FINLAND S NATIONAL FOREST PROGRAMME

Transcription

1 FINLAND S NATIONAL FOREST PROGRAMME 2015 Turning the Finnish forest sector into a responsible pioneer in bioeconomy Government Resolution 16 December

2 2 Name of the publication: Finland s National Forest Programme 2015 Turning the Finnish forest sector into a responsible pioneer in bioeconomy Publisher: Finnish Ministry of Agriculture and Forestry Graphic design: Kirsti Pohjapelto Printing: Juvenes Print, 2011 ISBN (Printed version) ISBN (Electronic version)

3 foreword Finland s National Forest Programme was adopted by the Government in March Changes in the whole operating environment of the forest sector and in the structure of the forest industry have been so strong that it was considered necessary to review the programme. The economic recession that began towards the end of 2008 and the financial crisis added to the ongoing structural change in the whole sector, also in forest management. Climate change, the depletion of non-renewable raw materials, technological development, changes in the population structure and values, and the transition to information economy are challenging the sector to reform. At the same time, however, these changes offer many opportunities for forest-based livelihoods, products and services. The revised National Forest Programme 2015 challenges the threats and ceases the opportunities. Over the next few decades the forest sector can and should be developed into a biocluster which produces more and more materials and services to other industrial sectors. The principles of the National Forest Programme improving the competitiveness of all parts of the sector s value chain, reconciliation of different uses of forests, and preservation of the environmental benefits of forests along with the broad-based approach to preparation and implementation provide a solid basis for the development work. Finland s National Forest Council approved the revised version of the National Forest Programme 2015 in its meeting on 8 December The approval was preceded by extensive preparatory work in the National Forest Council, its Secretariat, as well as in six Working Groups and various workshops, and seminars. The draft approved by the National Forest Council was also circulated for comments. An external evaluation was carried out on the progress of the programme adopted in The Finnish Government adopted the revised National Forest Programme 2015 by a Government Resolution on 16 December The programme is a shared mission of several ministries, to which the stakeholders and private sector are also strongly committed through the joint preparation process. I would like to extend my most sincere thanks to all of the organisations and individuals who participated in the planning of the programme for their valuable contributions. The implementation of the programme has already started in close collaboration among the actors in the sector. Our common goal is that forests as a valuable renewable natural resource continue to generate even more and diverse welfare and prosperity in the future. Sirkka-Liisa Anttila Minister of Agriculture and Forestry

4 CONTENTS ABSTRACT 5 THE FOREST SECTOR OFFERS DIVERSE AND SUSTAINABLE SOLUTIONS TO FUTURE CHALLENGES 9 FOREST SECTOR IN A NEW OPERATING ENVIRONMENT 13 STRATEGIC OBJECTIVES, TARGETS, INDICATORS, AND ACTIONS 17 1 Strengthening forest-based business and increasing the value of production Value added, eco-efficiency, and new products and services Wood-based energy Ecotourism and the natural produce industry Transport networks Improving the profitability of forestry Sustainability of timber supply and diversification of forest management methods Efficient roundwood markets Profitability and holding size in private forestry 23 3 Strengthening forest biodiversity, environmental benefits, and welfare implications Forest biodiversity Climate change Water and soil Forests improve the quality of life 28 CROSS-CUTTING THEMES 32 Forest sector know-how 32 Promoting business and entrepreneurship by means of research and development 32 Forest sector education 33 Increasing contribution to international and EU-level forest policy development 35 International forest policy 35 European forest policy 35 Development cooperation and other bilateral cooperation 36 PROGRAMME IMPLEMENTATION AND PROGRESS MONITORING 38 PROGRAMME FUNDING 40 IMPACTS OF THE PROGRAMME 43 ANNEX 48

