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Using incentives to promote stewardship on private forest land in BC Schwichtenberg, Detmar 1999

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Using Incentives to Promote Stewardship on Private Forest Land in BC by Detmar Schwichtenberg B A Sociology, University of British Columbia, 1987 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF T H E REQUIREMENTS FOR T H E DEGREE OF Master of Arts in T H E F A C U L T Y OF G R A D U A T E STUDIES (Institute for Resources and Environment) We accept this thesis as conforming to the required standard: T H E UNIVERSITY OF BRITISH COLUMBIA April 1999 © Detmar Schwichtenberg 1999 In p resen t ing this thesis in partial fu l f i lment of the requ i rements for an a d v a n c e d d e g r e e at the Univers i ty of Brit ish C o l u m b i a , I agree that the Library shall make it f reely available for re fe rence and study. I further agree that p e r m i s s i o n fo r extens ive c o p y i n g o f this thes is f o r scho lar ly p u r p o s e s may b e g ranted by the h e a d of my d e p a r t m e n t o r by his o r her representat ives . It is u n d e r s t o o d that c o p y i n g o r p u b l i c a t i o n o f this thesis fo r f inancia l ga in shal l n o t b e a l l o w e d w i t h o u t m y w r i t t e n p e r m i s s i o n . D e p a r t m e n t of T h e Univers i ty of Brit ish C o l u m b i a V a n c o u v e r , C a n a d a D E - 6 (2/88) Abstract The government of British Columbia plans to regulate forest practices on private land in the province, largely in response to public pressure. The stated goals are to ensure a long term and stable timber supply and to protect environmental values. To achieve these goals, the BC government must choose among regulatory options ranging from a highly coercive and punishment-oriented approach such as the Forest Practices Code at one extreme, to an encouragement and reward-based approach at the other. The ideal choice is one that achieves the desired goals at the lowest cost to both the public and landowners. My hypothesis is that a shift away from traditional punishment-based command-cmd-control approaches and toward education-and-incentives would greatly promote regulatory efficiency. To test the hypothesis, three areas of research are considered. First, Organizational Behaviour research is examined to better understand the relative efficacy of punishment and reward in motivating people, and to assist in designing a reward-based motivation system. Second, a survey of BC private forest landowners helps determine how they might best be motivated to achieve public objectives. Third, other forest jurisdictions are examined to gain practical knowledge on the relative effectiveness and cost of different regulatory options. The survey indicates most forest landowners recognize a legitimate public interest in forest management on private land, but also that landowners place a high value on their independence and freedom to manage their forests. Landowners therefore favour a regulatory system based on education and financial incentives. Landowner preferences are supported by Organizational Behaviour research and experience in other jurisdictions. Studies indicate education greatly enhances the willingness and ability of landowners to meet public objectives, and that regulatory systems based on incentives are less expensive to administer, less intrusive on private property rights, and more likely to promote innovation. Research also shows government predilection for coercive regulatory measures is mainly the result of perceived political advantages. Finally, the paper outlines a regulatory system based on education, freedom to manage forest resources and financial incentives that can be used to achieve public objectives on private forest land in BC. T a b l e o f C o n t e n t s Abstract ii Table of Contents iii List of Tables vii List of Figures viii Acknowledgements ix CHAPTER 1: BACKGROUND AND FRAMEWORK FOR REGULATION 1.1 Introduction 1 1.2 Background 2 1.2.1 Regulated and unregulated private forest land 3 1.2.2 Public pressure for improved stewardship 4 1.3 The current situation 6 CHAPTER 2: MANAGED FOREST LANDOWNERS SURVEY 7 2.1 Introduction 7 2.2 Objectives 7 2.3 Methodology 8 2.3.1 Who to survey? 8 2.3.2 How to collect data? 9 2.3.3 Choosing a random sample 10 2.3.4 Contacting interview candidates 10 2.3.5 Interview process 11 2.3.6 Collating results 12 2.4 Results 12 2.4.1 General Information 12 2.4.2 Private landowners, public interest and government regulation 13 2.4.3 Promoting stewardship on private forest land 20 2.5 Conclusions 40 2.5.1 Industrial vs non-industrial landowners 40 2.5.2 Public interest on private land 40 2.5.3 Regulation 41 2.5.4 Freedom to manage 41 2.5.5 Tax structure 42 2.5.6 Agriculture vs forestry (details in Appendix A) 42 2.5.7 Information and education 42 iii 2.5.8 Financial assistance 43 2.5.9 Markets 43 2.5.10 Eco-certification 43 CHAPTER 3: ENVIRONMENTAL VALUATION 44 3.1 Introduction 44 3.2 Impetus for regulation 45 3.2.1 Market and non-market values 45 3.2.2 Market failure 46 3.2.3 Valuation of ecological services 47 3.2.4 Valuation of BC's private forests 51 3.3 Conclusions: Lessons for private forest land regulation in BC 52 CHAPTER 4: REGULATION AND PRIVATE PROPERTY RIGHTS 53 4.1 Introduction 53 4.2 Historical precedent 53 4.3 Compensation for taking 54 4.3.1 Compensation and regulatory efficiency 55 4.3.2 Compensation and regulatory effectiveness 56 4.3.3 Compensation and regulatory fairness 56 4.4 Adapting private property structures 57 4.5 Conclusions 57 CHAPTER 5: MOTIVATION BY PUNISHMENT AND REWARD 58 5.1 Introduction 58 5.2 A personal bias for rewards 58 5.3 Organizational behaviour 60 5.3.1 Defining motivation 61 5.3.2 Motivation in commercial organizations 61 5.3.3 Motivation in social organizations 62 5.4 Applying Organizational Behaviour to private land forestry 62 5.4.1 Theory X and Theory Y 63 5.4.2 Balancing punishment and reward 64 5.5 Effectiveness of punishment and reward 64 5.5.1 Problems with punishment 65 5.5.2 Advantages of reward 66 5.6 Designing reward-based motivational systems 68 5.6.1 Clearly defined and attainable goals. 69 5.6.2 Linking goals to rewards 69 iv 5.6.3 Fairness and consistency 69 5.6.4 Participation in system development 70 5.6.5 Management by Objectives 70 5.7 Command-and-control versus education-and-incentives 71 5.7.1 Rationale for incentives: efficiency and effectiveness 72 5.7.2 Political rationale for command-and-control .. 73 5.7.3 Political science and limits to policy development 76 5.7.4 Scarce resources and new directions in forest policy 77 5.8 Conclusions 79 CHAPTER 6: FREEDOM TO MANAGE 81 6.1 Introduction 81 6.2 Rationale for freedom to manage 81 6.2.1 Lower cost to government and landowners 81 6.2.2 Freedom as an intrinsic motivator 82 6.2.3 Innovation and ingenuity 82 6.2.4 Private property rights 83 6.3 Results-oriented regulatory system 83 6.3.1 Old focus on process 83 6.3.2 New focus on results 84 6.4 Problems with environmental results 85 6.4.4 Overcoming obstacles to results-orientation 88 6.4.5 Freedom to manage as reward 88 6.5 Conclusions 89 CHAPTER 7: FINANCIAL INCENTIVES 91 7.1 Introduction 91 7.2 Direct financial assistance 91 7.2.1 Problems with direct financial assistance 93 7.2.2 Advantages of direct financial assistance 94 7.3 Preferential tax treatment 95 7.3.1 Property tax 96 7.3.2 Forest property tax in BC 98 7.3.3 Income Tax 103 7.3.4 Capital Gains Tax 104 7.3.5 Logging tax 105 7.4 Covenants and conservation easements 105 7.4.1 Implications for forest stewardship 106 7.4.2 Purchase of land use rights 107 v 7.5 Access to markets 7.5.1 Improving access to markets 107 108 7.6 Conclusions 109 CHAPTER 8: INFORMATION AND EDUCATION 112 8.1 Introduction 112 8.2 What is information and education? 112 8.3 Support for information and education 113 8.3.1 Evidence from other jurisdictions 113 8.4 Program design: Lessons from BC and other jurisdictions 114 8.4.1 Consultation with professional foresters 114 8.4.2 Program coordination 115 8.4.3 "One-stop-shopping" 116 8.4.4 Neutrality and objectivity 118 8.4.5 Continuity 119 8.5 Program delivery 120 8.5.1 Options for BC 121 8.5.2 Private initiatives 121 8.6 Educating the public 122 8.7 Conclusions 122 CHAPTER 9: FINAL CONCLUSION AND RECOMMENDATIONS 124 9.1 Final Conclusion 124 9.1.1 Seeking efficient regulation 124 9.1.2 Political opposition to new regulatory approaches 125 9.1.3 Survey of private landowners . 126 9.1.4 An education-and-incentives systems for BC 127 9.2 Recommendations 131 APPENDIX A: FOREST LAND VS AGRICULTURAL LAND 134 A.1 Introduction 134 A. 1.1 Tax advantages 134 A.2 Rationale for differences 135 A.2.1 Frontier mentality . 135 A.2.2 Preservation of farmland 135 A.2.3 Preservation of forest land 136 A.2.4 Unintended consequences 136 BIBLIOGRAPHY 138 vi L i s t o f T a b l e s Table 1: Tax categories of private forest land in BC 3 Table 2: Possible market and non-market benefits for private forest land 45 Table 3: Average global value of select terrestrial ecosystem services 50 Table 4: Property tax ratios on Vancouver Island 101 Table 5: Property tax ratios in the Kootenays 101 Table 6: Property tax ratios in the Central Interior 101 vii L i s t o f F i g u r e s Figure 1: Volume of timber harvested on private forest land in BC, 1987-1996 4 Figure 2: A continuum of motivational and regulatory concepts 62 A c k n o w l e d g m e n t s I would like to thank: Members and employees of the Forest Land Commission for their logistical support, unflagging enthusiasm and sense of humour. Special thanks to Alan Chambers for encouraging me to address the issue of private forest land stewardship, and to Kirk Miller for making room in a tight budget. Committee members Craig Davis, George Hoberg, Les Lavkulich and Casey van Kooten for their considerable expertise and support, and for encouraging me to reach my own conclusions. My parents Marianne and Giinther, siblings Kerstin and Holger; and sister-in-law Catherine for their confidence, patience and insightful feedback. Jennifer Wilson for her apparently genuine interest in forest policy, exacting literary standards and warm personality. Susan Herman for her knowledge of organizational behavior and for setting deadlines, and Joakim Hermelin for his international experience in private forest land issues. Also Sean Flynn, Harold Macy, Fred Marshall and the staff at BC Assessment. Managed forest landowners who took so much time to share their accumulated knowledge, invited me into their homes and guided me through their forest properties. Fellow students for the interesting conversation, beer nights and reference lists. Mark Sullivan for reminding me it is possible to do thesis work even on sunny days, and my sports friends for believing otherwise. Also housemates and everyone who made the post-defense celebration so entertaining. Chapter 1: Background and Framework for Regulation 1.1 I n t r o d u c t i o n The government of British Columbia plans to regulate forest practices on private land in the province, largely in response to public pressure. The stated goals are to ensure a long term and stable timber supply and to protect environmental values. To achieve these goals, the BC government must choose among regulatory options ranging from a highly coercive and punishment-oriented approach at one extreme, to an education and incentives-based approach at the other. The ideal choice is one that achieves the desired goals at the lowest cost to both the public and landowners. Achieving regulatory efficiency is a demanding task. It is difficult and time-consuming to consider all the factors that affect costs and effectiveness, and it takes time to determine if desired goals are being realized. In addition, efficient regulatory options are not necessarily the most politically expedient ones. As a result of these factors, choice of regulatory options is often decidedly subjective, based on emotional arguments from competing interest groups, bureaucratic inertia and perceived political advantages. Despite the obstacles, the best way to combat inefficient and politically expedient regulatory options is to highlight their shortcomings and research effective and inexpensive alternatives. The purpose of this paper is to analyze the efficiency of coercive regulatory approaches such as the Forest Practices Code, to consider the cost and effectiveness of alternative options based on education and incentives, and to propose an efficient regulatory system for private forest land. Research is concentrated in three main areas. First, the discipline of Organizational Behaviour contributes the basic concepts of human motivation - notably the relative efficacy of punishment and reward - as well as details on how best to design motivational systems based on encouragement and reward. Second, a survey of private forest landowners provides insight into how landowners might be best motivated, as well as gathering ideas for the objectives and structure of a new regulatory system. Third, other jurisdictions with private forest land yield examples of practical experience in the effectiveness and cost of different regulatory options. The paper concludes that regulatory options based on encouragement and reward have several crucial advantages over regulatory systems based on coercion and punishment. These include lower administrative costs, better use of human ingenuity and innovation, less adversarial relationships between regulators and regulated, and less infringement of private property rights. 1 A proposed system for BC would include availability of information and education for all private forest landowners, maintenance of landowners' autonomy and responsibility, and the use of financial incentives to encourage achievement of public objectives on private land. 1.2 Background BC has between two and four million hectares of privately-owned forest land, comprising about four to six percent of the total forest land area in the province. This seems relatively insignificant when compared to 59 million hectares of publicly-owned forest land, but the importance of private forest land is greater than the relative area suggests (Macy 1997, F L C 1996). First, private forest land is usually highly productive, combining fertile soils, moderate climate and intensive management to achieve growth rates higher than the provincial average. As a result, private forests contribute an average of 10-12 percent of the timber harvested annually in BC. Second, most private forest land is near human settlement areas, where it provides a range of non-timber benefits, including watershed protection, fish and wildlife habitat, recreational opportunities, visual backdrops, spiritual value, carbon dioxide sequestration and noise abatement. 1.2.1 Regulated and unregulated private forest land Stewardship1 of private forest land varies considerably. Just over 900,000 ha, known for tax purposes as "managed forest," (see table 1) and subject to some regulation, are considered reasonably well-managed, at least from a long-term timber production point of view. Figures provided by BC Assessment (BCA) indicate the mean annual increment (MAI) on managed forest land is about 4.5 million cubic metres (FLC 1996). This compares favourably to the average 3.4 million cubic metres harvested annually between 1992 and 1994 (see figure 1). Harvested areas in this category must be promptly reforested. Private forest land in three other tax categories recognized by BC Assessment - unmanaged forest, residential forest and farmland forest - is virtually unregulated and generally not well-managed, either in terms of long-term timber production or the provision of non-timber benefits. Large areas have been cleared for use as marginal agricultural land or residential development, while other areas have been the target of speculators who buy the land, then "cut and run." Figures indicate the MAI on unregulated private forest land is about 2.6 million cubic metres (see 1 For the purposes of this paper, stewardship of private forest land refers to a combination of ensuring a long-term timber supply and protecting environmental and recreational values. 2 Table 1: Tax categories of private forest land in BC Private Forest Land Classifications There are at least two million hectares of private forest land in four distinct tax categories recognized by BC Assessment. 1. Managed forest: About 920,000 hectares in 4160 parcels, of which 98% is owned by 20 large forestry companies, mainly on Vancouver Island but also the southern Interior. Land is assessed at its value for growing trees ("use value"), effectively reducing landowners taxes,' especially near urban areas where development pressure is high. In return landowners must submit and adhere to a basic forest management plan that calls for reforestation within 5 years of areas harvested or cleared by natural events, with trees "free to grow" in 15 years, some other silviculture and a commitment to harvest trees at some point. Property tax on the value of standing trees is deferred until harvest. Only private forest land in the managed forest tax category was in 1994 included in the Forest Land Reserve, a land use zoning that severely restricting landowners' development rights. The three main allowed uses of land in the FLR are timber production, grazing and conservation. 2. Unmanaged forest: Some 55,000 hectares in 650 parcels, much of it in small pieces adjacent to managed forest. Also assessed at "use value," though property taxes are higher than those paid by managed forest landowners. No forest management plan is required and forest practices are unregulated. Property tax on the value of standing trees is deferred until harvest. 3. Residential forest: Total of about 500,000 hectares, much of it in small pieces zoned for residential development, usually but not always near communities and suburbs. Exact data are unavailable, so the number of parcels is unknown and total area may under or overestimate total residential forest land area. Land is assessed based on its value for residential development ("highest and best use"), resulting in the highest property taxes among forest land categories. Property tax is paid annually on both the value of the land and trees, creating an incentive for landowners to cut trees prematurely. Forest practices are unregulated. Residential forest is often the site of the worst forest practices, including "cut and run" speculators. 4. Farmland forest: A minimum of 400,000 hectares, mostly in small pieces attached to farms in the Agricultural Land Reserve (ALR). Data are inexact and ALR land could contain over 2 million hectares of forest, often managed sporadically as part of farming operations. Property taxes are the same as other ALR land and easily the lowest of the four tax categories. The value of trees are not assessed for property tax purposes. Forest practices unregulated. Some owners of forest land run grazing animals in the forest to qualify for farm class. Source: BC Assessment, FLC 1996, Hopwood 1996, Wetlon 1988 tables 4-6), while the average annual harvest between 1992 and 1994 was 4.3 million ha (see figure 1). Reforestation efforts appear to be minimal, though a lack of data obscures the true picture. Pressure on all four categories of private land has increased in the past decade, driven first by higher global market prices for wood products, then by new environmental legislation, expanded protected areas and stumpage increases that make public timber more expensive and less 3 accessible. These factors make private timber production more financially attractive, though recently depressed timber markets have temporarily eased the pressure. Demand for development land remains strong, however, especially on southeastern Vancouver Island and the Gulf Islands (Macy 1997), where communities and rural subdivisions continue to expand, often at the expense of forest land. 1.2.2 Public pressure for improved stewardship The combination of apparent overharvesting and loss of forest land to development has attracted public concern to the stewardship of private forest land. At the same time, the public perception of stewardship is gradually expanding from the traditional objective of long-term production of timber to include the protection of non-timber benefits provided by forest land, especially recreational opportunities (Haley and Luckert 1992) and water quality, but also a range of other benefits (FRC 1991). As a result, the BC government has been forced to reconsider its private forest land policy both in terms of promoting forest management practices that yield both timber and non-timber benefits, and in terms of protecting the productive forest land base. Figure 1: Volume of timber harvested on private forest land in BC, 1987-1996 10 1 + Private Timber Harvest (Volume in millions of cubic metres) 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 • Unregulated Forest* • Managed Forest Source: Ministry of Forests annual reports, BC Assessment * Unmanaged, residential and farmland forest 4 1.2.2.1 Existing policy measures Some policy changes have already been made. In 1987 the BC government, through BC Assessment, introduced the "managed forest" tax classification, which offers private forest landowners a property tax break in return for developing and adhering to a "sustainable" forest management plan that emphasizes reforestation and other silviculture. At the same time, a joint federal/provincial Forest Resource Development Agreement (FRDA, pronounced "FeRDA") was initiated, providing technical and financial assistance for planning, reforestation and silviculture on private forest land. Landowners did not have to be in the managed forest class to take part. FRDA was discontinued in 1996. In June 1994 the government created the Forest Land Reserve (FLR), a land use zoning administered by the Forest Land Commission that severely restricts the use of some forest land for purposes other than forestry. This zoning is very similar to the Agricultural Land Reserve (ALR), which is administered by the Agricultural Land Commission and aims to protect land for agricultural use. One mandate of the Forest Land Commission is to collect data on private forest land in BC. Currently, information is so sparse that estimates of private forest land in the province vary between two and four million hectares, mainly because no one knows how much forest is on land in the ALR. These policy measures have serious shortcomings. For one thing, the managed forest tax category and its attendant "sustainable forest management plan" encompasses less than half of all private forest land in BC. The idea was to entice owners of land in the other three private forest land tax categories into the managed forest category by offering greatly reduced property taxes. Initially, many landowners chose to join the managed forest (FLC 1996), especially those paying substantial property taxes in the residential forest land tax category even though they had no plans to use their land for residential housing or other development. Owners of farmland forest showed little interest in joining the managed forest, since they already pay lower property taxes than managed forest landowners. Interest in joining the managed forest tax category was almost completely eliminated by the creation of the Forest Land Reserve, which includes only private forest land in the managed forest tax category and about 15 million ha of public land. The Reserve and its development restrictions were imposed without consultation with managed forest landowners. Many are resentful and wonder why managed forest landowners, already the best managers of private forest land in the province, are the only ones being "punished" with a loss of property rights, while other private forest landowners face neither land use restrictions nor forest management 5 regulations (though owners of farmland forest are subject to land use restrictions under the ALR). One final factor to consider is that recent policy changes do not directly address increasing public concerns over forest practices that threaten the loss of non-timber values. True, some non-timber benefits are a "by-product" of managing forest land for timber production. For example, reforestation of harvested areas helps prevent soil erosion, maintains water quality, sequesters carbon dioxide and eventually provides visual appeal, forest habitat and recreation opportunities. However, no provisions exist for protection of streamside buffer zones, wildlife tree patches and other ecologically sensitive areas, or the idea of preventing forest fragmentation and managing private forest land as part of a larger forest ecosystem. 1.3 The current situation The BC government is inclined to address public concerns over forest practices by applying the Forest Practices Code to private land, and has included a specific provision in the Forest Practices Code Act. Strangely, current plans call only for the Code to be applied on managed forest land, again excluding the majority of BC's private land from regulation. Not surprisingly, most managed forest landowners strongly oppose the Code, arguing the legislation is coercive, bureaucratic, inflexible, expensive and ultimately ineffectual. Instead, various groups of managed forest landowners, recognizing that some kind of regulation is inevitable, have put forward suggestions for a less bureaucratic and more flexible regulatory system based on education and incentives. 6 Chapter 2: Managed Forest Landowners Survey 2.1 Introduction To develop policy mechanisms that can improve stewardship on private forest land in BC, it is essential to know more about the demographics, views and ideas of private forest landowners. To this end, I initiated and recorded a series of personal interviews with private landowners in the "managed forest" tax classification. Managed forest landowners cumulatively own less than half of all private forest land in BC and are generally considered among the best private forest land managers. They were selected for the survey because they are accessible, knowledgeable and relatively few in number. The survey indicates that managed forest landowners are generally well-educated, experienced, and well aware of issues affecting private forest land. The survey also indicates that, while there are some differences of opinion between large and small landowners, they broadly agree on several key issues. First, the public has some legitimate interest in forest practices on private land. Second, something needs to be done to address these interests but should not punish or restrict those already engaged in good forest stewardship. Landowners regard government interference, bureaucracy, inflexibility and paperwork as punishment. Third, if government does increase regulation and restrict land use, it should offer some kind of compensation. Landowners suggested a range of incentives that would provide some compensation. This chapter describes in detail the objectives, style, structure and administration of the survey, recounts private forest landowners' responses, and summarizes findings from the survey, with a focus on future policy development. 2.2 Objectives The overall intention of the survey was to find out more about private forest landowners in BC. This information could then be used to assist in developing policies aimed at improving the overall stewardship of private forest land in BC. The survey focuses on private forest landowners in the "managed forest" tax classification and information gathered includes: 1. Basic demographics such as name, address, education and training background, forestry experience, size and nature of landholding. 7 2. Goals, values and beliefs of managed forest landowners, especially views on forest management, environmental issues and the role of government in addressing public concerns on private land. 3. How managed forest landowners think government can best induce private forest landowners to improve stewardship. The decision to address these three questions was made after considerable debate over the relative merits of quantitative versus qualitative survey methods. For guidance, I examined studies in other jurisdictions, as well as in BC. One paper (Bliss and Martin 1990) examined over 200 published surveys of non-industrial private forest landowners in the US, yet concluded that: "We cannot relate programs to people because we do not know anything about the people... even with all these studies, we do not have much information about the private landowner which can be used to predict behaviour patterns. " Other studies noted that most private forest landowners surveys were limited to descriptive statistics on ownership and owners (e.g. Birch et al 1982, Roberts et al 1986), while only a few focus on landowner attitudes, beliefs and motivations. Similar studies in Scandinavia concluded that more work was needed to understand more about owners, their goals, views and procedures for decision-making (Lonnstedt 1997). In BC there have been at least two in-depth descriptive surveys (Wetton 1988, Enfor 1996) of non-industrial private forest landowners - including information on where private land is located, the amount owned by individuals in different regions, how much wood is produced, site quality and demographics of landowners. At least two qualitative surveys (Macy 1997, NIWA 1994) have also been done but were restricted to Vancouver Island and included information only on "extension services," a combination of education and financial assistance. I decided more qualitative information was needed and would be within the scope of a master's thesis. 2.3 Methodology Before I could begin gathering information, I needed to answer two questions: who to gather information from, and how to do the gathering? These questions had to be considered within the limits of the resources available. There are an estimated 20,000 private forest landowners in BC 8 (Wetton 1988). Obtaining a representative sample of such a large group is difficult. In addition, records of who owns residential and farmland forest are not complete. 2.3.1 Who to survey? For tax purposes, BC has four, categories of forest land (see table 1). BC Assessment, which assesses property values for tax purposes, does not keep records of forestry activity on two of these forest land categories. That is because trees on agricultural land ("farmland forest") are not included in the tax assessment, while trees on land slated for residential development ("rural residential forest") are included in the total assessed value of the land. As a result, neither BC Assessment nor other government agencies know how much forest land in these two tax categories. The third tax classification, known as "unmanaged forest," comprises only a small fraction of private forest land in BC. That leaves owners of "managed forest," who collectively own less than half of all private forest land in the province. BC Assessment has good records of those in managed forest because landowners in this tax category receive a reduced property assessment, and therefore a tax break, in return for a forest management plan. The system is managed and monitored by B C Assessment. Conveniently, there are only 138 managed forest landowners. This number is manageable and allows fewer but more in-depth and personal interviews. 2.3.2 How to collect data? I originally considered three main options for gathering information: a mail-out questionnaire, a telephone interview survey and a one-on-one personal interview process (or some combination of these). 1 chose the third option for several reasons. First, as a journalist I have done many face-to-face interviews and am very familiar with the process. Second, I have found people more forthcoming and forthright in the presence of an interviewer than on the telephone or on mail-out questionnaires. Third, personal interviews allow more latitude for discussion than mail-out questionnaires. Every individual has different areas of interests and expertise and I wanted to encourage elaboration of those areas. Fourth, personal interviews in the home or workplace of those interviewed provide context to the discussion. I also hoped landowners would want to show me their land and their forest practices. The disadvantage of the personal interview is the logistical difficulty and expense involved in visiting managed forest landowners spread around the southern part of the province. Interviewing managed forest landowners has other implications. 1 had already spoken to a number of managed forest landowners as part of a previous job with the Forest Land 9 Commission and found them knowledgeable on matters of forest management, environmental issues and government regulation. Managed forest landowners are already the best managers of private forest land in the province and usually not responsible for bad forest practices that have attracted public attention. This could be considered a disadvantage because it does not address the question of why some private landowners badly manage their forest. On the other hand, determining who "good" managed forest landowners are and what motivates them could reveal how a sense of stewardship can be instilled in landowners currently engaged in bad forest practices. It could also reveal how to further improve stewardship of managed forest land. 2.3.3 Choosing a random sample To begin, every managed forest landowners on the BC Assessment list received a letter of contact outlining my identity, the purpose of the survey, the intended use of information gathered, assurances participants could withdraw at any time and that all information would be held in strict confidence. While the letters made their way to the recipients, I developed a list of questions and chose a random sample of candidates. To choose a sample, I ranked the list of 138 owners of managed forest land according to the number of hectares owned, from largest to smallest. Sizes range from 300,000 ha to only 12 ha. I decided to start with a sample of 25%, and so selected an initial sample of 35 landowners by taking every fourth name on the list. This provided a range of landholding sizes, from the very large to the very small. To decide whether to start my selections with the first, second, third or fourth name on my list, I put four pieces of paper, each with a different number, one to four, into a basket and chose one. Number one came up so I started my selection with the first name on the list, then the fifth, ninth and so on down the list. 2.3.4 Contacting interview candidates I began phoning landowners on my list of 35 in March 1998, starting with those who lived in Vancouver, surrounding municipalities and the Gulf Islands. Interviews were organized as soon as possible. After each of the first four interviews, I felt compelled to add, delete and re-word questions, as well as revise the question order. I have excluded these four pilot interviews from the final results, shortening the original list to 31. As a result, the survey is somewhat biased against landowners in the Lower Mainland and the Gulf Islands. The remaining interviews were conducted during three trips separate road trips - one up the east coast of Vancouver Island, a second up Hwy 97 from Hope to Vanderhoof and a third in a loop around southeastern BC. 10 Every landowner contacted was willing to be interviewed - most enthusiastically, some more reluctantly. However, for a number of reasons, only 22 names on the shortened 31-name list were interviewed. One landowner no longer owned managed forest, three landowners were in areas too remote to be incorporated into the three road trips and five others were unavailable during the times I was available to speak with them. These landowners were replaced by the landowner closest in land area on the original 138-name largest-to-smallest list. Two landowners became unavailable on short notice and were replaced by two landowners of similar size in the same geographic area. This re-selection resulted in my interviewing the two largest owners of private land in the province. 2.3.5 Interview process Representatives of large landowners were interviewed in offices, all but one in downtown Vancouver or attached to processing facilities. Almost all small landowners were interviewed in their homes, of which about half were located on their managed forest property. Two were interviewed in restaurants. Conducting interviews in these settings was very useful in providing context to the discussions. Both offices and homes were generally modest and functional, those interviewed dressed in casual work clothes. No one wore a tie. In addition, seven of the landowners also provided thorough tours of their managed forests - though only after the interviews - so I was able to visualize many of the things we had discussed. All interviews were recorded on tape and ranged from 40 to 90 minutes, with an average of less than one hour. Landowners and representatives appeared to answer questions openly and honestly, with large landowners tending to focus on cost and financial aspects, while smaller landowners were more interested in discussing forest management issues. These differences only became apparent when I transcribed the taped interviews. Many landowners took long pauses to consider their answers and seemed to appreciate a chance to talk about issues important to them. On the whole, the atmosphere was comfortable and relaxed. The personal interview process also had other advantages. 1 met one of BC's first Registered Professional Foresters and heard about the "old days" of forestry, examined a healthy clone from the Queen Charlottes' recently downed Golden Spruce, fed trout, biked the Gulf Islands, learned about controlling radioactivity in hospitals and nuclear power plants, and visited old university cronies and other friends now scattered around the province. 