Report: broad protection of state-owned old-growth forests has more benefits than costs 

If 100,000 hectares of state-owned old-growth forests are protected based on scientific criteria, the net social benefit of conservation could be as high as hundreds of millions of euros by 2050, according to an analysis by Postdoctoral Researcher Johanna Kangas and Professor Emeritus Markku Ollikainen. 

In June, the Finnish government published its proposal on criteria for old-growth and primary forests. Instead of science-based criteria, Ministries of Agriculture and Forestry, and the Environment proposed a very strict set of criteria, so that even the majority of forests already protected does not meet them. The government sent out this version for public consultation. 

If the state were to protect all the old-growth and primary forests it owns, based on scientific criteria and in accordance with the recommendations of the Finnish Nature Panel, it is estimated that this would result in the protection of approximately 100,000 hectares. The strict criteria would protect approximately 20 000 hectares. 

Until now, only the costs of protection have been estimated in Finland, but the benefits of protection and avoided costs have not been studied. 

Professor Emeritus of Environmental Economics at the University of Helsinki Markku Ollikainen and Postdoctoral Researcher Johanna Kangas have prepared a discussion paper on the subject titled Protecting state-owned old-growth forests – Benefits and costs, indirect effects and risks. 

The study, commissioned by Kone Foundation’s Metsän puolella (“In the Woods”) initiative, carries out a cost-benefit analysis of the protection of state-owned old-growth forests. The study assesses the monetary value of secured biodiversity and carbon benefits against the costs of protection, i.e. the lost forestry revenue.  

The analysis compares the net benefits of protecting 100,000 hectares of state-owned old-growth forests to the government’s proposal, where the protected area is approximately 20,000 hectares. 
The calculation is based on an inventory of potential old-growth sites in state forests collected by the “Luonnonmetsä” Working Group in 2019-2023. 

The main result and an extensive sensitivity analysis show that the net social benefits of protecting 100,000 hectares of state forests by 2050 would be substantial, up to hundreds of millions of euros. 

In the option proposed by the government, a significant area of valuable forest sites is left under the risk of being harvested, which would lead to lost biodiversity values and considerable release of carbon from trees and soil to the atmosphere. This would be also economically problematic, as the carbon sink of the Finnish land use sector (LULUCF) has already shrunk to almost zero. If Finland fails to meet its EU target to the net sink in LULUCF sector, the state will incur direct costs for the acquisition of LULUCF carbon removals from other member states. 

The revenue from harvesting, even though high, does not cover the value of lost biodiversity and the costs of released carbon. When the risk of harvesting in high value areas is taken into account in the cost-benefit analysis, the smaller protected area proposed by the government will in all cases impose net costs on society. 

The analysis therefore concludes with a recommendation that 100,000 hectares of state forests high in biodiversity value should be protected on the basis of scientific criteria. 

Kone Foundation will now submit the report to the Government, together with a petition from more than 400 forest and environmental scientists calling on the Government to redefine the criteria for old-growth forests on scientific grounds. 

Further information on the premises and conclusions of the study 

The study employs a social cost-benefit analysis. The analysis weighs the benefits of conservation against the costs of conservation under endogenous timber price. 

The most important benefit is the protected biodiversity, i.e. the diversity and unique character of the remaining old-growth forests. 

Old-growth forests store significant amounts of carbon and also act as carbon sinks, providing climate benefits that are taken into account in the calculation. 

To make the biodiversity and carbon benefits commensurable with the costs, they are valued in monetary terms. There is no market price for biodiversity. Its valuation is derived from the compensation paid under the Forest Biodiversity Programme for Southern Finland (METSO) and is also compared to estimates on the citizens’ willingness to pay for biodiversity protection, derived by statistical analyses of surveys and published in scientific journals. 

For carbon sinks, a range of price estimates is used for the LULUCF sector carbon removal units.  

The cost of forest protection is defined as the lost net present value of harvest revenue. The costs depend on the area of protected land, the productivity of the sites, the volume of timber and the increase in the timber price due to a reduction in timber supply. 

The net social benefit of protecting 100,000 hectares of old-growth forests is estimated to be positive for all biodiversity valuation parameters, when the carbon sinks are valued using estimated price of carbon removal units in the LULUCF sector. 

Sensitivity analysis on wood price, price of carbon, distribution of different forest types and discount rate shows that, with one exception, the net benefit remains positive in all cases. Thus, the result of a positive net benefit of conserving 100,000 hectares of state-owned forests is quite robust. 

Download the report (in Finnish) here

More information:  
Markku Ollikainen, Professor Emeritus 

markku.ollikainen@helsinki.fi 

Johanna Kangas, Postdoctoral Researcher 
johanna.a.kangas@helsinki.fi 

Mari Pantsar, Change Manager Koneen Säätiö Metsän puolella 
mari.pantsar@koneensaatio.fi 

Media inquiries:

Lauri Alaviitala
Communications Director, Kone Foundation
lauri.alaviitala@koneensaatio.fi