It is basic Economics 101. Competitive markets create better outcomes than monopolists. Monopolists restrict supply and charge higher prices. Dynamically, monopolists face fewer incentives to create new products or improve how their products are made. In fact, creating new technologies or processes could undermine a monopolist’s current market dominance.
What is true for the marketplace is also true for the regulations governing the actions of the marketplace. An interesting example of this principle is afforded by a current controversy over forestry certification programs.
While consuming timber products requires the harvesting of trees, many consumers, if not the vast majority, value forests and want their timber products harvested responsibly – in a way that sustain our forests.
A sustainable forest is broadly understood as one that conserves biodiversity, protects endangered species, is vibrant, is capable of regenerating, and is managed responsibly. Maintaining a sustainable forest also ensures that the economic needs of the timber industry and its consumers are also fulfilled.
Sound forestry management must balance out all of these competing needs that may, and often do, conflict.
It is extremely difficult, if not impossible, for consumers to know whether the timber was harvested responsibly by examining the final product. Forest certification programs encourage both private and public landowners to manage their forests responsibly and communicate this information to consumers and businesses empowering them to purchase wood products knowing that the timber has been harvested in a responsible manner.
Due to the multiple and competing needs, multiple certification programs have arisen. Each program balances the conflicting needs in timber production differently. Many environmental groups accuse one standard (the SFI standard) of weighing economic needs too heavily. Many forest landowners, however, find another standard (the FSC standard) to be impractical, due to the many differing standards – more than 30 worldwide – and the economic costs created by strict application of this programs’ approach in the United States.
As reflected in an April 22 Huffington Post article, environmental groups preach that the FSCstandard should be the only regulatory standard – advocating that a single overall regulatory structure should replace the current competitive landscape. The FSC standard does not have any special insights regarding how to balance the many competing needs though. And, should the FSC’sstandards not correctly balance all of these competing needs, adverse consequences will result.
The FSC standard weighs economic considerations lightly, and consequently creates significantly higher costs for those landowners that adhere to its principles in the United States. The higher costs of producing under the FSC standard are, ultimately, priced into the costs of the products.
More problematic, the price premiums associated with FSC-certified wood do not necessarily correspond with an environmentally-friendly product because FSC’s standards vary throughout the world. U.S. foresters end up facing high, costly benchmarks for certification, while their counterparts in Russia and China (among many other countries) can more easily obtain FSC recognition.
Back in the United States, if the costs created by the FSC standards exceed what consumers are willing or able to support, then requiring all domestic forests to adhere to the FSC standards will discourage people from purchasing timber from domestic forests. The consequences for the U.S. economy would be income and job losses. The adverse impacts would not be just economic, however.
U.S. policies that favor FSC wood create incentives to purchase timber from environmentally questionable regions and countries. The consequences from these purchases, though unintentional, are a reduction in the health of global forests and excessive global forest degradation compared to the more environmentally sustainable practices that consumers would support under more balanced U.S. forestry standards.
Please visit www.forbes.com.