A growth opportunity coupled with new challenges.

In the European Union, bioeconomy sectors are considered crucial to ensuring a climate-neutral Europe by 2050. This represents an opportunity for growth in Latvia, but will simultaneously create a range of challenges, concluded participants at the 8th International Conference of the Forest Certification Council of Latvia titled “Changes and solutions in environmental policy for sustainable, climate-neutral economic development”.

“This is a time full of challenges, with many different changes occurring simultaneously that affect all land-use related sectors, which are vital employers, producers of domestic and export products, and taxpayers. Therefore, it is important to make decisions regarding them based on insights gained from scientific research,” emphasised Māris Liopa, Chairman of the Forest Certification Council of Latvia and advisor to the Minister of Agriculture on sustainable forest resource management and utilisation. In his view, the most significant challenge is and will be the change in understanding regarding how we manage our land and how we can operate in accordance with the EU's new policies, finding opportunities and momentum for future growth.

The potential is already there

Irīna Pilvere, Rector of the Latvia University of Life Sciences and Technologies, emphasised that Latvia's greatest and most significant resource is land, as we rank second and fourth in the EU in terms of agricultural land (occupying 35% of the territory) and forest land (forests cover 53% of the territory) per capita, respectively. In fact, 88% of the country's total territory represents an opportunity for bioeconomy sectors; moreover, Latvia is the only Eastern European EU country to have developed a Bioeconomy Strategy. “At the moment, it seems that the strategy's goal of reaching a bioeconomy export product value of at least nine billion euros by 2030 will be met, because as early as 2022, thanks to external factors and inflation, it was at the 8.8 billion euro level,” stated I. Pilvere. Another goal is to increase the value-added of bioeconomy products to at least 3.8 billion euros by 2030 – this is also close to being met, as it was at the 3.5 billion euro level last year, which was 8% of the value-added in Latvia.

“That is not insignificant, as these are jobs and taxes for the state budget,” I. Pilvere noted. However, the strategy's goal regarding the number of employees – 128 thousand by 2030 – will likely not be reached, as for several years now the figure has hovered around 123 thousand. “Sectors are developing technologically and innovatively, and objectively the number of jobs is decreasing, but the main problem is that no new jobs are being created in rural areas,” I. Pilvere stated, adding that the EU Green Deal will affect both major bioeconomy sectors – forestry and agriculture – and consequently wood processing and food processing, which will require changing not only the approach but even the mindset.

Investment focus will shift

“Data from a UN FAO study on the global increase in demand for cellulose, fibreboard, plywood, and sawn timber by 2050 shows that the volume of roundwood required to produce these products must be 37-40% higher,” explains Artūrs Bukonts, Executive Director of the Latvian Timber Producers and Exporters Association. He points out that this study does not take into account the impact of energy on wood resource flows. Furthermore, if there is a desire to replace fossil resources with renewable raw materials, then global wood consumption reaches 3.5 billion m³. At the same time, it must be taken into account that a second trend is that the places from which wood resources could be supplied – commercially usable forest areas – are decreasing.

“To meet the growing demand and the subsequent appetite for processing capacity generated by technological productivity, researchers suggest investing twice as much in forestry annually by 2050 as is invested in the wood industry – that is, 40 billion euros in forestry and 25 billion euros in the wood industry,” A. Bukonts states. He points out that there is no other solution to balance the set policy goals with the increase in forest area and productivity in order to meet the predicted demand for wood products.

“There is also a third solution – reducing consumption, which can be achieved by continuing to live with fossil resources, which, however, means lowering the bar for the targets to be reached, or solving it through high costs,” A. Bukonts explains. In the scenario proposed by the researchers, the forest sector employs 33 million people worldwide in 2050 – the same as today. In Latvia, about 40,000 people are employed in forestry, wood processing, and furniture manufacturing. “Over the last few years, this number has not experienced significant changes,” says A. Bukonts, adding that European policies want to achieve several different goals and are heading in the direction of reducing wood availability.

“In Latvia, about 13 million m³ of roundwood is harvested annually, but by around 2030, the maximum volume could be only eight to nine million m³,” A. Bukonts notes. He admits that the current situation will not last beyond 2025-2026, but the question is by how many cubic metres the harvest volume will decrease – 5%, 10%, 20% or even 30%. “It will not decrease because there will be no demand for wood products, but because of the decisions made,” the expert points out. If we want to reach a 30% level of protected areas, then that will also affect commercially usable forest areas and wood harvesting. “It is clear that wood products will not be cheap,” says A. Bukonts.

Plantation potential

Although plantation forests are often perceived negatively, they represent an opportunity that reduces the burden on natural forests. Agris Meilerts, Chairman of the Board of SIA Latvijas Finieris mežs, pointed out that the company manages more than 11,300 ha of land, of which about 2,500 ha have been established as plantation forests – mostly birch stands. “A plantation forest is the same forest as one that has grown naturally, and there are no significant differences in forestry work either,” explains A. Meilerts, adding that the difference lies in a lower level of bureaucracy, as a plantation forest owner does not have to mark out cutting areas, draw sketches, write applications for harvesting, pay state fees, wait for a forester's approval, or receive a harvesting permit.

“In the near future, society will have to decide how to act: balance nature conservation and wood (including CO₂) production by relatively 'working the old way', or strictly divide forests into nature conservation forests and intensive production forests, moving closer to plantation forests,” A. Meilerts stated, adding that fears that private forest owners will cut everything down are nothing more than a myth. “Last year, prices for standing timber were very high – exceeding 100 €/m³ – but there have been no reports of plantation owners en masse cutting down all their plantation forests,” A. Meilerts emphasises, noting that nature and nature conservation are important not only to “green” groups but to every person; the difference is only in the understanding of what, how, and when to protect, and who will pay for it.