11 2.3.6 Co l l a t i n g results Upon completion of the survey, tapes were transcribed and the resulting information used to create answer summaries for each question. One interview did not record properly and is not included in the final data, reducing the number of interviews included in the results to 30. Perhaps the most interesting thing about the transcription and summarization process was how earlier interviews took on new meaning in the light of subsequent information. For me, the context had changed and I was able to get new information on issues I had not previously considered. Answer summaries for each question have been presented in the order of their apparent importance to managed forest landowners. Where relevant, differences in views and opinions between small and large landowners have been noted. For simplicity, I will follow established convention and refer to small landowners as non-industrial landowners, and large landowners as industrial landowners. In BC, a recent program to assist small landowners described non-industrial landowners as those with less than 4,000 ha of private forest land in one or more parcels and/or an interest in a sawmill with a capacity no greater than 50m3. One large landowner interviewed had no production facilities. 2.4 Resul ts 2.4.1 G e n e r a l I n fo rmat ion The most significant information from this section is the nature of land ownership. One third of managed forest landowners surveyed are industrial landowners: publicly or privately owned companies that also (except in one case) own and operate wood processing facilities. Industrial landowners surveyed range in size from 700 ha to 330,000 ha, and total about 674,000 ha. Among these landowners, I interviewed company representatives, usually a woodlands manager or chief forester. These men in their 40s and 50s all have post secondary forestry education and average over 20 years of practical forestry experience. They are all well-informed and aware of issues raised in the interviews, and tended to take a pragmatic and business-like approach to these issues. The other two-thirds interviewed are non-industrial landowners, either families or small companies, with holdings ranging from 12 ha to 365 ha in size. The average size is almost 90 ha, though only five are over 100 ha, and total 1885 ha. Most surveyed non-industrial landowners have alternate sources of income, often forestry related, and four also own small portable mills. 12 All but one small landowner surveyed are men, many with some kind of post secondary education, but only three in forestry-related fields. These three are also RPFs. Other education includes two biology PhDs, an economics PhD, a master's in engineering and a bachelor's degree in computer science. Non-industrial landowners average over 30 years of forestry experience, with three having less than 10 years experience and four with 50 years or more. While non-industrial landowners were also well informed on issues relating to private forest land, and some took decidedly business-like approach to interview questions, they were much more likely than large landowners to express emotional attachment to the land. Half of those interviewed live on their forest land. Some do little or no logging. Industrial and non-industrial landowners are not geographically divided. All are widely dispersed around the southern half of the province, with about one third on Vancouver Island, the Gulf Islands and the Lower Mainland, another third scattered around BC's southeastern interior, and the remainder in the Okanagan Cariboo-Chilcotin and Bulkley Valley. However, land area of those interviewed is concentrated on Vancouver Island, and to a lesser degree in the Kootenays. The forest land has been in current ownership an average of 37 years, in continuous timber production - to varying degrees - for 72 years and is all producing second, third and even fourth growth logs. 2.4.2 Private landowners, public interest and government regulation 2.4.2.1 Do you think the public has a legitimate interest in forest practices on private forest land? Almost all managed forest landowners said the public has at least some legitimate interests in what happens on private forest land. Only two of the 30 interviewed believe the public has no such interest, while the remaining 28 had different ideas on how far public interest should extend. Some reluctantly accept legitimate public interest on private land, some see certain limited interests, while others say all public interests should be addressed. Three landowners highlight the difference of opinion: "I would like to say that it's none of their business but these days it is their business. " "The public has some rights but not as many as they think they do. And if they want to increase rights, there has to be compensation or other recognition. " "I think public views should be addressed and cared for, especially if, like I am, they are part of a managed forest and get tax breaks. " 13 Among those who said the public has a legitimate interest on private forest land, easily the most recognized interest is water quality and runoff affecting downstream water users. Industrial landowners all said they manage for water quality as part of their overall planning, though most also said this does not necessarily mean leaving a riparian buffer zones on all streams. Non-industrial landowners tend to be less formal, and those with streams or rivers running through their properties were most likely to say they simply "do not go near the creek." One non-industrial landowner describes his informal water management policy: "When we do logging by a creek we leave a buffer zone. Not on the flood plain though. [Recently] we took out a temporary bridge once we were done in the area, and left logs across the streams. I wanted to take them out - they were perfectly good trees- but DFO and fishermen don't like that. I don't want to get in any trouble " To a lesser degree, landowners also recognize a legitimate interest in fish and wildlife habitat. Industrial landowners said they include animal range and fish stream management in their planning. One described how management of deer winter range differs from management in areas not considered essential to wildlife. Non-industrial landowners are less formal but well aware of the animal and plant species on their land. One non-industrial landowner has substantial areas of elk and deer winter range and manages his forest in such a way as to maintain the 60-70% forest canopy to provide the thermal cover they need to survive harsh winters. In return he gets tonnes of fertilizer applied to his land. Other legitimate interests mentioned include soil erosion and landslides, and generally maintaining the long term productivity of the land. Managing for visual quality is more controversial. Most landowners said visual quality should be the choice of the forest owner but expect public pressure to log selectively and in small clearcuts to remain strong. Industrial landowners said public pressure has induced them to include visual quality objectives in their management plans. One RPF providing a tour of an industrial forest tract showed me the exact spot in a non-industrial town that he decided to use as a reference point to ensure a planned cutblock would still look acceptable from the community. Non-industrial landowners, meanwhile, said they consider visual quality because they often live on or near their forest properties. Several said they know their neighbours and others in their communities, and are sensitive to their concerns. Many landowners said the degree to which the private forest landowners manage for visual quality depends on where the land is. Those next to major roads or towns should consider partial 14 retention logging. By the same token, private forest landowners with coho streams or in a community watershed should take special care of water quality. A number of other issues were raised. One is that the public tends to forget that private land forestry should be a legitimate business and that managing for non-timber benefits costs money. Most industrial landowners and many non-industrial ones argue that if the public wants more rights to protect its interests on private forest land, then the public should pay compensation. Other non-industrial landowners said tax concessions already received by managed forest landowners means landowners should make sure public concerns are addressed. Another oft-mentioned issue is the relationship between managed forest land in the Forest Land Reserve (FLR) and agricultural land in the Agricultural Land Reserve (ALR). Private forest landowners wonder why their A L R neighbours do not need riparian buffer zones and often allow cattle easy access to streams. Several non-industrial landowners noted that a pasture is also a clearcut replanted with a monoculture of grasses and grazed by introduced mammal species. They also point put most agriculture land was once clearcut and now provides little fish or wildlife habitat. Not directly related to the question but of obvious concern to many landowners is the issue of public access. Most allowed and even encouraged public access to private forest lands. Industrial landowners said they accept that the public treats their land as if it were crown land. Smaller landowners often had hiking, biking or riding trails through their forests. Root damage from mountain bikes is a concern, as are the noise and environmental effects of motorbikes, ATVs and snow machines. Some discourage dogs and horses. One landowner has 400-600 people a year hiking on a popular trail running through his property, of which "5% are incapable of treating the land with respect." One landowner wonders why, if the public is so interested in private forest land, they illegally cut down trees and leave garbage all over his property. However, most say the vast majority of people are appreciative and respectful. One landowner provides access to a piece of property of spiritual significance to First Nations. 2.4.2.2 Do you think the government should regulate forest practices on private land? Nineteen interviewees said government should regulate forest practices on private land but all have mixed feelings about government intervention on private property. They see a need to alleviate public concern over forest practices on private land but are concerned additional 15 regulation will mean the bureaucracy and paperwork associated with the Forest Practices Code. One non-industrial landowner summed up the contradictory feelings: "In principle yes [government should regulate], but when I see how they regulate on crown land, I have to say no. The best thing would be for people to care enough to do it. So I would say yes but squirm while I do it because it is very easy for government to screw something like that up. " Eleven landowners said "no" to government regulations, mainly because additional rules are an infringement of private property rights but also because of concern over bureaucratic interference, unnecessary restrictions, inflexibility and "useless paperwork." Non-industrial landowners were more likely than industrial landowners to say "no" to government regulation. Several industrial landowners said they were opposed to more regulation but accepted that more regulations are likely to come. These landowners said they supported the Private Forest Landowners Association's proposal for alternative private forest land legislation less "process-oriented" than the Forest Practices Code (see chapter four). One landowner said he found it ironic that the Private Forest Landowners Association has been lobbying government to regulate managed forest land. Whether "yes" or "no," landowners interviewed broadly agree on four issues. First, managed forest landowners have a legitimate stewardship interest and most do not require additional regulation. Most said they already meet or exceed Code standards, without the paperwork (though several larger landowners said this has not always been the case "until recently.") Several non-industrial landowners expressed concern over management practices among some industrial landowners. One non-industrial landowner said management on his family forest land has improved without regulation: "There are things I have done in the past that I would not do today. My Dad thinks the things we spend money on today is crazy. " Second, landowners believe additional regulation is likely. In that case they want new legislation to be less comprehensive and inflexible than the Code. Several suggested performance or "results-oriented" legislation covering only a limited range of environmental values and aimed mainly at ensuring a "sustainable forestry." Others stressed that any new regulatory system should allow maximum freedom for those consistently engaged in high standards or practice, while reserving additional scrutiny for those with bad track records. 16 Third, all regulation applied to managed forest should apply to all private forest land and that private forest landowners should be t r e a t e d e q u a l l y . Many landowners said that, not only are unsustainable forest practices (so-called "log and flog" or 'cut and run") a waste of land, but also that just a few examples of bad logging practices reflects negatively on all private forest landowners. Fourth, if the public demands additional regulations then c o m p e n s a t i o n or incentives should reflect the additional work required. One said the tax breaks he receives already entitle the public to the protection of environmental values. Another issue brought up be several industrial and non-industrial operators is that any regulations must be simple, easy to u n d e r s t a n d and administered by only one government agency. They expressed concerns over conflicts and contradictory information from the Ministry of Forests, Ministry of Environment, Department of Fisheries and Oceans and other government agencies. 2.4.2.3 What do you think of the way the government currently regulates forest practices on managedforest land in BC? Twenty-three of the 30 landowners interviewed are happy with the way BC Assessment regulates their activities. The main reason given is that BC Assessment requirements are minimal and visits infrequent. When asked what he thought of the current regulatory structure, one landowner remarked: "There is one?" Several landowners added that BC Assessment is understaffed and that the two foresters did their best to visit regularly, were observant, and were helpful with advice and ideas. One said BC Assessment understands managed forest landowners, maintains a good working relationship and looks at results rather than processes. Several landowners were not impacted because they have no mature trees and have done little or no logging. Two said they did not know enough about the regulations to answer the question. Five landowners dissatisfied with BC Assessment regulation gave a variety of reasons. One non-industrial landowners said that BC Assessment tends to follow Code practices and if a landowner wants to try something different he or she has to "justify or hide it." Two others are unhappy that woodlot license on public land stipulates that the Code also applies to their private land. They argue this does nothing to improve forest practices but means substantially more paperwork. A fourth said big private forest landowners still have so much economic clout they can do pretty much what they want, despite regulations. One industrial landowner said he did not like the threat of section 217 of the Forest Practices Code Act (allowing the Code to be applied to private land) hanging over his head and added that any regulations should apply to all private forest land. 17 2.4.2.4 Do you think managed forest land should be in the Forest Land Reserve? Landowners interviewed are split on this issue. Ten said they favour the inclusion of managed forest land in the Forest Land Reserve, ten are opposed, six undecided and another four said they do not know enough about the Reserve to answer the question. The apparent reason for the split is that most landowners want to see forest land remain in long term forest production but are, to varying degrees, reluctant to accept additional restrictions on land use associated with the Reserve, especially without any additional financial incentives. As one non-industrial landowner said about being in the Reserve: "As an entrepreneur, no, as a concerned British Columbian, yes." This ambivalence is also the reason six landowners said they remain undecided about the Reserve. Of those who favour the Reserve, six said the main reason is that it protects their right to practice forestry on their land. The Forest Land Reserve Act provides a "right" to practice forestry and specifically supersedes anti-logging restrictions that municipalities or organizations like the Islands Trust might try to impose. As one landowner put it, the Reserve restricts additional restrictions. Other landowners support the Reserve because they believe in land use planning, have no intentions of selling land or have no desire to use their land for purposes other than forestry. One said the Reserve prevents his kids from putting him in a home and developing the land. Ten landowners who oppose the Forest Land Reserve do so because it imposes too many restrictions on land use options - especially residential development - without compensation, and because this loss of options diminishes the re-sale value of their land. One industrial landowner said appreciation of land value is a big part of the investment return on private forest land and that the Reserve has diminished land values. A non-industrial landowner said he had his property appraised before and after the Forest Land Reserve and the value went down by $120,000. Another industrial landowner not interested in residential development said lower land values means lower assessments and lower property taxes, but added that smaller operations, where private forest land often acts as a pension fund, should have more development options. Three landowners said they are trying everything to get out of managed forest land and the Forest Land Reserve, so far without success. Several landowners said they are not putting 2 The Forest Land Reserve restricts land use to forestry and forestry-related activities, much like the Agricultural Land Reserve restricts land use to agricultural purposes. All managed forest land was included in the Forest Land Reserve in 1994, along with 15 million ha of crown forest. 18 additional land into the managed forest, and thereby automatically into the Forest Land Reserve, until they know more about what future restrictions will mean to landowners. Whether in favour, opposed or undecided, all landowners interviewed said they resent the imposition of the Forest Land Reserve without consultation. Managed forest landowners argue that they already manage their forest land to higher standards than other private forest landowners, yet only managed forest land is included in the Reserve. One landowner likened it to being sucker punched, first drawn into the managed forest by a tax break then unexpectedly put into the Reserve. Two others said the Reserve punishes those already engaged in good forestry while offering no new financial incentives. One landowner said such a system "should be built from the ground up, not from the politicians down." Other suggestions were put forward. Several industrial and non-industrial landowners said the Agricultural Land Reserve (ALR) and the Forest Land Reserve (FLR) should be combined and, because landowners face the same restrictions, they should also get the same benefits. Several others said the Forest Land Reserve should apply to all private land and one wants to include public forest land. One landowner is dissatisfied by a clause in the Forest Land Reserve Act that requires him to move his portable mill to a new location every five years. One non-industrial landowner is particularly bitter, wants out of the Reserve and welcomes the opportunity to voice his opinion. His managed forest land was purchased years ago and replanted as a "growing pension fund," with some areas considered for possible development and others for some combination of forestry and agriculture. He said that in the Reserve, he can no longer sell the land for purposes other than forestry, use it for agricultural purposes or even build additional residence for his children, should they want to get involved in forestry. On this last point, his concern is shared by two other non-industrial landowners. Several non-industrial landowners with children are also concerned with the capital gains they must pay if land is passed on to their children (more on this in section 2.4.3.4). The embittered landowner said he no longer sees forestry as a viable business option and has stopped improvement work on his land. 2.4.2.5 Would you like to use your forest landfor purposes other than growing trees? Twenty-one of the landowners interviewed said they would like to use their managed forest land for one or more purposes other than growing trees. The most cited reason is residential development. Seven want to develop residential properties, usually 5-10 acres lots, three have lakeshore or ocean properties they would like to develop, and three others have one or more areas 19 of marginal forest land they believe is best suited for residential development. Four landowners are considering recreational options, from hiking, biking and riding, to forest education tours, travel lodges and river rafting. Three are considering agroforestry - a combination of forestry, crops and animal husbandry - including Christmas trees, sheep, cattle, mushrooms, boughs, herbs and medicinal plants. Several landowners said a mix of forestry, agriculture, recreation and residential development is needed to keep taxes paid. Other use proposals include sawmills, a Ducks Unlimited preserve, parkland, wildlife management, rock quarries, a grazing lease and a tree nursery. One industrial landowner said land use possibilities will inevitably include commercial development, highways, power lines and ski hills. Six landowners have no non-forestry plans but would like to keep their future options open, usually for residential development. Two plan to use their land for forestry in perpetuity. One says he would only develop a piece if the alternative is selling his entire property. 2.4.3 Promoting stewardship on private forest land Before landowners were asked the final set of questions, I asked them to: "assume the government will increase regulation of forest practices on private land."3 2.4.3.1 Should the Forest Practices Code be applied to private forest land? Twenty-eight managed forest landowners interviewed opposed the application of the Forest Practices Code to private forest land. The reason is not that they oppose the intent of the Code -many said they see a need for better forest management practices on some private land - but that they consider the Code too "bureaucratic" and "stifling," full of "red tape" and "paperwork." The two dissenting landowners said there might be instances in which the Code could be selectively applied to landowners engaged in "unacceptable" forest practices. Overall, most landowners said they were doing a good forest management job and would best be left alone. Some typical comments, first from three non-industrial landowners and then two industrial ones: "I'm OK with parts of it, such as water quality, site degradation and that kind of thing, but not the detailed management. The Code doesn't allow that. The Code is complex, we '11 never figure it out and get swamped in red tape. " 3 The Private Forest Landowners Association (PFLA) has been actively lobbying the BC government to implement its proposal for a regulatory structure considerably less comprehensive and also less "process-oriented" than the Forest Practices Code. 20 "I've been managing this forest landfor years and some guy out of college who has never seen my land comes and tells me to do something. I'd kick his ass and tell him to get the hell out of here. " "I contributed to the Code on wildlife but I understand the Code is huge and has many requirements, so for guys like us the Code is probably too prohibitive... I don't know enough about the Code but we've been here for decades and generations and I want to see trees continue to grow. " "No. The Code is so process-oriented it's stifling. [We should] stay as far away from the Code as we can, to something that is performance-based. It's the biggest disincentive I can think of for putting land in managed forest. " "We manage [private land] to Code specs [but] I always encourage people not to manage to Code because it stops thinking. Many numbers are politically motivated and not scientific. For example, in our ecosystems riparian areas often burn right to the bank. " Many landowners said they have had first-hand experience with the Code. Al l but one of the industrial landowners also manage crown forest land under Tree Farm Licenses (TFLs) or Timber Supply Areas (TSAs), and said they manage their private land much the same way they manage operations on crown land. Two said they are being encouraged to do so by the Private Forest Landowners Association and the BC Forest Alliance. Seven non-industrial landowners said they also manage crown forest land through woodlot license agreements, under which the Code applies to both crown and private land. These landowners said they already manage to Code standards but do not have the staff and expertise to deal with the Code's complexities and paperwork. Most non-industrial landowners had "Code stories" to tell. One landowner related how a friend had often cut willow on his property and then wove the material into garden chairs. When the landowner was awarded a woodlot license, the Ministry of Forests told him willow cutting was not part of the management plan and therefore not allowed. Another tells about his experience in producing a management plan for his woodlot license: "My experience with the Code has been that it took them [Ministry of Forests] over five months to read a document that could be read in one hour. And the plan is just a philosophical document, it doesn't really say anything. It's not controversial at all. They found some small discrepancy in the amount of land [I said was] under management. Those figures are just estimates, because of things like our residence, driveways andforest roads." Another, also with a woodlot license, told how a major storm blew down trees on his property and he applied to remove it "to prevent insect infestation." The application took almost a year to 21 process, by which time the logs had deteriorated and diminished in value, and the market price for wood had fallen. Meanwhile, farmers with forest land in the storm area could immediately remove their fallen trees. Yet another tells how Forest Renewal BC (FRBC) turned down a request to fund reforestation on a piece of not satisfactorily restocked (NSR) crown lands. Later, the Ministry of Forests found extra funding and decided to do the replanting. The next year, someone hired by FRBC was found prepping the site, effectively undoing the replanting MoF had already done. The same landowner also recounted how FRBC paid to de-activate a road that lead to a MoF fertilization trial, forcing the researchers to fly in. Many landowners, industrial and non-industrial, emphasized they do not oppose the intent of applying the Code to private land. They see a need for better stewardship on some private land and want to see private forest land continue to grow trees at a sustainable level. Several said that the Code could provide guidelines, but that "common sense" should be used in applying them. Other landowners are worried the Code is not flexible enough to take into account differences in regional and local conditions. Other comments: • The return on investment on private forest land is only 4-5%, if things are going well, and the Code will make that even lower. • Some people want a lifestyle and they do a good job, so stay away from them. 2.4.3.2 Could incentives to used to regulate forest practices on private land? Twenty-six of the landowners interviewed said incentives could be used to regulate forest practices on private land. Two landowners said "no" and two others said they had not given the issue enough thought. The most common reason given in favour of incentives is that, if the public wants to improve stewardship on private land, it should be prepared to compensate landowners for additional costs incurred. As one non-industrial and one industrial landowner put it: "I am willing to go with the desires of the people of BC if they are willing to offset my costs of doing so. "Our [Private Forest Landowners Association] position has been that it [a regulatory structure] should be a results-oriented process and that should be tied in with additional 22 financial incentives, and if regulations are imposed over and above key public value points then there should be compensation as well. " This view seems to be most strongly held by industrial landowners, who often mentioned concerns about profitability. However, several non-industrial landowners also emphasized this concern, arguing that long term viability is needed if private forest land is to be well managed. One said l o n g t e r m v i a b i l i t y is the best way to prevent short term speculators from buying land, logging and reselling. Other non-industrial landowners also said they like the idea of incentives but are not primarily motivated by money. Several said forestry is a lifestyle more than a business. Two non-industrial landowners summed up this feeling: "I don't need an incentive. I like the way things are being done on my property. I don't do it for the money. I [only] have to make a certain amount to pay the taxes. " "We bought the land because we wanted to get out of the city and we like to hunt. Once we had the property and realized we have more time now that we are retired, we decided to see what we could do with trees on the property. Personal satisfaction is the real motivation." • One non-industrial landowner opposed to incentives is concerned incentive benefits will go mainly to larger landowners, and says the best incentive is p u b l i c p r e s s u r e . (Almost all the landowners said public pressure has had an effect on how they manage their land.) The second opponent doubts that incentives alone are sufficient to prevent bad forest practice and emphasizes the need for some kind of regulations to set base standards. Landowners broadly agree that any incentives should be in the form of t a x conces s ions , mainly property tax but also income tax. Many said they would like rates similar to those applied to food farmers. Landowners also agree that incentives should be conditional on performance. Those who do not meet minimum standards, do not get tax breaks. Those who do more, should receive additional tax breaks. One landowner said tax incentives should be available to encourage better wildlife management. Landowners, especially industrial ones, also said that, with the introduction of land use restrictions under the Forest Land Reserve, a d d i t i o n a l i n c e n t i v e s will be needed if private forest landowners in other tax classifications are to be attracted into the managed forest land category. Right now, being in the managed forest classification, and therefore automatically in the.Forest Land Reserve, is considered more of a disincentive than an incentive. 23 One non-industrial landowner said research by former UBC forestry professor Peter Pearse shows private landowners already manage their land better than crown land because their ownership gives them a built-in incentive to manage their land properly. 2.4.3.3 What do you think about taxation policies currently applied to private forest land? Property tax was the most broadly discussed during the interviews. Almost all landowners are well informed on the subject and offered a range of ideas and suggestions. There is, however, a distinct different of opinion between non-industrial landowners, who are generally happy with their property taxes, and industrial landowners, who are not. Most non-industrial landowners interviewed say they support lower taxes for managed forest landowners and find their property taxes reasonable, even inconsequential. Several had no idea how much they paid in property taxes. One landowner voiced a broad sentiment: "Ifyou are in the managedforest, you get tax relief I support that general idea. It's very worthwhile. It brings taxes down to levels where it is quite possible to carry out good standards of forest practice. " Satisfaction with current property taxes seems at least partly due to the fact that many saw their taxes drop considerably when they moved from other property tax categories to managed forest. One said he paid five or six times as much property tax before moving to the managed forest class. Another said her family owns two acres of waterfront residential land, which costs $2000 a year, and 25 acres of managed forest, which costs $100 a year. Several other non-industrial landowners are less certain of the exact property tax rate differentials, but describe the managed forest rate as "more reasonable." Two landowners said they have fought BC Assessment to get their land into the managed forest tax, both successfully. One tells how BC Assessment had said the "highest and best use" of his forest land was to subdivide into residential lots, and wanted to tax the property as rural residential land. The landowner wanted to keep it as forest land in the managed forest tax classification and took the issue to court. On the second attempt, the court ruled in his favour and he was able to change his tax classification from residential forest land to managed forest land, dropping his tax bill "from about $4000 a year to $600-700." The other landowner faced a similar situation and saw his tax bill drop to $350 a year, one-third the previous rate. When asked if a further property tax reduction could be used as an incentive to improve forest practices on private land, most non-industrial landowners were doubtful. One comment reflected the views of many colleagues: 24 "In my case it [property tax] is about $300 a year. In the beginning [before managed forest] I had to pay something like $1200. Its nice to pay less but we also have to work for it. The remaining $300 is not much of an incentive. " Three landowners said that lower taxes might be attractive but that tax cuts for managed forest landowners would mean higher taxes for others. One added that he did not like to see his neighbour, the CPR, pay a lower tax rate than himself. Industrial landowners are generally not satisfied with their property taxes. Their main concern is that, even though BC Assessment assesses managed forest land at values lower than unmanaged and residential forest, municipalities and regional districts set the mill rates applied to the different forest land tax categories (see chapter four: financial compensation). The result, say industrial landowners, is that they often pay higher property taxes on managed forest land than on residential or unmanaged forest land. This is contrary to the objective of the managed forest tax category: to provide landowners submitting and adhering to a forest management plan with a tax break, relative to other forest land tax categories. One industrial landowner states his case: "I think there should be a single mill rate all across the province. That's a real true incentive for people who want to keep their land in that land classification. The mill rate in one area can be much higher or lower than in neighbouring area... On unmanaged land in one municipality we pay 13.82 [cents per $1000 in property value], while on managed forest outside the municipality we pay $29.04. " Industrial landowners said the reason for the differential is that municipalities or regions see industrial landowners, who often also own wood processing facilities, as an attractive source of tax income. Several industrial landowners said they sympathize with the needs of municipalities and Regional Districts - who are now getting less money from the provincial government - but are still concerned local and regional governments might "throttle the golden goose.". Two industrial landowners said their property tax payments have also increased because, as the value of private forest land values increases, so does the assessment made by BC Assessment. One said his company's property tax assessment had doubled to $3.6 million in the past "four or five years." Several industrial landowners suggested property taxes should be variable and based on the site productivity or mean annual increment (MAI) of the forest land, as assessed by a trained forester. One added the base tax rate should drop if forest practices are adhered to and raised if landowners engage in "unsustainable practices." 