Niche Markets for Economic Revitalisation of Satoyama Forest ...

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2 EXISTING AND EMERGING CHALLENGES Despite the enormous economic potential of the various niche markets identified and discussed in chapter one, there are a number of challenges to be overcome before the economic revitalisation of satoyama forest resources in Ishikawa Prefecture can be achieved. The challenges can be grouped into three dimensions, namely; policy and institutional; product development and technology diffusion/ proliferation; and market development. A random list of the issues would include high equipment and transportation costs on forest thinnings, lack of cost–saving technology for processing the various wood products at competitive prices relative to imports, policy and technical issues relating to carbon markets, market constraints for wood blocks, and unfavorable national import policy on wood materials. Many of these issues are identified within the context of satoyama in Ishikawa Prefecture, but bear similarity to other local contexts across Japan. 2.1 Challenges Relating to Viability of Market for Wood Products Japan has successfully pursued an aggressive policy and implementation of forest expansion over the last four decades, and currently has an approximately 70 per cent forest cover. Over the same period, however, Japan maintained a highly liberalised import regime on wood products, thereby undermining the economic development of the domestic forestry sector, and the prices of domestic wood materials plummeted under pressure from the imports. The low prices, coupled with the high costs of wood processing and transportation in Japan, appear to have eroded the economic incentive for investors to locally produce timber and forest thinnings. Distribution and Processing System for Forest Thinnings: In order to promote methods for the use of forest thinnings such as wood block construction, efforts are needed on the local level to reduce costs in the collection and transport of the thinnings. Under the current distribution system, it is often the case that the processor will receive an order from a housing construction company and will saw and process raw wood purchased on the market. With wood blocks, it is generally necessary to dry the wood to less than 20 per cent moisture content. Drying methods include artificial drying and natural drying, and while artificial drying possesses are shorter, they incur drying equipment and fuel costs. While natural drying does not incur these costs, a two year period and a very large stockyard are required. If a processor is small scale and has low production capabilities, product costs will be high and variability in standards and quality may result. On the other hand, construction companies that require large supply sources strongly desire a stable supply of high quality material at low cost. 33 In response to these needs, forestry associations, the raw wood market, and processing companies are collaborating to establish distribution and processing centers at key regions, and a distribution network with housing construction companies is starting to form (Agriculture, Forestry and Fisheries Department, Ishikawa Prefecture Government edition, 2002). If high quality and low cost wood can be supplied in a stable manner through performing purchasing, managing, drying, materials processing, and product control of raw wood in an integrated and rational manner, an expansion in the use of forest thinnings, which were largely avoided by housing construction companies, can be achieved. These efforts could open the way for further exploration of new requirements and the development of technologies for the use of these materials in various fields such as residential construction technology like the wood block construction method that utilises forest thinnings. Establishing Stable Supply: There are challenges relating to successful scale–up of small scale, high efficiency plants to provide a stable supply to meet woody biomass demand, thereby permitting the development of more robust fuel supply systems, with lower overall costs. For example, the use of wood pellets for heating (which effectively utilises various leftover and discarded materials and are relatively easy to transport), would be enhanced if uniform demand could be established year– round. It is, therefore, desirable to develop and introduce not only stoves for heating, but also functional boilers for heating water which could meet the large demand from public facilities and businesses, and if possible, also cater to residential homes. 2.2 Challenges Relating to Biomass Reducing Equipment Costs: Costs associated with the installation and operation of boilers and stove equipment need to be reduced. Furthermore, various types of devices and systems to respond to diverse biomass collection and use must be developed and introduced. Of these, there is a high need to promote the development of innovative technologies involving the gasification and liquification of woody biomass, which is easier to use and has greater energy conversion efficiency than direct burning. Reducing Collection and Transport Costs: Woody biomass resources are generally located in mountainous areas and are dispersed over large areas. As this material is high in volume and weight, the reduction of costs associated with collection and transportation is an important challenge associated with promoting biomass based energy in Japan. Wood collection is considered the primary reason why wood material remnants, including forest thinnings, have not been used in energy production in the country. The use of high performance forestry equipment to improve labor productivity and road improvements are considered important steps in reducing costs (Forestry Agency edition, 2006a). In addition to shortening the distance between production, processing, and consumption sites the beneficial use and integrated applications for timber and woody biomass need to be explored at the local level. It will be necessary to establish a distribution system and methods which take into account the balance of demand and supply of targeted wood resources in specific locations. The Anamizu–cho gasification power generation system is a good example. 15