5 abstract Finland s National Forest Programme 2015 was ratified by Government Resolution on 16 December The mission of the programme is to generate increased welfare through diverse and sustainable forest management. The National Forest Programme was first ratified in March 2008 and revised in 2010 due to rapid changes in the operating environment of the forest sector and in the structure of the forest industry. The programme was drawn up in broad-based collaboration with interest groups, under the supervision of the Department of Forestry at the Ministry of Agriculture and Forestry and with the support of the National Forest Council. The programme has also been coordinated with the Strategic Programme for the Forest Sector, which is overseen by the Finnish Ministry of Employment and the Economy, as well as Finland s climate and energy policy and rural and regional strategies and policy programmes, among others. Finland s National Forest Programme has a parallel programme called the Forest Biodiversity Programme for Southern Finland (MET- SO), whose measures have also been incorporated in the National Forest Programme. The period of the National Forest Programme 2015 extends until However, the vision presented in the programme is based on the year 2020, by which time the aim is that the Finnish forest sector is a responsible pioneer in bioeconomy, forest-based livelihoods are competitive and profitable, and forest biodiversity and other environmental benefits have been strengthened. The key principles of the programme include the comprehensive development of existing and new forest-based products and services and the entire value chain, the integration of different uses of forests, and the preservation of the environmental benefits of forests. The mission is to generate increased welfare through diverse and sustainable forest management. Welfare is a broad concept that relates both to the national economy as a whole and to individual citizens. Finland s National Forest Programme 2015 is based on three objectives derived from the vision: u u u strengthening forest-based business and increasing the value of production; improving the profitability of forestry; and strengthening forest biodiversity, environmental benefits, and welfare implications. The attainment of these objectives is supported by means of cross-cutting themes: u u diversifying and strengthening forest sector know-how; and increasing contribution to international and EU-level forest policy devel - opment. Quantitative targets have been agreed for each objective and actions formulated to achieve these. The programme takes into account the changes that have taken place in the operating environment, experiences gained from the implementation of the programme ratified in 2008, findings of the programme s mid-term evaluation, and information gained from forecasting seminars. The most important challenges relate to developing new forest-based products and services, improving the profitability and competitiveness of forestry and the entire value chain, increasing the use of wood for energy, and meeting the objectives of the METSO programme. 5

6 6 Strengthening forest-based business and increasing the value of production Increasing the value added associated with wood through eco-efficient, customer-orientated, and competitive products and services Increasing the volume of responsible woodbased energy production and consumption Increasing entrepreneurship based on ecotourism and the natural produce industry as well as the commercialisation of intangible commodities Maintaining and developing the transport net work so as to allow competitive forestry and forest industry transport throughout the year The most important actions for achieving the targets relate to research and development work and various development programmes. The implementation of development programmes relating to the wood products industry has been identified as a high priority, especially as regards promoting internationalisation and tapping into the potential to increase timber construction. Another priority is to create conditions for the launch of spin-off enterprises focusing on wood or wood-based materials. The use of wood for energy is to be supported by means of energy and investment subsidies and by introducing energy subsidies for small-diameter wood. Adequate investment also needs to be channelled into improving transport networks. Improving the profitability of forestry Improving the conditions for forest growth and diversifying forest management methods Ensuring balanced demand and supply by promoting roundwood markets Boosting the profitability of private forestry, increasing holding size, and improving holding structure The most important actions relate to diversifying forest management methods by revising legislation and the subsidisation of silvicultural and forest improvement works (as per the Finnish Act on the Financing of Sustainable Forestry) and by controlling damage agents which threaten the health of forests. In order to reach the quantitative logging target of million cubic metres of domestic roundwood per year, action is also needed to improve the efficiency of roundwood markets by introducing more efficient databases of trade prices and indexes, for example. Other actions include increasing the provision of advisory services aimed at forest owners, developing a database of forest resources and preparing for system upgrades, encouraging the use of machinery in forest management, and promoting entrepreneurship in forest services. There are also plans to assess the need to revise the taxation of forest holdings and to develop new forms of forest ownership and practices for the redistribution of holdings, as well as advisory services. Strengthening forest biodiversity, environmental benefits, and welfare implications Halting the decline of forest habitat types and species and establishing a positive trend of biodiversity development Promoting carbon sequestration in forest management, use and conservation, and introduc - ing measures aimed at adapting to climate change Linking forestry to achieving a good ecological status for waters and ensuring a good ecologi - cal status for soil Strengthening the aspects of forests that promote human wellbeing and culture The most important actions required for meeting the targets include continuing the implementation of the METSO programme and developing environmental management in commercial forests. Other actions relate to introducing measures aimed at adapting to climate change and promoting carbon sequestration in forests by ensuring the conditions for the annual increment of growing stock, by preventing forest damages resulting from storms and other damaging agents, and by funding research. The aim of forestry actions and the funding of environmental management projects is to ensure that forestry activities do not weaken the condition of waters and soil. Recreational routes are to be maintained, and trade in the landscape and recreational value of forests is to be developed.

