Abstract

Policy and economic drivers

While earlier environmental concerns over the forest industry were directed mostly at the local pollution to air and water from mills, later concerns include generation of solid waste and the industry's impacts of forest ecosystems (Bloemhof-Ruwaard et al. 1996) and, in the last years, harvest's impacts on carbon budgets (Manomet Center for Conservation Sciences 2010). In the 1990s, Greenpeace's campaigning and the German media's attention to the negative environmental effects of forestry in Nordic countries led the publisher Springer to call for documentation from the paper industry on ecologically sound forestry practices (Gulbrandsen 2002). The Norwegian industry replied by establishing the environmental standard “Living Forests” together with forest-owner organizations and environmental organizations, which later fulfilled the PEFC standard (Norwegian Forest Certification, n.d.).

The European Union has pledged to, by 2020, reduce its greenhouse gas emissions by 20 percent, increase the share of renewable energy by 20 percent, and improve its energy efficiency by 20 percent (European Commission 2009a, 2009b). This has caused the wood pellets markets to boom (Sikkema et al. 2011, Sjølie and Solberg 2011). However, these policies have been strongly criticized by environmental groups and have also raised concerns in the scientific community regarding negative impacts on biodiversity (Eggers et al. 2009, Verkerk et al. 2011) and forest carbon sequestration (e.g., Schlamadinger and Marland 1999, Böttcher et al. 2012).

The global paper market is currently going through substantial shifts, with quickly shrinking demand in Western Europe and the United States. European paper demand declined about 20 percent in the period 2007 to 2012, while changes in the US markets have been even more distorting with the demand for office paper declining 40 percent and newsprint 60 percent in the period 2001 to 2011 (Andersen 2012). The setbacks in the US newsprint market have led to more exports from North America (Mahlburg 2011), causing additional problems for European paper producers. Sawn-wood demand is tightly linked to the construction of new houses and therefore vulnerable in periods with low economic growth. Finnish sawn-wood prices dipped in 2008 to 2009 as well as in 2011, and real prices have declined by almost 20 percent over the past 10 years (Hänninen and Sevola 2011). In the same period, the use of forest chips in Finland has grown seven times, while real chip prices have about doubled (Hänninen and Sevola 2011). Given that bioenergy producers are capable of paying as much for the chips as the pulp and paper producers, the growing demand for bioenergy may maintain the prices of sawmilling by-products.

Greenhouse gas emissions from wood material production are lower than from steel and concrete (Petersen and Solberg 2005); policies to reduce such emissions in the construction sector may thus impact positively on the sawmilling industry. Differently from the pulp and paper industry, for which the net capacity changes in Europe have been small in previous years (Andersen 2012), sawmilling capacity is growing in several Western European countries with an expected net growth of 2.4 million cubic meters (cbm) of sawn wood in Sweden from 2011 to 2012 (Hänninen and Sevola 2011). Without demand increasing at the same rate, the competition in the sawn-wood market is thus likely to tighten.

Previous studies

Most published studies of interviews and surveys of market conditions carried out in the forest industries are from Finland. Owari et al. (2006) interviewed directors and managers in Finnish forest industries to assess the perceived importance of forest certification in wood products marketing. The results indicated that certified companies are typically profiled as primary wood producers, focusing on export to markets with a strong demand for certified wood products. Certification was considered important for indicating a sense of responsibility, keeping market share, and selling products in existing markets. Although raising customer retention and satisfaction, the authors found no improvements in financial performance due to certification.

In another survey of the Finnish forest industry, semistructured interviews of 11 experts from forest industry and research were undertaken to assess the environmental impacts of the forest industry (Koskela 2011). Positive environmental impacts in the forest industry resulted from recycling, forest industry products, and use of energy. The experts mentioned a total of 18 different groups of environmental impacts. The five environmental impacts considered most important were energy, air emissions, water emissions, forest, and climate change. Most of the issues mentioned by the experts were by definition environmental aspects, not impacts. The most mentioned aspect was climate change.

Vihervaara and Kamppinen (2009) interviewed 12 key persons responsible for environmental and corporate affairs in the Finnish forest industries to obtain insight into sustainable forestry and their perceptions of the main future challenges and possibilities confronting the forest industries. The interviewees considered the challenges related to communication as the most important, including relations to nongovernmental organizations, ecological researchers, stakeholders, and markets. Challenges related to the supply of wood, including illegal logging, forest certification, and restrained roundwood supply caused by the question of old forests, were also considered of substantial importance. Use of wood for bioenergy purposes was considered a possible threat to the traditional forest industries but was also seen as an opportunity for the sector. Ecosystem services as climate change mitigation and emission trade were mentioned as future possibilities for the sector, along with improved efficiency in processing and new innovations.

