WOOD PRODUCTS MARKET

Demand for wood products is one of the main drivers of investment in forest management. Report from FAO showed that the production and consumption of wood products and wood energy are expected to increase. One shift will be the higher growth in the production and consumption of wood products in Asia and the Pacific, mainly stemming from the rapid growth in demand from emerging economies such as China and India. The most dramatic change will be the rapid increase in the use of wood as a source of energy, particularly in Europe as a result of policies promoting greater use of renewable energy (FAO, State of the World’s Forest 2009).

 

The Asia and the Pacific region is becoming the major producer and consumer of wood-based panels and paper and paperboard (although per capita consumption will remain higher in Europe and North America). Changes in the use of wood for energy and particularly the potential for large-scale commercial production of cellulosic biofuel will have unprecedented impacts on the forest sector.

 

The UN projects an increase in the global population of 55% by 2050 and Global consumption of hardwoods has multiplied nearly 25 times in the last 4 decades.

 

Paulownia is known as the “Aluminium” of the timbers, being that it is light and strong. An investment in Paulownia plantations is profitable because of the high demand for its timber in Asia. As Paulownia timber production is now also underway in Europe we expect a high demand for Paulownia timber in Europe in the next few years as well.

 

A 10 year old Paulownia tree can be expected to provide an average of 300 board-feet of timber. Tress will continue to increase in volume and value as they age; 18 year old Paulownia tress in China yield an average 6.5m3 with a diameter-at-breast-height of 1m.

 

The price of Paulownia timber varies with the quality of wood. Timber FOB China may range from $250 (Grade E) to $550 (Grade A1) per cubic meter, while high quality timber from Australia may cost as much as $20,000/m3. Table below may be used as a rough guide for determining timber quality.

Small End
Diameter (inches)
Growth rings per inch
8 6 4 4 <4
20+ A1 B1 C1 D E
16-19 A2 B2 C2 D E
12-15 A3 B3 C3 D E
8-11 A4 B4 C4 D E

Source: S. El-Showk and N. El-Showk (2003)

 

The Paulownia tree is uniquely suited to today’s needs. In the face of rising demands for timber and dwindling forests, it provides a low cost, environmentally friendly

and sustainable source of lumber. Large scale reforestation projects or smaller scale “social forestry” programs can use Paulownia to achieve their goals more quickly,

thanks to its rapid growth. Countries which large forested areas and must therefore import timber can use Paulownia to help establish a local supply.

It is a hardy pioneer plant and will succeed in areas where other forest species might not. If properly managed, Paulownia plantations can

help alleviate many of the environmental and economic hardships faced by developing countries today.

CARBON MARKETS

Payments for carbon sequestration to mitigate climate change is one of the fast-growing environmental markets. Under the Kyoto Protocol, three flexible mechanisms were created: the Clean Development Mechanism (CDM), joint implementation and emission trading. Under the CDM, Annex I (industrialized) countries may offset a certain part of their emissions through investment in carbon sequestration or substitution projects in non-Annex I (developing) countries and thus acquire tradable certified emission reductions. Under joint implementation, Annex I countries may jointly execute carbon sequestration or substitution projects. Emission trading permits the marketing of certified emission reductions.

 

Carbon markets comprise the compliance market (which follows stringent rules under the Kyoto Protocol) and the voluntary market. In 2007, the total carbon market (including all voluntary and compliance markets) amounted to US$64 billion, more than double the 2006 total (Hamilton et al., 2008). The voluntary carbon market, where a sizeable share of carbon credits comes from forest activities, also doubled in terms of emissions traded (65 million tonnes of carbon dioxide equivalent in 2007), and tripled in terms of value (US$331 million) (FAO, State of the World’s Forest 2009).