7 Forest sector know-how Promoting the competitiveness and renewal of the forest sector through forecasting, research, development, and innovation Ensuring that the forest sector has access to skilled and competitive labour that meets the sector s needs through education The aim is to improve the competitiveness of the forest sector by developing research structures, such as Strategic Centres for Science, Technology and Innovation, competence clusters, and networking between research institutes (e.g. the Consortium of Natural Resources and Environmental Research), as well as forecasting. Another aim is to direct the research carried out by the Finnish Forest Research Institute towards activities that support business and the role of forests in the society and for regional economies. Forest sector education is to be matched to the needs of the labour market, ensuring that the number and structure of educational institutions offering different levels of education as well as the content of education are consistent with the sector s needs. Increasing contribution to international and EU-level forest policy development Promoting sustainable forest management and improving the operating conditions of the for - est sector through international forest policy development Coordinating EU-level policy preparation and decision-making in affairs affecting the forest sector, taking into account the forest sector as a whole as well as national characteristics Emphasising sustainable forest management in development cooperation, with a view to mitigating poverty and improving the state of the environment. Promoting the inclusion of actors in international cooperation The aim is to improve coordination in EU-level and international policy development and to influence decision-making in order to ensure that the objectives of Finland s national forest policy and different aspects of sustainable forest management are taken into account in different processes. Impacts of the programme The National Forest Programme 2015 has significant economic and social implications. Although traditional forms of forest industry production are believed to lose ground, estimates indicate that, together with new energy and biorefinery products, the value of production may increase by as much as 20%, to approximately 23 billion per year. Income from stumpage and energy wood is estimated to increase to approximately billion, turnover from harvesting and transportation by million, and tax revenue for the Finnish State by approximately million. The estimated total increase in the value of production of the whole forest sector is approximately 8.5 billion. Moreover, the value added of ecotourism is estimated to rise beyond one billion euros. The objective of the National Forest Programme is to maintain the number of people employed in forestry and the forest industry at approximately 70,000 and to increase employment especially in the energy wood harvesting chain, mechanical wood processing, biorefineries, and the wood-based chemical industry. The recreational use of forests is hoped to improve the mental and physical welfare of the population. The logging and forest management measures included in the programme as well as the increasing use of forest chips present many challenges in terms of the environmental impacts of forestry. The best, most cost-effective methods available need to be employed to conserve forest biodiversity and to reduce the negative impacts that forestry has on the loading of waters. On the other hand, the increasing use of forest chips also signifies an increase of two percentage points in the share of renewable energy sources in primary energy consumption. Forests are expected to retain their function as carbon sinks throughout the programming period. Public funding of the programme The National Forest Programme 2015 is a crosssectoral government programme coordinated by the Finnish Ministry of Agriculture and Forestry. Compared to the 2008 State Budget, the additional funding required for the implementation of the programme amounts to approximately

8 8 million per year as regards the Ministry of Agriculture and Forestry, 30 million as regards the Ministry of the Environment, and 6 million as regards the Ministry for Foreign Affairs. The Ministry of Transport and Communications should to require an additional 90 million per year for the implementation of the programme. This figure is to be confirmed in connection with the Finnish Government s transport policy review. Business and energy subsidies controlled by the Ministry of Employment and the Economy as well as education funds controlled by the Ministry of Education and Culture also play an important role in meeting the programme s objectives. Approximately million more of the annual research funds available to different administrative sectors also need to be channelled to the forest sector. Actions formulated to achieve the objectives of the programme are also financed from many other sources, such as funds allocated to the Finnish Ministry of Employment and the Economy under the Centre of Expertise Programme and regional development funds controlled by the Regional Councils. Funding allocated to the Finnish Ministry of Social Affairs and Health is to be used in projects aimed at improving occupational health and safety. The National Forest Programme 2015 can also be promoted by means of tax-related methods. Issues relating to the funding of the National Forest Programme are discussed and decided annually in connection with formulating spending limits and the State Budget. Programme implementation and progress monitoring The programme is to be implemented subject to the spending limits and appropriations available under the State Budget, in cooperation with actors in the forest sector. The National Forest Council is responsible for coordinating the programme and for monitoring progress. The Finnish Ministry of Agriculture and Forestry is responsible for preparing an action plan that specifies the responsibilities associated with the implementation of the programme, the participating organisations, and the schedule. The National Forest Council is responsible for reviewing the action plan on a yearly basis. New revised Regional Forest Programmes for the programming period are to be finalised during Future revisions to the programme are to be made on the basis of the findings of evaluations and progress reports as necessary. The progress of both the National Forest Programme and the Regional Forest Programmes is monitored continuously, with particular attention to stakeholder participation, communication and efficiency of the implementation.