25 All but one of the industrial landowners interviewed said the best way to deal with their property tax concerns is to tax managed forest land at the same rate as agricultural land. In fact, they suggest that all tax matters should be the same for managed forest landowners as for "food farmers" (see harvesting tax, income tax and capital gains tax below). The main reason given is that managed forest is now part of the Forest Land Reserve (FLR) and subject to the same kinds of land use restrictions as agricultural land in the Agricultural Land Reserve (ALR). Several industrial landowners also said that, unlike most farmers, managed forest landowners allow public access to their forest land, that forestry is less environmentally damaging than agriculture and that farmers do not employ as many people as managed forest landowners. One landowner said that, with property taxes at current levels, it does not make sense to buy bare land now and wait 60 years for a return. While supporting the idea of equality between managed forest landowners and food fanners, industrial landowners acknowledged that this would not solve the problem of varying mill rates. Several of the non-industrial landowners also support F L R / A L R equality, including some who currently found their property taxes reasonable. One says the rate for A L R land is one-third the already low rate he pays for his managed forest land. Another says the need to pay property tax sometimes compels him cut trees even though log prices might not be good. In all, half of the landowners interviewed, industrial and non-industrial, raised the issue of FLRVALR equality. Harvest taxes (see section 7.3.1.1) were opposed by several industrial landowners who said trees are a crop, like corn or wheat, and that "food farmers" are not taxed when they harvest these crops. Under the same tax system as food farmers in the ALR, managed forest landowners would pay no severance or harvesting tax. One industrial landowner said the harvesting tax is one part of a system that also imposes income tax and a logging tax on all trees cut on managed forest land. However, another said a harvesting tax is appropriate because private forest landowners can't have high ground rental because it could take 60-100 years to grow a rotation. Instead, government gets its share when the trees are harvested. Non-industrial landowners, on the whole, did not have a problem with the harvesting tax. Though some were not entirely clear on what taxes applied to their forestry activities, the general sentiment was expressed by one landowner, who said: "I think what is going on now is pretty satisfactory. As you reap the benefits of your harvest, you pay the tax. I do not see taxation at rates similar to food farmers as a major issue. The taxes are so reasonable on this forest land that no one could complain about it." 26 Capital gains tax was not a big concern for most landowners interviewed, either because the land is owned by a publicly traded company that does not face the problem of intergenerational transfer or because most landowners currently have no plans to sell land, or to pass it on to another generation (in which case capital gains does apply). However, six non-industrial landowners were in situations in which capital gains taxes had been or were being levied. They expressed strong feelings about paying the tax: "If they wish to keep the land as forest land, they should provide the same [capital gains] exemption as on agricultural land. People have dedicated their lives to their forest land... We bought this land second-hand with most of the timber harvested and we've been reforesting. We've worked hardfor the capital gain. " "Even if we form a company, when we die it is deemed a sale and subject to capital gains. That's a real consideration for us right now. What we paid for it 35 years ago is practically nothing. Those are not the same rules that apply to farms. " "There are so many taxes now in BC and the only thing that's left is your capital gain. People usually earned it through a hell of a lot of work. I don't think there should be a tax on capital gain. They earned it. " Of the other three affected landowners, one said they had been pushed into selling some of their land to pay for capital gains after inheriting the property, a second said there was a risk of forest landowners harvesting trees prematurely to pay capital gains after inheriting, while a third wondered if - since the assessed value of his property had diminished since being put in the Forest Land Reserve - the government would offer him a "capital loss rebate." Other taxes were of minor concern. Many landowners interviewed did not always have a clear idea about what taxes they are paying. For industrial landowners, this is because the people interviewed were usually not the same people who dealt with tax issues. However, one said farmers pay 50% less school tax than managed forest landowners, a second said income tax, harvesting tax and logging tax was "triple taxation" of the same product, while a third said landowners should be able to deduct from the logging tax any expenses incurred over years. Many smaller landowners have combinations of ALR and FLR land, while others have woodlot licenses or other forestry and agricultural enterprises. This makes it difficult to keep track of various taxes. One non-industrial landowner said his investments in silviculture are not deductible from income tax, while another said all improvements are deductible. Others wanted to be able to deduct expenses for vehicles used in forestry, the way farmers can deduct expenses 27 for farm vehicles. Several were not aware of the existence of a logging tax, as separate from harvesting tax. 2.4.3.4 Do you think managed forest landowners currently have the freedom to manage their forest resources? Twenty-eight managed forest landowners interviewed said they currently have freedom to manage their forest resources. Several said they currently have "total freedom and would like it to stay that way." One said that "even the Islands Trust" supports his forestry activities, while another said the Fisheries Act and the Water Act were his only concerns. Several non-industrial landowners were unaffected because they had little mature timber and were doing no harvesting. The two landowners who said they did not have sufficient freedom did so because their private lands are incorporated into a crown land woodlot license and subject to Forest Practices Code rules. Despite their overall satisfaction with the current arrangement, there are some concerns. The main one, especially among industrial landowners, is the threat of the Forest Practices Code "hanging over our heads." Another concern among all landowners is that the Code would likely only be applied to managed forest land, leaving other less well-managed private forest land unregulated. Other issues were also raised. One non-industrial landowner said industrial private landowners have been criticized by environmental groups, which he considers unwarranted. A second said the practices of industrial forest landowners reflected badly on non-industrial landowners. Another said BC Assessment requires relatively quick reforestation of harvested areas, which does not allow time for natural regeneration. However, he added that the inspection forester has been lenient in his interpretation of the rules, allowing him to do some natural regeneration. A third landowner said that his freedom to do non-forestry activities on his land had been curtailed by the Forest Land Reserve. Most landowners, industrial and non-industrial, are adamant they want current freedoms maintained in future. Generally, they argue that the current system is working and does not require change, though several non-industrial landowners expressed doubts about some management practices among industrial landowners. Few landowners are optimistic that current freedoms will be maintained. One landowner expresses a common sentiment when he says there are just enough "bad apples" among private forest landowners to ensure public pressure will force government to "do something." 28 If government does do something, landowners support some kind of regulation that maintains as much "freedom to manage" as possible. All but one of the industrial landowners interviewed said they have been involved with the PFLA and its development of a more "results-oriented" alternative to the "process -or ien ted" Code (see section 6.3). Industrial landowners argue this will give them much greater freedom in achieving the outcomes important to the public, with less paperwork. Several added that the PFLA proposal calls for the removal of section 217 from the Forest Practices Code Act, a provision that allows the Code to be applied to private land. Non-industrial landowners are also concerned about the Code - and even the PFLA alternative - and want as much freedom an possible maintained. Anything else will be "deconstructive," said one landowner: "I believe there should be a wide range offreedom. If government regulations impinge on the right of the property owner to manage his own property, it works against achieving the cooperation of the landowner. I'm a big believer in non-industrial private landowners owning their property and managing their own way. Most do a good job. " Two non-industrial landowners said they wonder about who might administer a new regulatory system. One said the n e w r e g u l a t o r y b o d y cannot be the Ministry of Forests (replacing BC Assessment) because: "For something really different... you really need a different bureaucracy, not the MoF and their way of doing things. " The second said a new regulatory body should be an " a d v o c a t e " for forestry, much like the Agricultural Land Commission is an advocate for farmers in the ALR. In the past, one landowner said, he looked forward to seeing the District Agriculturalist and discussing important issues but when he sees a forester he thinks "what have I done wrong this time?" A minority of non-industrial landowners are "unconcerned" about the Code, some because they are not harvesting or planning to harvest, others because they have woodlot licenses and the Code already applies to their private land. Several landowners said the Code would do little to change their management practices, but would significantly increase paperwork. One landowner said he liked the PFLA proposal for a results-oriented regulatory approach but wonders whether such a system is feasible: "The idea has its merits and is certainly better than a process-oriented system. But where are we going to get people who can measure these things? It takes a lot of experience. On my land it has taken a lifetime of being sensitive to what's happening to living things. " 29 2.4.3.5 Should information and education services be made available to private forest landowners? Twenty-six landowners interviewed said information and education services should be available to private forest landowners. Only two said "no" and two were "undecided." However, while most said the services should be available, only a few landowners said they would make use of such services. Reasons for this lack of interest differ between industrial and non-industrial landowners. Industrial landowners said they already have trained foresters and woodland managers on staff, and often do training and education in-house. When they said they support education and information services, they were thinking more about smaller landowners who might not have the same level of expertise, and especially about non-industrial forest landowners not in managed forest and in the Forest Land Reserve. When asked if they would be willing to share this expertise with smaller landowners, one said it is "not in our interest to help competitors," two said this is already happening to some degree through the P F L A (one noting the conflict involved in assisting competitors) and two others said that until recently they had done so but economic realities had since made them "lean and mean," leaving fewer resources for such activities. Most non-industrial landowners said they would not make use of most information and education services because they already have extensive forestry training and/or experience. They said they were thinking more about making such services available to private forest landowners not in the managed forest category, especially farmers and ranchers. Several non-industrial landowners said there were "always new things to learn." The four non-industrial landowners who said "no" to information and education services, or were "undecided," did so because they felt most of the information is already available i f you knew where to look. This perception is also shared by non-industrial landowners who said "yes" to information and education, though they also note the process is complicated and requires interaction with a range of government and private agencies. One relatively new landowner describes her quest for information: "I think a lot is available if you look for it but it's very time-consuming. Once you have the contacts, they are more than helpful. They sent me information on barrier protection, reforestation and how to deal with root rot. It's there, but nothing is compiled as a guide. That would be very helpful. " Types of information desired again varied. For non-industrial landowners, easily the most common suggestion was access to the services of a professional forester, someone to come out 30 and look at their forest, make suggestions and discuss ideas about forest management with the landowner. One landowner summarized the feelings of many other non-industrial landowners: "The most instructive two days I spent was going out with a forester and looking at the forest through the eyes of a forester. I really benefitedfrom that. I know it's probably easier to send people to workshops but each piece of land tends to be unique. I don't know who is going to pay the teachers [foresters] but... the public likes to see undisturbed forest so it might not be bad if they paid for a bit of it. " Topics landowners might like to discuss with a professional forester include reforestation, other siliviculture, diseases such as root rot, environmental protection, marketing, non-industrial scale forestry issues, harvesting and technical issues, forest ecology, and financial and non-industrial business assistance. Several landowners suggested a forester's role could include convincing others with private forest land to join the managed forest tax classification. One interviewee said professional foresters could probably "learn a thing or two" from forest landowners. Like the landowner quoted above, most non-industrial landowners said they realized making one-on-one forestry advice available, while desirable, is expensive. Most said they could not afford the services of a forestry consultant. In this context, several landowners mentioned FRDA (Forest Resource Development Agreement) because this joint provincial/federal funding scheme made professional foresters available to private forest landowners. Other kinds of information and education services suggested included workshops and lectures, possibly through local colleges, the Private Forest Landowners Association, woodlot associations, or the Ministry of Forests. Several landowners said they are reluctant to see any government agencies involved, citing concerns over the development of a "massive bureaucracy." Other landowners, industrial and non-industrial, said there are already workshops and courses being taught, possibly through the PFLA or community colleges. Materials suggested included videos, pamphlets, newsletters, handbooks and other printed information. One landowner said business advice should include dealing with unscrupulous logging contractors and log brokers He said common problems are contractors who also own forest land can mark some trees logged on contract as their own, while others make a mess and leave the landowner to clean up. The landowner suggests a system of training and certifying contractors. 31 Other comments • The small amount of private forest land in BC makes it hard to achieve the "critical mass" needed for good information and education programs, and to form strong forest landowners associations. • In Oregon and Washington, non-industrial owners benefit [from information and education programs] more than others. • Information and education should be reasonably priced, but not free. • When providing information, who decides what is right and what is wrong? • Some people have not been in the education system for 30-40 years, and are often unfamiliar with trade language. 2.4.3.6 Should the government provide funding assistance for silvicultural activities on private land? Opinions on this issue were split roughly down the middle, with landowners industrial and non-industrial on either side. Those who said the government should provide funding assistance did so for two main reasons. Among industrial landowners, the main reason given is that, if the government is going to regulate forest management on private forest land, then they should assist in funding silvicultural costs. Several non-industrial landowners also made this point, but a greater number said they support silvicultural funding assistance because silviculture is expensive and many non-industrial landowners do not have the money to pay these costs up front, especially if they do not have much mature timber to harvest. Several industrial landowners said funding assistance was probably more appropriate for non-industrial landowners. One said funding would help create forestry jobs. Landowners opposed to silvicultural funding assistance have two main concerns. One is that silviculture is part of forest management and if silvicultural activities do not make business sense, then they are not worth doing. Subsidizing these activities encourages landowners to do things they might not otherwise do. Several non^industrial landowners said their desire for additional government funding was offset by their concerns as taxpayers that government programs tended to be "wasteful." One said we are simply passing the cost on to future generations because government would have to borrow the money. The second concern is that government programs tend to grow and become more "bureaucratic" over time. One landowner expressed a common sentiment: 32 "I was against FRDA and I'm against FRBC. Once they [the government] get their foot in the door they will be in there hollus bollus. I don't want them to even get a finger in the door. If you want to do enhancedforestry, then do it at your own expense. " Two non-industrial landowners opposed to funding said they use selective harvesting methods and are therefore not engaged in traditional silvicultural practices such as replanting and brushing. Two others expressed doubts that silvicultural activities pay for themselves in the long run. Most industrial landowners and several non-industrial ones said that, if government wants to encourage silvicultural activity, they should do so through taxation policies rather than direct subsidies. This makes it less likely that landowners will carry out needless silvicultural activities, and also reduces direct government involvement in forest management. One landowner said a sound business climate would automatically ensure necessary silvicultural activities are carried out. Even those opposed to funding said that i f the money were made available, they would take advantage. Several said government should only pay a percentage of silvicultural costs, instead of making them free for landowners. Two non-industrial landowners said they would not take part "out of principle." Over half of landowners interviewed took part in the joint federal/provincial program known as FRDA (Forest Resources Development Agreement), which included funding assistance for silvicultural activities. These were mainly non-industrial landowners but also several industrial landowners. Many who took part in FRDA said they oppose funding assistance for silvicultural activities but took advantage because the "money was available." One industrial landowner said his company took part to "create jobs." Several non-industrial landowners took part because they did not have the resources to fund silviculture. One said he liked the money but has misgivings: "I've gone through the FRDA thing, got help from them just as a lot of other people got help. But like a lot of other government programs, it was wasteful. I did it because I needed to... I appreciated the financial gifts in order to get my stands into a fully stocked position. I would have done it anyway, but probably slower. " Many non-industrial and industrial landowners called FRDA "increasingly bureaucratic" and "wasteful," with too much money spent on "paperwork." One landowner said FRDA paid him $6000 to produce a management plan he did not need. Landowners also expressed concerns that subsidies encourage unnecessary silvicultural activities (FRDA funded up to 80% of costs). 33 Several non-industrial landowners were very positive about FRDA, saying the program got them started in forestry, both through funding and technical advice: "We got involved in FRDA early on, planting and thinning, and we got good money for it. It really got us started. We would probably not have done those things if we did not have financial support. We needed $5000for seedlings, and where to get them was a bit of a mystery. With FRDA we had help, and not only financial. " "I thought it was great because it was voluntary. If someone wanted to try it they could. Also, [government] should only pay part of it so the landowners still have to pay. That means landowners only use the funds if they really want to do something, not just because the money is available. " 2.4.3.7 Do you ever have trouble finding a market for timber cut on private land? Eighteen landowners interviewed said access to markets is not an issue, while eight said finding markets is a significant problem. Four had little or no mature timber to sell. Concern over access to markets v a r i e s c o n s i d e r a b l y , depending mainly on access to manufacturing facilities but also on geographic location. Only one of the ten industrial landowners interviewed said access to markets is a concern. Industrial landowners said this is because they also own wood processing facilities and can tailor their private land cut to suit the needs of those facilities. Several industrial landowners said they also export logs to the US and Asia. One says his company does not sell any logs on the open market but, rather, trades with other companies. For example, one company might trade logs to log home manufacturers and take pulp wood in return. The one industrial landowner interviewed who has no production facilities said he can readily sell logs but would like greater access to m a r k e t s i n t h e US, where he said numerous small mills would like to buy Canadian logs. Several other industrial landowners mentioned export restrictions. One said it's a purely political decision and that "we are supposed to be doing free trade," and a second that "markets have become global so we can't have local restrictions anymore." One non-industrial landowner said he needs a permit to "export" certain kinds of wood to Alberta. Non-industrial landowners were about evenly divided on the question of access to markets. The split seems to be l a r g e l y g e o g r a p h i c a l . Most concerned about access to markets were private forest landowners on the Gulf Islands. Four of five Gulf Island landowners interviewed said the biggest problem was the limited number of log buyers in their proximity. One landowner summed up the views: 34 "There are only one or two timber buyers so your chances of getting a good price for your logs are diminished, even from three or four years ago. All these amalgamations [of wood buyers] have been taking place. " One relatively new Gulf Island landowner said selling timber has required considerable research. First she had to locate buyers, then ship logs to a sort yard on another island. However, the ferry ramp on the island with a log sort could only handle half a load at a time, so she instead decided to send the load to the mainland or Vancouver Island. This is more expensive and time-consuming option, given the ferry schedule. The landowner also discovered that any logs that go off her island have to be listed by species and volume. Another Gulf Island landowner wondered what happened to government plans to create more sort yards for private logs, while a third said a movement is now afoot to do a collective or co-op marketing system for private forest landowners, saying this kind of system had worked well in other countries and would "be a boost here in BC." Some landowners on Vancouver Island also said they are concerned about the limited number of buyers for their products, especially at the south end of the island. One landowner said big companies are organized so they know not to compete with each other in buying logs. Landowners on northern Vancouver Island seemed to have fewer marketing problems. Two landowners expressed different perceptions: "One wishes the market were deeper and broader. More buyers would be nice. Also, there is no market for the lowest quality of wood, known as slash in the industry, so we have to waste it. We have sold some firewood on the local market but those activities tend to be marginal. We do it to clean up our sites. We have to live with the market as it exists, for our good wood. " "Buyers are very competitive. Initially, going back 15 years, there were only two buyers on this part of the island but there is now a veneer plant that is an aggressive buyer of second growth fir, a new buying station in Nanaimo, a non-industrial dry land sort in Lady smith and also a couple of buyers of hardwoods have come along... Each needs different products, sizes and grades. " Non-industrial landowners in the BC interior did not find a lack of buyers to be a problem, though they, like their colleagues around the province, said they are concerned about the weak market for wood. Many non-industrial landowners said they were currently not harvesting, hoping for better prices in future. One landowner said new markets had developed for hardwoods such as alder and aspen, while another has mostly cedar and says the market is still strong. 35 Other comments: • Non-industrial landowners can have difficulty finding markets for non-industrial amounts of wood, especially high or low quality wood. One industrial landowner said there is no real market for lower quality woods in any volume. • There is a need for a publication listing buyers and prices, as well as log brokers. 2.4.3.8 Could some kind of sustainability or eco-certification program be used to promote improved forest practices on private land? Ten landowners interviewed said an eco-certification system could be used to improve forest practices on private land, nine landowners said "no", four are "undecided" and six said they do not know enough about the issue to comment. There are significant differences of opinion between industrial and non-industrial landowners. Most non-industrial landowners said either that they support some kind of eco-certification, or they do not know enough about the issue to comment. Those in favour were enthusiastic but said certification has to pay its way. Most believe certification is inevitable. As one non-industrial landowners says: "I think it could work very well. We are eventually going to get there. If you adhere to an acceptable standard then you can get a premium over the next guy. But it has to be international, not homegrown in BC. " Many non-industrial landowners said certification should be automatic i f landowners adhere to regulations and pass routine inspections. Several said certification must take place at the plant or mill level because wood from various non-industrial landowners gets mixed up during production. One said keeping certified wood separate from uncertified wood could only be done at considerable expense, a second that industrial landowners could have problems with such a system if they are "not philosophically in tune," and a third that he would like to have a choice of what system to participate in and that two, possibly CSA (Canadian Standards Association) and FSC (Forest Stewardship Council) are already available in BC. A fourth sees certification as recognition of good stewardship: "I Think its a good idea. It's an incentive. It makes the logger feel good, feel like they have done something the public likes to see. It also takes the heat off those who are doing it right." 36 Several non-industrial landowners said certification is a bad idea, because most managed forest land is being well managed and certification will just mean more government intervention. One landowner says certification is political, echoing the concerns of several non-industrial and industrial landowners: "My initial reaction is that it's just a bunch of public relations spin doctors. I'm not against it in principle but I'm not sure how well it would work once it's through the public relations. It's too close to politics. " Most industrial landowners either oppose an eco-certification scheme, or are undecided. The main reason is that they remain unconvinced that consumers are prepared to pay a premium for certified wood: a premium at least large enough to offset the additional costs of a certification system. At the same time, industrial landowners said consumer preferences are changing and that some kind of certification system is inevitable. One industrial landowner sums up the position: "Any certification program should be marketplace driven and shouldflow from the market back to the land. Until there is a demandfor it, there is not need. Consumers have to demand certification because it is costly. The last thing you want is another government program. Pressure is building though, slowly, and inevitably there will be some kind of requirement for an internationally acceptable certification program. " Several industrial landowners also said certification is becoming an issue in Europe but not in their principal markets in the US and Asia. One landowner said he was a champion of certification four or five years ago, but has since changed his mind because certification means the desires of relatively uninformed consumers supersede a landowner's forest management objectives. Another landowner said a customer had recently inquired about certified wood but was not prepared to pay much of a premium. 2.4.3.9 If and when government does introduce a new regulatory system on private forest land, which of the following issues do you think are most important to consider? Access to markets, sustainability certification, "freedom to manage, " property and other taxes, extension and education programs? With this question, some landowners named only the one, two or three issues most important to them, while others ranked them all in order of importance. Twenty-two landowners, industrial and non-industrial, said freedom to manage is the most important consideration for any future legislation. Another four said freedom to manage was the second most important consideration. Most said they currently have considerable freedom to manage their forest and wanted to keep 37 things that way. Reasons for placing importance on freedom to manage differed between non-industrial and industrial landowners. Many non-industrial landowners said freedom and "lifestyle" were the main reasons they owned forest land and that freedom should be maintained as long as they are doing a good job. Some expressed concern over the cost of regulations. Industrial landowners are much more concerned about regulatory costs, and said any new legislation should maintain freedom to manage by introducing a "results-oriented" system rather than a "process-oriented" system like the Forest Practices Code. Several said freedom to manage gives them the ability to react quickly to changing market conditions. Two industrial landowners said freedom to manage is more of a right than an incentive. Landowners identified property and other taxes as next in order of importance. Three said property and other taxes were the most important issue, while another 16 ranked taxes second, usually after freedom to manage. For most, the biggest concern is property taxes. This is especially true for industrial landowners (for details, see section 2.4.3.3). Several non-industrial landowners also want lower property taxes but several others said property taxes are already so low that additional cuts are not much of an inducement. Three suggested changes to the way income is taxed. Two landowners said capital gains was their major concern. One said lower taxes are always nice but that everyone has to pay their share. Third on the list is extension and education, including funding assistance for silvicultural activities. One landowner said extension and education is most important, one ranked this issue second and four placed it third, after freedom to manage and taxes. A l l except one who chose this option are non-industrial landowners. Also, every landowner interviewed said the education component is more important for other landowners, especially those not in the managed forest tax category. One said more education would mean landowners know what they want and would demand more freedom. Another said it is "just as important" to educate the public as to educate the landowners. Four landowners, all of them non-industrial owners on Gulf Islands or southern Vancouver Island, said access to markets is the most important consideration: Two others considered the issue to be of some importance. Only two landowners, both non-industrial, considered eco-certification to be an important issue, ranking it second and third, respectively. 38 2.4.3.10 Are there any other issues you think are important to this discussion? A b o u t h a l f o f l andowners in te rv iewed fe l t that the quest ions had covered most o f the issues they felt to be most relevant. T h e other h a l f made a range o f suggestions. S e l e c t i v e l o g g i n g was ra ised by four landowners , in d i f ferent w a y s . O n e sa id that, even though aesthetics are cont rovers ia l and most pr ivate forest landowners resist i m p o s i t i o n o f v i s u a l qua l i t y standards, many already pract ice alternat ives to c learcuts , o f ten because o f p u b l i c pressure. H e sa id alternat ive pract ices inc lude patch cuts, se lect ive retent ion, str ip l ogg ing , cab le l ogg ing and he l icopter logg ing . A second l andowner said he has a ne ighbour l ogg ing on c r o w n land w h o is d o i n g one hectare patch cuts because o f pressure f r o m the l oca l watershed commit tee . A th i rd sa id he has done se lect ive l ogg ing on h is property fo r 30 years, m a i n l y r e m o v i n g the "dead , d y i n g and d iseased . " A fourth says some landowners th ink they ' re d o i n g se lect ive l ogg ing but are rea l l y h igh -g rad ing : " A M owner who is looking to the future will not cut best, biggest and straightest trees because he knows they will be more valuable 10 or 15 years from now. He might cut lower grade logs and lower his cut, maybe carrying out commercial thinnings. He should be planning for the long term. T w o industr ia l landowners said f o r e s t l a n d p r i v a t i z a t i o n o f c r o w n land is l i k e l y in future. O n e sa id this w o u l d create a stewardship ethic and p rov ide tenure secur i ty , and c o u l d be used as an incent ive to manage ex i s t i ng pr ivate lands w e l l . It w o u l d a lso p rov ide the p r o v i n c i a l government w i t h m o n e y before trees are harvested. T h e second landowner sa id that, w h i l e he d i d not support p r i va t i za t ion , it w o u l d l i k e l y happen because the government is b roke and they need money for compensat ion issues l i ke the Protected A r e a s Strategy and fas t - t rack ing land c l a i m s . Severa l industr ia l landowners sa id they are interested in b u y i n g add i t i ona l forest land. O t h e r c o m m e n t s • W e s t i l l have a f ront ier mental i ty in B C and have not yet deve loped a s tewardsh ip eth ic . • Changes on p u b l i c land have increased pressure to cut trees on pr ivate land . • B C Assessment c o u l d be a good regulatory body i f g iven su f f ic ient resources. • T h e best regulat ion system is some c o m b i n a t i o n o f regulat ions and incent ives . • C o m p a n i e s shou ld keep their o w n records and do thei r o w n audits , r educ ing cost to government and increas ing f reedom to manage. • T h e a b i l i t y to manage f o r non - t imber va lues depends o n the revenue d e r i v e d f r o m the forest. • M a y b e w e need more regulat ions for farmers, not less for foresters. 39 • Unless non-industrial landowners get a tax structure similar to food farmers, they are "on their way out" and larger companies will buy up the land. 2.5 Conclusions The purpose of the survey was to gather information about the goals, views, ideas and capabilities of private forest landowners in the "managed forest" tax category. This information can be used to assist in the development of policy mechanisms aimed at improving the level of stewardship on all private forest land in BC. The 30 personal interviews that comprise the survey indicate several important areas of agreement among managed forest landowners, and a range of ideas that will be of assistance in private forest land policy development. 2.5.1 Industrial vs non-industrial landowners Many surveys make a distinction between industrial and non-industrial landowners but since 1 favour forest policies that apply equally to all landowners, I was initially reluctant to emphasize this distinction. This approach was partially supported by large areas of overlap in views expressed by industrial and non-industrial landowners. However, there were also areas where different views and sentiments were expressed, and different market and other conditions prevail. Therefore, I have employed the distinction between industrial and non-industrial landowners where the situation warrants. 