Satu (2010) used the Delphi technique to obtain expert opinions of opportunities lying in the interface between traditional forest industries and the emerging bioenergy industry in Finland. The experts were also requested to identify the significance of various industry assets and activities and to indicate the importance of these assets and activities in 2015 compared with 2006. The identified key assets included production plants, raw material, technology, and business knowledge as well as skilled personnel, with all assets assumed being more important for the forest industry than for the bioenergy industry. The majority of the experts agreed that collaboration between these two industries is the only way to significantly increase biofuel production while recognizing that such collaboration would be very challenging. The management of customer relations was seen as the most important core activity in the forest industry, followed by research and development, which was thought to be greatly increasing in importance in the coming years.

Thirty-eight persons in the forest and bioenergy industries in 11 European countries participated in a survey among industrial operators and associations of the competitive situation of biomass (Alakangas and Keränen 2011). The pulp and paper as well as board industries expressed concerns of possible tightening of the market due to the increased demand for wood energy and a lack of policies favoring the sector beyond the bioenergy industry.

Panwar et al. (2010) surveyed residents (n = 282) in four US states, where forestry historically and currently is socioeconomically important, on corporate social responsibility. The study found that women are more critical when evaluating an industry's social and environmental performance. In the area of environmental expectations, the women also exceeded the men. The authors speculate that women may place environmental issues higher than social issues, indicating that women perceive business activities to harm the environment more than inflicting problems on society. The results indicated some differences in perceived industry performance across education levels and urban/rural residency.

Thompson et al. (2010) examined social responsibility orientation (SRO) gaps between forest industry executives and people living in the US Pacific Northwest (n = 298). The forest industry executives had a significantly lower SRO than other respondents, indicating a more individualistic social orientation. Analysis of demographic variables indicated individualistic beliefs to be more prominent among men and rural residents than among the general society respondents. Analysis of demographics and firm characteristics found no significant difference among forest industry executives. The authors argue that understanding gaps in SRO between business executives and the general population provides a basis for companies to understand any misalignments with societal values, which can be important when needing to balance different stakeholder demands.

Scenario analyses

Scenario analysis is not a prediction of future development but rather an economically consistent assessment of the sector's behavior and responses to external factors for improving the understanding of complex dynamics and interactions (International Panel on Climate Change [IPCC] 2000). The advantage of quantitative model scenario analyses study lies in data-intensive, economically consistent assessments, but they seldom include the evaluation of the likelihood of the scenarios. Scenarios are typically created by researchers who do not necessarily have the insight of those working in the industry. The industry's expectations may be useful as input in quantitative scenario analyses for constructing or benchmarking scenarios. In a scenario analysis, each scenario consists of a set of events (Jarke et al. 1998), and in this study, we ask employees in the Norwegian forest industries how likely they consider that these events take place by 2020. In addition to the presumed direct policy interest, they will be used in quantitative scenario analyses of the Norwegian forest sector, which will supply industry and policymakers with information of how the sector may develop. Because the survey was undertaken twice, in December 2010 and December 2013, it also displays how market perceptions changed during this short period of time.

Survey

A questionnaire was distributed at two Norwegian sawmilling industry annual summits: the Christmas meeting of the Technical Association of the Norwegian Sawmilling Industry in Hellerudsletta, Norway, on December 14, 2010, and on December 10, 2013.The participants were asked to answer the survey during the seminar, with the questionnaire subsequently being collected. Ninety-seven persons eligible for responding the survey attended the meeting in 2010 and 94 in 2013, most of them being mid- to high-level managers in Norwegian sawmill companies.

The questionnaire consisted of totally 22 hypothetical forest sector development trends and events divided into four groups of questions: future domestic demand for wood-based products, international markets for wood-based products, costs and productivity, and environmental considerations (Table 1). The respondents were asked to indicate their beliefs of the various development trends and situations to take place in the Norwegian forest sector by 2020, using a 5-point Likert scale, where 1 indicated “very unlikely” and 5 “very likely.”

Table 1. Development trends and situations included in the survey.