9 THE FOREST SECTOR OFFERS DIVERSE AND SUSTAINABLE SOLUTIONS TO FUTURE CHALLENGES Finland s Revised National Forest Programme 2015 Finland s National Forest Programme 2015 was first ratified by the Finnish Government on 23 March The programme aims to increase the welfare of Finnish citizens through the diverse use of forests following the principles of sustainable development. It is the task of the public sector to create such operating conditions that forests can be managed in a competitive manner. The public sector also funds the provision of services that have not become established on the open market. The operating environment of the forest sector has changed much faster than was forecasted at the time of drafting the programme. Changes in the demand for forest industry products and the resulting structural change as well as the effects of export controls imposed by Russia on wood consignments could, to an extent, be forecasted at the time of drafting the programme in 2006 and The severity of the changes in the sector s operating environment, on the other hand, came as a surprise, especially the economic recession that began towards the end of 2008 and the effects of the financial crisis on production and financial structures. The structural change of the forest industry is still ongoing. Technological development is fast and its effects are also reflected in the demand for forest industry products. At the same time, climate change, the depletion of non-renewable raw materials, changes in the population structure and values, and a transition to information economy are challenging the sector to reform while offering many opportunities for new products and services. Due to the aforementioned changes in the operating environment, Finland s National Forest Pro- gramme 2015 was revised in The revisions were prepared on the basis of comprehensive consultations with interest groups and making use of the results of the programme s mid-term evaluation. The revisers recognised that the forest sector plays a key role in promoting sustainable development and has the potential to reverse the effects of the economic recession. There is a possibility to develop the forest sector into a biocluster that produces more and more materials and services to other industrial sectors over the next few decades. This long-term objective was the basis for the tangible targets set for The drafters of Finland s National Forest Programme 2015 were united in their work by a common vision and the following values: u u u u appreciation of nature in all actions; recognition of customer orientation as a key precondition for profitable and competitive operation; high-standard and diverse expertise; and collaboration that is based on transparency and trust between the various actors. Finland s National Forest Programme (2015 b) comprises a mission and a vision as well as strategic objectives and targets derived from the vision. Specific actions have been formulated to meet the strategic objectives. The mission of Finland s National Forest Programme is to generate increased welfare through diverse sustainable forest management. 9

10 10 The mission means that Finnish forests are used and managed according to the principles of sustainable development, taking into account economic, ecological, social, and cultural aspects of sustainability. Sustainable forest management also includes conservation. Forests are managed and used diversely in such a way that their renewability is ensured from one generation to the next. Welfare is a broad concept that relates both to the national economy as a whole and to individual citizens. It encompasses many tangible and intangible elements, such as national income, employment, livelihood, health and recreation, clean and viable environment, and forest biodiversity. The vision of Finland s National Forest Programme targets the year 2020, when The Finnish forest sector is a responsible pioneer in bioeconomy. Forest-based livelihoods are competitive and profitable. Forest biodiversity and other environmental benefits have been strengthened. The vision sets a positive challenge for the forest sector. Achieving it requires new innovations, development, and novel know-how. The forest sector s objective is to become a pioneer as our society moves towards bioeconomy, because this is where the most potential for the sector s success will lie in the future. In bioeconomy, natural resources are used in a sustainable manner, replicating and taking advantage of biological processes in the processing operations. The diverse fibres and chemical compounds that can be derived from biomass as well as biological processes will form the basis of new innovations. Bioeconomy needs to be seen as a broader and more multivariate an opportunity, as its applications have the potential to cover all aspects of society. Bioeconomy also strives to take account of all of the effects of production on ecosystems and natural biochemical cycles. Forest biodiversity and other environmental benefits of forests, such as clean air, water, and soil productivity, are vital for us. These environmental benefits are examples of what are known as the ecosystem services of forests, i.e. the diverse benefits that humans get from nature. Strengthening biodiversity and other environmental benefits is not just a vital condition for being able to make use of forests but also a value in itself. The development of a value chain from the forest to the consumer that covers all aspects of forests and incorporates both current and new forest-based products and services; the integration of the multiple uses of forests; and the conservation of the environmental benefits of forests, all these demand sustained and seamless cooperation between the private and the public sector, as well as heavy investment in future products and services. Achieving this goal also requires sustained research and development work as well as reforms in forest research and education to meet these objectives. A competitive forest sector is an attractive employer which appeals to skilled labour. As questions relating to forests are both local and international at the same time, national and international forest policies need to be anticipatory and proactive, as well as mutually complementary. Finland s National Forest Programme 2015 is based on three objectives derived from the vision: u u u strengthening forest-based business and increasing the value of production; improving the profitability of forestry; and strengthening forest biodiversity, environmental benefits, and welfare implications. The attainment of these objectives is supported by means of cross-cutting themes: The competitiveness and profitability of livelihoods will be vital to the sector s success. Only customerorientated business that represents good value for money and competitive know-how can succeed and create foundations for profitable forestry. u u diversifying and strengthening forest sector know-how; and increasing contribution to international and EU-level forest policy development.