2.5.2 Public interest on private land There is broad agreement among all landowners surveyed that the public has at least some legitimate public interest in forest practices on private land, especially water quality but also fish and wildlife habitat, soil erosion control and maintaining long-term productivity of the land. Most landowners said visual quality should be the choice of the landowner but recognize that visual quality is viewed by the public as a proxy for stewardship. Most landowners allow public and even encourage access to their land but see it as more of a privilege than a right. Concerns include mountain bikes, ATVs, snow machines, wood theft, dogs and garbage. Most landowners expect public pressure for better forest stewardship to increase. Industrial landowners said they have reacted by increasingly including riparian areas, wildlife management, sensitive soils, visual quality and recreation in their forest management plans. Non-industrial landowners take a less formal approach. All landowners said they are currently doing a good 40 job. Every non-industrial landowner said they already manage their private forest land to high standards, usually for personal reasons but also because of public pressure. 2.5.3 Regulation Most landowners interviewed are content with the current system of regulating forest practices on managed forest land, mainly because there are few restrictions, and believe most managed forest landowners do a reasonable job of forest management (though some small landowners thought large ones could do better). However, most also feel the government must "do something" to improve stewardship on other private forest land, because a few "bad apples" were affecting the reputations of all private forest landowners. They also said restrictions should apply equally to all private forest land, including the Forest Land Reserve. Even landowners who strongly support increased regulation (especially industrial) share a major concern with those opposed to regulation (usually non-industrial): that additional government regulation inevitably means more bureaucracy, inflexibility, waste, expense and paperwork. For these reasons, landowners almost unanimously oppose the application of the Forest Practices Code to private land. Conversely, most say some combination of incentives could be used to promote stewardship in private land. Finally, landowners broadly agree that i f the public demands additional regulation they should pay, or at least defray, the costs. This view was especially strong among industrial landowners. 2.5.4 Freedom to manage Landowners have strong ideas about parameters for any new regulatory system aimed at improving stewardship on private land. Most importantly, a majority said that, if a regulatory system is implemented, the most important concern is the maintenance of the "freedom to manage" their forests. For most, that means defining objectives the public would like to achieve on private land, then leaving landowners freedom to achieve those objectives in ways suitable to their particular situation. Industrial landowners referred to this a "results-oriented" system, as opposed to a "process-oriented" system like the Forest Practices Code. Cost was the biggest consideration. Non-industrial landowners' support for freedom to manage is more intuitive and informal, with loss of freedom and lifestyle the main concern. 41 2.5.5 Tax structure Industrial landowners are particularly concerned about property tax, mainly because tax rates determined at the municipal or regional level tend to negate tax advantages for managed forest landowners provided by lower property assessments at the provincial level. Large landowners also say their property values, and therefore their taxes, have risen substantially in recent years. Most non-industrial landowners said their property taxes are reasonable, even inconsequential, especially compared to taxes paid before they were put in the managed forest tax category. Most also consider the harvesting tax reasonable, unlike some industrial landowner, who argue a tree crop is like a corn or wheat crop, yet food farmers are not required to pay a tax on harvest. Non-industrial landowners subject to capital gains tax said they worked hard for the capital gain, like planting and tending trees, and that the tax forced them either to sell some land to raise money or to harvest immature trees. All wonder why they do not qualify for the same capital gains exemption as food farmers. 2.5.6 Agriculture vs forestry (details in Appendix A) Industrial landowners favour tax conditions for managed forest landowners in the Forest Land Reserve similar to those applied to agricultural landowners in the Agricultural Land Reserve. This opinion was supported by many non-industrial landowners. Owners of forest land in the ALR pay lower property tax than managed forest landowners, pay no harvesting tax, get a $500,000 capital gains exemption and can pass on farm assets to lineal descendants without paying capital gains. 2.5.7 Information and education Two thirds of managed forest landowners interviewed said information and education programs should be made available to private forest landowners, but most were thinking about other landowners - especially those not in the managed forest tax category - rather than themselves. Almost all landowners interviewed had considerable forestry experience and education. In addition, industrial landowners said they already have trained foresters on staff. Non-industrial landowners said they know their land intimately, though some said there is always more to learn. A few landowners said all necessary information is available if you know where to look. Non-industrial landowners value access to a professional forester with whom to view their land, discuss ideas and swap suggestions. Other topics of interest include reforestation, other 42 silviculture, disease, environmental protection, marketing, small scale forestry, harvesting and technical issues, forest ecology and financial and small business advice. Landowners large and small expressed concern that government education and information programs would become bureaucratic and wasteful and suggested alternatives such as woodlot owner associations. Other materials suggested include videos, pamphlets, newsletters, handbooks, and other printed material. 2.5.8 Financial assistance About half of all landowners interviewed said government should provide funding assistance for silvicultural activities; industrial landowners because they see it as compensation for lost property rights and the non-industrial landowners because they don't have the money to pay silivicultural costs up front. Those opposed to silvicultural funding programs say silvicultural costs are part of the business, that government programs are wasteful and that they tend to encourage silvicultural activity that is not necessary. If funding assistance were made, most landowners said it should be done through tax policies rather than as direct subsidies. About half took part in a previous joint federal/provincial funding initiative and found the program helpful but also bureaucratic and wasteful. Non-industrial landowners are likely to consider money a less important motivating factor than things like lifestyle, personal satisfaction and freedom. 2.5.9 Markets Most landowners said marketing their logs was not a problem. Large landowners had their own wood processing facilities, while most small landowners said they had a number of buyers interested in their trees. However, a solid minority said marketing is an issue, mainly because their forest land is on an island and/or there are only one or two log buyers in their proximity. Some industrial landowners are concerned over log export restrictions to the US. A l l are concerned with the current bad market for wood. 2.5.10 Eco-certification Non-industrial landowners are more likely to support eco-certification than industrial landowners, but are also concerned about possible costs. Some non-industrial landowners said they are already doing a good job and eco-certification is just another form of government intervention. Most industrial landowners oppose eco-certification, mainly because of concerns over cost and uncertain benefits. Most landowners believe some sort of eco-certification system is inevitable. 43 Chapter 3: Environmental Valuation 3.1 Introduction The efficient use of limited resources when addressing environmental concerns requires that, before comparing the relative cost and effectiveness of different regulatory approaches, we first make rational decisions about what ecological issues most deserve our attention. This is currently not the case. Environmental regulations are often enacted for decidedly subjective and emotional reasons, fueled perhaps by a glaring case of environmental degradation, momentary focus of media attention, proximity to one's own backyard, expenditure of resources by powerful lobby groups, political aspirations of government, or the big round eyes of species perceived to be at risk. While this intuitive approach has been valuable in garnering attention for environmental causes, it does not result in the most efficient use of public and private resources. An alternative to this subjective approach is to create objective measures of the benefits to human welfare provided by ecological systems.* Unfortunately, valuation of such benefits is very complex, largely because scientific knowledge is uncertain and incomplete but also because it is difficult to compare economic, social and spiritual benefits without having some kind of standard valuation system. Economists have made a number of attempts to assign monetary values to benefits to human welfare provided by earth's ecosystems. Although these methods all have shortcomings, they are useful in highlighting the substantial benefits humans derive from earth's ecosystems, ranking the value of ecosystem functions relative to one another, and developing basic monetary estimates of the ecological benefits to allow a comparison with commonly measured economic benefits. Collectively, this information can assist in deciding what regulatory action, if any, is appropriate for private forest land in BC, and what factors to consider in the development of such regulations. * An ecological system, or ecosystem, consists of plants, animals, and microorganisms that live in biological communities and that interact with each other and with the physical and chemical environment, with adjacent ecosystems and with the atmosphere (Constanza et al 1997). 44 3.2 Impetus for regulation 3.2.1 Market and non-market values The traditional justification for government regulation on private forest land has been to secure a stable and long-term supply of timber to the economy, based on the assumption that the long time period required to grow trees discourages investment in reforestation and favours conversion of forest land to agriculture or development. As a result, policies have been aimed mainly at reforestation and preventing land conversion but also on promoting soil conservation and water quality. Over time, however, the public has become increasingly aware of non-timber benefits provided by forests. Non-timber benefits come in two varieties (see table 2). Some can be bought and sold, just like timber, and have a market price or market value. Market values include goods such as mushrooms, berries, salal, medicinal herbs or maple syrup, and services such as grazing rights or commercial recreation. Other benefits cannot be readily bought and sold and so do not command a market price. Non-market values commonly associated with forests include non-commercial recreation, aesthetics, fish and wildlife habitat, carbon dioxide sequestration, soil stability, watershed protection, noise abatement and spiritual significance. It is these non-market values that the BC public appears to consider inadequately protected (FRC 1991) and which the government seeks to protect through additional regulation. Table 2: Possible market and non-market benefits for private forest land Market values Non-market values Timber Products: Social and cultural functions: sawlogs non-commercial recreation pulp wood aesthetics firewood spiritual significance Christmas trees Non-timber products: Ecological serv ices: mushrooms boil conservation berries watershed protection medicinal herbs fish and wildlife habitat ornamental products carbon sequestration nutrient c\cling Non-timber services micro-climate control commercial recreation biodiversity conservation grazing rights 45 Though public concerns appear to be mainly intuitive, they reflect a growing academic awareness of non-market values provided by forests and other ecological systems. Environmental economists refer to non-market values as ecological services (Barbier, Burgess and Folke 1994) or ecosystem services (Costanza, et al 1997). They encompass all ecological goods and services currently perceived to support and protect human activities or affect human well-being. They include the maintenance of the atmosphere, amelioration and stability of climate, flood controls and drinking water supply, waste assimilation, recycling of nutrients, generation of soils, pollination of crops, provision of food, maintenance of species and a vast genetic library, and also maintenance of the scenery of the landscape, recreational sites, aesthetic and amenity values (de Groot 1992, Folke 1991). Note that protection of biological diversity, or biodiversity, is based on the premise that diversity at genetic, population and ecosystem levels are assumed to contribute to maintaining ecosystem services. For example, loss of unknown species may mean the loss of genetic material that contains a potential cure for cancer, a population of microorganisms might be vital to a species web that provides soil generation or waste assimilation, or an intricate combination of interdependent species may be needed to provide as yet unknown ecosystem functions necessary for human survival. 3.2.2 Market failure Environmental economists believe ecological services are not adequately protected by existing institutions in industrial societies. Most economists would view this inadequate protection as the result of market failure (Pigou 1920). The reasoning is relatively straightforward. In market systems, product prices increase to reduce quantity demanded when supplies are low, and prices drop to increase the quantity demanded when supplies are high, keeping supply and demand in equilibrium. This mechanism is known as a negative feedback signal. The problem with ecological services is that, because they are "external" to the market (i.e. they have no market price), there are no market signals to keep supply and demand in equilibrium. As a result, even when the supply of ecological services provided by forests is diminishing, there is no corresponding price rise to reduce demand and encourage conservation. There is no negative feedback signal to keep use in equilibrium with availability, and therefore a market failure. Two comments summarize the problem: 46 "Markets are superb at setting prices, but incapable of recognizing costs. Today we have free markets that cause harm and suffering to both natural and human communities because the market does not reflect the true costs [social and environmental] of goods and services"(Hawkins 1993, p75). "Because ecosystem services are not fully captured in commercial markets or adequately quantified in terms comparable with economic services and manufactured capital, they are often given too little weight in policy decisions" (Costanza, et al 1997, pi) . 3.2.2.1 Reasons for failure Until relatively recently, the inadequate weight given to protection of ecosystems has been largely ignored outside the academic community (and even in it), for several reasons (Cairns and Pratt 1995, Daly and Cobb 1994). One, current societies employ measures of human welfare, like gross national product (GNP), that were never intended for this purpose and do not measure degradation and loss of ecological services. Second, existing world views tend to alienate people from their dependence on healthy ecosystems. Third, modern societies assume that future technological solutions will compensate for the loss of ecological goods and services. Public attitudes appear to be changing, driven by the increasingly visible alteration and destruction of ecosystems as population and per capita consumption of resources increase. Meanwhile, there is a growing awareness in the scientific community of the value of ecological services to human welfare, as well as an awareness of the interdependence of economic and ecological systems (Daly and Cobb 1994). This interdependence increases as economic activity grows in relation to the capacity of ecosystems. Isolating them for academic purposes has led to distortions and poor management, which takes us back to Pigou. 3.2.3 Valuation of ecological services The logic of market failure has led environmental economists to argue that the best way to protect ecosystem services (i.e. non-market values) is to incorporate or "internalize" them into the market system (Hanemann 1988, McNeely 1988, Randall 1988). One way to achieve this is to grant private individuals sole rights to particular environmental resources (Constanza et al 1997). The main problem with this option is that it may not result in the conservation of environmental resources if their value is rising at a rate less than those of alternative investments. For example, a private individual may find it to his or her best advantage to liquidate an animal species and invest the money elsewhere. There would also be considerable political opposition to privatization of environmental resources. 47 Another approach is to find indirect ways to determine the economic or market value of ecological services. Common methods are discussed in greater detail later in this section. However, the point is that, once values of ecological services have been established, the market can be used to encourage their conservation. In the case of forest land, establishing the economic value offish and wildlife habitat, carbon dioxide sequestration, watershed protection and other ecological services would encourage wood product prices to reflect the true cost of cutting trees, including the loss of important biological functions. Awareness of the value of ecological services provided by forest would allow us to measure the benefits derived from different regulatory approaches. Valuation of ecological services might also provide cause to consider that, while forest landowners provide a range of ecological services beneficial to human welfare, they do not derive any income from these services. So landowners bear the cost of providing ecological services, while societies in BC and elsewhere reap the benefits. Publicly buying or leasing ecological services from landowners would provide a strong incentive to reforest and to manage forest land for a range of environmental attributes increasingly demanded by the public. Alternatively, or simultaneously, land cleared for development or agriculture could be taxed at a rate that reflects the loss of ecological services. 3.2.3.1 P r o b l e m s w i t h v a l u a t i o n Unfortunately, valuation of ecological services is a difficult task. One problem is the sheer magnitude and complexity of ecosystems that, despite considerable research in recent years, still harbour many unknown species and biological functions. Scientific uncertainty is exacerbated by the fact that all ecosystems, like market systems, are related to each other in some way (Costanza, Cumberland, et al 1997). For example, when the price of oil changes, so does the demand and the price of products that use gasoline, as well as the demand and the price for coal and other substitutes, and so on. Similarly, the "right" price of a forest ecosystem will depend on the availability of a range of other ecosystems with which it is interdependent, as well as ecosystems that may be substitutes or complements in use. As a result, the value of an ecosystem would always be interconnected with both ecosystems and economic systems. Another problem with valuation is that economists are more interested in marginal value - the cost or benefit of one more unit - than the average value of a good or service. Marginal value, however, is a difficult concept to bring into environmental analysis. It may be clear that the cost of wiping an entire species is high, but what would be the value attached to the loss of one, ten, 48 or a hundred members of a species? Similarly, while the cost of losing all forest ecosystems probably approaches infinity, what is the value of the loss of each successive hectare of forest? Perhaps the biggest problem is the opposition to valuation among environmentalists. For many, attaching a price tag to clean mountain air, a herd of caribou or an ocean sunset is philosophically unacceptable. Valuation concedes the validity of an economic system seen as responsible for environmental degradation and appears to give individuals the "right" to destroy ecosystems, as long as they pay the going price (Stanbury and Vertinsky 1998). In addition, it is argued, some values simply cannot be expressed in monetary terms and valuing ecosystems in terms of their use to humans is anthropocentric.4 Certainly some things, such as extinction, are beyond costing and others are difficult to estimate (Economics Focus 1998). For example, what is the price of other species' rights to existence? Or the intrinsic satisfaction we gain from knowing biodiversity is being protected? Some things, the argument goes, such as human life, environmental aesthetics and ecological functions are "intangible," and protecting them is the morally right thing to do (Sagoff 1988). One influential book says the very difficulties associated with valuation detract from the importance of protecting the ecosystems being valued: "Dollar figures are powerful, but they can never be secure and never represent a complete defense of the value of biodiversity... There is nothing worse than for ecologists to get bogged down over valuing" (Leakey and Lewin 1995, pl35^. 3.2.3.2 Advantages of valuation Proponents of valuation counter that, as long as we have limited resources (always) and are forced to make choices, we make implicit valuations. For example, we may invest in regulatory legislation or restoration projects for forest ecosystems, improve highways or fund medical research, build particle accelerators or space telescopes. A l l have value to human welfare, yet more resources for one project means less for another. As for morality, the moral argument for protecting ecosystems might well conflict with the moral argument that no one should go hungry (Constanza, Cumberland, et al 1997). Finally, some things may well have non-use or intrinsic value, but these are also decided by humans. Humans cannot avoid being anthropocentric, they can only be aware that they are. 4 Anthropocentism refers to a world view that considers everything in terms of human wants and needs (Daly and Cobb 1994). 49 Since we are required to make choices and therefore implicit valuations, there is a strong argument that valuation should be as explicit as possible. That means using the best information available, as well as being explicit about the uncertainties of valuation. This encourages the development of new and better ways to make the best policy decisions possible. Something to consider in this context is that politicians might well prefer implicit valuations precisely because they are vague and allow more latitude to do what is politically expedient rather than beneficial to society as a whole. In addition, governments have proven themselves fully prepared to mortgage the welfare of future generations in order to pay for current consumption (van Kooten 1993) and thus enhance their re-election prospects. This is apparent in the way governments have managed public debt, and also in the way they have allowed ecosystems to be degraded to allow higher levels of material consumption. Explicit valuation would make this much more difficult. 3.2.3.3 M e t h o d s o f e n v i r o n m e n t a l v a l u a t i o n Researchers have used a variety of ways to value ecological services provided by ecosystems (Mitchell and Carson 1989, Barde and Pearce 1991, Pearce 1993, Goulder and Kennedy 1997) One simple method is to compare the cost of a piece of ocean front real estate with a similar real estate with no ocean view. Other things being equal, the difference in price is the value of the ocean view. Another method, promoted by U N guidelines (Economics Focus 1998) estimates the cost of repairing environmental damage as a way of valuing ecosystem services. Most methods, however, are based, directly or indirectly, on attempts to estimated individuals' "willingness to pay" (WTP) for ecosystem services (Costanza, et al 1997), including one study that concludes British Columbians are willing to pay over $1 billion a year for recreation and preservations values (Murray and Reid 1992). The major shortcoming of WTP, or "contingent valuation," is that most individuals do not have sufficient knowledge of social fairness, ecological sustainability and other important issues to provide anything more than intuitive estimates. Of course, insufficient knowledge is also apparent in consumers' willingness to pay for a vast array of non-essential items promoted by astute advertisers. One study (Costanza, et al 1997) attempts to consolidate the large amount of information aimed at valuing a wide variety of ecosystem services and present the results in a way policy makers, the public and Master of Arts students can understand. While emphasizing the inexact and complex nature of their calculations, the authors estimate that, for the entire planet, the value of 17 separate ecosystems is somewhere between US$16-54 trillion a year, with an average value 50 of US$33 trillion. Most of this value is "external" to the market system, which estimates total global economic activity, or global GNP, at about US$18 trillion a year. Study authors consider their estimates to represent a minimum value that will probably increase as we learn more about the value and complexity ecosystem services, and as increasing populations and per capita consumption put additional pressure on finite ecosystems. The authors acknowledge the many limitations of this approach but argue the method at least offers an approximation of the value of earth's ecosystems and their importance relative to one another. 3.2.4 Valuation of BC's private forests Keeping in mind the high degree uncertainty in determining exact dollar values for ecosystem services, it is still useful to look at some ecosystem values derived from this study in the context of private forest land policy in BC (see table 3). Most notably, the annual value of ecosystems services provided by one hectare of temperate forest is estimated to be around US$302 (Cdn$460), suggesting that one million hectares of managed and unmanaged forest land in BC provides annual ecosystem services worth Cdn$460 million, compared to timber production annually worth about $1.6 billion (Price Waterhouse 1995). The study also indicates that wetlands and watercourses are of particular importance, and support the assumption that riparian areas merit particular consideration. Together, the information suggests that changes are needed to include the value of ecological services in market signals influencing the behaviour of private forest landowners. (Note that the benefits provided by ecosystems in BC accrue in large part to people outside the province). Naturally, it is not as simple as that. For one thing, the study identifies the average value of ecosystem services per hectare, rather than the marginal value. The marginal ecosystem value of Table 3: Average global value ($US) of select terrestrial ecosystem services Biome Global area Total value Total global value (terrestrial) (millions of hectares) ($/h a/year) (billions of $/year) All Forests 4,855 969 4,706 tropical 1,900 2,007 894 temperate 2,955 302 906 Grass/rangelands 3,898 232 906 Wetlands 330 14,785 4,879 tidal marsh/mangrove 165 9,990 . 1,648 swamps/floodplains 165 19,580 3,231 Lakes/rivers 200 8,498 1,700 Source: Costanz et al, 1997 51 the first hectare of forest converted to residential housing could be virtually nil, but would steadily rise with each additional hectare converted. Conversion would cease only once the value derived from ecosystem services outweigh values derived from the sale of timber and other marketable forest products. It is even possible that the ecosystem services value of private forest land is negligible relative to much larger areas of public forest land in BC and that private forest land should not, economically speaking, be protected. On the other hand, given the proximity of private forest to human settlement areas, it is possible that the value of ecosystems services provided by private forest in BC is higher than the average, and could even exceed the value of timber and products derived, in which case private forest land should receive additional regulatory protection. 3.3 Conclusions: Lessons for private forest land regulation in BC The concept of ecosystem service valuation is complex and difficult to apply. Despite the shortcomings, however, valuation appears to have considerable merit. First, valuation emphasizes the importance of ecosystem services to human welfare, and states their importance in the monetary terms recognized by those who participate in the existing global economic system. In fact, in the long run, ecosystems are absolutely essential to human existence, in effect priceless. At the very least, valuation suggests the price of commodities produced by exploiting ecosystems directly or indirectly should be much higher than they are today. Second, valuation of biodiversity and its attendant ecosystem services makes their contribution more explicit and encourages their proper consideration in the political decision-making process. Even if the monetary values are inaccurate, they at least assist in ranking the importance of different ecosystem services relative to one another. Third, valuation shows that, as ecosystems are increasingly stressed, their value rises, thus demanding our increased attention. Finally, the uncertainty of valuation emphasizes the importance of additional research. In the context of this paper, valuation neither supports nor contradicts public perceptions in BC that government should "do something" to promote stewardship on private forest land, not only for timber production but also non-market values, so the decision whether to regulate or not remains largely political and subjective. Clearly, additional work on the valuation of ecological systems in BC is needed. Valuation does show, however, that private forest landowners provide important ecosystem services to the public not only for BC, but on a global scale, and that future policy development must take this into consideration. 52 Chapter 4: Regulation and Private Property Rights 4.1 Introduction Existing and proposed BC government restrictions on private forest land use and management constitute a loss to landowners of some private property rights. This situation is not uncommon in North America (and elsewhere) and is known as regulatory taking, or the takings issue. In Canada, regulatory taking is legally considered well within the powers of the state and there appear to be few limits on the BC government's ability to control land use and economic activity taking place on private land. An examination of the implications of regulatory taking, however, suggests costs and benefits of regulatory taking should be seriously considered before new forest policy is implemented, and that at least some compensation for loss of private property rights be a component of new private forest land policy in BC. 4.2 Historical precedent Private property law in both Canada and the United States is based on English common law, which is in turn based on historical precedent rather than written laws. This precedence has over time established that the private landowner has exclusive but not absolute rights and that property rights are limited by the overall interests of society, as administered by the state (Barlowe 1972). In the case of private forest land, this limitation is based on two different legal concepts. Most long-standing forest practice regulations are based on the doctrine of waste, which establishes that individuals may not use their property in a manner that will injure the real property rights of others (Cubbage and Siegel 1985). This was initially intended to balance the desire of a current landowner to make productive use of a property, with the desires of future landowners to receive the property substantially unimpaired. The doctrine has gradually expanded to ensure that natural resources are not "improvidently" depleted or destroyed. The doctrine of waste is the basis for legislation in many jurisdictions that seeks to ensure long-term productivity of forest land and prevent "needless destruction and inappropriate consumptive uses." (Kreutzwiser and Crichton 1987). Newer forestry laws regulating road construction, harvesting, stream protection, silviculture, chemical applications and other potentially harmful practices on private land in many jurisdictions are based on the concept of private nuisance (Cubbage and Siegel 1985), which allows the use of "police power" to restrict the freedom with which owners may use their land, 53 in order to "protect and promote public health, safety, morals and general welfare." This concept is open to broad interpretation and has allowed courts in the US and Canada to rule, generally, that environmental protection for public welfare takes precedence over private property rights (Hansen 1978). Public nuisance has been challenged many times by forest landowners in the US, during which time it has been clearly established that the law allows states to enact new forestry practices regulations (Cubbage and Siegel 1985). In BC, weaker protection of property rights easily allows land use restrictions such as the Forest Land Reserve, as well as the application of restrictive forest management regulations such as the Forest Practices Code. 4.3 C o m p e n s a t i o n fo r t a k i n g Neither the doctrine of waste nor private nuisance should be confused with eminent domain, which allows property to be taken for public purpose in return for "just compensation." Under eminent domain, property owners are required to forfeit all private property rights (ie. ownership) to the state, rather than just a portion of their property rights, as under regulatory taking. In return, the state is expected to pay compensation, usually market value. In the US, such compensation is expressly demanded by the constitution but in Canada compensation is not mandatory and varies among provinces, though payment of market value is fairly standard. Transfer of private ownership to the state under eminent domain, or expropriation, is often used for public projects such as highways, power lines or hydro dams. Regulatory taking under the doctrine of waste or public nuisance may decrease property value and earning potential but does not result in the complete loss of the physical property. Even in the US, where the constitution's Fifth Amendment guarantees that no "private property be taken for public use, without just compensation," courts have generally ruled that as long as restrictions are applied equally to all landowners, compensation is not required. In Canada the state generally has stronger authority over private land (Greenwood and Whybrow 1991), though the federal constitution gives power over local land use regulation to provinces. In BC, a precedent for regulatory taking on private land without compensation has been set by the creation of the Agricultural Land Reserve and more recently the Forest Land Reserve. Despite the apparent lack of ambiguity, the issue of compensation for regulatory taking remains open to debate. In the US, in particular, landowners continue to resist regulatory taking in the courts (Lewis 1995), arguing that regulatory requirements are becoming increasingly onerous and closer to complete expropriation of property. A similar argument can be made in BC. For example, legislation such as the Forest Practices Code might well require private forest 54 landowners to leave a riparian buffer zone along fish-bearing streams. No tree harvesting is allowed in this zone, nor can the area be disturbed in any other way. Since the landowners can no longer use the land, it has essentially been "taken" (Lewis 1995). In reality, partial compensation is often indirectly provided in the way of financial assistance or tax breaks, considered in Chapter Seven, but a proper basis for such compensation needs to be established. 