Don't Axe Market-Based Timber Standards

Government interference is pulling the strings out of a good system.

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WideModern_TimberLogging_071113.jpg
This Aug. 25, 2009 photo shows Bo Burns cutting logs at K&B Timberworks Inc. in Reserve, N.M.

If the American jurist John Marshall were alive in our time, he just might amend his statement (in reply to Daniel Webster's legal argument) that "the power to tax involves the power to destroy." These days, the power to regulate, mandate, stipulate and otherwise dictate can be just as harmful.

A prime example is the Environmental Protection Agency, whose coercive capabilities have grown over the past several decades to where it can hold the power of life or death over entire industries. Witness President Obama's new push for an ambitious, federally-directed response to climate change.

Besides continuing to advocate for an all-too-familiar discriminatory tax hike on oil and gas, the White House announced a reinvigorated regulatory agenda for coal-fired electricity, to be led by the EPA. Why this assertive stance from the executive branch? Because there is little appetite among Members of Congress, including coal state Democrats, for such a job-killing crusade. Sen. Joe Manchin, D-W.V., captured this sentiment when he told the D.C. insider publication Politico that "It's unreasonable. What they're doing has never been done."

Ironically, what's getting credit for much of the U.S.'s carbon emission reductions in recent years has been natural gas development. Cutting-edge extraction technologies are transforming communities across the nation by delivering jobs (as well as the prospect that North America will become a net energy exporter in a decade or so).

The contrast in results between the mostly private-sector-driven natural gas boom and the mostly government-driven climate agenda seems clear: the former approach can reasonably balance prosperity and environmental protection, while the latter can often leave a lot to be desired. Such a contrast can be present in many areas of our economy, one of which this author came across recently: forests.

[Read the U.S. News Debate: Is It Time to Drill in the Arctic Refuge?]

For many years, industry and interest groups have developed standards for certification of wood and wood products, in order to provide end-users with some idea of the practices that went into the cultivation and harvesting of those materials. This certification "market" has been relatively open, with foresters and businesses able to partner with programs such as the American Tree Farm System (ATFS), Forest Stewardship Council (FSC) and Sustainable Forestry Initiative (SFI).

A competition of sorts has arisen among these standard-setting methods, as many environmental groups have successfully pressed large industrial customers to embrace FSC's strict guidelines for its purported traits, such as highly-selective logging. For their part, supporters of SFI and ATFS argue that their forest-care requirements are sufficiently "green," while allowing for prudent development in timber-based communities that boosts the economy.

Proponents of these three standards employ all kinds of evidence in their favor, but the resulting debate has helped all participants to sharpen their respective arguments and encourage transparency. Interestingly, even the EPA seems to acknowledge the value of competitive certification on its website, noting that it fosters "a private incentive to encourage landowner commitment to sustainable forest management."

Recently, however, a growing number of policies show preference for FSC as the favored certification program. For example, the U.S. Green Building Council's LEED (Leadership in Energy and Environmental Design) framework gives credits to FSC-certified timber that are denied to ATFS and SFI wood. Normally, this should be a matter that sorts itself out in the marketplace of ideas: the best concepts with the widest appeal to Americans, interacting and transacting voluntarily, carry the day. Unfortunately, the pressure is mounting on the federal government to impose a de facto monopoly standard for wood.

[See a collection of political cartoons on energy policy.]

One reason is that the U.S. General Services Administration has been moving to adopt many facets of LEED in its building practices. Since the number of LEED projects (both government and private) grows each year, so do the effects of a policy that alters incentives in the timber sector. If FSC becomes the government's only choice, how will taxpayers who pick up the tab for billions of dollars in projects be affected? What will the consequences be for the overall economy and our ecology if the competitive dynamic among wood certification methods is artificially erased?

According to one study from EconoSTATS at George Mason University and Forisk Consulting, the answers to these questions could be troubling. Specifically, the analysis found positive qualities from the current competitive playing field and drawbacks with imposing a sole method of land management in the south and the Pacific northwest regions of the United States.

The researchers determined that forcing landowners to manage their property to the standards of the FSC program would lead to over 40,000 job losses and more than $6.6 million in lost severance tax revenue in these two parts of the country alone.  

The implications of these findings apply to other economic sectors besides the timber industry. Whenever voluntary standards mutate into a heavy-handed regulatory framework, efficiency considerations arise that can affect economic activity (and, equally important for taxpayers, government fiscal responsibility).

[See a collection of political cartoons on the economy.]

Another upshot to an exclusionary approach could actually be negative environmental outcomes. Some argue that policies preferential to FSC could increase the incentives for businesses to import timber from foreign nations, from where 90 percent of FSC-sanctioned wood originates. FSC enforces lower standards for land management and certification in these countries than in the U.S. The end result, critics contend, could be a market distortion in favor of forest products harvested under what they see as environmentally questionable circumstances. 

Reformers suggest that a common-sense, pro-growth policy for the timber industry might entail expanding LEED's criteria to include more types of sustainable timber. GSA could likewise continue to evaluate LEED's costs and benefits and demand value for taxpayers. Recently our colleagues at Citizens Against Government Waste discussed the intriguing concept of "Energy Savings Performance Contracts" that federal officials could further explore.

Competitive, market-based forces can lead to wonderful synergies that allow for reasonable consumer prices, job creation, innovation and responsible environmental stewardship all at once, provided Washington doesn't short-circuit the process. Until policymakers embrace this principle, Americans will need to be wary of new ways the "power to destroy" that Marshall wrote about could manifest itself.

Sepp is Executive Vice President for the 362,000-member National Taxpayers Union (ntu.org), a nonprofit, nonpartisan citizen group founded in 1969 to work for lower taxes, limited government, and economic freedom at all levels.

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