11 Vision THE FINNISH FOREST SECTOR IS A RESPONSIBLE PIONEER IN BIOECONOMY. FOREST-BASED ECONOMIES ARE COMPETITIVE AND PROFITABLE. FOREST BIODIVERSITY AND OTHER ENVIRONMENTAL BENEFITS HAVE BEEN STRENGTHENED. Strengthening forest-based business and increasing the value of production Improving the profitability of forestry Strengthening forest biodiversity, environmental benefits, and welfare implications Strategic objectives and targets Value added, ecoefficiency, and new products and services Wood-based energy Ecotourism and the natural produce industry Transport networks Sustainability of timber supply and diversification of forest management methods Efficient timber trade Profitability and hold ing size in private forestry Forest biodiversity Climate change Water and soil Quality of life Crosscutting themes Increasing contribution to international and EU-level forest policy development Diversifying and strengthening forest sector know-how ACTIONS action action action action action action action REGIONAL FOREST PROGRAMMES 11 The most important actions in the near future relate to revising the structures and operating methods of the forest sector, to improving the sector s competitiveness, to improving the transport network and the availability of skilled labour, to improving the conditions of entrepreneurship, and to supporting the use of wood for energy. These actions need to be complemented by strong, future-orientated research and development to bring about new products and services based on forests and wood and to enable extensive commercialisation, as well as actions aimed at ensuring the profitability of forestry and good conditions for the annual increment in growing stock. In addition to the economic use of forests, other objectives and themes that will feature throughout the programming period include ensuring forest biodiversity, mitigation of and adaptation to climate change, and preserving soil health and water quality. A key consideration in programme implementation is to pay attention to coordinating objectives and actions associated with different uses of forests throughout the programming period. This requires extensive cooperation from all interested parties. The availability of public development funding has decreased as a result of the economic recession. The programme drafters have also strived to find new market-based approaches and funding models in order to meet the set targets. In the future, the objective will be to find innovative means of securing funding through the cooperation of the public and the private sector and by setting up funds, for example. Finland s National Forest Programme also has a parallel programme called the Forest Biodiversity Programme for Southern Finland (METSO), which is integral to the National Forest Programme. The Strategic Programme for the Forest Sector, which is coordinated by the Finnish Ministry of Employment and the Economy, also supports the National Forest Programme as regards forest-based business and implements the actions for which the Finnish Ministry of Employment and the Economy is responsible. According to the programme principles, the objectives and actions are matched to the aims of Finland s climate and energy policy and rural and regional strategies and policy programmes, for example, through reciprocal processes.

12 The following table shows the most important targets set for the National Forest Programme 2015 in 2008 and progress relative to these objectives: Government Resolution of 2008 Finland s National Forest Programme 2015 progress relative to the most important targets Initial status in 2006 Status in 2009 Target for 2015 Roundwood removals, million m 3 /yr 51,7 42, Use of forest chips, million m 3 /yr 3,4 6,1 8 12,0 Silvicultural investments, million /yr (public subsidies) 61,3 79,5 85 Net profit from private forestry, /ha/yr 87,3 56,1 120 Value of forest and wood products industry production, billion /yr 2 21,3 15,0 22,5 Employment in the forest sector, persons METSO programme (METSO II, as of 2008) Permanent conservation, private conservation areas 1, ha Environmental support and habitat management projects 2, ha (2008) (kum ) (v. 2016) Protected areas on State lands designated by Metsähallitus Monetary values are given at 2009 prices, subject to the cost-of-living index Finnish Nature Conservation Act 2. Finnish Act on the Financing of Sustainable Forestry 3. Excluding habitat management projects 4. Excluding habitat management projects 12 Key terms Sustainable forest management Use and management of forests and woodlands in a manner that maintains their biodiversity, productivity, regenerative capacity, and vitality as well as the potential to carry out significant ecological, economic, and social activities on local, national, and global levels in a manner that does not jeopardise other ecosystems now or in the future. Sustainable forest and management also includes forest conservation. Ecosystem approach A framework adopted under the UN Convention on Biological Diversity (CBD) which seeks to take a holistic view to the sustainable use, management, and conservation of natural environments. The approach emphasises the preservation of the structure and functions of ecosystems so as to secure the availability of functions vital to both humans and nature in the future. According to a report of the Ministerial Conference on the Protection of Forests in Europe, when applied to forests, the ecosystem approach equates to sustainable forest management. Ecosystem services Benefits to humans derived from nature. Many ecosystem services are vital to humans and other organisms. Biodiversity is essential to ecosystem services, as it helps nature to adapt and regenerate. Ecosystem services are divided into production, regulatory, cultural, and maintenance (i.e. support) services. Examples of ecosystem services include the production of timber, berries and mushrooms, carbon sequestration and the maintenance of soil productivity (regulatory), scenery as well as outdoor activities and recreation (cultural), and photosynthesis and nutrient cycles (support). Support services lay the foundations for other ecosystem services. Environmental benefits Regulating and supporting ecosystem services. Bioeconomy Sustainable use of natural resources and the introduction of biological and biotechnological processes to production chains. Bioeconomy involves using natural resources in a sustainable manner, replicating and taking advantage of biological processes.