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Linking the survey results to scenarios

Three alternative scenarios in addition to BAU of the Norwegian forest sector were developed with the objective of projecting the impacts on the Norwegian forest sector economy and greenhouse gas flows (Sjølie et al. 2010). The scenarios were built on the IPCC scenarios (IPCC 2000) with the basic drivers being economic growth, society's environmental concerns, and the degree of globalization. The spatial, partial equilibrium model of the Norwegian forest sector NorFor (Sjølie et al. 2011, 2013) is used for the scenario analyses. It projects forest management, harvest, production, and consumption of wood products and trade for each county in Norway and tracks the sector's main greenhouse gas fluxes. Producers (i.e., forest owners and industry owners) are assumed to maximize profit and consumer utility. The scenarios are the following:

• BAU: Dominant recent trends will continue, and no drastic policies will be undertaken. Growth in gross domestic product is assumed moderate (1.5%/y), the energy price being 0.075 $/kWh,¹ and the demand for forest products is assumed to follow actual trends.

• High economic growth—high technology: The scenario is built on the IPCC A1 scenario, with high economic growth (2%/y) and a high degree of international trade leading to reduced world market roundwood prices. High-productivity growth in the sector, coupled with technological development, results in the establishment of biorefineries. The demand for bioenergy is reduced in this scenario due to low energy prices. While the demand for newsprint declines drastically, the demand for tissue and packaging increases.

• Environment—greenhouse gas reduction: This scenario is constructed around the IPCC B2 scenario, where environmental issues and the reduction of greenhouse gas emissions have high priority in society. Economic growth and technological development are similar to BAU. The demand for bioenergy and solid wood products increases substantially owing to wood's “green image” and greenhouse gas–intensive products being heavily taxed. One second-generation biofuel plant is established in Norway.

• Sawn-wood market and bioenergy: Based on the IPCC A2 scenario, with medium-level economic growth and technological development, environmental concerns are less emphasized in this scenario. More uniform standards within Europe (e.g., European conformity marking) increase regional trade of roundwood and sawn wood and lowers the European sawn-wood prices by 40$/cbm compared with BAU. Subsidies to bioenergy grow due to the concerns of energy supply security, but second-generation biofuel is still too expensive to be produced in Norway.

Each question was associated with one scenario, as indicated in Table 1. The respondents' perceptions of the likelihood of elements constituting the scenarios could thus be assessed. However, some of the questions regarding specific environmental measures undertaken in forestry (“~5% of all productive forest is conserved,” “forests older than 130 y shall not be harvested,” “forest conservation is seen as better than the use of wood products, including for the purpose of carbon storage,” and “because of the climate benefits, all harvested fields are regenerated denser than today”) do not follow directly from any scenario but are suggested to be linked to Scenario 2 (environment—greenhouse gas reduction), which is the closest scenario (labeled “[2. Environment—greenhouse gas reduction]” in Table 1). In the “Results” section, the forest industry's assessment of the likelihood of different factors to take place in 2020 is compared with the factors constituting the scenarios.

Sawn-wood products

The overall picture of expectations in the sawn-wood market is that there are few radical changes from 2010 to 2013 (Fig. 1). However, 15 fewer respondents (about 20%) believed in the “1 cbm per capita and year consumption” goal in 2013 than in 2010. The respondents reported continued belief in increased use of wood in construction and high-rise buildings. They were also positive about productivity growth in the sawn-wood industry. Both years, most respondents did not foresee the 10 percent decline in Swedish sawn-wood prices but believed in more sawn-wood import opportunities.

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Paper products

Almost half of the respondents found a 30 percent decline in paper consumption in Norway and Europe to be likely, a number that barely changed between the 2 years (Fig. 2). This belief was not followed by the view of a 30 percent decline in pulpwood prices. Also, the respondents did not, in general, foresee a reduction in international trade due to the risk of phytosanitary diseases.

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Bioenergy

The largest changes in the survey from 2010 to 2013 were seen in the bioenergy sector. Compared with 2010, considerably fewer respondents in 2013 believed in energy prices twice the current level, high-demand growth for bioenergy, second-generation biofuel being competitive with fossil fuels, and the first second-generation biofuel plant being established in Norway in 2020 (Fig. 3). The largest change among all questions seen in the survey was on the question “energy prices double the current level is not uncommon.” Thirty-four fewer respondents checked 4 or 5 (likely and very likely) on this question in 2013 than in 2010, a reduction from 74 to 41 percent of the respondents. In 2010, 41 percent believed in second-generation biofuels being competitive with fossil fuels, but only 19 percent expressed the same opinion in 2013.

