Teagasc Forestry Development Unit response to the Funding of Forestry Review Group
Teagasc will participate as a member of the National Forest Policy Review Group and therefore the focus of this submission is directed towards the Funding of Forestry Schemes Review Group.
Afforestation Schemes:
With falling and continuing low incomes in many of the traditional agricultural enterprises there is an increasing need by farm households to improve their family farm incomes by optimizing the return from their assets. This is particularly true at a time when off-farm opportunities are limited[1]. The recent experience of the Teagasc forestry advisory service is that there is a significant increase in interest among landowners in planting. This is also borne out by the level of Form 1 (pre-planting) applications being received by the Forest Service[2]. Traditionally a change in the level of interest is observed by the Teagasc forestry advisory service in advance of that experienced by the industry and therefore is it reasonable to expect an ongoing high level of Form 1 applications.
In the context of the target to afforest an additional 460,000 hectares[3] over the next few decades it is essential that an appropriate funding structure is established to drive this target. The funding mechanism must be appropriate to support the development of the sector in the most sustainable way taking account of the wider rural development benefits and implications of afforestation.
Continued support for the afforestation of agricultural land is essential to ensuring that afforestation is encouraged and that planting and related targets are achieved. The landowner makes the long-term investment decision of committing the land and the opportunity cost of that land to forestry. In return for this the State supports forestry development by contributing towards the cost of establishing the forest and by providing an annual return to the forest owner. Both receive returns on their investments – the forest owners in the form of premium payments and revenue from timber sales and the State in the form of a contribution to afforestation targets to secure the future of the timber processing sector, bioenergy targets, climate change mitigation and other public good benefits.
The decision to afforest is a permanent land use change and farmers expect to be compensated not only for loss in income but also loss in option value of their land. Attempts have been made to quantify this loss in value[4] and it would be reasonable to expect that the rate at which the premium is set should contribute towards compensating the forest owner for this loss in addition to providing a compensatory income.
The multi-functional nature of forests is now well recognized. Many of the benefits of forests accrue not only to the forest owner but also to the local community and to the country as a whole. It is difficult for the forest owner to directly benefit from some of these non-timber benefits e.g. tourism, landscape enhancement, carbon sequestration, biodiversity and so an element of the premium payment could be considered as an appropriate mechanism to compensate the owner for these public benefits.
The decision in 2009 to reduce the level of annual forest premium payable on new and existing forests caused uncertainty for those considering a forestry enterprise. A climate of uncertainty is not conducive to making a decision about a long-term commitment such as afforestation. It is therefore suggested that a minimum premium rate is guaranteed for new applicants thereby providing a level of security to the forest owner.
In the future continued payment of the annual premium could be linked to verifiable actions based on sound forest management practices e.g. second shaping of broadleaves, inspection paths, management plans, thinning operations, fire breaks etc. This would mean that premium payment would be linked to the quality of management of the forest. This linking of premium payment should be seen as a reflection of good forest management and not as a disincentive to plant. Such linkages should be structured in a way that does not penalize forest owners for circumstances outside of their control e.g. a decision not to thin due to low timber prices or unavailable markets.
A mandatory element of the current FEPS scheme is a short 12.5 hour woodland management training course. To date participants on these courses have been very positive about its content and usefulness. It is recommended that a similar mandatory training course should be an important requirement for all new farmer premium recipients and would ensure that farm forest owners would have some awareness of what is involved in the establishment and management of a successful forest. Considering the long-term nature of forestry and the low level of knowledge amongst landowners about forestry this would be a significant measure to ensure that the optimal value for money is attained from this investment both by the landowner and the State.
Although it may not be possible to link the FEPS scheme with the new Agri-Environment Options Scheme, FEPS has delivered significant biodiversity enhancement value in these forests. It is suggested that the more successful biodiversity measures of FEPS might be offered as a menu of options for forest owners to improve/enhance the biodiversity value of their new forests. Forest owners could select from this menu and receive top-up payments similar to the new Agri-Environment Options Scheme.
Irish forests contribute significantly to reducing net greenhouse gas emissions and as a mechanism to support forest owners and encourage an additional stream of funding into forestry consideration could be given to allowing voluntary carbon trading among forest owners. This would have the additional benefit of clearly identify forests as positive contributors to the CO2 abatement strategy and to the economy. Farmers could directly benefit should such a scheme evolve as they may be able to offset greenhouse gas emissions from the expansion of other agricultural enterprises on their farms with carbon sequestration from their farm forests.
Forest Management
Significant investments are made in the establishment of forests – including the investment which is the land and its opportunity cost by the forest owner along with the investment in afforestation grants and forest premium payments by the State. It is essential that this investment realizes the maximum economic, social and environmental return to society. This is achieved through good and timely management of the forest beyond the 4-year grant-related stage.
