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Greening a Forestry Supply Chain to Mitigate Climate Change: A Case Study from the Rainforests of Ecuador
Peter Pinchot

The EcoMadera community forestry enterprise is a Pinchot Institute pilot project— combined with a for-profit business— testing an innovative strategy for conserving Ecuador’s coastal rainforests. The EcoMadera project was established in 2002, when a group of landowners in a small rainforest community in northwestern Ecuador partnered with a US Peace Corps volunteer, David Smith, and with Pinchot Institute Senior Fellow Peter Pinchot, to create a community forestry enterprise. The goals set by the community members were to conserve the forests that were being lost to persistent illegal logging and conversion to agriculture, and to improve the standard of living of families living within the local watershed.

Twelve years later, EcoMadera has grown into a small, but rapidly growing forest products company. It manages forest plantations and native forests, manufactures wood products in a facility located in the community, markets them internationally, and provides full-time employment to 55 community members. This kind of success, relatively rare among community forestry projects in the tropics, is inspiring others to learn more about this approach and apply it in other locations in tropical forests. EcoMadera is now updating its community forestry business model to demonstrate how a project like this can have a greater impact on mitigating climate change.

Global Context
Debates about climate change focus largely on the role of coal, oil, and natural gas as the primary sources of greenhouse gas emissions. However, over the last 150 years, forest exploitation and deforestation have been responsible for 30 to 40% of the human-generated carbon emissions contributing to global climate change. This trend is continuing, with tropical deforestation and forest degradation in Latin America, Africa, and Asia still producing roughly 15% of global annual carbon emissions. Temperate forests, having significantly recovered from forest loss in the 19th and early 20th century, are currently acting as carbon sinks, but are predicted to become carbon emitters as the climate continues to get warmer.1 These trends make it clear that reducing forest carbon emissions is essential to our ability to make the transition to a low-carbon economy and to return to a sustainable climate regime.
Forest Carbon Stocks and Emissions

An additional 50 years of tropical deforestation, without any further fossil fuel emissions, would put us close to a 2°C increase, the estimated threshold for avoiding the worst impacts of climate change.

In 2008, recognizing the need to develop an effective strategy to control tropical deforestation, the United Nations established a program for Reduced Emissions from Deforestation and Degradation (REDD). During the past six years, 51 tropical nations (including Ecuador, where EcoMadera operates) have partnered with the UN to develop national REDD strategies.

A key obstacle to putting REDD into practice has been the failure to create a global carbon market that can provide sufficient funding to support national programs to control deforestation. The UN estimates that it will cost $30 billion a year to reduce deforestation sufficiently to stay within the 2°C limit. In the absence of a global carbon market, no international consensus has emerged to provide this funding.

There are several factors that have to be addressed to reduce deforestation in developing countries: 
  • Unlike temperate forests, most native tropical forests are populated by rural communities who make their primary living from their land. 
  • Families in most tropical rural communities lack full legal rights to their land, which inhibits sustainable management. 
  • Over 80% of deforestation is caused by conversion of forests to agriculture. 
  • Tropical forests are very diverse, and there has been little research in silviculture, wood products, and markets for most species. Diverse native tropical forests typically have low timber value. 
  • If the economic opportunities from agriculture appear to be greater than what landowners can gain from managing native forests, they make a rational decision to convert their forests to agriculture.
Thus the key elements of reducing tropical deforestation include helping forest communities gain legal rights to their land and ensuring that they can gain equal or greater benefits from managing their forests sustainably than they can from agriculture. This strategy is the foundation for the UN REDD program and for the EcoMadera community enterprise.
Pinchot Institute forestry team with botanical samples in a study of 300 local tree species
While waiting for the emergence of REDD carbon markets, EcoMadera has focused on raising the value of community forests through sustainable forestry, on managing native forests and forest plantations, and on local manufacturing of valuable wood products. The Pinchot Institute has played a central role in the evolution of this enterprise, with major support from the MacArthur Foundation, Overbrook Foundation, and Prince Albert II of Monaco Foundation, and from USAID and private donors. These funds have supported basic studies that are the foundation of sustainable forestry, including conservation planning, taxonomy and silviculture of 300 tree species, low impact timber harvest, and design of innovative wood products that can utilize 60 to 80 largely unknown wood species in products that can drive value back to forest communities.