13 FOREST SECTOR IN A NEW OPERATING ENVIRONMENT The integration of global economy is moulding the operating environment of the forest industry The integration of global economy continues, and both capital and production are moving increasingly flexibly to countries where production factors such as raw materials and labour are cheaper and their continued availability secured. The operation of the value chain is also marked by increasingly close links to growing markets such as Southeast Asia and South America. The ownership of natural resources is becoming increasingly international, and decision-making within the industry in Finland is also more and more affected by international capital markets. One outcome of this development is that the political supervision of the use of natural resources is being transferred more and more clearly to supranational bodies, such as the European Union. The deep economic recession that began in 2008 has changed economic and financial structures far into the future and increased global uncertainty. For Finland, this development means that the change continues, as the national economy is highly dependent on export. Industrial activity that is based on natural resources cannot be profitable unless the production structures and operating methods are reformed. Increasing customer orientation in production and the development of new innovations and services are among the most vital means of generating new business. The Government has an increasingly important role as the creator of competitive operating conditions for economic operators. The forest sector is one of the four key industries of Finland, along with the metal, electronics, and chemical industries. Income from forest industry exports accounts for just under a fifth of Finland s national export income; the figure is tenfold compared to other countries in the world. The contribution of the forest sector to the gross domestic product is approximately 5%, and it accounts for 3.5% of the employed workforce. The average figures for the world are 1.0% and 0.4% respectively. The overall importance of the forest sector is wider still, as Finland s forest cluster comprises both forestry and other closely-linked industries, such as mechanical engineering and the chemical industry, printing, energy production, and consultancy. The Finnish forest industry s domestic production accounts for 5% of the global production of paper, paperboard, and pulp and 2.4% of sawn timber and wood-based panels, despite the fact that the volume of growing stock in Finland is only 0.5% of the total growing stock of all the forests in the world. Finland is the leading country in the European Union in terms of using wood-based energy. Wood accounts for approximately 20% of Finland s total energy production, which is five times more than the EU average. Having several strong industries is important for Finland s national economy. However, the forest sector has not progressed as hoped in the 2000s. Both the value added in forest industry production and the sector s contribution to the gross domestic product have decreased during the last 10 years (Figure 1). This development reflects the shift in the focus of the consumption and production of forest industry products towards growing markets. The economic recession that began in 2008 was the final push that has forced to changes in the production structure of the Finnish forest sector as well. 13

14 12 10 Value added, billion in 2008 monetary value Forest sector Pulp and paper industries Wood-products industries Forestry Share of the GDP, % Preliminary data for Monetary values are deflated using wholesale price index. 14 Figure 1. Value added in the forest sector and its share of the gross domestic product between 1975 and (Source: Statistical Yearbook of Forestry, 2009) Table 1. Value of forest-based functions and services in Value of forest-based functions and services in 2008 (million ) Pulp and paper industry, value of output Wood products industry, value of output Forestry, value of output 2 Stumpage revenue, gross stumpage income 2 Harvesting and transportation, silviculture, services, etc. value of output (2006) Ecotourism, estimate of value added 1 ~ 800 Energy, horticultural, and environmental peat, estimated turnover 3 ~ 300 Forest chips + fuelwood, value on site of use + stumpage value Berries, mushrooms, herbs, and lichen, trade value + estimated household use 2 (2006) ~ 120 Game husbandry, imputed value 78 Reindeer husbandry, imputed value 2 15,2 The recreational value of forests has been calculated by putting a price on recreational visits to forests, the total coming to approximately 1 billion 2 (2006). The figures are not fully commensurate and some are based on estimates. They nevertheless provide an idea of the scale of the value of forest-based functions and services. Source: 1 Statistics Finland, 2 Finnish Forest Research Institute, 3 Association of Finnish Peat Industries