The management of broadleaved crops requires an even longer term perspective than in the case of conifer crops. Early interventions such as tending and first thinning are important if quality timber is to be produced in the long-run. However the long timescales involved between the investment that is the crop intervention and the realization of the benefits of that intervention may mean that in the absence of grant aid this substantial investment in the crop will not take place resulting in much of the benefits of the broadleaf forest not being realized in the long term. The current Tending and Thinning of Broadleaves element of the Woodland Improvement Grant Scheme helps ensure that this intervention takes place and that the crops are actively managed. An important advantage of the current scheme is that it encourages the utilization of the thinnings, which in turn generates economic activity in the woodland. This scheme also reinforces the fact that a woodland is not just a source of annual forest premium but is primarily a valuable timber and multi-functional resource.
As with broadleaves, the economic returns from the first thinning of conifers can be marginal, even at a time when existing and emerging markets for wood are propping up roundwood prices. COFORD has recently produced a production forecast for the country, including Northern Ireland[5]. This forecast is based on forest owners making the decision to thin and actually carrying out the thinning where appropriate. There is evidence that private forest owners are actually deferring the decision to thin and in cases this means that the window of opportunity for thinning will pass without thinning taking place[6],[7]. This will have serious consequences, particularly as the initial indications from the COFORD Supply/Demand forecast are that there will be a significant timber deficit if the forecasted demand materializes.
The fact that forest owners are deferring the decision to thin may be related to current difficulties in accessing markets. This issue is being addressed through the establishment of forestry producer groups throughout the country. However this may also be linked to the current unavailability of sufficient funds for forest roads. The Forest Roads Scheme can be considered a critical support to encourage thinning as without an adequate forest road infrastructure thinning becomes impractical and uneconomic. Without this support there is a significant likelihood that many forests won’t be thinned. This is particularly true as the difference in economic returns between thinned and unthinned crops may be insufficient to encourage forest owners to thin.
A decision not to thin or a deferment of the decision which might result in the no-thin option being the only one available has fundamental implications for timber production forecasts for both the processing and bioenergy sectors. This in turn impacts on local employment, biodiversity, level of CO2 sequestration and opportunities for forest-based recreation. The payback to the State on the initial investment in forestry (the grants and premiums) will not be optimized unless the maximum area of forest that is suitable for thinning is actually thinned. It is therefore essential that thinning is encouraged through the establishment of support structures.
In a situation where the funding available for roads is extremely limited the option of funding loading bays only could be considered in some situations as this is the minimum required to harvest timber and could facilitate the greatest number of owners to thin.
An additional incentive for consideration would be to encourage forest owners to utilize their own timber resources to become self-sufficient in their energy needs. This incentive could take the form of financial support towards the purchase and installation of wood burning home heating systems. Such an initiative might be funded by SEAI.
Producer Groups and Discussion Groups
Teagasc is involved in the establishment of forestry producer groups throughout the country in an attempt to help forest owners gain access to markets and create economies of scale.
The focus of these groups, though varied, is to facilitate forest owners to co-operate with their neighbours to develop economies of scale in order to harvest and market their timber. An essential element of these groups is the empowerment of the forest owners by upskilling them and facilitating them to make their own decision in relation to accessing markets for their products.
Teagasc has expended considerable effort in encouraging the development of these groups and now that several have been established issues have arisen, particularly with economies of scale in relation to roads and roading grants. This is particularly problematic for those forest owners with smaller plantations. Consideration should be given to the provision of preferential treatment to such groups in the area of grants such as roading grants. Grant structures should actively support the grouping of forests e.g. producer groups should benefit if they group together to share the benefit of the roading grants across the properties in the group. This may mean that a smaller block may benefit from proportionately more road per hectare. Other mechanisms to promote group activity should also be encouraged e.g. in group felling license applications.
An interesting recent development in the dairy sector is the development of Dairy Discussion Groups. This was an action encouraged in the EU Rural Development Programme and forestry is also included under this measure[8]. Consideration should be given to funding such Discussion/Producer Groups for forestry. Membership of a Dairy Discussion group attracts payments of €1,000 per annum. In return for this members have to attend meetings and partake in specific activities. In the case of forestry this could be linked with the preparation of management plans and carrying out of inventory and thinning, if appropriate.
An initiative that would also be worth investigating is the Forestry Challenge Scheme operating in Scotland. This scheme for woodland enhancement evaluates applications for woodland improvement and enhancement based on their merit and level of innovation. This scheme encourages landowners to develop their own woodland development proposals and submissions are evaluated on relative merit.
Investment in Forestry
It is important to ensure that any developments related to investment in forestry do not distort the land market in an undesirable manner and that the results in the greatest public as well as private interest. The support mechanisms provided by the Department of Agriculture should ensure that rural development ideals are achieved i.e. that land is planted and managed by landowners living in the local community and with links to the local economy thereby ensuring that as much as possible of the income generated and the value added stays within and supports the local community.
Any value-for-money assessment needs to focus on more than just a narrow financial interpretation, but should also value other goods and services, including public goods – CO2 sequestration, achievement of renewable energy targets, amenity, recreation and landscape values. Consideration should be given to identifying a mechanism for other sectors of the economy that benefit from forests to pay for this afforestation.