4.3.1 Compensation and regulatory efficiency Regulatory taking without compensation allows governments to "offload" policy costs on to private individuals who are few in number and often without power. Politically, this is an attractive option because the costs of a policy are largely hidden and do not directly affect voting taxpayers or government budgets. Unfortunately, it also allows government to understate the true cost of new regulations, making it difficult to establish the true net gain, or loss, to society. Given the limited resources available to society, implementing policies that yield little or no net gain is wasteful. In contrast, efficient use of society's scarce resources makes it possible to achieve more social objectives, including environmental ones. Requiring government to compensate private individuals for regulatory taking would reveal the true and often high cost of new policies. These costs would have to be justified and outweighed by the social benefits derived. Establishing net social benefit is not easy (see section 3.2.3) but the need to do so would force government to take a greater interest in valuation of social benefits purportedly derived from forest land regulation, including a stable timber supply and protection of ecological services. Once benefits can be at least approximated, regulatory efficiency becomes more transparent. In the end, the true test of whether a policy is desirable is if those who benefit from the policy are able to compensate the losers and still be better off (Costanza, Cumberland, et al 1997). Few studies in forest, literature make an effort to quantify the benefits of regulation (Cubbage 1995) even though the same studies consistently find that mandatory and voluntary forest practice guidelines impose substantial costs on both private forest landowners and the government agencies that implement them. In BC, no attempt at all has been made to identify the net social benefits of either the Forest Land Reserve or the proposed implementation of the Forest Practices Code on private land. One important point to consider in the context of regulatory taking and compensation is that, if government must pay compensation, there is a strong incentive for politicians to avoid enacting policies aimed at environmental protection (Haley and Luckert 1998). This concern could be 55 mitigated by paying compensation over an extended period, or providing tax benefits in lieu of lump sum payments. (This issue is further discussed in section 7.4) 4.3.2 Compensation and regulatory effectiveness A lack of compensation for regulatory taking not only disguises the true cost of new policies, it can impede their ability to achieve the desired social outcome, or even encourage an outcome opposite to the one intended. This situation is known as a "perverse incentive." One oft-cited example is the US Endangered Species Act (ESA), enacted in 1973. Under the ESA, landowners with endangered species or habitat for endangered species on their property are required to protect the species and/or habitat. No compensation is given for habitat protected and therefore lost to other forms of production. This provides landowners with an incentive not to report the existence of endangered species on their property, or to simply destroy existing habitat. Research indicates this has frequently occurred (Bourland and Stroup 1996). New programs are beginning to make money available for rent payments to landowners who protect endangered species habitat (Kennedy, Costa and Smathers 1996). The reason for the ineffectiveness of the ESA is that landowners feel they have no financial stake in achieving the socially desirable outcome. This is also the case with the imposition of the Forest Land Reserve, which removed managed forest landowners' development rights without compensation. The result has been resentment and friction between many landowners and government agencies. In the event of additional regulatory taking through forest practices legislation on private land, a lack of any compensation or financial incentive will give landowners a strong inducement to ignore or avoid regulations where possible, thwarting intended social objectives. 4.3.3 Compensation and regulatory fairness One of the stipulations generally attached to regulatory taking without compensation is that the rules should apply equally to all landowners. That way at least there is a sense of equity and fairness. In the case of the Forest Land Reserve, however, only land in the managed forest tax category was included, resulting in the loss of development rights without compensation. Owners of unmanaged and residential forest land were not included in the Reserve and did not lose their development rights. Instead, unmanaged and residential forest landowners often realized an increase in the value of the their land because managed forest land was no longer available for development. Similarly, development restrictions on agricultural land resulting 56 from the creation of the Agricultural Land Reserve in 1973 raised the value of other land still available for development, including forest land. 4.4 A d a p t i n g p r ivate p r o p e r t y s t ructures Despite what some landowners may wish, private property rights cannot be absolute. In fact, current trends point toward a continued weakening of property rights. This is not necessarily a bad thing. Growing populations and increased per capita consumption put pressure on resources and demand new and more sophisticated ownership systems (Pearse 1990). In addition, there is a growing public awareness of the social benefits provided by forest land, and that these forests are a part of much larger and complex ecosystems that transcend artificial boundaries. This idea, known as ecosystem management, suggests private land is are part of broader ecosystems and need to be protected (Lewis 1995) even if, as in BC, they are limited in area. Or, as another writer puts it, "no property exists in biological isolation" (Cubbage 1995). 4.5 C o n c l u s i o n s The BC government faces few legal impediments to restricting land use or forest practices on private forest land, and there appears to be no legal requirement to provide compensation in the event of such regulatory taking. However, private property rights are central to our existing economic structure and flouting those laws can undermine the system, as well as alienating private property owners rather than gaining their cooperation in achieving public objectives. The government should therefore choose regulatory options that minimize infringement of private property rights where possible. Where government does infringe on private property rights, compensation for regulatory taking should be seriously considered. First, compensation forces government to consider the true cost of new regulatory policies and seek options that minimize those costs. There is, however, a risk that high initial cost would discourage politicians from enacting environmental regulations. Second, compensation can encourage the cooperation of private forest landowners in achieving public objectives on their land. Third, compensation assists in ensuring landowners are treated fairly, and that some private forest landowners do not benefit from lost private property rights of other landowners. A combination of minimizing private property rights infringement and paying compensation would encourage more truly beneficial policies and fewer politically expedient ones. 57 Chapter 5: Motivation by Punishment and Reward 5.1 I n t roduc t ion Once the BC government decides regulatory intervention is needed to improve stewardship on private forest land, it must next decide how this aim might be best accomplished. The BC government is strongly inclined to improve stewardship by applying the highly coercive and punishment-oriented Forest Practices Code to private land. This type of approach, known as command-and-control, typifies government efforts to address most environmental problems in North America and Europe. Private forest landowners strongly oppose this approach and advocate instead an encouragement and reward-oriented regulatory system based on financial and other incentives. When applied to forestry, reward-oriented systems usually include an educational component, so I will refer to this approach as education-and-incentives. The two approaches reflect a well-worn debate over very different methods of motivating human behaviour. One assumes humans must be forced to perform by coercion and punishment, the other that humans can be enticed to perform by encouragement and reward. The two approaches are often referred to simply as stick and carrot. Chapter Five examines the relative merits of coercion, punishment and command-and-control versus encouragement, rewards and education-and-incentives, focusing first on the use of stick and carrot to motivate individuals in commercial and non-profit organizations, then on approaches used by government to motivate citizens and firms to meet public environmental objectives. Research will be analyzed within the context of proposed efforts to motivate industrial and non-industrial forest landowners to improve stewardship forest land stewardship. 5.2 A persona l bias f o r r e w a r d s Before I begin to outline academic research on the relative merits of stick and carrot in motivating human behaviour, it is first necessary to expose a bias in favour of reward over punishment. This bias is based on personal experiences that highlight the power of reward as a motivational tool in a wide range of settings in which humans interact. These experiences eventually caused me to wonder at the almost complete lack of reward in government regulations aimed at motivating humans to protect the environment, and prompted me to return to university in an attempt to answer this question. My most persuasive individual experience came when I spent a month as a young teen in 1978 driving with my family through communist Czechoslovakia, East Germany and Poland, 58 including a stop at my father's former family farm southeast of what is now Gdansk. What struck me most, aside from giant statues of Lenin and roadside signs proclaiming the virtues of Peace, Prosperity and Socialism, was the indifference of the working population. Workers on the now collectivized farm seemed particularly apathetic, although tradesmen, professionals and other former friends of my father were also visibly indifferent to their work. At the risk of oversimplifying a complex situation, the lack of "work ethic" seemed to me the result of a system in which workers received a fixed salary regardless bf performance, eliminating the relationship between effort and financial reward. The trip also made me consider the economic effect of entire countries run by bureaucrats. A second experience impressed on me the power of financial reward to motivate my own behaviour. After graduating from high school, I worked on a farm in Germany, intending to save for eight months before going traveling. It soon became apparent that my apprentice's salary was completely inadequate to meet my objectives. To make matters worse, considerable overtime was unpaid and the farmer's idea of motivation was verbal abuse. Frustrated and sullen, I considered quitting but instead summoned the courage to voice my complaints. To my surprise, the farmer agreed to pay me overtime for work after 50 hours a week. My enthusiasm, and no doubt performance, improved notably. My reward was a summer of freedom, backpacking around Europe. The efficacy of money as a motivator was reinforced when I planted trees in northern BC in summer to pay for university. Pay was based on number of trees planted or area covered, and planters worked and thought hard to make sure they maximized their earnings. Little time was wasted, even for breaks. It was not a pleasant job but we were highly motivated. Later I learned first hand that I could be motivated by non-financial rewards. As a novice journalist working on salary, I had an editor who had an amazing ability to persuade subordinates to work and think, even though there were no additional financial incentives for performance and little chance of getting fired. She gave us lots of autonomy and responsibility, set high personal standards and expected us to do the same. I could never quite explain it, but she made me want to do a good job. Of course, being from a farm, I am familiar with the concept of non-financial rewards. Few things are as satisfying as putting the last bale of hay in the barn, then sitting on the veranda with a cold beer. These and other personal influences convinced me to begin looking at a range of human activities and consider the relative merits of punishment and reward. Parents can motivate children by exercising their authority as parents and by rewarding them for "being good." 59 Coaches can berate and reinforce. Teachers coerce and encourage. Religious organizations use variations of heaven and hell to influence earthly behaviour. Management wields the carrot and the stick. Similarly, government can choose command-and-control and education-and-incentives to influence behaviour of citizens. The same principles apply because the objective is to motivate individuals and the factors that motivate them are much the same regardless of the context in which motivation takes place. 5.3 Organizational behaviour The debate over use of punishment and reward is an old one. Socrates and his disciples studied human nature and weighed the relative merits of coercion and encouragement in motivating human behaviour, as did the Romans, medieval philosophers like Thomas Aquinas and later Descartes, Hobbes and Spinoza. These and many other thinkers noted that political and commercial leaders historically relied almost exclusively on coercion and punishment to motivate people, even though encouragement and reward can also be powerful motivational tools. Modern work on human motivation has been incorporated into a relatively new social discipline known as Organizational Behaviour (OB). The discipline is aimed at understanding how an organization - described as "a number of individuals systematically united for some end or work" (Robbins 1993) - can be most effective in achieving its aims, goals or objectives. OB looks at a range of organizational attributes, including power, communication, leadership, hierarchy, group dynamics, technology and organizational behaviour. This paper will focus mainly on reward systems and why OB research considers them to have significant advantages over punishment-oriented systems. In making my arguments, I will refer to original references only if the findings have stood up under scrutiny. To improve organizational effectiveness, OB draws on knowledge from different behavioural disciplines (Robbins 1993, Cherrington 1994). Psychologists probably have the biggest influence because they focus directly on understanding and predicting individual behaviour. Other disciplines, however, contribute to our understanding of concepts such as group processes and organization. Sociologists study the social system in which individuals interact, examining people in relation to other people. Social psychologists focus on the influence people have on one another, with much work recently devoted to how people adjust to change. Anthropologists study societies, past and present, to learn about humans and their activities, especially their culture and environments. Political scientists study the behaviour of individuals and groups 60 within a political environment, while historians provide a record of practical experience in human motivation. 5.3.1 Defining motivation Since organizations are made up of human individuals, the underlying question becomes: how can people best be motivated to work toward the goals of an organization? Or, more specifically, what motivates human individuals and how can this knowledge be used to achieve organizational goals? At this point, it is useful to explain exactly what is meant by motivation. "Motivation" is derived from the Latin word movere, which means "to move." In the context of OB, motivation is what "energizes, directs and sustains human behaviour" (Steers and Porter, 1975). Motivation has three basic characteristics. First, the amount of energy or effort individuals are willing to exert - those who are willing to exert more are highly motivated. Second, that effort is goal directed. Activity should focus on achieving some objective, since motivation is more than just being busy. Third, that people persist in their activity and continue their goal-directed efforts for extended periods of time, or until the goal has been reached. Essentially, humans can be motivated in three ways: coercion, exhortation and incentives. These motivational methods are achieved through punishment, education and reward. I will initially focus on the relative merits of punishment and reward, but will include the role of exhortation (education) later on in this discussion. First, however, an explanation of why motivating humans to work toward the goals of an organization is applicable to improving stewardship on private forest land. 5.3.2 Motivation in commercial organizations Much of the theoretical and practical research examining the efficacy of punishment and reward in motivating human behaviour has been done in the context of commercial organizations - businesses, companies, corporations and other organizations intended to provide goods and services for profit - because commercial organizations have been the most interested in applying the lessons learned (Cherrington 1994). The result has been a gradual increase in motivational systems relying on encouragement and reward. There appear to be three reasons for this. First, in a commercial organization, participation is voluntary. Even though individuals may be induced to accept certain coercive and punishment-oriented rules and regulations because they desire the financial reward associated with being employed, they have the option of working elsewhere. This option has increased as workers become increasingly mobile and educated, and less likely to accept coercion. Second, commercial organizations have gone from manufacturing 61 and industry, where physical area allows constant supervision and workers are not required to be innovative and creative, to more service-oriented businesses, where ideas and creativity are very important. The importance of reward in fostering creativity will be further discussed below. Third, commercial organizations have a strong profit motive, and so commercial leaders are prepared to try innovative motivational techniques to improve the bottom line. The effectiveness of such systems can be relatively easily measured by their success in improving productivity. Though much of the research in motivational techniques, as well as their application, has been done in the context of commercial organizations, research and application has gradually expanded to include other types of organizations. These include volunteer, charity and community organizations, as well as environmental, religious and political organizations. Though these organizations may differ in structure and objectives, motivational principles are applicable because they are made up of human individuals, and it is the nature of these individuals that determine the efficacy of punishment and reward as motivational tools. 5.3.3 Motivation in social organizations A regulatory system that involves government and citizens is also made up of individuals, leaders to motivate and followers to be motivated, systematically working toward what is presumably a socially-desirable objective. It is, in effect, a social organization. In case of private land forestry, the social organization is comprised of government, the change agents, and private forest landowners, the change targets. This chapter outlines research that has gradually increased the use of encouragement and reward to motivate individuals in commercial organizations, and indicates areas in which this same knowledge can be used to motivate individuals in our particular social organization. The result offers support for the increased use of encouragement and reward in motivating private forest landowners to meet social objectives on their forest land. 5.4 Apply ing Organizational Behaviour to private land forestry Research behind the principles of organizational behaviour suggests people behave the way they do based on past experiences, good and bad (Thorndike 1991). Through trial and error, humans learn to repeat forms of behaviour that are rewarded, while avoiding behaviours that are punished. Subsequent research (Green et al 1986) established that effects of punishment and reward differ among individuals and are dependent on personal factors such as values, beliefs and physical limitations. Therefore, opinions of positive and negative can vary and are 62 subjective, so no set of reinforcements is universally applicable. However, some generalizations can be made. 5.4.1 Theory X and Theory Y Acknowledgment that both punishment and reward can change or reinforce human behaviour has led to the development of two very different human motivation philosophies: one based on encouragement and reward, the other on coercion and punishment. The two philosophies have been around for some time but the man who formalized them (McGregor 1960) called them Theory X and Theory Y, apparently in reference to Brand X versus Brand Y detergent commercials popular at the time. Theory X takes a rather dark view of human nature and rests on four fundamental assumptions. • The average human inherently dislikes work and avoids it if possible. • Because they dislike work, most people need to be coerced, controlled, directed and threatened with punishment to get them to achieve desired objectives. • The average human prefers to be directed, wishes to avoid responsibility, has relatively little ambition and wants security above all. • Human dislike of work is so strong that even the promise of rewards is not enough to overcome it. Instead, people accept rewards but continually demand higher ones, creating a ratchet effect of inflated expectations. Theory Y takes a more generous view of human nature, based on five very different assumptions: • Expenditure of physical and mental effort in work is as natural as rest or play. Most humans do not inherently dislike work. • People will exercise self-direction toward objectives to which they are committed. • Commitment to objectives is a function of the rewards associated with their achievement. Rewards can be financial or intrinsic, such as job satisfaction, autonomy and responsibility. • The average human not only accepts but seeks responsibility under the right circumstances. Avoidance of responsibility is the result of past experience. • The imagination, ingenuity and creativity of the average human is only partially realized. 63 5.4.2 Balancing punishment and reward In practice, most organizations adhere to motivational philosophies somewhere on a continuum between the two extremes (see figure 1). For example, commercial enterprise have rules dictating minimum hours of work, starting and quitting time, sick leave, dress codes, inter-employee conduct, theft, fraud and the like. Failure to respect rules leads to punishments, Figure 2: A continuum of motivational and regulatory concepts Coercion Punishment ] Command-and-control Process-orientation Encouragement Reward [ Education-and-incentives Results-orientation including dismissal. The same commercial organization can also have encouragement systems that offer financial rewards, autonomy, responsibility and flexibility in return for performance above minimum standards. The exact location on the continuum depends on the experiences and preferences of managers and on objectives they want to achieve (Lawler 1973). The location also depends on the often significant differences that exist among the individuals being managed. Even the same person reacts differently at different times and in different situations. For example, a charity organization is unlikely to use coercion and punishment to motivate because members would simply not participate. Members of commercial organizations are more likely to tolerate more coercive measures because they strongly desire the financial rewards that go with the job. Members of social organizations, citizens of a society, are most likely to tolerate coercive measures because they cannot easily opt out, and because management (the government) has policy power to enforce and punish coercive measures, or laws. 5.5 Effectiveness of punishment and reward Ability of organizational leaders to apply coercive measures and the willingness of employees, members or citizens to accept such measures is not, however, the central issue. The real issue is whether coercive and punishment oriented measures are more effective means of 64 motivating individuals to meet organizational objectives. Organizational Behaviour research and its application in commercial organizations indicates that, while some rules and minimum requirements are usually required, encouragement and reward are more effective. 5.5.1 Problems with punishment The problem with coercion is that it ultimately relies on punishment, or the threat of punishment, to ensure compliance. This is not to say that punishment cannot motivate changes in human behaviour. A child may learn by touching that a stove plate is hot and avoid the experience in future. Similarly, a few expensive photo radar tickets can convince most drivers to obey the speed limit, and a jail sentence persuade a thief not to steal, or at least not get caught. In a commercial enterprise, fear of a tongue lashing (or, longer ago, a real lashing), demotion, fines or dismissal can convince people to follow the rules. However, punishment has several disadvantages (Cherrington, 1994) that make it ineffective in motivating and sustaining many kinds of commercially and socially desirable human behaviour. These reasons are directly applicable to the case of private land forestry in BC. 1. Effective punishment and control requires constant supervision. Though possible in contained situations such as a factory floor or office building, constant supervision is usually difficult, time-consuming and consequently expensive. Over a large and dispersed work force, constant supervision may be prohibitively expensive. This is a crucial consideration for any government agency attempting to supervise private forest landowners dispersed over a large and variable physical area. The BC government is learning this lesson in attempting to enforce the Forest Practices Code. 2. It is difficult to force people to be innovative and creative. Managers want employees to find more effective and efficient ways to do their jobs, but find they cannot stimulate innovative and creative acts by decree. Instead, coercive systems are more likely to channel human creativity toward minimizing or avoiding punishments. The same is true for government agencies attempting to force their will on citizens. Consider the effort and creativity that goes into minimizing and avoiding taxes. In the case of private land forestry, coercive legislation is likely to encourage landowners to devote their intellectual energy toward minimizing and avoiding punishment, rather than to finding new and better ways to improve forest stewardship. Under the Forest Practices Code, many companies meet the letter of the law but not the spirit. 3 . Punishments can only indicate what is wrong, not what is right. Managers can punish employees for breaking rules. The absence of punishment, however, could mean either that they 65 are d o i n g someth ing r ight o r s i m p l y that they haven ' t been caught. S i m i l a r l y , c o e r c i v e regulat ions can pun ish undesi rable forest pract ices on pr ivate land but leaves n o m e c h a n i s m to re in force what is be ing done right. F o r example , pun ishments can induce landowners to ach ieve the m i n i m u m standard o f water qua l i t y in f i sh -bea r ing streams, but it cannot encourage them to go b e y o n d m i n i m u m standards, even i f they have the expert ise and techno logy . A s w e l l , the fact that a l andowner has not been pun ished may not ind icate adequate per fo rmance but rather that inadequate per formance has not been detected. Pun ishment o n l y indicates what not to do , not what to do. 4. P u n i s h m e n t s c r e a t e n e g a t i v e f e e l i n g s t o w a r d the p u n i s h i n g agent . In a c o m m e r c i a l enterprise, most managers recogn ize the importance o f g o o d re lat ions between management and employees . Un fo r tunate ly , pun ishment requires constant superv is ion , w h i c h is in i t se l f in t rus ive . A c t u a l pun ishment exacerbates this p r o b l e m , a l ienat ing and f rustrat ing emp loyees w h o are then less l i k e l y to w o r k toward the ob ject ives o f the o rgan izat ion , and more l i k e l y to quit . G o v e r n m e n t is more f l e x i b l e in us ing pun ishments because pr ivate forest landowners cannot opt out o f the soc ia l o rgan izat ion , though they c o u l d se l l the i r land. H o w e v e r , l andowners are a lso l i k e l y to f i n d constant superv is ion int rus ive and demean ing , and resent pun i t i ve f ines . L a n d o w n e r s surveyed say n e w coe rc i ve measures such as the Forest P ract ices C o d e i m p i n g e o n pr ivate property r ights and autonomy, and ind icate a l ack o f trust in the i r forestry ab i l i t y . 5.5.2 Advantages of reward G i v e n the l im i ta t ions o f pun ishment -o r iented systems, research in O r g a n i z a t i o n a l B e h a v i o u r has focused on f i n d i n g w a y s to use reward -o r iented systems to mot ivate i nd i v idua ls . U s i n g rewards to mot ivate human behaviour , can be c o m p l e x . F i rs t it is necessary to k n o w what peop le va lue , so w e k n o w what rewards they covet. T h i s w a s one o f the a ims o f the managed forest landowners survey in Chapter T w o . S e c o n d , rewards must then be bu i l t into a system that l i nks the ach ievement o f o rgan izat iona l ob ject ives to des i rab le rewards. H u m a n s have some bas ic p h y s i o l o g i c a l needs, such as f ood , water, sex and the r e m o v a l o f pa in . These needs, k n o w n as p r imary mot ivators , are usua l l y b e y o n d the scope o f modern reward systems and are not re levant to efforts to mot ivate pr ivate forest landowners . Instead, r e w a r d systems focus on p s y c h o l o g i c a l needs, k n o w n as secondary mot ivators . These needs are more c o m p l e x and have cha l lenged many attempts to f o r m a l l y ident i fy and labe l them ( M a s l o w 1943, H e r z b e r g e r a / 1959, H e r z b e r g 1966, M c C l e l l a n d 1961 and 1962, M a s l o w 1968, C h u n g 1977). 66 They include security, self-esteem, achievement, affiliation, recognition, status, praise, social approval, responsibility, autonomy and power. 5.5.2.1 Money and financial reward Rewards that meet secondary needs can be used to motivate people to work and think. Of course needs, and therefore desired rewards, can vary considerably among individuals, so reward systems will by necessity vary among organizations, or even among individuals in the same organization. The situation is considerably simplified, however, by the use of money as a reward because money is seen by most individuals as a means to a variety of ends. For example, money can provide financial security and a sense of achievement, as well as increased autonomy, status and power Money also has other advantages. First, money can be easily controlled and changed. Second, pay is easy to quantify. Third, it has meaning shared across many cultural and ethnic groups, symbolizing success, wealth and property. Fourth, even high achievers who do not value money itself see financial rewards as recognition for their effort and ability. As a result, the most common rewards in commercial enterprises are financial, including wages, salaries, bonuses, profit-sharing and incentive plans (Lawler 1971). This does not mean money, or financial reward, is the only or even most powerful motivator. In fact, the ability of money to motivate depends on the degree to which individuals believe money will result in the satisfaction of their perceived needs. In the words of an author of one benchmark study: "The valence [value] of money to an individual is determined by the valence of all the outcomes he or she perceives to depend upon money and the subjective probability that money will lead to them (Vroom 1964)." For example, if an individual desires security, esteem, love or power and perceives that he or she can obtain them directly from money, then money will have a high valence. Other individuals are not motivated by money because they do not believe they can buy the things they desire. The varying strength of financial reward as a motivator is relevant to the regulation of private forest land in BC because the survey of managed forest landowners indicates industrial landowners are more likely to be motivated by money than non-industrial landowners. This is not surprising, since industrial forest landowners tend to be large commercial organizations 67 whose main aim is to realize a return on investment, making them very conscious of cost and revenue considerations. Non-industrial landowners, meanwhile, are usually owned by families or individuals who often have secondary sources of income. Though there are retirement considerations, a need for periodic income and a desire to at least not lose money on their forest land investment, non-industrial landowners appear to be strongly motivated by factors other than money. These survey findings are supported by research in the US (Bliss and Martin 1990). 5.5.2.2 Non-financial rewards Some non-financial rewards are, like money, extrinsic motivators. That is, they come from some external source, and include social approval, praise and recognition. According to the survey, social approval, or public pressure, seems to be a strong motivating force among non-industrial forest landowners. Non-industrial landowners also have intrinsic motivations for engaging high levels of forest land stewardship, including pride in their forestry ability and experience, satisfaction associated with working outdoors, autonomy, responsibility, a sense of "doing it right" and the desire to manage their forest resources with as little outside interference as possible. Survey respondents tended to refer to this as "freedom to manage" and "lifestyle." One plan aimed at social approval suggests an annual and well-publicized awards ceremony to honour private landowners who excel in achieving high environmental standards. Though money is of most importance to industrial landowners, they also have, to varying degrees, other motivations. Social pressure and public approval appear to have motivated at least some changes in forest practices, and successful industrial landowners seek recognition for their accomplishments, especially if they have strong attachments to a community or region. Employees of industrial landowners also say they take pride in their forestry ability and would ideally like as much autonomy, responsibility and freedom to manage as possible (see Chapter Six). 5.6 Designing reward-based motivational systems The previous section established that a range of rewards can be used to motivate human behaviour. However, a variety of other factors must be considered before this knowledge can be effectively incorporated into a system that rewards individuals to work toward organizational objectives (Robbins 1993, Cherrington 1994). These factors are relevant to the creation of a system aimed at motivating landowners to meet social objectives on private forest land. 68 5.6.1 Clearly defined and attainable goals. First, it is necessary to define the goals and objectives individuals are expected to meet. Research indicates humans are much more likely to strive to achieve specific and quantifiable goals than vague goals (Locke 1968), and that higher goals lead to higher task performance. However, while goals should be challenging, they should not be so daunting that there appears to be little or no chance of achieving the desired outcome (Vroom 1964). Environmental objectives the public would like private forest landowners to meet are notoriously vague, difficult to quantify and scientifically uncertain (see section 6.2.3). Goals should be as clearly defined and quantifiable as possible, as well as achievable. Here education (exhortation) can play a significant role by providing knowledge and skills that make complex objectives more attainable (see Chapter Eight). 5.6.2 Linking goals to rewards Second, there should be a direct link between achieving the desired goal and the reward received. Absence of a direct causal connection will nullify the motivational effect of reward. Any effective motivational system applied to private forest landowners must link rewards, such as money, autonomy or recognition, to the degree to which landowners are meeting socially-desired environmental objectives on their land. The BC government has set certain minimum forest management goals for the private landowners to achieve, in return for a reduction in property taxes. Many private forest landowners found the stewardship goals attainable and the reward desirable, and voluntarily became part of the managed forest tax category. Unfortunately, the link between performance and reward has been reduced for some landowners by the ability of municipal and regional governments to mitigate this tax advantage (see section 7.3.2.1.2). 5.6.3 Fairness and consistency Third, Organizational Behaviour research includes studies in social psychology that indicate the importance of treating individuals in an organization fairly, mainly in terms of financial compensation but also in other areas. Owners of managed forest land wonder why only their land - already considered among the best managed private forest land - was included in the restrictive Forest Land Reserve, while unmanaged, residential and farmland forest was not. They also wonder why proposed forest practices legislation is to apply only to managed forest land. 69 5.6.4 Participation in system development Fourth, it is critical that the individuals being motivated have a chance to participate in designing the motivational systems in which they take part. This is known in OB as participative management or participative decision-making. Research shows individuals will achieve higher levels of effort and performance if they are involved in managing an organization, including the definition and setting of goals and building reward structures. Individuals should also be treated with respect, encouraged to recommend innovative ideas, and encouraged to take development and training opportunities. Meanwhile, research indicates people tend to reject goals that are imposed, considered unfair and inconsistent, or considered irrelevant and meaningless (Locke 1968). Individuals may also reject goals imposed by management, or government, they mistrust. The main drawback to participative decision-making is that it can be time-consuming, complex and expensive. It is difficult to assess whether the increased costs of participation are offset by the benefits. However, unlike a commercial organization, our social organization does not require management (government) to pay for the time and effort contributed by individuals (landowners) in developing a regulatory system. The government is currently consulting with the different private forest landowner associations in an apparent effort to develop a mutually acceptable regulatory system. 