15 The strategic importance of natural resources and biomass is growing The strategic importance of renewable natural resources is growing globally, as non-renewable natural resources become increasingly limited, the population continues to grow, and global warming weakens the productivity of ecosystems. Countries such as Finland that possess renewable natural resources and high-level expertise have a competitive advantage that can be harnessed by tapping into the potential presented by bioeconomy. Forests, and the sustainable use of forests, are the foundation on which Finland s bioeconomy can grow. approximately 1.5 billion per year. Four fifths of this income remains in the local area, as the majority of forest owners live in the region where their holding is located. The structural change of the industrial sector, which has come about as a result of global economic development, has also affected the income generated by forest owners from timber sales; real stumpage prices have dropped, with the exception of a substantial peak in This may lower interest in forestry and forestry investments, which is why conditions for profitable, long-term forestry entrepreneurship need to be improved. The combined value of production across the entire forestry sector, including services, has previously been in the region of 4.6 billion mill. m 3 Total increment Drain Pine Spruce Broadleaves Figure 2. Increment and drain of the growing stock of Finnish forests (Source: Statistical Yearbook of Forestry, 2009) Climate and energy policy are taking on more significant roles The value of forests increases as we seek ways to mitigate climate change and produce energy. Climate change affects both the functioning of ecosystems and economy on a global scale. Means to combat and adapt to climate change are being explored through both international and national processes. The high EU-level targets are challenging Finland to increase the use of renewable forms of energy and to cut greenhouse gas emissions. 15 Forests are the most important economically exploitable natural resource in Finland (Table 1). Thanks to active forest management, the growing stock in Finnish forests is healthy and prolific. The annual increment amounts to almost 100 million cubic metres (Figure 2). Just over 50% of the increment is used for wood processing, while the potential for sustainable logging is approximately 70%. The value of forest and wood products industry production is approximately 20 billion. Forests also yield diverse and abundant harvests of game, berries, and mushrooms, in addition to being an important element of the living environment and recreation of Finns. Moreover, forests lend themselves to ecotourism, which is an extremely important source of income in some areas. Forest use has to be guided by the natural strengths of different areas across the country. Private forest owners, who amount to approximately 730,000, own just over 60% of Finland s forests and are responsible for approximately 80% of annual logging. Income from timber sales amounts to With respect to energy policy and climate change, the forest sector has become increasingly important but also more complex what is a benefit in one respect can be a disadvantage in another. For example, increasing the use of wood for energy is unavoidable if climate targets are to be met, but not enough research has yet gone into the effects of this on biodiversity, water, soil, air quality, and human health. The need to preserve biodiversity demands action A significant percentage of biological species are directly or indirectly dependent on forests. Nine percent of Finnish forests are protected. In terms of conservation needs, however, conservation areas are distributed unevenly over the territory of Finland. Only 2.3% of forests in southern Finland are strictly protected, while the corresponding figure for northern Finland is 15.8% Metsä- ja kitumaan pinta-alasta

16 16 Preserving biodiversity is not just about its intrinsic value; diverse and well-functioning ecosystems also produce a multitude of services, such as timber, clean water and air, and recreational possibilities. The welfare of humankind and other organisms is fully dependent on these so-called ecosystem services provided by nature. Intergenerational principles, which are at the core of sustainable development, demand that forest biodiversity and other ecosystem services that help to sustain forest functions be maintained as part of the forest management regime. Know-how, innovations, and technology lay foundations for competitiveness Major changes in the global and national operating environments are challenging the forest sector to make better use of know-how. The skills potential of not just existing sustainable forestry but also other forest-based business and entrepreneurship needs to be developed both for the domestic and the export market. Climate change, energy and environmental issues, the ageing of the population, and the depletion of raw materials and resources increase the need for new technology and production methods. Ideas for new products can be found with the help of the new industries that are emerging at the intersections of different scientific disciplines, such as biosciences. Know-how needs to be tied to international value chains. One example is turning industrial know-how into knowledge-intensive service expertise (instead of products, customers are offered comprehensive solutions). Harnessing the opportunities presented by innovations (products, services) that are fundamentally based on using natural resources and ecosystem services in a sustainable manner requires investment in research and development. Growing economies are investing more and more into research and innovation, which also intensifies competition in this area. Finland needs to be able to bundle research, development, and education more and more closely together and to return to the cutting edge of information society development. The collaboration of the public and the private sector plays a crucial role in innovation policy. International treaties and EU policies are gaining influence The operating environment of forestry and the forest sector is also affected by political and structural changes outside Finland s national borders. Global economic integration and environmental issues are making international treaties (UN, FAO, WTO, etc.) more and more important. The Treaty of Lisbon will also strengthen the role of the EU even further. Although the treaty does not include actual legal provisions for a common forest policy, EU law and policies contain many provisions that affect the forest sector directly or indirectly. Post-Kyoto Protocol negotiations on climate change are among the most significant global processes. From Finland s perspective, the primary objective is to be able to influence the content of different treaties and policies in a coordinated manner during the formulation stage. Values and expectations are changing Finnish society sets more and more diverse expectations on the use of forests. Forests are inherent in Finnish culture, which makes forest use an emotive subject. There is a drive to preserve and protect forests. Demand for ecologically sustainable products is growing at the same time, which creates favourable conditions for making more and more versatile use of forests. The coordination of the many different functions of forests calls for an open-minded and comprehensive examination of the ways in which forests are used. Forests are also a source of many immaterial commodities which will become more important as the general standard of living rises and the amount of time available for leisure activities increases. The material and immaterial commodities offered by forests create new opportunities for work and entrepreneurship, as well as the general welfare of citizens on the whole.

