Illegal Logging and Related Timber Trade - Dimensions, Drivers, Impacts and Responses: A Global Scientific Rapid Response Assessment Report

6 MULTIPLE AND INTERTWINED IMPACTS OF ILLEGAL FOREST ACTIVITIES

smallholder lands but also on surrounding lands, which can include public forests, agroforestry zones and, in some cases, protected areas. This is also influenced by the process of social expansion of frontiers dominated by smallholders, whereby immigrants looking for new lands to occupy move into these areas. Ultimately, this leads to negative effects on forests and a lack of incentives for conservation (Chomitz, 2007). It also accelerates the expansion of agricultural frontiers with a growth of sub- sistence, cash crops or mixed production systems to the detriment of forests. While some smallholders are able

timber operations if smallholders, indigenous people and chainsaw millers opt to log selectively a few highly valu- able timber species. This often happens in contexts of growing market pressure (Cano et al., 2015; Mejía et al., 2015). Nonetheless, much of the milling of these groups is carried out using chainsaws in situ and carts, small trac- tors and river rafts for transport. If no (or few) roads are opened, this will likely threaten the few targeted tree spe- cies, but overall have a low impact on forest structure, a short-term impact on wildlife hunting (i.e. during but not after harvest), and thus limited impact on the successional trajectory of the remaining forests. Indirect impacts The states are the main losers in the persistence of small- scale informal logging as well as with the development of small-scale chainsaw milling, which goes against their strategy of formally managing and taxing forest resourc- es. In addition to foregone tax revenue, small-scale chain- saw milling could compromise their efforts to sustainably manage forests. While benefits are appropriated locally,

Box 6.3

Forest conversion to pulp and paper, and oil palm plantations in Indonesia

In Indonesia, by far the most widespread illegal practice associated with forest conversion is under-reporting of commercial timber stocks (KPK, 2015).This helps the companies, on the one hand, to minimize forestry taxes due to the government, and on the other hand, to maximize returns on the sale of timber.As the govern- ment is progressively addressing this problem, there is an increasing tendency among oil palm companies to forgo timber profits and focus exclusively on oil palm. If the concession contains commercial timber stocks, the company is required to obtain a timber utilization permit (IPK), a forest clearing permit and pay appropri- ate taxes. Many companies resort to bulldozing over the timber and burying it in the ground in order to avoid the necessity of dealing with the forestry authorities, an illegal practice.The underreporting problem has had a hard impact on the government’s ability to collect for- estry revenues.According to KPK (2015), between 2003 and 2014, the government recorded only 23 percent of timber volumes that were actually extracted and lost between USD 6.5 to 9 billion as a result. A large proportion of forest allocated to forest conces- sions in the past has been reclassified for plantation development.With 35 million hectares of forest land allocated to industrial timber plantations (HTI) and oil palm estates, these two commodities have been the leading drivers of deforestation in Indonesia and a major source of timber (Casson et al., 2014).While large-scale oil palm plantations drive most of the forest conversion, increasingly smallholders are expanding their planta- tions, currently contributing to 42 percent of total palm oil supply (Directorate General of Estates, 2014). Oil palm expansion has led to significant impacts on CO2 emissions (Carlson and Curran, 2013), mainly due to expansion into peatlands. Between 1990 and 2009/2010 net CO2 emissions, from land use change due to oil palm plantations, peat fires and peat oxidation, increased from 92 to 184 Tg CO2 yr-1 in Indonesia, Malaysia and Papua New Guinea (Agus et al., 2013). Between 2007 and 2010, the total area of industrial scale oil palm agriculture on peatlands increased by over half a million hectares, from 1.6 to 2.15 million hectares. Some 0.2 million hectares of this expansion was in Malaysia— nearly all of it in Sarawak—and the rest was divided more or less evenly between Sumatra and Kalimantan (Miettinen et al., 2013).

Transporting logs along the river Indonesia. Photo © Sophie Furnival/CIFOR

they are rarely invested in the local forest sector, or in enriching the forests, or in modernizing the SMEs. In ad- dition, the persistence of these informal systems also oc- curs via illegal payments to public officials and to control systems, which allow relatively well developed interme- diary networks to transport the timber to markets (Mejia et al., 2015). These payments fuel local corrupt systems that work against smallholders and chainsaw millers who do not have the resources to process their permits, and are vulnerable to asymmetric interactions with interme- diaries (who also provide the capital to finance the timber extraction). Furthermore, once valuable timber species are ex- hausted, small-scale timber extraction and chainsaw milling tend to put pressure not only on indigenous and

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