Low Carbon Economy, Green Markets, and Impact Investing
The dramatic growth of the green economy, focused on sustainability and on mobilizing “impact investing” —venture capital invested with a commitment to achieving social and environmental outcomes—provides important new opportunities for addressing both climate change and tropical deforestation. Exciting examples include: the California cap and trade program, which is creating the first formal carbon offset market for preventing tropical deforestation; the rise in global investment in renewable energy projects to nearly $300 billion annually; the rapid growth of energy-efficient, low-emission housing design and commercial construction; and growth of impact investment funds to nearly $1 trillion in capital. These trends create an unprecedented business opportunity for community forestry to scale up to the point where it can have a major impact on deforestation and carbon emissions—if we can help community forestry enterprises to access these markets.

For decades, the conservation community has supported community forestry projects through multilateral and private foundation funding, and many nations have developed policies friendly to community forestry. These actions have been necessary, but in many cases insufficient to slow deforestation. Why? Because deforestation is driven largely by the opportunity cost of agriculture and other non-forest uses. To reduce deforestation, communities have to connect their forests to markets which will provide returns to landowners that are economically competitive with the most valuable non-forest opportunity.

A countertop made of mixed-species hardwoods from the EcoMadera project.To become competitive, community forestry has two options: 1) accessing government incentives for conservation and 2) establishing a viable business enterprise that can drive value back to forests and their owners. Where opportunity costs are high (soy beans, cacao, African oil palm, and even cattle), conservation incentive programs cannot compete effectively with agriculture. Thus EcoMadera believes that, where the deforestation threat is high, the combination of a competitive business venture and government incentives is the most viable option.

EcoMadera has built its forest product business by accessing two of the green markets described earlier: global wind energy and the US green construction industry. First, we grow balsa tree plantations and manufacture balsa wood laminates which are transformed into the core material for industrial composites used in wind turbine blades. EcoMadera exports to balsa composite markets in Europe, the US, and China. The wind industry demand for balsa is growing rapidly, and EcoMadera is currently raising capital to expand its manufacturing capacity and to establish more balsa plantations.

Second, based on the Pinchot Institute’s program of R&D in forestry and wood products, EcoMadera is starting up a second business line in mixed-species hardwood products. Our first product is butcher block countertops. This product has grown out of EcoMadera’s “whole forest design” strategy, which is based on utilizing the harvestable species in the native forest in the relative abundance in which they can be sustainably harvested. We let good silviculture drive our product design, which then drives the maximum value possible back to the forest. The types of wood used will vary according to the mix of species in the latest timber harvest, with 6 to 8 species per countertop, and a balance of colors and textures. We are working with green architects, designers, and contractors to develop the most appealing species mixes, and we are negotiating a contract with a national distributor of countertops.
Maria Quezada, Plant Manager (2nd from right) with Shop Foreman Gema Basurto (far right) and balsa clients

The Value of Empowering Local Women as Leaders
EcoMadera’s manufacturing facility is run by three female employees from the local community. One manages the entire manufacturing facility, another is production foreman, and a third manages kiln drying—the most technically demanding skill set. Since these highly capable women assumed their new posts a year ago, the manufacturing process has been made more efficient, achieving a 25% increase in wood yield, and employee productivity has been dramatically improved.

