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Box 3: Deforestation in China: Implications for the construction sector
Over the period 1949-1981 China logged some 75 million hectares, 92% of which were natural rather than
plantation forests, to satisfy demand for timber for construction and other uses. The ensuing rapid deforestation
resulted in the loss of ecosystem services, notably watershed protection and soil conservation. In
1997, severe droughts caused the Yellow River to dry up for 267 days, affecting industrial, agricultural and
residential water users in northern China. The following year, devastating flash flooding occurred in the
Yangtze and other major river basins, resulting in the loss of 4,150 lives, displacement of millions of people,
and economic damages estimated at 248 billion Yuan (approximately US$ 30 billion). China’s government
determined that deforestation and farming on steep slopes caused these tragic events. In 1998, the government
banned logging under the Natural Forest Conservation Program (NFCP). Timber harvests fell from
32 million m 3 in 1997 to 12 million m 3 in 2003, reflected in a 20-30% increase in timber prices at the Beijing
wood market over the period 1998-2003.
The forest ecosystem services lost due to deforestation in China over the entire period 1950-98 were estimated
to be worth as much as US$ 12 billion per year, including climate regulation, timber and fuel supply,
agriculture productivity, water regulation, nutrient cycling, soil conservation and flood prevention. About
64% of this loss can be attributed to the supply of timber to the construction and materials sector. The
value of forest ecosystem services lost due to timber production may be expressed in terms of the market
price of timber (Figure 2). This suggests that the ‘true’ marginal cost of timber production in China may
have been almost three times greater than the prevailing market price, far more than the modest price increase
that resulted from the logging ban. Note that the logging ban resulted in increased imports of timber
to China from other countries, suggesting that the environmental costs of timber consumption may have
been shifted at least in part to non-Chinese forests 25 .
Figure 2: Forest ecosystem services and timber prices in China
Note: The chart illustrates the economic
value of forest ecosystem services
that may have been lost as a result of
logging to supply timber to the construction
and materials sector in China
over the period 1950-98, expressed in
the same terms as timber prices (US$
per m3). These are rough estimates of
ecosystem ‘externalities’ associated
with logging, which are not reflected in
market prices. Forest policy can be an
effective means of ‘internalizing’ these
values.
Source: Mark Trevitt (Trucost) for TEEB 26
T E E B F O R B U S I N E S S – E X E C U T I V E S U M M A R Y 5