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No premium price for legal timber, only market access to EU, say officials

“I don’t think we’re going to see any formalized green premium,” announces DFID official.

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Certified timber inEast Kalimantan, Indonesia. Timber certification is one mechanism for ensuring sustainable forest management. Photo by Michael Padmanaba/CIFOR

BEIJING, China (14 November 2011)__Wood products that are certified to have been made from legally sourced timber to meet new EU standards will not necessarily result in a higher price for Asian producers that had hoped to offset the increased costs of production due to the certification requirements, said EU officials.

“I don’t think we’re going to see any formalized green premium,” Hugh Speechly, Coordinator of Forest Governance and Trade Programme at the UK Department for International Development, said at the Asia Forest Partnership (AFP) Dialogue 2011 in Beijing. However, wood products imported to the EU with a license from countries that have a timber voluntary partnership agreements (FLEGT-VPA) will be considered as zero risk, which is an immediate market benefit, he said.

Last year, the EU signed a law banning the sale of illegally harvested timber in Europe from 2013, following a similar regulation issued by the United States in 2008.  The EU and Indonesia signed a FLEGT-VPA – the first in Asia – earlier this year, which says that timber with a certificate from the Southeast Asian nation’s national Timber Legality Verification System (SVLK) will be regarded as legal.

“We do hope that (the certification) will give us a premium price,” said Iman Santoso, Director General of Forest Utilization at Indonesia’s Ministry of Forestry. Exporters will have to bear additional costs to ensure that the wood products they have procured are legal, and “it’s not cheap,” he added. Vietnam, which manufactures timber products, also voiced a similar concern in the discussion.

According to the European Forest Institute (EFI), illegally harvested timber accounted for approximately half of wood products exported from Indonesia. About 20 percent of timber products imported into the EU markets are illegal, EFI estimated.

Producing countries armed with a FLEGT-VPA agreement with the EU have an advantage over others when they’re exporting timber to nations that transform the material to other products to sell to the European market, such as China and Vietnam, said Vincent van den Berk, Coordinator of FLEGT Asia Programme. A FLEGT license would verify the raw material as legal, leaving the processing countries to verify only the legality of the processing part, he said.

EU is in negotiations with Malaysia and Vietnam to form similar FLEGT-VPA agreements and may start talks with Thailand and Laos next year, Vincent said.

China is the world’s largest importer of illegal wood in volume, with about 20 percent of imports illegal, according to the latest Chatham House estimate.  The United States, the EU and Japan accounted for more than half of China’s exports of wood products, with shipments amounting to US$5.1 billion to EU and US$7.5 billion to US in 2009, according to a Forest Trends report, funded by the EU.

Prices depend on supply and demand and there may be a premium once the legislations come into force, said Chen Hin Keong, Global Forest Trade Programme Leader of TRAFFIC Southeast Asia. If not many companies can supply verified legal timber, there will be competition and prices may go up, he said. This largely depends on the market and will be different for particular buyers and products.

AFP Dialogue 2011 was held on 8-9 November 2011 in Beijing. It was a partner event at the second Asia Pacific Forestry Week (APFW) that takes place from 7 to 11 November 2011, organized by the Food anf Agriculture Organization of the United Nations (FAO), the Asia-Pacific Network for Sustainable Forest Management and Rehabilitation (APFNet) and the State Forestry Administration of China.

For other reports from the event, visit the blogs of these organizations:
Food and Agriculture Organization of the United Nations (FAO)
The Center for People and Forests (RECOFTC)


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