as raw logs. That year the public received an average of $7.62 per cubic metre. The very next year, exported logs dropped to 8.3 percent of the total volume. By Pearce’s reasoning, the average stumpage collected by the public should have been reduced. But it wasn’t. It increased to $8.03 per cubic metre. Evidently, there isn’t a smoothly working linkage between the level of log exports and the public interest, at least not in the direction Pearce asserts.

    You might think, “You are just cherry picking one case that happened to not support Pearse’s reasoning.” Okay, let’s look at the two years before the year Pearse wrote his op-ed. In 2017, 9.0 percent of the total volume cut in the province was exported as raw logs, almost all of it from the coast. The average stumpage collected by the Province was $12.34 per cubic metre. In 2018, exported logs fell to 8.0 percent of the cut. Did this reduction in log exports result in a decrease in stumpage? No, stumpage jumped up to $18.78. Why? Mainly because the ministry of forests raised stumpage rates in BC. What does that show? It demonstrates that BC taxpayers don’t really need log exports to get a higher return on its forests; it just needs government to set higher stumpage rates.

    In my view, those who argue for restrictions based on the need for more jobs—and those who argue for no restrictions based on getting a higher return for the public resource—are both overlooking most of the real costs associated with exporting raw logs. Yet it’s only by rigorously examining the full economic and environmental costs of logging in BC that we’ll be able to have a clear sense of the impacts of log exports—or the export of any wood product from BC.

    This includes the net loss to taxpayers arising from the fact that stumpage and other forest-related revenue don’t even cover the cost of the ministry of forests’ management of the resource. It must also include indirect subsides the industry receives, like a reduced rate for consumption of electrical energy. Much worse than those economic omissions is the failure to examine the environmental harms created by logging, milling and exporting raw logs, lumber, pulp and paper.

    None of these costs are included in considerations of whether the over-exploitation of BC forests—which is the sole driver of log exports—is good for the broad public interest. All that economists like Pearse consider in looking at log exports and other forest product exports are the numbers associated directly with the logging industry and its downstream partners. This is actually only a minuscule slice of the real costs.

    Consider, for example, one cost that is never considered when the economic benefits of exporting logs is reckoned: the carbon emissions associated with a year’s worth of logging for raw log exports. We are in the midst of a growing climate emergency and ignoring this cost would be foolish—just look at what happened in BC starting on November 12, 2021. This cost applies equally to all forest products, but let’s confine our consideration to the export of raw logs.

    In 2019, the year in which Pearse penned the above analysis, 8.5 percent of the volume of forest cut in BC was exported as logs, mainly to China. That amounted to 4.7 million cubic metres of logs. But those logs represent only about one-half of the forest biomass that was killed by the logging required to obtain those logs. By international convention, the carbon emissions associated with the decomposition of that forest biomass are attributed to the year in which the cut took place. When we convert the total forest biomass that was killed to equivalent greenhouse gas emissions, we find that logging for the export log market produced 7.7 million tonnes of CO2 equivalent emissions in 2019 that could have been avoided.

    To put that number in context, not cutting those forests for log exports would have been the equivalent of taking 80 percent of all light trucks and passenger cars in BC off the road for a year.

    Can we put an economic value on the emissions that would have been avoided? We can. In 2019, the BC Carbon Tax put a cost of $40 per tonne on carbon emissions. The atmosphere can’t tell the difference between a carbon dioxide molecule that comes from burning fossil fuels or one that comes from decomposing or burning wood. They both have the same effect on global heating. All forest carbon will, over time, return to the atmosphere. But by accelerating that return by several decades, or even centuries, we are having the same effect on climate change as we would by burning fossil fuels with the equivalent carbon content.

    So, if we’re being realistic, 2019’s 7.7 million tonnes—priced at $40 per tonne—should have cost the log producers $308 million. How much of that was actually collected and added to the public purse? Not a single penny.

    Over the years 2008 to 2019, the uncollected tax on 96 million tonnes of carbon emissions associated with producing logs for export amounted to $2.97 billion.

    That’s not the only real cost associated with log exports that isn’t being counted by either Pearce or the job seekers.

    For example, the loss of forest carbon sequestration capacity—the ability of mature forests to absorb carbon from the atmosphere, isn’t included in any reckoning of the cost of exporting raw logs.

    Logging also dramatically raises forest fire hazard in the area logged for 30-40 years. Forest fires can destroy communities and local economies, yet the resource economists never include those costs when they perform their analyses. Fires fill the air with particulates that can cause serious health problems, and those problems come with both high social and economic costs. Nor are the carbon emissions from those fires included.

    Likewise, logging can affect the timing and peak flows of BC rivers and cause catastrophic flooding in BC communities. Look at what happened to Merritt, Princeton and the Fraser Valley in mid-November 2021. Increased sedimentation and warming of water caused by clearcut logging degrades salmon habitat, lowering the salmonid productivity of BC streams and rivers. Yet such impacts never appear in the economic analyses that argue whether the 10 percent of BC logging that occurs for log exports is good for the public interest or not. Nor does the impact clearcut logging has on the huge potential BC has for forest-based research and tourism.

    The problems with both Pearse’s economic analysis supporting log exports and the argument against log exports based on the lost opportunity for more jobs in BC, are the same. They both ignore many of the economic costs associated with this industry and they both ignore all of the environmental costs of the industry.

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