5.6.5 Management by Objectives The criteria listed above are incorporated in Management by Objectives (MBO), a philosophy of management that reflects a positive, proactive way of managing human endeavour (Drucker 1954). Focus is on predicting and shaping the future of an organization by setting long-term objectives and concentrating on the achievement of objectives rather than the performance of activities. To achieve this, MBO requires the development of clear, precise organizational goals, the coordination of individual goals with those of the organization, and the systematic review of performance, with adjustments made if goals are not met. Feedback is essential and constructive criticism a useful and necessary part of the process. MBO requires considerable coordination, planning and also participation by all groups involved in the decision-making process. It stresses communication, trust and mutual respect. The effectiveness of MBO has been examined in case studies and surveys of managerial opinions (Raia 1974, Cherrington 1994). The lessons of MBO suggest that promoting stewardship on private forest land requires clear, long-term objectives and a focus on the achievement of those objectives. Objectives might include maintenance of environmental values, a stable timber supply and long-term financial 70 viability. Private forest landowners be should involved in defining goals, reviewing performance, providing feedback and making adjustments. These suggestions support the idea of a "results-oriented" regulatory system favoured by many private forest landowners, in BC and elsewhere, as opposed to the "process-oriented" kinds of regulation such as the Forest Practices Code (see section 6.3 and 6.4). 5.7 Command-and-control versus education-and-incentives Government use of rewards to motivate individuals and firms to achieve environmental objectives is not a new idea. Numerous articles and books have been written in the past 30 years (Stavins and Whitehead 1992) by economists, policy planners, political scientists and others, particularly on the use of financial or economic incentives to achieve environmental objectives. Policies based on financial incentives - often referred to as market-based policies5 - have been proposed, and to a much lesser degree applied, to address a range of environmental concerns. These include control of industrial effluent, toxic waste, air pollution and greenhouse gas emissions, promotion of recycling, reducing water use and waste, reducing packaging and preventing overexploitation of fisheries (Tietenburg 1990, Stavins and Whitehead 1992, Stavins and Whitehead 1996, Ridley and Low 1993, Project 88 1991). Financial incentives have also been proposed and often used to improve forest management, mainly to encourage reforestation but increasingly to protect wildlife habitat and biodiversity in the US (Kennedy et al 1996, Bourland and Stroup 1996, Lippke and Fretwell 1997, Brown et al 1993), Canada (FLC 1996, Attridge 1997) Europe (Stjerquist 1973, Salwasser 1990) and New Zealand. Many jurisdictions, especially Britain, New Zealand, the European Union and the eastern US, have successfully used financial and other incentives (see Chapter Six) to reforest marginal agricultural land. In New Zealand, the government has been trying to ascertain the non-market values of forest land - that is, the value in terms of aesthetics, recreation, carbon dioxide assimilation, pollution control, etc, and to compensate the landowner for those values. The US also has programs aimed at habitat and species protection. 5 Market-based policies include what are euphemistically referred to as "negative incentives," such as user fees, pollution charges or carbon taxes. These are aimed at including all costs, including environmental costs, in the price of goods and services purchased by consumers (see Chapter Three). 71 5.7.1 Rationale for incentives: efficiency and effectiveness The rationale for the use of incentive-based policies instead of command-and-control policies to achieve environmental objectives is much the same as the rationale for using reward systems to motivate individuals in commercial organizations. These include: • Ensuring environmental protection is pursued at less cost to industry, government and ultimately the public. • Encouraging individuals and firms to innovate, finding new and better technologies to achieve environmental objectives. • Making environmental costs more visible because costs are passed on to the consumer. This allows more public debate on tradeoffs between environmental objectives and economic goals. • Avoiding the adversarial relationship among regulators, environmentalists and those regulated often caused by command-and-control policies. The first two points are particularly important because they address the issues of efficiency and effectiveness. If incentive-based policies can indeed achieve environmental objectives at less cost to society than command-and-control policies, then more resources are available to achieve environmental objectives currently not being met. Of course, this assumes incentive-based policies are at least as effective (per dollar spent) as command-and-control policies. This is much more difficult to ascertain than cost. The strongest argument is that incentives can achieve objectives not achievable through command-and-control, especially by encouraging individuals to think and innovate. To see the relative effects of command-and-control and market-based policies on innovation and new ideas, it is useful to look at the former command economies in Eastern Europe, Russia and elsewhere (Stavins and Whitehead 1992). In any case, it does not have to be a either/or proposition. Just as motivational structures in commercial organizations are somewhere on a continuum between coercion (punishment) and encouragement (reward), public policies aimed at environmental protection also exist on a continuum, with command-and-control policies at one extreme and incentive-based policies at the other (see figure 1). The former represents a highly state-interventionist approach to regulation, justified by the assumption that unregulated private enterprises are motivated mainly by short-term profit and tend to discount or ignore the effects of their activities on the environment (Cook, 1997). The latter option relies on market forces, based on the assumption 72 that the best w a y to promote h igher env i ronmenta l standards is to ensure it is i n the f i n a n c i a l (and other) interests o f the pr ivate enterprise to do so. T h e idea is to c o m b i n e m i n i m u m and pun ishab le standards w i t h incent ives to encourage per fo rmance above those standards. 5.7.2 Political rationale for command-and-control A s regulatory cont ro l has expanded in both C a n a d a and the U S (Ice et al 1997), env i ronmenta l p o l i c i e s implemented by government have not been e x c l u s i v e l y c o m m a n d - a n d -cont ro l but have cer ta in ly tended very m u c h to that end o f the c o n t i n u u m . T h i s br ings up an o b v i o u s quest ion . I f reward -or iented systems have advantages over pun ishment -o r iented systems, w h y have governments tended so s t rong ly toward c o m m a n d - a n d - c o n t r o l regu latory structures to ach ieve env i ronmenta l ob ject ives? M o r e s p e c i f i c a l l y , w h y has the B C government chosen an a lmost pure c o m m a n d - a n d - c o n t r o l structure l i k e the Forest P ract ices C o d e instead o f a more innovat ive system based on educat ion and rewards, despite recommendat ions f r o m the Forest Resources C o m m i s s i o n ( F R C 1992) that n e w regulat ions shou ld be " c o s t e f fect ive , f l e x i b l e , reward good pract ices and pun ish bad, and be deve loped in an open , accountab le m a n n e r ? " T h e answer l ies in p u b l i c percept ions and the nature o f our democra t ic p o l i t i c a l system. F o r po l i t i c ians , the most important goal is to be re -e lected (Stone 1989, W e i m e r and V i n i n g 1992). T h i s goa l supersedes the goals o f any regulatory system and p rov ides a strong incent ive fo r p o l i t i c i a n s to heed p u b l i c o p i n i o n ( K i n g d o n 1995). In B C , p u b l i c o p i n i o n in the ear ly 1990s s h o w e d strong support fo r a " t o u g h " regulatory stance ( F R C 1991 and 1992, M o F 1994) a i m e d at i m p r o v i n g forest pract ices in the p rov ince . T h i s i n fo rmat ion is consistent w i t h a m u c h broader p o l l i n 16 countr ies , i n c l u d i n g C a n a d a and the U S ( E n v i r o n i c s International 1998), w h i c h indicates large major i t ies o f peop le st rongly favour str ict l aws as the best w a y to ensure the protect ion o f env i ronmenta l values. A m i n o r i t y sa id incent ives were the best w a y to protect the env i ronment . In general , w h e n people see someth ing they do not l i ke , they seem to take the v i e w that " there ought to be a l a w " to prevent the o f fend ing behaviour . O n e S w e d i s h academic says governments assume laws take ef fect by their mere ex istence: "Our traditional approach to government has been legalistic. It is assumed that people have an absolute duty to obey the government and that, therefore, all government planners have to do is issue an order and the desired results are automatically obtained. This 73 attitude about government with its 'light switch' theory of regulation, is not adapted to the mass regulation problems of the modern age " (St jernquist 1973, p23) . T h e obv ious so lu t ion is to try to educate the p u b l i c on the mer i ts o f incent ives over c o e r c i o n (see sect ion 8.6). F o r the moment , though , cont inued p u b l i c support for coe rc i ve measures re in forces p o l i t i c a l strategies a imed at at ta in ing re -e lect ion , resu l t ing in several trends. 5.7.2.1 " D o i n g s o m e t h i n g " a n d " g e t t i n g t o u g h " F i r s t , governments are expected to react q u i c k l y to p u b l i c demands, to be seen to be " d o i n g someth ing , " pa r t icu la r l y in a " c r i s i s " s i tuat ion (Cubbage 1995). E n v i r o n m e n t a l protests ce r ta in l y const i tuted a c r i s i s in B C and the coe rc i ve Forest P ract ices C o d e was meant to send a c lear s igna l to the B C p u b l i c and the internat ional c o m m u n i t y that the government w a s "get t ing t o u g h " on the forest industry (Stanbury and V e r t i n s k y 1998). M u c h o f the C o d e is des igned fo r its s y m b o l i c content, such as the large number o f of fenses (over 300) and the large penalt ies attached to them (up to $1 m i l l i o n per day) . T h i s a l l o w s the C o d e to be w a v e d a round as a s y m b o l o f the government 's c o m m i t m e n t to h igher standards o f forest pract ice . In real i ty , the government w a s never w i l l i n g or able to make the large f i n a n c i a l c o m m i t m e n t needed to enforce the C o d e . F o r example , M i n i s t r y o f E n v i r o n m e n t o f f i c i a l s say they rece ived less than h a l f o f the amount they est imated w o u l d be needed to proper ly enforce the n e w leg is la t ion . T h e desire to c o m m a n d - a n d - c o n t r o l the forest industry a lso appears to appeal to the an t i -cap i ta l is t , pro-state intervent ion fact ion o f B C ' s r u l i n g N e w D e m o c r a t i c Party , and is supported by env i ronmenta l is ts susp ic ious o f incent ives -based env i ronmenta l p o l i c i e s and o f the a b i l i t y and desire o f b i g business to p roper ly protect the env i ronment . T h e C o d e makes it c lear that compan ies do not have the " r i g h t " to degrade the env i ronment . In contrast, regulatory systems based on educat ion and incent ives tend to lack the sense o f i m m e d i a c y demanded by the pub l i c . T h e y are a lso c o m p l e x and take t ime to deve lop , because they are a departure f r o m the c o m m a n d - a n d - c o n t r o l structures w i t h w h i c h p o l i t i c i a n s and bureaucrats are fami l ia r . In fact, turnover o f p o l i t i c a l leaders w o r k s against the trust and cooperat ion needed to b u i l d funct iona l incent ive -based mot iva t iona l systems. In add i t i on , the effects o f incent ives -based p o l i c i e s take t ime to become apparent, and m a y o f fer no immed ia te p o l i t i c a l reward to those w h o in i t iated their deve lopment and imp lementat ion . 74 5.7.2.2 Well-disguised costs S e c o n d , governments l i k e c o m m a n d - a n d - c o n t r o l structures because the costs are usua l l y w e l l -d isgu ised . A d m i n i s t r a t i o n and enforcement costs are often h idden in a maze o f expendi tures spread a m o n g government departments, so taxpayers don ' t d i rect ly perce ive the expense. O the r costs are passed on to i nd i v idua ls and c o m m e r c i a l o rgan izat ions be ing regulated and can be d i f f i c u l t to measure. C o s t estimates fo r the Forest P ract ices C o d e vary cons ide rab l y (Saunders 1993, M c C l o s k e y 1993, H a l e y 1995) f r o m $300 m i l l i o n to over $2 b i l l i o n . T h e N D P government de f lected c r i t i c i s m s o v e r uncertain costs by a rgu ing the costs o f not i m p l e m e n t i n g the C o d e w o u l d be h igher ( W i l s o n , 1998). T h e costs o f incent ive -based regulatory systems, m e a n w h i l e , are both immed ia te and apparent. M o s t obv ious is the cost, o r loss o f net revenue, to government that results p r o v i d i n g f i nanc ia l incent ives or tax breaks to those b e i n g regulated. O n e paper, prepared by the P r i va te Forest L a n d o w n e r s A s s o c i a t i o n ( P F L A 1 9 9 8 ) estimates government w o u l d for fe i t $7.8 m i l l i o n in current annual revenue i f their p roposed incent ive -based regulatory proposals are imp lemented , though it a lso predicts other tax income w i l l r ise by $5.4 m i l l i o n because o f increased forestry act iv i ty . A n o t h e r cost i nvo lves educat ion o f landowners and bureaucrats, an i n i t i a l investment that can be s ign i f icant , e s p e c i a l l y i f the educat ion i nvo lves issues as c o m p l e x as forest and ecosystem management. O f course, educat ion is a lso needed to teach bureaucrats and those be ing regulated about a n e w regulatory system as c o m p l e x as the C o d e . A t least k n o w l e d g e i n forest and ecosystem management has last ing benef it . 5.7.2.3 "Creating jobs" T h i r d , c o m m a n d - a n d - c o n t r o l regulat ion g ives governments the oppor tun i ty to "create j o b s , " and to f i l l them w i t h people w h o might later vote po l i t i c i ans back into power . T h e y cer ta in ly do create j o b s , w h i c h is w h y they tend to be expens ive , but i f the same env i ronmenta l ob ject ives can be ach ieved w i t h f ewer bureaucrats, more pub l i c funds are ava i lab le fo r other s o c i a l l y - d e s i r a b l e expenditures. A shortage o f w o r k to be done is not the p rob lem. 5.7.2.4 Having power and using it Four th , governments l i k e to cont ro l th ings (Stanbury and V e r t i n s k y 1998) and c o m m a n d - a n d -cont ro l systems p rov ide a h igh degree o f con t ro l . T h i s is cer ta in ly true o f the Forest P ract ices C o d e , w h i c h prov ides the M i n i s t e r o f Forests cons iderab le d iscret ion and is set up so that subsequent changes to regulat ions and standards are ent i re ly in the hands o f a commit tee o f the cabinet , rather than the Leg is la ture . A n incent ive -based systems w o u l d transfer p o w e r f r o m 75 po l i t i c i ans to pr ivate forest landowners . A s w e l l as c o n t r o l l i n g th ings fo r p o l i t i c a l advantage, governments cont ro l th ings because, as ment ioned ear l ier , they can. C i t i z e n s cannot eas i l y opt out o f society , so most c i t i zens have l i tt le c h o i c e but to f o l l o w rules en fo rced by leg is la t ive and j u d i c i a l power . 5 .7 .3 Political science and limits to policy development Insight p rov ided by p o l i t i c a l scient ists p rov ides a better understanding o f the reasons governments cont inue to app ly c o m m a n d - a n d - c o n t r o l p o l i c i e s to forestry. In an ideal w o r l d , dec i s ion -makers (po l i t i c ians and bureaucrats) respons ib le for forest p o l i c y deve lopment and imp lementat ion w o u l d c o m p i l e a l ist o f a l l e c o n o m i c , env i ronmenta l , soc ia l and sp i r i tua l va lues , then rate them so that the outcomes o f var ious p o l i c y alternat ives c o u l d be o b j e c t i v e l y compared . T h e admin is t rator c o u l d then cons ider a l l p o l i c y opt ions , and chose and imp lement the one that o f fered the greatest aggregate va lue . T h i s is k n o w n as the " r a t i o n a l - c o m p r e h e n s i v e " m o d e l ( L i n d b l o m , 1959). In real i ty , these cond i t ions a lmost never ex ist . Instead, d e c i s i o n - m a k e r s face, to v a r y i n g degrees, amb iguous and p o o r l y de f ined prob lems, incomplete i n fo rmat ion about a l ternat ives, i ncomplete sc ien t i f i c basel ine i n fo rmat ion , inadequate in fo rmat ion o n the consequences o f alternatives and on p u b l i c va lues and preferences, as w e l l as l i m i t e d , in te l lectua l capac i ty , s k i l l s and f i nanc ia l resources. T i m e is a lways short because changes are usua l l y made in response to some k i n d o f " c r i s i s . " These l im i ts to ideal d e c i s i o n - m a k i n g create a s i tuat ion k n o w n as bounded rationality ( M a r c h and S i m o n 1958, Forrester 1984). U n d e r these " b o u n d e d " cond i t ions , d e c i s i o n - m a k e r s rare ly l ook at p o l i c y p rob lems afresh and make bo ld , s w e e p i n g changes. Instead, they make a success ion o f s m a l l , incrementa l changes to p o l i c i e s a l ready in effect, u s i n g so lut ions w i t h w h i c h they are f a m i l i a r and have used before (Pe r row 1970), search fo r a lternat ives a long f a m i l i a r paths and select the f i rst sat is factory so lu t ion that c o m e s a long . A c c o r d i n g to Forrester , d e c i s i o n - m a k e r s " s a t i s f i c e , " o r s i m p l y m a k e do, rather than " o p t i m i z e . " F o r po l i t i c ians , th is means a v o i d i n g p o l i t i c a l l y cos t l y mistakes . F o r bureaucrats, it means m a i n t a i n i n g thei r o w n re levance because they have expert ise in o l d p o l i c i e s and are l i k e l y less f a m i l i a r w i t h n e w p o l i c i e s and approaches. C o m m a n d - a n d - c o n t r o l p o l i c i e s a lso concentrate p o w e r i n the hands o f bureaucrats. T h e p rob lem w i t h " s a t i s f i c i n g " is that it fo rces p o l i c y makers to ignore exce l lent p o l i c y opt ions. 76 5.7.3.1 Developing the Forest Practices Code These models seem to fit neatly with the development of the Forest Practices Code. In the summer of 1993 the ruling NDP government asked the Ministry of Forests, the Ministry of Environment, Lands and Parks, and the Minerals Division of the Ministry of Employment and Investment to draft an all-encompassing Forest Practices Code in time for the Spring 1994 parliamentary session. This involved consolidating and improving a range of existing regulations and guidelines, including 20 provincial Acts, six national Acts, approximately 700 federal regulations and over 3000 guidelines (Nelson, 1993). Resources were limited, alternatives dependent on complex relationships among economic, environmental, social and spiritual values, and scientific information uncertain. Time was tight because the government needed to address local and international concerns over forest practices in BC. A bold policy change would have included at least some consideration for incentives and other market-based policy options. Instead, policy makers took the rules and regulations of command-and-control, process-oriented policies used in the past and amalgamated them into one new piece of legislation. The policy style did not change. Decision-makers "satisficed" rather than "optimized." Interestingly, in 1998 the "crisis" facing the forest industry has become economic rather than environmental, and government is responding by tinkering with the existing command-and-control Forest Practices Code rather than trying a less heavy-handed incentives-based approach. Even though the current and past crises have so far yielded no truly new approaches to forest policy, political scientists consider such crisis conditions crucial to creating a "window of opportunity" for innovative change. The trick is for interest groups to lay the groundwork in anticipation of a crisis sufficient to create a demand for a new policy approach. One policy analyst (Kingdon, 1995) uses the analogy of a surfer waiting for the big wave. She has to get out on the water, be ready to go and prepared to paddle. If not, when the big wave comes along, she's not going to catch a ride. The next big wave may not come along for some time. Then again, it may come very quickly. 5.7.4 Scarce resources a n d new direct ions in forest pol icy Advocates of incentive-based forest policies believe such a window of opportunity already exists. Governments seem increasingly inclined to at least consider the short-comings of command-and-control regulatory systems, and examine the merits of using incentives to motivate socially desirable environmental outcomes. This trend is largely driven by a lack of resources 77 (Kingdon, 1995, Stavins and Whitehead, 1992) as governments try to reconcile continued public demand for environmental protection with growing public demand for fiscal prudence. Governments are also faced with growing concerns that an expanding eco-bureaucracy is imposing unsustainable costs on individuals and businesses, without providing the promised benefits. Incentive-based policies offer the possibility of achieving environmental objectives at less cost to both government and the private sector. 5.7.4.1 Shift toward incentives This does not mean we can expect governments to suddenly discard command-and-control regulations in favour of entirely new incentive-based regulations. Rather, in keeping with political and bureaucratic limitations, such changes are likely to happen slowly and only in the face of public pressure for new approaches to environmental protection. In addition, most regulatory policies are likely to require some combination of coercion and reward to be most effective. The result is likely to be a gradual shift along the continuum: away from command-and-control and toward incentives. The private forest land situation in BC allows the government a good opportunity to initiate change without incurring significant political risk. Less than 5% of forest land in BC is privately owned and an incentive-based system would affect only this land, leaving public land under the auspices of the Forest Practices Code. In addition, private forest landowners, at least in the managed forest tax category, have a strong interest in making sure an incentive-based system meets public expectations because it will allow them to avoid the costs and loss of autonomy associated with the Code. If this limited experiment with incentives achieves desired environmental outcomes, the lessons can be morebroadly applied. 5.7.4.2 Nothing ventured, nothing gained Of course, there is always the possibility, however remote, that command-and-control systems are in fact the most efficient and effective way to achieve environmental objectives, particularly in situations a complex as forestry. If this turns out to be the case, government can always tighten the regulatory screws and move back toward the coercion end of the continuum. However, evidence provided in this paper suggests incentive systems have considerable merit and are worthy of incorporation into future forest policies. 78 5.8 Conclusions M o s t modern p ract ica l and theoret ica l research has been conso l ida ted in a re la t i ve ly n e w s o c i a l d i s c i p l i n e c a l l e d O rgan i za t i ona l B e h a v i o u r ( O B ) . T h i s d i s c i p l i n e examines mot i va t i ona l techniques, m a i n l y in c o m m e r c i a l o rgan izat ions , and p rov ides a h i g h degree o f ins ight into h o w humans are best mot i va ted to w o r k toward organ izat iona l goals . M u c h o f this research, espec ia l l y the re lat ive e f f i cacy o f pun ishment and reward , is d i rect ly re levant to the deve lopment o f a regulatory system best su i ted to mot i va t i ng forest landowners to i m p r o v e stewardsh ip o n pr ivate land. Research in O B shows that pun ishment -o r iented m o t i v a t i o n a l systems have been l o s i n g favour in c o m m e r c i a l o rgan izat ions because they are d i f f i c u l t and expens ive to admin ister , ind icate o n l y what is w r o n g and not what is r ight , cannot induce peop le to th ink a n d innovate , and cause resentment a m o n g employees . In contrast, mot i va t i ona l systems that use f i n a n c i a l and n o n - f i n a n c i a l rewards - such as autonomy, respons ib i l i t y and recogn i t ion - are less expens ive to admin ister , ind icate what is r ight, induce creat iv i ty and innovat ion and b u i l d a sense o f trust and cooperat ion . In real i ty , most mot i va t iona l systems incorporate some c o m b i n a t i o n o f pun ishment and reward , and c o m m e r c i a l o rgan izat ions have been m o v i n g a long the c o n t i n u u m a w a y f r o m pun ishment and t o w a r d reward . O B research indicates an e f fect ive mot i va t i ona l system based on reward must i nc lude c l e a r l y de f ined and attainable goa ls , must ensure a c lear l i nk between the attainment o f goa ls and subsequent rewards, be fa i r l y and cons is tent ly app l i ed , and inc lude part ic ipants , in our case pr ivate forest landowners , i n the deve lopment o f the mot i va t i ona l system. O B research a lso emphas izes that the focus o f the system is on the des i red outcomes rather than the process o f get t ing there. Pun ishment -o r ien ted systems are often referred to as " c o m m a n d - a n d - c o n t r o l , " w h i l e r e w a r d -or iented systems are k n o w n as incent ives -based or, fo r the purposes o f th is paper, based o n "educat ion -and - i ncen t i ves . " E v e n though educat ion -and - incent i ves regulatory systems o f fer soc ia l o rgan izat ions m u c h the same advantages, in terms o f c o s t - e f f i c i e n c y and ef fect iveness , as reward -o r iented systems in c o m m e r c i a l o rgan izat ions , governments have tended very m u c h t o w a r d the c o m m a n d - a n d - c o n t r o l end o f the Cont inuum i n dea l ing w i t h p u b l i c env i ronmenta l concerns , i n c l u d i n g the h i g h l y coerc ive Forest P ract ices C o d e . T h e reasons fo r th is preference are p o l i t i c a l rather than e c o n o m i c . P o l i t i c i a n s want above a l l to be re -e lected and must therefore cons ide r p u b l i c o p i n i o n . T h e p u b l i c , in turn, demands fast act ion through str ict and coe rc i ve env i ronmenta l l eg is la t ion , so 79 po l i t i c i ans choose c o m m a n d - a n d - c o n t r o l systems that ind icate government is " d o i n g s o m e t h i n g " and "get t ing tough . " C o m m a n d - a n d - c o n t r o l opt ions such as the Forest P ract ices C o d e a lso o f fer other p o l i t i c a l advantages, i n c l u d i n g w e l l - d i s g u i s e d regulatory costs, the ab i l i t y to create admin is t ra t ive j o b s and maintenance o f cont ro l ove r a key industry. C o n v i n c i n g po l i t i c i ans and bureaucrats to change is not easy. Bureaucrats tend to choose systems w i t h w h i c h they are f a m i l i a r and have expert ise , and most env i ronmenta l l eg is la t ion has tended very m u c h toward the c o m m a n d - a n d - c o n t r o l end o f the con t inuum. P o l i t i c i a n s , m e a n w h i l e , tend very m u c h toward incrementa l change and are reluctant to take the p o l i t i c a l r i sk associated w i t h rap id and rad ica l change. H o w e v e r , pr ivate forest land in B C is f a i r l y l i m i t e d in area and p o l i t i c a l sens i t iv i ty ( though the latter is chang ing) , compared to p u b l i c land forestry , and is an ideal context in w h i c h to try innovat ive and cost -e f fect i ve n e w approaches to forest management. 80 Chapter 6: Freedom to Manage 6.1 Introduction Most managed forest landowners surveyed (see Chapter Two) believe measures aimed at improving stewardship on private forest land in BC are necessary, or at least inevitable, and accept that new regulations will likely be introduced. At the same time, landowners are adamant that any new regulations should minimize the bureaucracy and inflexible rules associated with command-and-control regulatory approaches like the Forest Practices Code. Forest landowners want instead a system that maintains, as much as possible, their current independence, responsibility, flexibility and level of private property rights. In short, landowners want to maximize what they refer to as freedom to manage, and rated this the number one criterion for any new regulatory system. This aversion to bureaucracy and desire for autonomy is at odds with government efforts to meet public interests on private forest land because new regulations inevitably involve some loss of freedom to manage. However, while government in BC has the legal authority to impose almost any regulation on private forest land (section 4.2), a respect for private property rights should limit infringement. In addition, evidence suggests (see section 5.3) retaining freedom to manage can be used to motivate landowners to improve stewardship on private land. Chapter Six examines the public and private advantages of maintaining landowners' freedom to manage and outlines a system that could achieve public objectives on private forest land while respecting autonomy and private property rights of landowners. 6.2 Rationale for freedom to manage Private forest landowners want to minimize bureaucratic intervention in their affairs. This section focuses on areas where private desire for freedom to manage can be used to meet efficiently the public interest on private land. Many of the arguments are similar to those outlining the advantages of education-and-incentives over command-and-control (section 5.7.1) but are more issue specific. 6.2.1 Lower cost to government and landowners Less interventionist and bureaucratic regulations cost less to administer, for both government and landowners. Lower operating costs appear to be the main reason among industrial forest landowners for supporting freedom to manage. Most also have tenure on public land and are 81 f a m i l i a r w i t h the mul t i tude o f h i g h l y deta i led and expens ive p rov i s ions i m p o s e d b y the Forest P ract ices C o d e . Some non - indust r ia l landowners a lso base thei r desire fo r f reedom to manage o n past exper iences w i t h what they regard as waste fu l and paperwork -o r iented regulat ions. C o s t s to government and landowners are u l t imate ly borne by taxpayers and consumers . 6.2.2 Freedom as an intrinsic motivator F r e e d o m to manage is the reason many landowners are engaged in forestry. T h i s is pa r t icu la r l y true o f non - indust r ia l landowners , m a n y o f w h o m cite f reedom, independence and l i festy le as thei r mot i va t ion fo r manag ing forest land. T h i s theme is repeated in other studies of, non - indust r ia l forest landowners (St jernquist 1973, B l i s s and M a r t i n 1990), w h i c h ind icates landowners w h o exerc ise h igh levels o f s tewardsh ip do so largely fo r in t r ins ic reasons, and do not want to dea l w i t h the f rustrat ion o f a system imposed by the " p o l i t i c a l / b u r e a u c r a t i c m a c h i n e " ( N I W A 1994). T h i s is consistent w i t h f i nd ings (sect ion 5.5.2.2) that ind icate respons ib i l i t y , autonomy, pr ide and j o b sat is fact ion can be p o w e r f u l mot ivators and can be used to encourage pr ivate forest landowners to env i ronmenta l ob ject ives . L o s s o f f reedom to manage w i l l cause resentment and f rustrat ion a m o n g landowners and l i k e l y make them less w i l l i n g to w o r k toward s o c i a l l y - d e s i r e d env i ronmenta l ob ject ives . M o s t managed forest landowners surveyed sa id they a l ready engage in h igh levels o f s tewardsh ip and shou ld not be pun ished by restr ict ive leg is la t ion a l o n g w i t h landowners not interested in stewardship . T h i s seems to be par t icu la r l y true o f landowners w h o have cons iderab le forestry educat ion and exper ience . I f the educat ion proposals a lso inc luded in this paper (Chapter E ight ) are inst i tuted, landowners w i l l be more educated, and more l i k e l y to desire and expect to be g iven more latitude in manag ing their forest lands. 6.2.3 Innovation and ingenuity F r e e d o m to manage promotes innovat ion and n e w ideas. R e s t r i c t i n g landowners w i t h p reconce ived and often s c i e n t i f i c a l l y uncertain not ions about h o w best to c o m b i n e t i m b e r p roduct ion and protect ion o f e c o l o g i c a l serv ices on pr ivate land fa i l s to take into account the cons iderab le p o w e r o f human ingenuity . F r e e d o m to manage encourages landowners to find n e w forest management approaches, as w e l l as n e w uses fo r their land never env isaged by a bureaucracy , i n c l u d i n g g r o w i n g alternative crops l i k e mushrooms , sa la l , m e d i c i n a l and ed ib le herbs, decorat ive plants and other non - t imber forest products ( F R B C 1998). M e a n w h i l e , f l e x i b i l i t y p r o v i d e d by f reedom to manage a l l o w s landowners to adapt to l o c a l and reg iona l cond i t ions , as w e l l as a chang ing marketp lace . 82 6.2.4 Private property rights Respect for private property rights is one of the fundamental principles of our society and even though Chapter Four demonstrated that government has considerable legal authority to restrict both land use and forest practices on private land, infringement of private property rights should be minimized, especially if it cannot be demonstrated that the infringement is necessary to meet the public interest. If another system with less infringement can achieve the same public interest, it seems prudent to consider that option. A point to consider is that private property ownership appears to reinforce the very objectives proposed forest policies are intended to achieve. Many private forest landowners conserve soil, replant trees and practice silviculture because they own the land and want to maintain and enhance its value. Others protect streams and encourage wildlife because they take pride and satisfaction in practicing conservation on land they own and enjoy. In contrast, it is difficult to encourage tree-harvesting companies to take a long-term interest in land they do not own. Studies in BC show that the more secure the future tenure of the land, the more likely forest companies are to invest in silviculture and other improvements (Pearse 1993, Zhang 1994). This suggests regulations on private forest land need not be as restrictive as regulations applied to public land. 6.2.5 Diversity of ownership Finally, there is a risk that over-regulation can lead to concentration of forest land ownership. Non-industrial landowners surveyed said restrictive legislation favours industrial landowners because only they have the resources and expertise to deal with complex regulations. Research in the US indicates that over-regulation will frustrate landowners and force them to sell to corporate interests (Lewis 1995). In BC only a small fraction of all private forest land is in the hands of non-industrial landowners (see table 1). 