17 STRATEGIC OBJECTIVES, TARGETS, INDICATORS, AND ACTIONS 1 Strengthening forest-based business and increasing the value of production 1.1 Value added, eco-efficiency, and new products and services The competitiveness of the Finnish forest industry is based on customer-orientated products with high value added. As a renewable raw material, wood offers diverse opportunities for new products within Finland s future growth industry, bioeconomy. In order to boost competitiveness, investment needs to be focused on developing new products and operating models as well as completely new kinds of business functions, on increasing the value added of current products, and on improving the industry s operating conditions. High-quality occupational healthcare within the forest sector may develop into a strength on an international scale. Technological expertise needs to be complemented by stronger business know-how as well as new technological and service-based enterprises. Service provision and networking between major industrial players and the SME sector will become increasingly important. The profitability and eco-efficiency of current products can also be boosted by means of better production processes and technology as well as more efficient use of raw materials. Opportunities for new wood-based products have already been identified in the wood products industry, construction, electronic paper technology, packaging, bioenergy and bio-based products, as well as the food and the pharmaceutical industries. The plan is to build biorefineries next door to pulp mills, allowing biomass to be converted into raw material for biodiesel, ethanol, and products for the chemical industry. The potential in nano pulp is immense. Timber construction and the manufacture of wood products represent sustainable uses of natural resources and provide long-term carbon sequestration. The properties of wood make it both an energyefficient and a cost-efficient construction material. The greatest benefits with regard to the sustainable use of natural resources and the mitigation of climate change can be gained by using wood to replace other materials. As a choice of material, wood is unbeatable in terms of both construction and use, as well as recycling. 17

18 As a considerable number of buildings in Finland are made of wood, their maintenance increases the need for renovation. The development of high-quality value added products made of sawn timber and wood-based panels, such as components for the carpentry and furniture industries, panels for interior design and decoration, as well as structures for garden design and other outdoor fixtures increases the use of wood. The use of wood can also be increased by developing wood-based products in which the structure of wood has been modified chemically or physically, or where wood is combined with other materials. The manufacture of wood products can also be linked to other services, such as installation, maintenance, and renovation. The wood products industry shows considerable growth potential both in Finland and especially as regards the export market. 28% to 38% of total energy consumption by According to the National Renewable Energy Action Plan that Finland has submitted to the Commission, energy produced using wood will account for more than half of this increase. Developing the concept of biorefineries, investing in converting existing production facilities to run on renewable sources of energy, and increasing the use of forest chips in power plants represent the highest potential for increasing wood-based energy production. Increasing the contribution of wood-based energy also requires maintaining the competitiveness of current forest industry production. In addition to their climatic effects, renewable sources of energy also create economic and employment potential in rural areas in particular, which supports balanced regional development. Increasing wood-based energy production and developing the market for energy wood may also increase competition for timber from first thinnings. Challenges include optimising value added and distributing raw material resources efficiently, as well as coordinating sustainability considerations (see Chapter 3). 18 Syöttötuoli JS Oy. Harnessing the full potential of wood requires research and development, progressive thinking, risktaking, and innovative cooperation throughout the forest cluster both internally and with other associated industries. Approximately six million cubic metres of forest chips are currently used for energy production. Forest chips consist of branches, crowns, and stumps collected in connection with regeneration felling as well as chips from trees felled when thinning young stands. In techno-economic terms, the potential production capacity of forest chips is estimated at approximately million cubic metres per year. The availability of forest chips is highly dependent on the volume of commercial logging. The production of wood pellets currently stands at approximately 300, ,000 tonnes per year. Private households also use approximately 5 6 million cubic metres of firewood per year. 1.3 Ecotourism and the natural produce industry 1.2 Wood-based energy The targets associated with the EU s climate and energy policy require that the use of renewable sources of energy is increased, which is also important in terms of energy self-sufficiency. According to the targets set by the EU, Finland needs to increase the contribution of renewable sources of energy from Factors contributing to the increasing volume of domestic ecotourism include urbanisation, rising levels of income and time available for leisure activities, as well as growing awareness of wellness and health issues. Nevertheless, the most important growth potential for ecotourism lies in attracting more foreign tourists to Finland. This can only be achieved if tourism entrepreneurs actively develop and market services suitable for different customer groups. De-