The Truth about the Economics of Logging

By Cara Mico
Economist Ernie Niemi presented at the North Coast Communities for Watershed Protection (NCCWP) monthly educational series in “The Truth about the Economics of Logging” during an Online Event on September 13, 2022.

Mr. Niemi broke down the true cost of logging and how to rethink forestry. Ernie specializes in applying the principles of cost-benefit analysis, economic valuation, and economic-impact analysis to describe the economic importance of natural resources. He is the President of Natural Resource Economics out of Eugene.

“If we want to have a stronger economy we need to have a higher quality of life,” says Mr. Niemi.

There is a common argument that forests must be cut for the economy.

Here’s what the numbers actually show.

In the past 30 years the timber industry has eliminated about 30,000 jobs in Oregon, or about ⅓ of their workers and is continuing to press to eliminate more jobs. New machine technology can eliminate 8 jobs per machine.

Industrial land owners have about 6 million acres of forest land in Oregon which generate around $1 billion in profits, half of which goes to wall street, and about 40% of that leaves the United States.

In 2016, the BLM found that about 1 truck of timber valued at $2,500 or about $500/MBF.

Salmon caught in the ocean bring in about $22-46 per fish, ocean caught salmon is valued at $154-239 per fish, and the value of a fish caught recreationally in a river is valued between $545-$1100 per fish.

As long as a company is only concerned about internal costs and profits, they’ll continue to cut harvest timber. But there are social costs, or external costs, that when ignored, can lead to a reduction in societal well being. Corporations are legally obligated to care about shareholders profits, while society shoulders the external costs.

The economic benefit from salmon fishing uses the same mentality as tree harvesting, and the two industries were in conflict for many years with timber operations impacting salmon populations. So when trees were found to benefit salmon, there was a shift to keep some trees in riparian areas. In other words when the economics of conservation pencils out, industry practices shift.

“If the benefits of cutting a tree exceed the costs, cut the tree, but count all the costs, not just the costs that the land owner wants to count. If the benefits don’t outweigh the costs, then don’t cut it down since the tree benefits society. Sustainable timber to industry means that they can continue to make profits if they impose the actual costs on the rest of us. Sustainable is not sustainable for the larger scheme of things,” said Mr. Niemi.

The Oregon Office of Economic Analysis has known that a healthy environment is a stimulus for a healthy economy, something called a second paycheck.

“Our office’s forecast assumes that households will continue to move to Oregon in search of plentiful job opportunities and high quality of life.”

In other words, the existence and bequest value of forest conservation has an intrinsic value.

In 1998 the value of protecting each acre of old-growth and spotted owl habitat was $632,000-$1,359,000 per acre. A study in 2006 showed that the value of protecting salmon habitat far exceeded the value of the timber.

The most recent study done on salmon from OSU has shown that coastal Coho salmon bequest value is about $5000 per fish. The economic impact of commercial fishing is about $1.5 million and sport fishing is around $16 million, but the intrinsic bequest value is about $1.5 billion.

The economic value of a forest is conservatively around $50-$185 per ton of CO2 captured, so a truckload of trees has a climate cost of $5,000-$17,500.

The benefits no longer outweigh the costs since we no longer have an abundance of nature, we have a scarcity of nature.

If you are interested in getting involved you can sign a local Watershed Protection petition, you can sign a petition to stop timber harvesting and pesticide spray in drinking watersheds. Anyone can sign the petition here.

Mary Wood, PSU Phillip Knight School of Law Professor is the next scheduled speaker on Oct 17.