New Partnerships— A Multiple Benefit Community Forestry Model
Despite the progress in establishing a viable community forestry enterprise, EcoMadera is still struggling to control deforestation elsewhere in the 125,000-acre watershed where it operates, settled by 500 colonist families in the late 1970s. Although EcoMadera has become a viable forest products business, until recently, we had not evolved an effective strategy for connecting the families to markets that can compete with agriculture.

In the past eight months, EcoMadera has developed a strong partnership with the Ecuadorian Ministry of Environment that will allow us to integrate government incentives into a comprehensive set of benefits to landowners. We have developed an memorandum of understanding between EcoMadera and the Ministry with the following conservation strategy: 
  • EcoMadera partners with the Ministry to help landowners gain legal land titles to land parcels, allowing them to access bank credit and participate in government incentive programs. 
  • We help families enter the Ministry’s Socio Bosque forest reserve incentive program, with annual payments to avoid all timber cutting and agriculture. 
  • EcoMadera establishes lease contracts with families to implement sustainable forestry on the rest of their native forest. The contracts are based on revenues from the sale of wood products such as countertops, sold in US green construction markets. 
  • We help families gain a forest plantation subsidy from the Ministry of Agriculture by providing technical assistance and a contract to purchase the future timber (balsa and hardwood). 
  • We help families gain subsidies from the Ministry of Environment for forest restoration on abandoned agricultural lands.
Our business model estimates that, with these multiple sources, families can realize revenues of between $3,000 and $4,500 annually from their 125-acre parcels, which is close to the median Ecuadorian family income and equal or greater than revenues from cattle and most local agricultural crops.

EcoMadera is now expanding this multiple benefit conservation model, with continued strong support from the MacArthur Foundation, and more recently from the German development agency, GIZ. Just recently the Ministry of Environment has expanded its Socio Bosque incentive program to include all the elements of this model including sustainable forestry and forest restoration. The Ministry plans to work closely with EcoMadera to develop this strategy as a model for community forestry in Ecuador. EcoMadera also recently hosted a visit by the Rainforest Alliance and representatives of Quichua indigenous communities in the Amazon region of Ecuador, who want to partner with EcoMadera and develop a sustainable forestry program.

Based on this new landowner model and the expansion of the balsa laminate business and the start up of hardwood countertop manufacturing, EcoMadera is updating its business and market plan. We are also working with social investors to raise capital for continued expansion.

More information about EcoMadera and its developing business and market plan can be found at http://www.ecomaderaforest.com. We would greatly appreciate any comments or suggestions regarding this project.

Peter Pinchot is a Senior Fellow at the Pinchot Institute, and director of the EcoMadera project in Cristóbal Colón, Ecuador. He can be reached at peterpinchot@ecomaderaforest.com.

Notes
1 USDA Forest Service. 2012. Future of America’s Forest and Rangelands: Forest Service 2010 Resources Planning Act Assessment. Gen. Tech. Rep. WO-87. Washington, DC. 198 pp.
2 IPCC, 2013: Summary for Policymakers. In: Climate Change 2013: The Physical Science Basis. Contribution of Working Group I to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Stocker, T.F., D. Qin, G.-K. Plattner, M. Tignor, S.K. Allen, J. Boschung, A. Nauels, Y. Xia, V. Bex and P.M. Midgley (eds.)]. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA.
3 Trumper, K., Bertzky, M., Dickson, B., van der Heijden, G., Jenkins, M., Manning, P. June 2009. The Natural Fix? The role of ecosystems in climate mitigation. A UNEP rapid response assessment. United Nations Environment Programme, UNEPWCMC, Cambridge, UK.
4 Verbist, B., Van Goidsenhoven, M., Dewulf, R., Muys, B. (2011). Reducing emissions from deforestation and degradation. KLIMOS working paper 3, KLIMOS, Leuven, Belgium.
5 A. Baccini et al (2012). Estimated carbon dioxide emissions from tropical deforestation improved by carbondensity maps. Nature Climate Change doi:10.1038/nclimate1354 Published online 29 January 2012
 
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