6.3 Results-oriented regulatory system 6.3.1 Old focus on process Traditional approaches to environmental regulation are often called process-oriented because they dictate in detail the sequence of steps individuals or businesses must follow in order to arrive at the socially desired environmental outcome. The Forest Practices Code is a good example of a process-oriented regulatory system. Despite recent "streamlining," it lays out in 83 great detail the series of steps companies must follow in the harvesting and reforestation process, including mapping, planning, road construction, harvesting technique and reforestation through to a new stand of "free growing" trees. The underlying assumption is that, if forest companies follow the process, they will arrive at the socially desired result - a sustainable timber supply and protection of ecological services. Process-oriented policies are a kind of command-and-control policy and suffer basically the same shortcomings (section 5.7). Most importantly, they are economically inefficient (Spence and Weitzman 1993) because there are no market signals to indicate which firms can most cheaply achieve the desired result, so firms have no financial incentive to find ways of achieving the result more cost-effectively. Process-oriented policies are also expensive to administer and ignore important differences among firms and regions. In the end, too much time and energy is expended on a bureaucratic system designed to ensure the process has been satisfied, which detracts from the original objective. In the words of the landowners surveyed, process-orientation is "expensive" and "inflexible," represents "red tape, bureaucracy and paperwork," and "infringes on private property rights." Governments have tended very much toward process-oriented policies in dealing with environmental problems (Stavins 1997, Costanza, Cumberland et al 1997), for much the same reasons they have opted for command-and-control. They appeal to the public desire to "get tough" with inherently untrustworthy industries, bureaucratic costs are well-hidden, they maintain a high degree of government control and they create bureaucratic jobs. These criteria appeal to politicians seeking re-election (section 5.7.2). However, like command-and-control policies, process-oriented regulations are being reconsidered as governments face increased fiscal restraints, a growing sense of urgency in dealing with environmental concerns, as well as concerns over the costs imposed on businesses and their effect on international competitiveness. 6.3.2 New focus on results Opponents of process-oriented systems, including forest landowners in BC, propose instead a results-oriented system of regulating forest practices on private land. A results-oriented system means stating clearly the goals government wants landowners to achieve, then giving them a high degree of freedom in choosing the succession of steps that achieve those goals or results. The role of government in such a system is to audit only the final result, rather than the entire process. Purported benefits include less expensive bureaucracy, greater freedom to innovate, flexibility to deal with variable local conditions, less confrontation and more cooperation. 84 Proponents of results-orientation point especially to Sweden, which has in recent years greatly reduced bureaucracy and paperwork (Haley 1995), moving away from a highly interventionist process-oriented forest policy to a much more flexible results-oriented policy. Other results-oriented systems exist in New Zealand and US states such as Idaho, Wyoming and Oregon. In BC, numerous stakeholders supported a results-oriented Forest Practices Code (Baskerville 1992), including the forest industry, the BC Wildlife Federation, various professional associations (including professional foresters) and the Commission itself. Even Greenpeace said the "outcome should be the target." 6.3.2.1 Back on the continuum Like command-and-control and education-and-incentive policy structures (section 5.7), process-oriented policies and results-oriented policies are at opposite extremes on a continuum (see figure 1). The former dictates in great detail the steps a business must follow in order to achieve an environmental result, while the latter specifies a result and allows a business complete latitude in achieving that result. As with command-and-control and incentives-based policies, most public forest policies will in practice be somewhere on a continuum between the process-oriented and results-oriented extremes. Given the workings of government (section 5.7.3), the likely future trend is a gradual shift along the continuum toward results-orientation. There is some evidence of this shift in BC. The BC Ministry of Environment, Lands and Parks recently moved toward greater results-orientation in regulating pulp and paper mill emissions. The previous system, based on models used elsewhere in North America, was process-oriented policy, with government prescribing in detail the steps mills must follow in treating air emissions and water effluent, right down to dictating the type of technology the companies should use. New regulations set effluent and air pollution standards (results) and fine companies that emit more than the set amount, giving companies flexibility in finding new ways to achieve the desired results. This example also indicates that command-and-control policies can also be results-oriented, and that failure to achieve the set result can be punished. This paper advocates that success in achieving results should be rewarded. 6.4 Problems with environmental results Despite the apparent theoretical advantages, there are a number of practical obstacles to applying a results-oriented regulatory system to private forest land in BC. Perhaps the most significant drawback is a lack of proven results-oriented systems in other forestry jurisdictions on which BC can model its own system for private land forestry. Results-oriented systems in 85 Sweden, New Zealand and some US states are relatively new and it is not yet possible to say whether they have been successful in achieving desired results. More importantly, the intended result of these systems is mainly to ensure reforestation and management of harvested areas in order to guarantee a stable long-term timber supply, while a results-oriented system in BC would be expected to also include protection of non-market values, or ecological services. 6.4.1 Defining and measuring results Evidence suggests landowners are more likely to strive for clearly defined and quantifiable goals than for vague goals (section 5.6.1). Evidence also suggests clear goals make it easier for the government to monitor the effectiveness of a results-based regulatory system (see section 5.6.5). The traditional goal of most forest policies - to ensure a stable and long-term timber supply - is relatively easy to define and measure. It just means measuring the approximate growth rate of trees, then each year harvesting a volume roughly equal to the annual growth. The result can be easily measured by keeping an inventory of the volume of standing timber on all private land. If the inventory shows a steady decline, the policy is not achieving its intended result. The only real difficulty is accurately measuring annual growth rates. Similarly, it is relatively easy to identify results that enhance recreational use of forest, or visual quality. Establishing clearly defined and measurable environmental results is much more difficult. Scientific knowledge of forest ecosystems and their interactions is inadequate and uncertain, so the desired ecological result of forest practice restrictions is unclear. For example, maintaining biodiversity requires baseline information on all species that exist in a forest, their interactions with other species and what forest attributes different species require for their existence. Since we do not have this knowledge, we do not know what forest attributes - such as streams, wetland areas, course woody debris or wildlife trees - most require protection. In addition, results benefiting one species may not benefit another. Deer and elk apparently do well - at least in summer - in recent clearcuts where grazing is plentiful and predators easy to spot. Meanwhile, amphibians do not do well in clearcuts, but instead require cool, moist, shaded habitat found in mature forest. Similarly, leaving snags and wildlife tree patches behind during harvest is good for eagles and other raptors, but not good for their prey, now easily visible from high perches overlooking a clearcut. Inadequate scientific knowledge also hampers our ability to assess the importance of other ecological services provided by forests, such as carbon dioxide sequestration, soil conservation, watershed protection, climate control or the provision of unique medicinal plants. We do know 86 they have value but we do not know how much, or how they rank relative to one another. This is why efforts to establish values for ecosystem services (section 3.2.3) are so important. The situation is further complicated by a debate over semantics that brings up new questions. What is a result and what is a process? Is a healthy riparian buffer zone a result? Or is it just part of a process aimed at maintaining water quality in fish-bearing streams? Or is that in turn part of a process aimed ensuring the survival of salmon stocks. And if salmon survival is the desired result, and the process is not dictated, could companies simply line the banks with concrete and build a spawning channel? 6.4.2 Time and cumulative effects Another problem with a results-oriented regulatory system is that considerable time may elapse before a regulatory agency is able to audit results. Mistakes may remain undetected for some time and considerable ecological damage may result. Even if audited regularly, mistakes may not be readily apparent. In Oregon, determining the results of the state's Best Management Practices (BMPs) with regard to stream protection and water quality means waiting for "testing storms," which are unpredictable and may not occur for decades (Ice et al 1997). Under a process-oriented system, each step along the way is monitored, so mistakes made by landowners can be detected earlier. Given the low level of responsibility shown in the past by the forest industry and the Ministry of Forests, this can be a significant drawback for a results-oriented forest policy. In addition, environmental damage tends to be cumulative. For example, clearcutting along parts of a stream may have little effect on fish in terms of increased water temperatures, but as more areas are logged, temperatures may rise above the threshold tolerated by some fish species. This is a particular problem if two of more logging companies are at work in the same watershed. 6.4.3 Knowledge and liability A results-oriented system requires knowledgeable landowners. This may be true for many managed forest landowners but landowners in other private forest land categories, such as farmers and ranchers, often have little or no forestry education or experience. Bringing all private landowners up to speed would require time and effort, and provide little opportunity for political gain. Finally, it can be argued that giving individuals and companies greater freedom to manage under a results-oriented system exposes them to greater liability, because they cannot simply throw up their hands and argue they "followed the process." Under a process-oriented system bureaucrats dictate the steps landowners must take, so their liability is limited. 87 6.4.4 Overcoming obstacles to results-orientation On the whole, obstacles to results-orientation are probably no more daunting than those associated with process-orientation. It is certainly true that defining environmental results is difficult, especially given BC's remarkable diversity of plant and animal species over a huge land area (Bunnell 1990, Bunnell et al 1991), but results must also be considered before there is any point in establishing a process-oriented system. In fact, process-orientation can detract from the desired results. How often are the intended outcomes of the Forest Practices Code discussed? At least some results can be clearly defined. One relatively uncontentious result is the preservation of salmon stocks in logged areas. These stocks can be measured before and after harvest for comparison. To maintain stocks, logging companies will need to prevent stream siltation and higher water temperatures, which in turn requires some kind of riparian vegetation buffer zone. Other results will become more clear as scientists gain a greater understanding of forest ecosystems. Mistakes being made under a results-oriented system can be addressed through regular audits. Since a results-oriented system requires much less paperwork, more resources will be available to put experienced people into the field. 6.4.5 Freedom to manage as reward Though some minimum rules and penalties will be needed for a results-oriented regulatory system on private forest land, this paper has established strong reasons for rewarding individuals and firms who meet socially desired environmental results. One way to reward landowners is by maintaining or increasing their freedom to manage. Landowners who consistently meet environmental objectives would be given almost complete latitude in managing their forest land and would be subject only to infrequent audits. Landowners who fail on one or more occasions to meet environmental objectives would be audited with increasing frequency, and would be required to prepare more detailed management plans. Such a system was recently proposed in place of the Forest Practices Code on public land (MoF 1998). One landowner suggests a 1-5 ranking system for public land, with those at 1 being given complete freedom to manage, and those at 5 facing the most restrictions. Consistently meeting objectives set by government would move landowners up the ranking system, while failures would move landowners down. Changes in rankings would also have financial implications, because detailed management plans and other paperwork cost money. In addition, it would be 88 possible to provide additional tax breaks or other financial rewards as landowners move up the ranking system. Recognition can also be used to reward landowners in BC. Wisconsin provides awards to county "Tree Farmer of the Year," sponsored by the American Forest Council, in effort to promote active forest management on non-industrial forest land (Bliss and Martin 1990). Similar programs exists in other US states, Sweden, New Brunswick and Quebec. 6.5 Conclusions If government chooses to apply the Forest Practices Code or similar legislation to private forest land, it will greatly restrict landowners' freedom to manage their forest properties. This infringement of private property rights may be acceptable if it is necessary to achieve public interests on private forest land. However, research suggests that public objectives could be achieved with much less loss of freedom to manage, which would not only protect private property rights but also provide additional benefits to the public. These include lower administrative costs of regulation, a leverage to encourage improved stewardship, promotion of innovation and new ideas and encouraging diversity of ownership. For political reasons, the BC government continues to tend toward interventionist regulatory policies that dictate in detail the process landowners must follow in order to achieve public objectives on private land. Landowners suggest instead a results-oriented system in which government dictates only the socially-desired outcomes and allows private forest landowners much greater latitude in achieving those outcomes. This would allow landowners considerably more freedom to manage their resources. While results-orientation has been increasingly used by governments, often to control point source pollution, such a regulatory system is more difficult to apply to forestry, especially if regulations are aimed not only at promoting a stable timber supply but also at protecting ecological services provided by forests. Scientific uncertainty makes it difficult to define and measure environmental outcomes, and our inability to identify the relative importance of differing ecological functions makes it difficult to assign priorities. . In addition, process-oriented regulatory systems tend to pick up mistakes more quickly than results-oriented systems, because it may take a long time for environmental effects to become apparent. Focusing on results requires educated and experienced landowners who may be more open to liability than under process-oriented systems. 89 In response, proponents o f resu l ts -or ientat ion point out that env i ronmenta l results must a lso be ident i f ied and p r io r i t i zed in a p rocess -or iented system, otherwise the series o f steps d ictated by regulat ion have no c lear intended outcome. M e a n w h i l e , mistakes under a resu l ts -or iented system can be p i c k e d up by regular audits, conducted by peop le w h o w o u l d be d e s k - b o u n d under a more process -or iented system. G i v e n the advantages o f ma in ta in ing l andowners ' f r eedom to manage thei r resources, it appears prudent for government to cons ider a resu l ts -or iented system, l eav ing open the op t ion o f a p p l y i n g add i t iona l restr ict ions i f necessary. 90 Chapter 7: Financial Incentives 7.1 I n t r o d u c t i o n Financial reward is a strong motivator of human behaviour (section 5.5.2.1) and one that must form an integral part of any system aimed at promoting stewardship of private forest land. Financial incentives have been used for some time to encourage reforestation on private land (Salwasser 1990, FLC 1996) and to protect the long-term productivity of forest land. Objectives encouraged by financial incentives have gradually expanded to include planning, mapping, road building and other silviculture such as brushing, pruning and thinning. This situation currently typifies most private forest land in North America, including BC. In the past decade, however, public interest has expanded beyond long-term timber productivity and now includes growing concerns over the protection of non-timber benefits, including market values such as recreation and non-market values, or ecological services, provided by forests. Some non-timber benefits are already protected to some degree by financial incentives aimed at reforestation but the public is increasingly demanding greater protection for ecological values, including fish and wildlife habitat, watershed protection, visual quality and soil conservation. Chapter Seven examines the financial rewards provided to private forest landowners in BC, how they compare to financial rewards provided in other jurisdictions, the relative effectiveness of direct and indirect (tax) incentives, how these incentives might be used to protect not only timber values but also ecological values provided by forests, and how financial incentives might best be structured in BC to minimize costs and maximize effectiveness in promoting stewardship on private forest land. 7.2 D i r e c t f i n a n c i a l assistance Also known as cost-sharing, direct financial assistance is usually part of more comprehensive government programs known as an "extension services," which combine education and direct financial assistance. Generally, the idea is to first offer information and education, then provide subsequent financial assistance for activities such as management planning and mapping, road building, reforestation and other silviculture. Landowners pay some percentage of these costs and/or provide "sweat equity." Extension programs appear to be politically popular for some of the same reasons as command-and-control regulatory systems, including their sense of immediacy in "doing something," the ability of politicians to announce their creation and their 91 ab i l i t y to "create j o b s . " F o r s i m p l i c i t y 1 w i l l deal here o n l y w i t h the f i n a n c i a l assistance part o f ex tens ion programs, and d iscuss educat ion and t e c h n i c a l adv ice in Chapte r E igh t . In C a n a d a , a l l p rov inces have access to d i rect f u n d i n g assistance programs through j o i n t f e d e r a l / p r o v i n c i a l extens ion programs. In B C , th is extens ion p rogram was k n o w as the Forest Resource D e v e l o p m e n t Ag reement ( F R D A , p ronounced " F e R D A " ) and c o m b i n e d sc ien t i f i c research, e c o n o m i c analyses, techn ica l adv ice and f u n d i n g assistance ( C F S 1996). M a n y managed forest landowners in the survey par t ic ipated in the Pr ivate W o o d l a n d s Forest ry S u b -P rog ram o f F R D A , w h i c h p rov ided f u n d i n g o f up to 9 0 % o f a l l o w a b l e s i l v i c u l t u r a l costs, w i t h an i n i t i a l l i m i t o f $50 ,000 per c l ient that was subsequent ly reduced to $30 ,000 . T h i s m o n e y was ava i lab le to non - indus t r ia l forest landowners , i n c l u d i n g ind iv idua ls , partnerships, non -p ro f i t societ ies and corporat ions h a v i n g legal t i t le to at least 10 cont iguous hectares o f p roduct i ve forest land . T h e largest e l i g ib le parce l s ize was 4 ,000 ha. T o protect p u b l i c investment, l andowners must keep thei r land fo r 15 years af terward. T h e Pr ivate W o o d l a n d s Forest ry S u b - P r o g r a m d isbursed a total o f $15.9 m i l l i o n (1994 do l la rs ) fo r s i l v i cu l tu re , p l a n n i n g and m i n o r road improvements before the p rogram was d i scont inued in M a r c h 1996. In the U S , the federa l Forestry Incentive P r o g r a m ( U S D A 1995) is ava i lab le in a l l states to owners o f 5 to 400 hectares o f forest land w h o are not engaged in business o f manu fac tu r ing forest products (i .e. non - indust r ia l landowners) . L a n d o w n e r s w h o meet m i n i m u m p r o d u c t i v i t y requirements rece ived 5 0 - 6 0 % o f costs for site preparat ion , t ree -p lant ing , p r e - c o m m e r c i a l th inn ing , release cut t ing , vegetat ion con t ro l , and b rowse protect ion dev ices fo r seedl ings. T h e annual l i m i t is $10 ,000 per landowner . T h e U S a lso has pr ivate extens ion programs in w h i c h forestry corporat ions are i n v o l v e d in f i n a n c i a l and techn ica l assistance programs fo r sma l le r pr ivate forest landowners , e s p e c i a l l y i n the Southeast. L a n d o w n e r s are asked to c o m m i t the i r t imber to the c o m p a n y in return fo r management and reforestat ion. Industry statist ics ind icate 72 m i l l i o n seedl ings are p r o v i d e d to landowners each year under these programs ( F R B C 1996). In add i t ion , some U S p o w e r ut i l i t ies are f und ing tree p lan t ing programs in the U S and d e v e l o p i n g countr ies as a means o f sequester ing atmospher ic carbon to counter emiss ions o f c o a l and gas p o w e r e d thermal stations. (Some indust r ia l landowners in B C surveyed fo r this paper sa id they p rov ide seedl ings and techn ica l assistance to non - indust r ia l landowners , usua l l y in return fo r future cut t ing p r i v i leges . ) T h e E u r o p e a n U n i o n a lso has extens ive p u b l i c f u n d i n g assistance programs, la rge ly in an effort to reduce agr icu l tu ra l surpluses by encourag ing the convers ion o f marg ina l f a r m l a n d to forest land. T h e E U prov ides f u n d i n g not o n l y fo r p l a n n i n g and s i l v i cu l tu re but a lso an annual 92 i n c o m e fo r 20 years to compensate fo r lost fa rm income. In G e r m a n y , this adds up to anywhere between 600 and 1400 G e r m a n marks per hectare annua l l y ( C d n $ 4 8 0 to $1120) , depend ing o n site p roduct iv i t y and geographic reg ion . C o n s i d e r a b l e d i rect f u n d i n g assistance is a lso ava i l ab le i n N o r w a y and F i n l a n d , as w e l l as j u r i s d i c t i o n s as d iverse as N e w Z e a l a n d , C h i l e , B r a z i l , A r g e n t i n a , Paraguay, Indones ia and A u s t r a l i a ( F R B C 1996). 7.2.1 Problems with direct financial assistance Desp i te the popu la r i t y o f d i rect f i n a n c i a l assistance programs, o b v i o u s shor tcomings have been ident i f ied by surveys and art ic les on pr ivate forest land ( C F S 1996, B l i s s and M a r t i n 1990, N I W A 1994) and supported by the results o f the managed forest landowners survey. F i rs t , d i rect f i n a n c i a l assistance programs tend to devote substant ial resources to program admin is t ra t ion , so o n l y a percentage o f the funds c o m m i t t e d ac tua l l y ends up in the hands o f landowners , w h i l e the remainder pays fo r what tends to be a g r o w i n g bureaucracy (Cubbage 1995). L a n d o w n e r s surveyed w h o took part in F R D A , even those w h o supported the p rogram, c o m m e n t e d on excess ive bureaucracy and admin is t rat ive costs. S e c o n d , d i rect f i n a n c i a l assistance often funds act iv i t ies that landowners w o u l d l i k e l y have car r ied out even in the absence o f subs id ies . Part ic ipants in F R D A in te rv iewed i n C h a p t e r T w o support this content ion , though they say f u n d i n g assistance accentuated the speed and scope o f thei r forest management projects. Research a lso shows that f u n d i n g assistance programs are e f fect ive in p r o m o t i n g pr ivate land stewardsh ip more because they p rov ide educat ion and access to a pro fess iona l forester than because o f f i n a n c i a l subs id ies , though f u n d i n g does af fect the t i m i n g and s ize o f a project ( B l i s s and M a r t i n 1990). A s a result, d i rect f i n a n c i a l assistance is less o f an incent ive to manage than an "ex post facto management subs idy . " T h i r d , d i rect f u n d i n g programs tend to be sporad ic , often depend ing on the state o f government f inances and the need a m o n g po l i t i c i ans to meet re -e lect ion interests. T h i s tends to frustrate landowners w h o pay s i l v i cu l tu ra l costs out o f their o w n pockets o n l y to d i s c o v e r that, had they wa i ted a f e w months , they w o u l d have been subs id i zed under a n e w l y announced f u n d i n g program. T h i s approach tends to reward l andowner w h o hesitate before under tak ing reforestat ion and other s i l v icu l tu re , and pun ish those engaged in good stewardsh ip pract ices on the i r o w n accord . 7.2.1.1 Reactions to direct financial assistance problems S w e d e n has e l im inated most d i rect subs id ies , p r o v i d i n g f i nanc ia l assistance o n l y under spec ia l c i rcumstances , such as in the case o f abandoned fa rmland or forest land severe ly 93 damaged by insects, d isease or fire ( H a l e y 1994). In those cases it is cons ide red un fa i r f o r the o w n e r to shoulder the w h o l e reforestat ion cost. " N o r m a l " reforestat ion costs are never subs id i zed but are cons idered part o f the cost o f d o i n g business. (It shou ld be noted that th is n e w approach f o l l o w s years o f cons iderab le p u b l i c investment in res tock ing c learcut areas, la rge ly a l l a y i n g fears o f an i m p e n d i n g t imber shortage.) A paper re leased in B C ( F L C 1996) takes the S w e d i s h approach, suggest ing reforestat ion costs be p u b l i c l y funded o n l y under the same extenuat ing c i rcumstances . O n e ident i f i ed candidate is the B u l k l e y V a l l e y around V a n d e r h o o f , w h e r e an est imated 55 ,000 h a o f pr ivate land w a s not reforested after harvest - i n i t i a l l y p rompted by subsid ies to c lea r marg ina l land fo r agr icu l ture - and seems dest ined to rema in N o t Sat i s fac to r i l y R e s t o c k e d ( N S R ) w i thout p u b l i c f und ing . N e w Zea land has responded w i t h an innovat ive p rogram in w h i c h di rect financial assistance is pa id to landowners in the same year that the expense is incurred , lead ing to the deve lopment o f spec ia l i zed reforestat ion compan ies w h i c h buy and lease land to plant ( G r e e n w o o d and W h y b r o w 1996). These compan ies issue shares o r bonds w h i c h are lega l l y tradable and w h i c h any pr ivate i n d i v i d u a l o r inst i tut ion can buy. Because o f h igh g rowth rates in N e w Z e a l a n d , these shares gain real va lue w i t h i n about three years, and a broad cap i ta l market fo r forest futures has been establ ished. 7.2.2 Advantages of direct financial assistance Desp i te the apparent i n e f f i c i e n c y o f d i rect f i n a n c i a l assistance, it shou ld be noted that th is approach appears to have ach ieved at least some success in m a n y j u r i s d i c t i o n s . L a r g e areas o f marg ina l agr icu l tura l land in the E U , notab ly S c o t l a n d , Ireland and G e r m a n y , have been reforested, as have areas in S w e d e n , the eastern U S and C a n a d a ( F A O 1997). B C has been less success fu l ( F R B C 1994), largely because less than h a l f o f a l l pr ivate lands in the p rov ince has been e l i g ib le fo r d i rect f i n a n c i a l assistance, m a i n l y non - indust r ia l land in the managed forest tax category. D i r e c t f i nanc ia l assistance a lso has the advantage that costs o f the p rogram are re la t i ve ly easy to ident i fy , compared to tax incent ives , where the costs or revenue lost to va r ious layers o f government are d i f f i c u l t to determine. O n ba lance, though , sho r t -comings suggest that d i rec t f i n a n c i a l assistance has not been an e f f ic ient w a y o f p r o m o t i n g pr ivate forest land stewardsh ip . 94 7.2.2.1 Direct financial assistance and non-market values Direct financial assistance could have a new role to play as public demand for non-market benefits provided by forests continues to increase. Current criticism of direct financial assistance is often based on the valid argument that public money is simply a subsidy for silvicultural investments that landowners would have to make anyway in order to realize a financial return from future timber sales. However, landowners have no such financial incentive to invest time and money in the protection and enhancement of non-market values, because they cannot derive future income from an investment in streamside buffer zones, winter range for elk and deer, or wildlife tree patches. True, some forest landowners invest time and sacrifice income to protect and enhance non-market values for intrinsic reasons such as pride and satisfaction. Protection of non-market values could be considerably enhanced, however, if landowners received direct financial assistance. The level of payments is difficult to establish (section 3.2.3) but initial values could be estimated and adjustments made through trial and error. This argument is reinforced by evidence (section 4.3) that suggests mandatory streamside buffers, wildlife tree patches, or other ecologically sensitive "no log" zones constitute a kind of regulatory taking and should be compensated. The US has gone further than other jurisdictions in providing direct financial assistance for the protection of non-market values. One federal program available to states is the Conservation Reserve Program (USDA 1995), which is aimed at soil and water conservation. Owners are reimbursed 50-75% of tree planting and enhanced forestry activities, up to a maximum of $3500 a year per landowner. Another program is the Stabilization and Conservation Service which, with assistance from Natural Resources Conservation Service, administers federally sponsored cost-share programs for a variety of soil and water conservation practices, including tree planting, timber stand improvement and wildlife habitat improvement. Private initiatives are also encouraged. Together with the American Forest Products Association, some corporations are promoting the idea of habitat enhancement of complete ecosystems, including riparian zone protection, monitoring rivers and streams for their entire length, 20% set-asides for special values, and alternatives to large-scale clearcutting. 7.3 Preferential tax treatment Tax policies can have a significant impact on how landowners manage their forest land (Bliss and Martin 1990, Grayson 1993). With that in mind, most jurisdictions offer some combination 95 o f tax exempt ions , deduct ions , deferments, credi ts and remiss ions to ach ieve p u b l i c ob ject ives o n pr ivate forest land. These measures have often been success fu l in p r o m o t i n g t imber p r o d u c t i o n but have not been w i d e l y used to protect non -market va lues . T a x incent ives are d i f ferent f r o m di rect f i nanc ia l assistance in several w a y s . F i rs t , tax p o l i c i e s tend to be cont inuous rather than sporad ic , s ince leg is la t ive author i ty is usua l l y requi red to make changes. That p rov ides a sense o f s tab i l i ty and enhances the a b i l i t y o f l andowners to make long - term investment plans. O f course , tax p o l i c i e s resu l t ing in s o c i a l l y undesi rable ef fects are a lso more d i f f i c u l t to change. S e c o n d , tax p o l i c i e s a p p l y equa l l y to landowners in any one tax category, so they are genera l ly v i e w e d as more fa i r and equi tab le . T h i r d , the ef fects o f tax p o l i c i e s tend to be subt le and often i n v i s i b l e in the short - term, m a k i n g them p o l i t i c a l l y less g lamorous than d i rect f i n a n c i a l assistance. F o u r t h , tax p o l i c i e s can be c o m p l i c a t e d and cont rad ic tory in terms o f a c h i e v i n g s o c i a l ob ject ives , s i nce taxes are l ev ied at federa l , reg iona l and l o c a l levels . T h i s can frustrate and confuse landowners , and create unnecessary admin is t ra t ive over lap . O n e recur r ing theme in d iscuss ions on tax p o l i c i e s app l ied to pr ivate forest land is that the system be s imp le and easy to understand. T h i s , and the factors above, w i l l be cons idered in the d i scuss ion o f tax p o l i c i e s app l ied to pr ivate forest land in B C and other j u r i s d i c t i o n s . 7.3.1 Property tax A l l j u r i s d i c t i o n s surveyed fo r th is paper have some k i n d o f preferent ia l property tax treatment f o r forest land . S o m e European countr ies imp lemented such p o l i c i e s before C a n a d a w a s even a count ry ( G r a y s o n 1993) but there is a lso a l o n g h istory o f preferent ia l property taxes in N o r t h A m e r i c a , beg inn ing in the U S in the 1860s. O n t a r i o f o l l o w e d suit in 1906 and B C in 1951. N o w a l l C a n a d i a n p rov inces and a l l but four U S states o f fer preferent ia l property tax fo r forest land . T h e rat ionale beh ind the ear ly trend toward preferent ia l property taxes is based on the l o n g pe r iod requi red to g r o w most trees. Forest landowners must pay annual property taxes but der ive i n c o m e f r o m tree harvest ing o n l y p e r i o d i c a l l y or, i f land has been c learcut and then reforested, o n l y after a wa i t o f 50 years or more . That means a substant ial investment must be made over a l o n g per iod o f t ime, usua l ly longer than the l i fe o f an i n d i v i d u a l , before a return is rea l i zed . T o c o m p o u n d the p rob lem, tax can a lso be app l ied to the va lue o f the trees, w h i c h is o f ten substant ia l and increases as trees mature. T h i s can d iscourage investment and encourage the harvest ing o f immature trees. 96 7.3.1.1 Harvest tax T o encourage investment in t imber p roduct ion , governments have f o u n d w a y s to reduce annual property taxes on forest land. O n e method is to assess o n l y the va lue o f the land fo r property tax purposes. That translates into substant ia l ly l o w e r annual property taxes, e s p e c i a l l y as trees mature. H o w e v e r , tax o n the va lue o f the trees is u s u a l l y not e l i m i n a t e d but m e r e l y deferred and co l l ec ted w h e n the trees are harvested and landowners rea l i ze an income. T h i s is k n o w n as a severance tax or, as in B C , a harvest tax. T h e harvest tax in B C is determined by l o g market va lues on the coast and by forest product va lues in the inter ior . It is not a f i x e d percentage o f t imber va lue but rather a res idual va lue left after subtract ing costs. 7.3.1.2 Taxing "use value" A n o t h e r method is to assess the land at its current use, rather than its "h ighest and best use . " S i n c e land has less potent ia l va lue as forest land than as land fo r res ident ia l , c o m m e r c i a l o r indust r ia l deve lopment , this can const itute a substant ial annual property tax sav ing . T h i s approach is espec ia l l y important in areas o f rap id e c o n o m i c g rowth where pr ivate forest land is under strong deve lopment pressure. In the absence o f "use v a l u e " assessments, property va lues and therefore property taxes can r ise r a p i d l y and force landowners to se l l o r deve lop thei r land . O n e example on B C ' s G u l f Islands, where deve lopment pressure is strong, p rov ides a good i l lust rat ion . A 160-acre property o n Lasquet i Is land was assessed a market va lue o f $80 ,000 in 1992, $160 ,000 in 1993, $300 ,000 in 1994, and expected to be wor th $450 ,000 in 1995, w i t h property tax in that year o f $5 ,000. Instead, the land was p laced in the managed forest tax category, assessed at a "use va lue " o f $56 ,000 w i t h $800 in property tax ( K u b e n i k 1996). Other examples are i nc luded in the managed forest land survey (sect ion 2.4.3.3). O n e landowner sa id he pa id f i ve o r s ix t imes as m u c h property tax before m o v i n g to the managed forest c lass . A n o t h e r sa id her f a m i l y o w n s t w o acres o f waterf ront res ident ia l forest, w h i c h costs $2000 /year in taxes, and 25 acres o f managed forest, w h i c h costs $100 a year. T w o landowners surveyed had to f ight B C Assessment to a l l o w a s w i t c h f r o m res ident ia l forest to managed forest. B o t h succeeded, w i t h one reduc ing h is tax b i l l " f r o m about $4000 a year to $ 6 0 0 - 7 0 0 , " the other $ 3 5 0 a year , a th i rd the prev ious rate. M a n y taxat ion experts argue it is best to assess land at its market va lue rather than some " a r t i f i c i a l " use va lue , and of fer tax concess ions by ad just ing the re lat ive rates at w h i c h d i f ferent categor ies land - ag r icu l tu ra l , forest, res ident ia l , c o m m e r c i a l and industr ia l - are taxed ( G r e e n w o o d and W h y b r o w 1991). T h i s issue w i l l be further d iscussed later in this chapter. 