Perverse Habits: The G8 and Subsidies That Harm Forests and Economies

In 1998 the leaders of the Group of Eight (Japan, France, the United States, Great Britain, Germany, Italy, Canada and Russia) committed to actions that would help protect the world’s forests. Some G8 members, however, continue to provide large and perverse subsidies to forest products industries promoting programs that undermine forest protection and accelerate forest loss.

“Perverse Habits: The G8 and Subsidies That Harm The Forests And Economies,” surveys some of these G8 subsidies explaining why such payments are not justified and suggesting actions that these countries should take to conserve and manage forests for future generations.

The authors note these payments promote inefficiency and harm forests, and that these funds could be better spent on more productive activities including helping poor countries to conserve forests and manage them in ways that reduce poverty and improve environmental quality.

Findings of the report point to Canada, Japan and the United States as the leading providers among the G8 of subsidies that destroy the world’s remaining frontier forests. Among the European members of the G8, France stands out as the only government with direct investments in logging companies.

In Canada, perverse subsidies amount to an estimated US$2-2.7 billions per year. In the Province of British Columbia, alone, subsidies to the industry in 1997 totaled about US$2 billion, of which half is estimated to be perverse contributing to destruction of old growth forests.

The Japanese government is engaged in subsidy programs that provide payments to sawmills in Japan that process logs imported from old growth logging in Siberia, Canada and elsewhere. Japan’s export credit and overseas investment insurance agencies are supporting plantation and wood chipping programs that directly destroy old growth forests and negatively affect traditional communities in Austrialia, Indonesia and elsewhere.

In the United States, timber programs in National Forests have lost over $2 billion between 1992-97 according to conservative government analyses. These losses represent only a part of the entire timber sale budget, much of which can be considered a perverse subsidy to the U.S. logging industry. Of special concern is the continued subsidy for commercial logging operations in the Tongass National Forest in Alaska.

France is involved in road building and related investments in Central Africa that directly serve the economic interests of French (and other) logging companies. Numerous scientific studies have shown that the use of development assistance for road building and improvement result in serious harm to the primary tropical forests of the region.

Other European G8 countries (Germany, the United Kingdom and Italy as well as France) contribute to development assistance programs managed by the European Commission. Some of these programs involve substantial subsidized loans and grants for road building in Central Africa and elsewhere.

In Russia, forests are beset by illegal logging on a massive scale. Non-collection of taxes and fees from such operations serves as a subsidy, admittedly somewhat offset by the high risks of doing business in that country.

The authors recommend the following:

• Jointly establish and fund an independent external commission to conduct a rigorous, in-depth investigation of G8-funded perverse subsidies that promote forest degradation. G8 governments that actively engage in subsidizing their domestic or overseas forest products industry in ways harmful to the environment and the economy should commit to eliminate such subsidies.

• G8 members and the multilateral institutions that they govern should establish priority programs to assist other countries in the identification and elimination of perverse forestry subsidies. Funds for these programs would become available by eliminating the current perverse subsidies that the G8 governments pay.