2.3 Challenges Relating to Carbon Markets Potential Supply of Forestry Projects: According to the IPCC (2007) sequestration potential in Japan is estimated in the range of 35–70 MtCO2/yr and planted forests account for more than 60 per cent of the carbon sequestration. While assessments cited in the IPCC report show that there is little potential for afforestation and reforestation in Japan, forest management and practices for planted forests including thinning and regeneration have been identified as necessary to maintain carbon sequestration and to curb saturation. There is, therefore a potential supply of ongoing carbon sequestration management projects compatible with satoyama conservation goals. Emerging Demand for Forestry Projects: Unlike other market oriented solutions discussed in this brief, carbon finance opportunities which depend primarily on government policy and demand for sequestration management projects in forestry will be driven primarily by regulatory developments in Japan. At present there is no mandatory national scheme that would prompt a demand for such projects, although there is a voluntary scheme. Future carbon markets in Japan, if they are to arise, would most likely flow from Japan’s engagement with the Kyoto Protocol and future agreements under the United Nations Framework Convention on Climate Change. 34 Under the current Kyoto Protocol Japan is a major purchaser of carbon emissions rights from overseas project under the United Nations’ CDM. The demand for offset projects, whether domestic or otherwise will likely remain high in Japan due to the country’s high level of energy efficiency and high marginal abatement costs in its industrial sector relative to other Kyoto signatories with reduction commitments. The World Bank estimated at the end of 2006 that Japan possessed 84 megatons of demand for Kyoto Mechanism credits in addition to the 266 megatons it had already purchased at that point (World Bank, 2007). While it is not clear what international cooperation regime will emerge after the Kyoto Protocol expires in 2012, carbon markets are likely to play a role. The G8 at Heiligendamm in 2007 agreed to aim to half CO 2 emissions by 2050. The International Emissions Trading Association’s recent Market Sentiment Survey indicate that more than 90 per cent of respondents believe that the GHG Market is an established instrument that will continue post 2012. In addition, more than 65 per cent of those surveyed anticipated that a global market will be established in the next ten years. Still, how and whether these trends will result in a domestic offset market in Japan for forestry projects is an open question. 2.4 Technical Challenges of Forestry Projects • Carbon Measurement: Estimating carbon emissions to a uniform standard from forest preservation activities is more difficult than for energy–related projects because the carbon content of forests varies significantly depending on the density, age and type of trees, and the soils. Detection of forest degradation, as opposed to actual deforestation, is particularly challenging. • Natural/Accidental Deforestation: Forests can be reduced through natural or accidental causes, such as fires or disease, causing unplanned fluctuations in emissions, and markets would need to allow for this in some way. The Chicago Climate Exchange dealt with this for their Forestry Carbon Emissions Offsets by creating a carbon reserve pool of 20 per cent of emissions to allow for catastrophic loss, released at the end of the programme. The way in which this issue is handled will affect credibility and could influence the price at which units are traded. • Ensuring Climate Benefits: A key challenge is to ensure that emissions reductions are additional. The nature of the drivers of deforestation implies a substantial risk that, if small areas are protected, leakage to other areas could take place and overall emissions would not be reduced, although this is certainly a more acute problem with international emissions trading and offset projects in countries where deforestation is a major problem, unlike Japan. • Agreeing on an Equitable Basis for Participation and Incentives: Determining the baseline of emissions from deforestation beyond which tradable credits would be earned can be challenging, although this is less the case with a national programme than an international one. Getting the level right may involve assessment of the historical trend and is a technical challenge given the variability in deforestation rates year by year. A particular challenge, when setting baselines, is how to treat activities that have already enhanced carbon sinks. Focusing only on current activity alone would mean the management entities currently neglecting satoyama the most could benefit the most. Since carbon finance opportunities depend primarily on government policy the primary barriers to a domestic emission trading in Japan at this point are political. At present, Ministry of Environment and Ministry of Economy, Trade and Industries (METI) are divided over the development of an emissions trading scheme in the Kyoto compliance period. Nevertheless there are technical challenges 35 that are specific to forestry and sinks in emissions trading that are worth mentioning. 16
Page 1 and 2: Niche Markets for Economic Revitali
Page 3 and 4: IICRC Report Niche Markets for Econ
Page 5 and 6: CONCLUSION 25 ENDNOTES 26 REFERENCE
Page 7 and 8: Foreword Satoyama has always provid
Page 9 and 10: The first refers to the current and
Page 11 and 12: a) Working Definition Working Defin
Page 13 and 14: 1 EMERGING NICHE MARKETS FOR SATOYA
Page 15 and 16: 1.2 Commercialisation of Wood Block
Page 17 and 18: • Realising stable power generati
Page 19: In Japan, the priorities have been
Page 23 and 24: nature, satoyama should be accorded
Page 25 and 26: the public (Forestry Agency edition
Page 27 and 28: Figure 11: Price by Year Comparison
Page 29 and 30: such technological innovation in th
Page 31 and 32: ENDNOTES 1. In recent years, the im
Page 33 and 34: emovals of forests are under develo
Page 35 and 36: Nature Conservation Bureau, Ministr

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