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Forestry

The respondents were asked to indicate their belief in two development trends regarding forestry costs. Both in 2010 and 2013, about one-third answered likely or very likely, one-third neutral, and one-third unlikely or very unlikely to the question that forestry costs are reduced by up to 15 percent by 2020. About half of the respondents found forestry costs increase by up to 15 percent owing to changes in management and harvest operations to be unlikely (Fig. 4).

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Environmental issues

In 2010, 80 percent of the sample believed in “more attention being paid to environmental issues in the society” and “wood is good: a trustworthy environmental profile increases the demand for wood products.” These numbers declined to 63 and 68 percent in 2013, respectively (Fig. 5). The 2010 to 2013 changes in responses on the more specific questions regarding environmental considerations in forestry were small, while the overall trend was slightly less belief in these measures being undertaken by 2020. Two-thirds answered positively to the question of 5 percent of all productive forest to be preserved in 2010, contrasted to 50 percent in 2013.

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Eleven questions had a median of 4 in the 2010 survey, while six questions had a median of 4 in 2013 (Table 2). Thus, there was a considerable reduction in support for certain statements between the two surveys. A Mann-Whitney U test (Mann and Whitney 1947) indicated that the responses for the 2 years were significantly different at a 5 percent level for the following questions: sawn-wood demand increases to 1 cbm per person per year; energy prices double the current level is not uncommon; total demand for bioenergy (heat, electricity, and fuel) increases by approximately 50 percent compared with today; second-generation biofuels are competitive with fossil fuels; and approximately 5 percent of all productive forest is conserved (Table 2). In all these cases, the responses shifted toward less belief in that situation occurring in 2020 between the two surveys.

Table 2. Survey statistics: quartiles (first [Q1], second [median], and third [Q3]) for 2010 and 2012 and P value of Mann-Whitney U test (only those with P value < 0.05 are reported).

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Scenarios

Table 3 displays the number of questions perceived as likely linked to the scenarios. A question was categorized as likely if the median of the answers exceeded 3. Of the five questions associated with Scenario 1 (high economic growth—high technology), two were considered likely in 2010 (15% productivity growth in the sawn-wood industry and in the paper industry), while in 2013, this belief was expected only for the sawn-wood industry.

Table 3. Number of questions associated with each scenario and the number of questions perceived as likely, i.e., with median > 3, in 2010 and 2013.

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Ten questions were associated with Scenario 2 (environment—greenhouse gas reduction), where a shift in the perceptions was observed between the two surveys. The only two trends not perceived likely in 2010 were reduced demand for steel and concrete and second-generation biofuel being competitive with fossil fuel. Still not considered probable 3 years later, these two questions were in 2013 joined by sawn-wood demand growing to 1 cbm per person, doubled energy prices, second-generation biofuel being established in Norway, and biodiversity issues given higher priority in the nonlikely group.

Of the more specific environmental measures given in the survey that were loosely linked to Scenario 2, labeled “[2. Environment—greenhouse gas reduction],” in 2010 the respondents expected only one situation to materialize: an increase to 5 percent of all productive forestland being conserved by 2020. However, none of the development trends in this category of environmental measures were expected by the respondents in 2013. There were no changes in the number of questions perceived probable in Scenario 3 (sawn-wood market and bioenergy) in 2010 and 2013.

Of the 19 questions directly associated with the scenarios, 10 were perceived likely in 2010 and 6 in 2013 (Table 3). The respondents expressed in general a strong belief in productivity growth in the sector, compatible with Scenario 1 (high economic growth—high technology). In both 2010 and 2013, they answered positively to the question of a 30 percent decline in paper consumption but not on the question of a similar decline in pulpwood prices. The shrinkage in demand for paper may thus be believed to be mitigated partly by growing bioenergy markets. However, the confidence in bioenergy expansion has clearly deteriorated between the two surveys. Thus, while the support for the main trends and situations specified in Scenario 2 (environment—greenhouse gas reduction) was rather strong in 2010, with 7 of 10 questions perceived as likely, only 4 of the questions were considered probable in 2013. In Scenario 3 (sawn-wood market and bioenergy), there were no radical changes between the two surveys.