97 7.3.2 Forest property tax in BC There are cur rent ly four property tax categor ies for forest land in B C (see table 1), each taxed in a di f ferent w a y (see tables 4 -7) . M a n a g e d forest and fa rm land forest are assessed at the i r " u s e v a l u e , " based o n access ib i l i t y , l ocat ion , topography and so i l types, w h i l e unmanaged and res ident ia l land are assessed at market va lue . M a n a g e d , unmanaged and f a r m l a n d forest are assessed o n l y o n the va lue o f the land , w h i l e res ident ia l forest land is assessed fo r both l and and t imber va lue . M a n a g e d and unmanaged forest is subject to a harvest tax, a p p l i e d b y a d d i n g the va lue o f t imber s o l d to property assessment t w o years after harvest, w h i l e f a r m l a n d and res ident ia l forest is not subject to a harvest tax. T a x rates a p p l i e d to the assessed property va lue are genera l ly , but not a lways , h ighest fo r res ident ia l , f o l l o w e d by unmanaged, managed forest and f i n a l l y f a rm land forest. C o n f u s e d ? S o are m a n y landowners . C l e a r l y these property tax p o l i c i e s do not meet the c r i te r ia o f s i m p l i c i t y or equity . A n effort was made in 1987 to s i m p l i f y the process by o f fe r i ng property tax incent ives su f f ic ient to ent ice a l l owners o f pr ivate forest land into a n e w l y created managed forest land tax category. T h e strategy appeared to be w o r k i n g un t i l the creat ion o f the Forest L a n d Rese rve in 1994 ( F L C 1996), a land use z o n i n g restr ict ion m u c h l i k e the A g r i c u l t u r a l L a n d Reserve ( A L R ) that severe ly cur ta i ls res ident ia l , c o m m e r c i a l o r indust r ia l deve lopment r ights. O n l y managed forest land was i n c l u d e d , and owners o f other pr ivate forest land have s ince rejected the idea o f j o i n i n g the managed forest tax category, whatever the tax benef i ts . O w n e r s o f forest land i n the A L R a l ready pay l o w e r property taxes, and no harvest tax, so have n o incent ive to j o i n the managed forest. 7.3.2.1 Proposals for property tax changes O n e proposed so lu t ion i s to create add i t iona l property tax incent ives , p re ferab ly the same as those cur rent ly app l ied to agr icu l tu ra l land ( for a c o m p a r i s o n o f forest vs agr icu l tu ra l land taxat ion , see tables 4-7) . Proponents o f th is idea a lso covet other tax incent ives n o w of fered o n l y to agr icu l tu ra l landowners but the p r o v i n c i a l government o n l y has leg is lat ive p o w e r to c o n t r o l property taxes, w h i l e the p o w e r over other taxes resides w i t h the federa l government . T h i s makes changes m u c h more d i f f i cu l t . S t i l l , p roperty taxes are usua l l y the largest f i x e d cost fo r most forest landowners , so agr icu l tu ra l land status w o u l d p rov ide a substant ia l f i n a n c i a l incent ive . H o w e v e r , there are add i t iona l obstacles. L o c a l governments in B C (mun ic ipa l i t i es and reg iona l governments) , as e lsewhere in C a n a d a and the U S , re ly o n property tax as their m a i n source o f i n c o m e to pay fo r schoo ls , roads, p o l i c e 98 and fire protect ion , sani tat ion, parks and other government serv ices. T h e importance o f property taxes has increased further in recent years because p r o v i n c i a l governments have been cut t ing financial assistance to l oca l governments . In B C , f igures presented at the 1998 meet ing o f U n i o n o f B C M u n i c i p a l i t i e s ( U B C M ) ind icate government grants to m u n i c i p a l i t i e s have been reduced f r o m $ 1 1 3 m in 1996 to $ 7 8 m in 1998 and l o c a l governments expect further cuts in 1999 ( V a n Sun 1998). Ju r i sd ic t i ons such as Onta r io , Q u e b e c , M i c h i g a n and W i s c o n s i n ( G r e e n w o o d and W h y b r o w 1991, M a l m e 1995) have addressed this p rob lem by f i rst lett ing l o c a l governments c o l l e c t property tax revenue, then re imburs ing landowners f r o m p r o v i n c i a l or state budgets. S i n c e property tax incent ives are des igned to have a broad p u b l i c benef it , it makes sense that the brunt o f such measures shou ld not be borne at the l o c a l l eve l . In Q u e b e c , the rebate amounts to 8 5 % o f s c h o o l and other m u n i c i p a l taxes, though the last 10 years o f rebates must be repa id o f the land is converted to other uses. Onta r io p rov ides a 1 0 0 % tax rebate, though not fo r less than $100 and m a x i m u m o f $25 ,000 . S o m e restr ict ions and convers ion penalt ies app ly . 7.3.2.1.1 Non-industrial forest landowners T h e survey suggests non - indust r ia l managed forest landowners in B C genera l ly v i e w thei r property taxes as very reasonable and that further cuts w o u l d not const i tute m u c h o f an incent ive . E v e n the deferred property tax in the f o r m o f a harvest tax is cons idered reasonable part ly because many landowners do not have mature t imber , do not cut large v o l u m e s o f w o o d or because they recogn ize that p a y i n g some tax is part o f be long ing to society . P roper ty taxes so l o w that further reduct ions do not const itute m u c h o f an incent ive is c o m m o n in most C a n a d i a n p r o v i n c e s ( H e r m e l i n 1998). O n e property tax change that shou ld be made, however , is to a l l o w landowners o f res ident ia l forest land to pay property tax o n l y on the va lue o f the land base, then pay the t imber por t ion on harvest in the same w a y as owners o f managed and unmanaged forest. Cu r ren t l y , owners o f res ident ia l forest land pay annual taxes on both land and t imber va lues , c reat ing a "perverse i n c e n t i v e " to deforest. E l i m i n a t i n g perverse incent ives can be as important as i m p l e m e n t i n g pos i t i ve incent ives . A n o t h e r area o f potent ia l change is to ensure landowners can put thei r land in the managed forest tax category, even i f B C Assessment th inks the "h ighest and best use" o f their property is res ident ia l deve lopment . T a x savings incur red c o u l d be recouped i f the land is subsequent ly w i t h d r a w n and deve loped . It shou ld a lso be noted that the "h ighest and best use" c r i te r ia appl ied, 99 by B C Assessment is de f ined in monetary terms and does not cons ider non -market va lues . O f t e n pr ivate land w i t h endangered and therefore va luab le ecosystems, such as G a r r y O a k , o l d D o u g l a s - f i r and o l d g rowth Ponderosa P i n e , are located in areas w i t h h igh land pr ices and pressure for deve lopment , such as G u l f Islands, southern V a n c o u v e r Is land and southern Inter ior ( H o p w o o d 1996). 7.3.2.1.2 Industrial forest landowners A t least one change shou ld be made in the w a y property taxes are assessed on indust r ia l forest land. Cu r ren t l y , B C Assessment , a p r o v i n c i a l agency, determines the va lue o f a p iece o f property - the assessed va lue - but m u n i c i p a l i t i e s and reg iona l d ist r icts independent ly set the property tax rates - the m i l l rate - that are app l ied to that assessed va lue . W h e n the B C government d e c i d e d in 1987 to l o w e r property taxes to pr ivate forest landowners w i l l i n g to j o i n the managed forest land tax category and submit and adhere to a general forest management p lan , it d i d so through B C Assessment , w h i c h l owered the assessed va lue o f the property and therefore the tota l property tax pa id . T h i s approach o n l y w o r k s i f m u n i c i p a l i t i e s and reg iona l d ist r icts app ly the same tax rate to managed, unmanaged and res ident ia l forest. H o w e v e r , in many instances th is tax sav ing has been e l im inated because m u n i c i p a l i t i e s and reg iona l d ist r icts app ly a h igher tax rate to managed forest land than to unmanaged and res ident ia l forest land, often because indust r ia l forest landowners are an obv ious source o f tax i n c o m e in c o m m u n i t i e s and reg ions l a c k i n g other sources o f tax i n c o m e (see tables 4 -6 ) . T o e l im inate th is p rob lem, government need not dictate the m i l l rates app l ied by l o c a l governments but o n l y require them to f i x the re lat ive rates at w h i c h the d i f ferent forest land c lass i f i ca t ions are set. F o r example , managed forest land must be taxed at rate x, unmanaged forest at 3x and res ident ia l forest land at Ax. T h i s w o u l d protect owners o f managed forest land f r o m taxat ion rates that e l iminate the intended management incent ive . O n t a r i o inst i tuted a system in 1998 in w h i c h managed forest is assessed at rates " s i m i l a r " to fa rmland , then ensures the assessed va lue is taxed at 2 5 % o f the rate app l ied to res ident ia l land. In return, l andowners submit a 20 -year forest management p lan , m a i n l y reforestat ion and an intent ion to harvest (Onta r io 1997). T h e B C government o n l y "encou rages" m u n i c i p a l i t i e s to set rates a p p l i e d to managed forest at leve ls c lose to fa rm land. 100 Regional Breakdown of Private Forest Land in BC (Residential and farmland forest areas are minimum estimates) Table 4: Property tax rations on Vancouver Island Assessment Class Area Site quality Assess value Tax revenue (in hectares) (average MAI*) (land & timber) (per hectare) Managed forest 650,000 6.0 $600 million $12 Unmanaged forest 5,300 6.0 $3 million $15 Residential forest 15,000 6.0 $90 million $60 Farmland forest 15,000 6.0 $1 million under $2 Total 685,300 $694 million Source: BC Assessment * Mean annual increment, measured in cubic metres/hectare/year Table 5: Property tax ratios in the Kootenays Assessment Class Area (in hectares) Site quality (average MAI*) Assess value (land & timber) Tax revenue (per hectare) Managed forest 225,000 2.3 $47 million $3 Unmanaged forest 28,000 2.0 $10 million $9 Residential forest 85,000 2.0 $45 million $5 Farmland forest 20,000 2.5 $1 million under $2 Total 385,000 $100 million Source: BC Assessment * Mean annual increment, measured in cubic metres/hectare/year Table 6: Property tax rations in the Central Interior Assessment Class Area Site quality Assess value Tax revenue (in hectares) (average MAI*) (land & timber) (per hectare) Managed forest 2,500 2.5 $1 million $5 Unmanaged forest 3,500 2.5 $4 million $30 Residential forest 175,000 2.5 $87 million $5 Farmland forest 120,000 2.5 $3 million under $2 Total 301,000 $95 million Source: BC Assessment * Mean annual increment, measured in cubic metres/hectare/year 101 7.3.2.2 Property tax on site productivity Rather than tax the va lue o f forest land, some j u r i s d i c t i o n s tax site p roduct i v i t y , o r susta ined y i e l d . T h i s method was proposed by a number o f industr ia l landowners in the survey and of fers several advantages. O n e is that it taxes h igh p roduct i v i t y sites at h igher rates than sites that y i e l d l o w e r p roduct iv i ty . T a x a t i o n po l i c i es that do not take p roduct i v i t y into account tend to encourage the c o n v e r s i o n o f l o w p roduct i v i t y sites to other uses. S i te p roduct i v i t y taxes a lso smooth out property taxes, rather than c reat ing b l i p s w h e n trees are harvested as can be the case w i t h the current harvest tax. F i n a l l y , site p roduct i v i t y taxes moderate increases w h e n property va lues are rap id l y r i s i ng . O r e g o n once had a tax on land va lue and a severance (harvest) tax, but has n o w int roduced a tax based on site p roduct iv i ty . Idaho of fers a c h o i c e o f property tax and severance tax o r site p roduct i v i t y tax to landowners between 5 and 2 ,000 acres and most prefer the site p r o d u c t i v i t y method because it is less c o m p l i c a t e d ( M a l m e 1995). E v i d e n c e f r o m other j u r i s d i c t i o n s is more ambiguous . N o r w a y has used the sustained y i e l d method but is n o w conver t ing to a separate tax on land and t imber , t rans i t iona l l y o f f e r i n g landowners a c h o i c e ( V e n n e s l a n d 1998). F i n l a n d unt i l 1993 taxed o n the basis o f site p r o d u c t i v i t y (an area-based y i e l d taxat ion w i t h progress ive tax rate) in w h i c h the taxable i n c o m e is not af fected by actual remova ls or by stumpage revenues obta ined ( G r a y s o n 1993, Jarve la inen 1998). N o w a n e w taxat ion opt ion , based on net stumpage earnings (a net revenue-based taxat ion w i t h f i x e d tax rate), is be ing in t roduced. A f t e r 2006 a l l F i n n i s h forest owners w i l l be taxed a c c o r d i n g to net stumpage earnings. A t the moment , about h a l f o f the non - indus t r ia l forest landowners have chosen the net revenue-based system. A tax on site p roduct i v i t y encourages landowners to manage thei r forest land more intens ive ly . I f the land is capable o f g r o w i n g 5 m 3 / h a / y e a r and the tax is based on this ab i l i t y , w o o d produced above this amount const itutes a " t a x f ree" bonus. O w n e r s w h o do not harvest are in ef fect pena l i zed . 7.3.2.3 Unintended effects of reduced property tax R e d u c t i o n s in property taxes are intended to prevent the c o n v e r s i o n o f forest land to other, more prof i tab le uses, m a i n l y res ident ia l deve lopment . H o w e v e r , it is genera l ly accepted that reduced taxes are cap i ta l i zed into land va lue ( G r e e n w o o d and W h y b r o w 1991), i nc reas ing its v a lu e and prevent ing forest landowners f r o m e x p a n d i n g the i r ho ld ings o r n e w o w n e r s f r o m b u y i n g forest land. It m a y a lso increase specu lat ion on the urban f r inge, by l o w e r i n g h o l d i n g 102 costs. In the in ter im, the p u b l i c is , i n effect, rent ing o r leas ing deve lopment r ights. R e c o u p i n g taxes w h e n land is conver ted to other uses addresses th is p r o b l e m to some degree. 7.3.3 Income Tax Federa l i n c o m e tax laws a l l o w forest landowners to deduct s i l v i c u l t u r a l expenses f r o m i n c o m e der ived f r o m the sale o f t imber or t imber -cu t t i ng r ights. In add i t i on , forest l andowners can genera l ly deduct expenses f r o m other sources o f i ncome . T h e latter is e s p e c i a l l y advantageous for non - indust r ia l landowners , w h o often der ive m u c h o f their i n c o m e f r o m n o n -forestry re lated sources and might not even have mature trees to harvest. A l l o w a b l e deduct ions inc lude the cost o f bu i l d i ngs used in forestry operat ions, interest, property taxes, improvements , seedl ings, labour , and deprec iat ion o f equ ipment and too ls . T h e o n l y catch is that the landowner be able to demonstrate " a reasonable expectat ion o f p ro f i t " f r o m the forest operat ion. That is, w i t h "expe r ience , s k i l l s , p l a n n i n g and f i n a n c i n g , " the forestry - re lated business w i l l be p ro f i tab le in the l ong run. These rules are the same as those app l ied to other businesses, but the p ro f i t ab i l i t y ru les are par t icu la r l y important fo r forestry because losses can add up over many years before any i n c o m e is rea l i zed . Income tax deduct ions can encourage landowners to reforest after harvest and take o n other s i l v i c u l t u r a l improvements a i m e d at the l ong - te rm p roduct ion o f t imber but they cannot p romote conservat ion w o r k such as protect ing or c reat ing habitat for plants and an ima ls , restor ing streamside buf fer zones af fected by past l ogg ing pract ices o r other act iv i t ies not related to the p roduct ion o f i ncome . T h i s was a po int o f concern fo r several landowners surveyed and w o u l d require tax changes at the federa l l eve l . A g r i c u l t u r a l status fo r forest landowners w o u l d have i m p l i c a t i o n s fo r i n c o m e tax (see A p p e n d i x A ) . There appear to be no examples in other j u r i s d i c t i o n s o f i ncome tax p rov i s ions that p romote conservat ion act iv i t ies . E v e n in Eu rope , where tax p r o v i s i o n s st rongly encourage reforestat ion and other s i l v i cu l tu re , the p rov i s ion o f more c o m p l e x non - t imber benef its does not yet seem to be a pr ior i ty . H o w e v e r , one report released by the U S Department o f A g r i c u l t u r e ( U S D A 1995) states that, i f the p r o v i s i o n o f non - t imber benef i ts is a lso in the p u b l i c interest, then the taxat ion system shou ld be des igned to, " i f not promote, then at least not pun ish these a c t i v i t i e s . " 7.3.3.1 Green Savings O n e opt ion that can reduce i n c o m e tax and d i rect money toward forest management is a " g r e e n " savings account , in w h i c h owners can accumulate pre - tax do l la rs to pay fo r future management expenses ( M a c y 1997). N o r w a y has had such a system, k n o w n as the Forest T rus t 103 Fund, in place since the 1930s. An obligatory fee is deducted from the amount paid to forest landowners for their timber. Most timber is purchased through forest landowners associations and they make the deductions. The landowner retains ownership of the fund but must use it for the benefit of the forest property, such as "silviculture, timber production and forest management," including his/her own and hired labour. No interest is paid on these accounts, encouraging landowners to make investments as soon as possible. Instead, 23% of interest goes to forest owner association and rest to the Department of Agriculture. Landowners can choose to deduct anywhere between 8% and 25% from their timber revenue, which is not included in income tax. When removed, a portion remains free of income tax. A similar system is being proposed in Nova Scotia (FR.BC 1996), with a levy based on annual harvest put into a trust fund managed by the Nova Scotia Sustainable Forestry Board or other regional body. Funds would be distributed through voluntary landowner applications. Adaptations of this system could be used to fund work aimed at protection or enhancing non-market values on private land. 7.3.4 Capital Gains Tax The managed forest landowners survey indicates capital gains tax does not appear to be an issue among industrial forest landowners in BC. I will therefore restrict the discussion to non-industrial forest landowners, some of whom identified capital gains tax as a significant factor in their forest management decisions. Their concerns are shared by other non-industrial landowners in Canada and the US (USDA 1995, Hermelin 1997). When forest land is transferred to lineal descendants, either upon death or by gift, the Canadian federal government taxes the capital gain. Often this capital gain is substantial, especially if land is located near urban areas, as is most private forest land in BC. As a result landowners can be forced, or at least inclined, to develop part of their forest land to pay the capital gains tax, or to harvest trees prematurely to raise money. Alternatively, landowners may simply sell the land, often to corporations, further concentrating the ownership of forest land (whether this is a bad thing is beyond the scope of this paper). Also, landowners may decline to invest in reforestation or other improvements, in anticipation of a inter-generational transfer. Most European countries (Grayson 1993, Vennesland 1998, Jarvelainen 1998) allow forest land, like agricultural land, to be rolled over to a new generation without incurring a tax penalty. The US has an inheritance or state tax for such situations that is lower than the rate for capital gains (Bliss and Martin 1990, USDA 1995). One alternative method suggested for BC (Macy 104 1997) is to p rov ide a cap i ta l gains exempt ion based o n years o f ownersh ip , so that a l a n d o w n e r w h o has he ld the land fo r 40 years might rece ive a comple te exempt ion , w h i l e another l a n d o w n e r w h o has he ld the l and fo r o n l y 3 years might rece ive o n l y a very s m a l l exempt ion . N o n - i n d u s t r i a l landowners can ga in some benef i t f r o m the cap i ta l gains tax, re lat ive to thei r indust r ia l counterparts; in that occas iona l sales o f t imber are treated in C a n a d a as cap i ta l ga in rather than i n c o m e and therefore taxed at a l o w e r rate. T h e d e c i s i o n o n h o w to treat the sa le o f t imber can be c o m p l i c a t e d , depend ing on whether the landowner ho lds the property on a l ong te rm basis to earn i n c o m e or s i m p l y f l i pped the property in the short - term, the number and f requency o f s i m i l a r t ransact ions, length o f t i m e the property was he ld , extenuat ing c i rcumstances (such as death or expropr ia t ion ) , i n d i v i d u a l or corporate o w n e r s h i p and whether a l l the trees o n a property are cut at once or over a per iod o f t ime ( V e r s i 1995). In the U S , taxat ion ru les in p lace f r o m 1943 to 1986 a l l o w e d t imber i n c o m e to be treated as long - te rm cap i ta l ga ins fo r tax purposes, w h i c h meant total taxes pa id were lower . T h i s w a s e l im ina ted in favour o f reduced marg ina l tax rate (Cubbage 1985). S i g n i f i c a n t l y , owners o f f a rm land forest in C a n a d a can pass on thei r property to c h i l d r e n w i thout p a y i n g cap i ta l gains, and a lso rece ive a $500 ,000 cap i ta l gains exempt ion i f they se l l the property on the open market. I f the property is j o i n t l y o w n e d by a coup le , the exempt ion total is $1 ,000,000. S i m i l a r rules app ly to both agr icu l tu ra l l and and forest land in western E u r o p e ( G r a y s o n 1993). 7.3.5 Logging tax T h e B C government lev ies a l ogg ing tax on l ogg ing operat ions under the L o g g i n g T a x A c t ( C F A 1983). T h e tax is equa l to the lesser o f 1 0 % o f " i n c o m e der ived f r o m l o g g i n g operat ions" o r 1 5 0 % o f the credi t a l l o w e d under sect ion 127 o f the federa l Income T a x A c t , w h i c h a l l o w s a deduct ion for two - th i rds o f p r o v i n c i a l taxes p a i d on l ogg ing income. T h i s tax is b iased toward non - indus t r ia l landowners because the first $25 ,000 o f l ogg ing i ncome in a year is exempt. H o w e v e r , the Income T a x A c t a l l o w s the deduct ion o f one - th i rd o f the l o g g i n g taxes f r o m tax otherwise payable , so the impact on indust r ia l landowners is mi t igated to some degree. Q u e b e c has a s i m i l a r l o g g i n g tax. 7.4 Covenants and conservat ion easements A covenant is a pr ivate legal agreement between t w o or more part ies that determines h o w a s p e c i f i c p iece o f land w i l l be used. F r o m a landowners po int o f v i e w , it is a p romise to do o r 105 re f ra in f r o m d o i n g cer ta in th ings per ta in ing to the use o f the i r land . F o r examp le , a l a n d o w n e r m igh t s ign a covenant w i t h a conservat ion o rgan i za t ion that states " M r Jones and h is he i rs p romise to use the property for conservat ion purposes . " A l t e r n a t i v e l y , an agreement m igh t p romise that the land "no t be used fo r deve lopment purposes . " L a n d o w n e r s enter into these rest r ict ive covenants because they want to ensure their land is used in perpetuity fo r conservat ion and /o r because the s e l f - i m p o s e d land use restr ict ions l o w e r property va lues and therefore property taxes. A conservat ion easement is a k i n d o f covenant that actua l l y transfers an interest in land f r o m the l andowner to another party, usua l ly a non -p ro f i t o rgan izat ion such as a " l a n d s t rust" o r " l a n d conservancy , " or other o rgan izat ion s p e c i a l i z i n g in the management o f forest and other lands fo r conservat ion purposes. L i k e other covenants , the terms o f the easement de f ine and l i m i t the k i n d o f act iv i t ies that can take p lace on the property , usua l l y p reserv ing the land f r o m deve lopment but a lso ensur ing the protect ion and enhancement o f e c o l o g i c a l va lues . L a n d o w n e r s cont inue to ma in ta in ownersh ip o f the land i t s e l f and m a y cont inue to use it fo r purposes such f a r m i n g o r forestry as l o n g as they meet the st ipu lat ions o f the agreement. C o n s e r v a t i o n easements are often granted by landowners , or so ld fo r a re la t i ve ly l o w p r ice , but th is does not necessar i l y have to be the case. T h e agreement can be f o r a l i m i t e d t ime o r in perpetui ty but, once s igned , the l andowner cannot opt out o f the agreement. ' ? 7.4.1 Impl icat ions f o r forest s tewardsh ip Covenants and easements have obv ious i m p l i c a t i o n s for conservat ion o f non -market va lues o n pr ivate forest land and governments in C a n a d a have been i n t roduc ing leg is la t ion to encourage thei r use. N e w B r u n s w i c k recent ly became the latest p rov ince to pass a C o n s e r v a t i o n Easement A c t ( G i b s o n 1998), f o l l o w i n g the lead o f B C , A l b e r t a , Saskatchewan , Onta r io , P E I and N o v a Scot ia . Severa l non - indus t r ia l forest landowners sa id they w o u l d be m u c h more w i l l i n g to enter into agreements w i t h non -p ro f i t o rgan izat ions than fo r fe i t land use r ights to the government . B C recent ly made th is easier by a l l o w i n g covenants , under sect ion 219 o f the L a n d T i t l e s A c t , to be h e l d by pr ivate conservat ion groups. C o n s e r v a t i o n easements c o u l d a lso be used as a m e c h a n i s m through w h i c h government c o u l d p rov ide at least part ia l compensat ion for loss o f forest land use r ights. T h e U S government created the Forest L e g a c y P r o g r a m as part o f the 1990 F a r m B i l l , a l l o w i n g the U S Forest S e r v i c e to purchase permanent easements on lands that can be e f fec t i ve l y protected and managed, and that has important va lues ( U S D A 1995). In B C , government or non -p ro f i t o rgan i za t ion m a y 106 enter into agreements w i t h pr ivate forest landowners to purchase and manage e c o l o g i c a l l y sensi t ive areas, such as streamside buf fers and w i n t e r habitat fo r ungulates, l e a v i n g landowners f reedom to manage the rest o f the i r land. 7.4.2 Purchase of land use rights A n o t h e r opt ion is outr ight compensat ion for a l l regulatory tak ings , i n c l u d i n g the outr ight purchase o f deve lopment r ights at market va lue ( S c h w i n d t and G l o b e r m a n 1996), and a lso the purchase o f land use opt ions cons idered to be env i ronmenta l l y detr imenta l . T h i s w o u l d cer ta in ly p rov ide a strong f i n a n c i a l incent ive for l andowners to meet p u b l i c interests o n thei r land . T h e added advantage is that such compensat ion fo rces government to cons ide r the true cost o f regulat ions (see sect ion 4.3). It a lso encourages land to be assessed at market va lue rather than some a r t i f i c i a l use va lue . Opponents o f this approach argue that the h igh cost o f compensat ion w i l l prevent government f r o m address ing env i ronmenta l issues ( C o h e n and R a d n o f f 1998). T h i s argument has meri t , so to keep in i t i a l expenses d o w n , government c o u l d pay compensat ion over t ime , or through add i t i ona l tax deferrals . A l t e r n a t i v e l y , the B C government c o u l d se l l c r o w n forest land , e x c l u d i n g deve lopment r ights and forest p ract ices cons ide red h a r m f u l , and use proceeds to buy deve lopment r ights and land use opt ions f r o m ex i s t i ng pr ivate forest landowners . A n o t h e r po int to cons ider is that i m p o s i n g deve lopment restr ict ions on some forest land increases the p r ice o f other land s t i l l ava i lab le fo r deve lopment . S o m e o f this increased va lue c o u l d be used to compensate landowners w h o have lost va lue . 7.5 Access to markets L a n d o w n e r s cannot be expected to engage in good stewardsh ip i f management o f pr ivate forest land is not a v iab le enterprise. Un fo r tunate ly , some non - indust r ia l landowners , pa r t icu la r l y on the G u l f Is lands and V a n c o u v e r Is land but a lso in the inter ior , have had p rob lems f i n d i n g markets for their t imber , m a k i n g it d i f f i c u l t fo r them to manage a prof i tab le enterpr ise. N o r m a l l y , a lack o f markets w o u l d not be an area o f concern fo r government p o l i c y . In th is case, however , government forest p o l i c y appears to be the m a i n reason fo r the poor state o f l og markets in B C . B e f o r e W o r l d W a r T w o , the l og market in B C was very act ive a long the coast, w i t h t i m b e r s o l d by independent l ogg ing compan ies to l og brokers and buyers. T h i s compet i t i ve market has s ince been undermined by the gradual integrat ion o f large forest compan ies that both harvest 107 t imber and manufacture w o o d products , great ly r e d u c i n g the need fo r compet i t i ve l o g b u y i n g ( M a r c h a k 1983). T h e Pearse Repor t noted that by the 1970 the v o l u m e o f logs bought and s o l d on the V a n c o u v e r L o g M a r k e t had dec l i ned f r o m 20 percent immed ia te l y after the S e c o n d W o r l d W a r to less than 14 percent by the m i d - 1 9 7 0 s , a l though actual v o l u m e s harvested i n B C had doub led . E v e n the 14 percent f igure does not accurate ly portray the actual s i tuat ion because m a n y o f the t ransact ions i nc luded are not between independent buyers and sel lers but rather trades a m o n g integrated compan ies w h o swap one k i n d o f l og fo r other logs more sui table to thei r needs. Cu r ren t l y , ten compan ies account fo r 8 7 % o f the t imber t ransact ions o n the V a n c o u v e r L o g M a r k e t , mos t l y in the f o r m o f trades ( B u r d a et a l 1997) rather than c o m p e t i t i v e b u y i n g and se l l i ng . O n e o f the m a i n ef fects o f this arrangement is the e x c l u s i o n o f non- integrated buyers f r o m the w o o d products manu factu r ing industry , pa r t icu la r l y w h e n markets are strong. T h e l ack o f compet i t i on a m o n g buyers has a lso reduced the p r ice o f logs in B C . A s i x year study - 1988 /89 to 1995 /96 - o f the more compet i t i ve Seattle L o g M a r k e t shows pr ices were , o n average, 136 percent h igher than those on the V a n c o u v e r L o g M a r k e t ( M a s c a l l 1997). F o r non - indust r ia l landowners , the lack o f compet i t i ve l og markets has resul ted in a lack o f independent buyers interested in modest v o l u m e s o f t imber , w h i l e admin is t ra t i ve ly determined l og va lues set on the V a n c o u v e r L o g M a r k e t ( B u r d a et al 1997) have keep pr ices l o w . S i g n i f i c a n t l y , stumpage pa id on p u b l i c forest land is set based on these admin is t ra t i ve ly determined l og va lues , a l l o w i n g the A m e r i c a n s to argue that B C subs id izes its forest industry through access to l o w cost t imber ( S c h w i n d t and Heaps 1996). Stumpage has r isen substant ia l ly s ince 1992 but m u c h o f the increase goes to F R B C , w h i c h channels the m o n e y into projects such as reforestat ion and restorat ion, that forest c o m p a n i e s shou ld have been d o i n g a n y w a y . 7.5.1 Improving access to markets T h e ideal so lut ion to th is p rob lem is fo r the B C government to market greater v o l u m e s o f t imber harvested on c r o w n land ( B u r d a et al 1997) and to encourage a greater range o f s m a l l and m e d i u m - s i z e d w o o d products manufacturers rather than encourag ing large integrated forest compan ies . These approaches were st rongly advocated by the Forest Resources C o m m i s s i o n ( F R C 1991) and are again the top ic o f d i scuss ion . In the in ter im, government has set up p u b l i c l y - r u n compet i t i ve markets, notab ly the V e r n o n L o g M a r k e t , that make a var ie ty o f d i f ferent w o o d s ava i lab le to untenured businesses and i nd i v idua ls , and that buy s m a l l cons ignments f r o m pr ivate landowners . 108 Pr ivate in i t ia t ives have also made market ing easier fo r pr ivate forest landowners . O n e e x a mp le is W o o d B C in 1 5 0 - M i l e House , where t i m b e r f r o m pr ivate land is gathered into larger cons ignments attractive to w o o d products manufacturers , and where s m a l l va lue -added manufacturers can buy s m a l l v o l u m e s o f spec ia l ty w o o d s . C o m p u t e r s are a lso p l a y i n g a ro le . T h e Cent ra l Interior W o o d Producers , A s s o c i a t i o n has set up a bu l le t in board on the Internet to b r i n g buyers and sel lers together. In add i t ion , the B C government has set up B C W o o d F ib re N e t to encourage l i nks between buyers and sel lers. F i n a l l y , one w a y fo r pr ivate forest landowners to create n e w markets is to seek " e c o -c e r t i f i c a t i o n " or "sus ta inab i l i t y c e r t i f i c a t i o n " fo r the i r products . B o t h the Forest S tewardsh ip C o u n c i l and the C a n a d i a n Standards A s s o c i a t i o n are w o r k i n g to set up ce r t i f i ca t ion systems, h o p i n g that consumers are w i l l i n g to pay a p r e m i u m for w o o d harvested a c c o r d i n g to re la t i ve ly str ict env i ronmenta l standards. L a n d o w n e r s surveyed l i k e d the idea but were concerned about cer t i f i ca t ion costs. 7.6 Conclusions G o v e r n m e n t s o r i g i n a l l y began o f fe r i ng forest landowners f i n a n c i a l incent ives because the l o n g t ime per iod requi red for trees to reach marketab le age tended to encourage the c o n v e r s i o n o f forest land to other uses that o f fered a more immediate return on investment, such as agr icu l ture or res ident ia l deve lopment . It was felt that incent ives were needed to ensure a stable future supp ly o f t imber to the economy . M o r e recent ly , under pressure f r o m the p u b l i c , governments have become more aware o f the n o n - t i m b e r benef i ts p r o v i d e d b y forests and have begun c o n s i d e r i n g f i n a n c i a l incent ives to promote the protect ion o f env i ronmenta l va lues . M o s t governments try to promote stewardship , a i m e d m a i n l y at ensur ing t imber supply , through di rect f i nanc ia l assistance for act iv i t ies such as reforestat ion, other s i l v i cu l tu re , m a p p i n g and p lann ing . T h e p r o b l e m w i t h d i rect f i n a n c i a l assistance is that these programs, often part o f more comprehens ive "ex tens ion p rograms" c o m b i n i n g research, educat ion and f i n a n c i a l assistance, tend to be increas ing ly expens ive to admin ister . In add i t ion , such assistance is i n effect a subs idy , s ince it o n l y encourages landowners to carry out act iv i t ies they must a n y w a y undertake, a lbeit more s l o w l y . F i n a l l y , d i rect f i n a n c i a l assistance tends to be sporad ic and dependent on p r e v a i l i n g p o l i t i c a l cond i t ions . O n the other hand, d i rect f i nanc ia l assistance costs are usua l l y transparent, compared to tax benef i ts , w h i c h are often h idden . A l s o , d i rect f i nanc ia l assistance m a y be usefu l in p r o m o t i n g the protect ion o f non -market va lues p r o v i d e d by forest land, because there are no market 109 incent ives fo r landowners to undertake act iv i t ies such as stream protect ion and w i l d l i f e range management. M o s t governments , i n c l u d i n g in B C , a lso p rov ide preferent ia l property tax treatment fo r forest landowners . P o l i c i e s often reduce annual tax payments in return fo r a harvest o r severance tax w h e n trees are actua l l y harvested. In B C , property taxes fo r non - indust r ia l landowners are a l ready l o w and o f fer l i t t le scope for add i t iona l reduct ions as an incent ive fo r p rotect ion o f env i ronmenta l va lues . H o w e v e r , an ex i s t i ng p o l i c y to requi re payment o f annual property tax on both land and t imber va lues on res ident ia l forest land shou ld be changed to a l l o w l o w e r annual payments , w i t h a harvest tax app l ied w h e n trees are cut. Industr ial landowners , m e a n w h i l e , w o u l d benef i t f r o m a p o l i c y that ensures m i l l rates a p p l i e d by l o c a l governments do not w o r k at cross -purposes to tax breaks p rov ided by the p r o v i n c i a l government . Forest landowners c o u l d a lso benef i t f r o m agr icu l tu ra l status, w h i c h w o u l d o f fer a number o f financial benef i ts (see A p p e n d i x A ) . Income taxes are m a i n l y a federa l matter and large ly b e y o n d the p o w e r o f the p r o v i n c i a l government to l o w e r in exchange fo r i m p r o v e d stewardsh ip , though the p r o v i n c i a l government can issue tax credits o r adjust its por t ion o f the i ncome tax. Changes to be in t roduced in 2001 c o u l d g ive p rov inces more d iscret ionary power . F o r n o w the p r o v i n c i a l government c o u l d w o r k w i t h the federa l government to of fer tax deduct ions fo r landowners w h o invest in conservat ion . Cu r ren t l y , deduct ions are o n l y a l l o w e d fo r improvements that w i l l y i e l d future prof i ts , such as reforestat ion, other s i l v icu l tu re , n e w bu i l d i ngs and equipment . C a p i t a l gains tax is a lso a federal issue but deserves ser ious attent ion, pa r t icu la r l y for n o n -industr ia l forest landowners w h o m a y seek to deve lop forest l and to raise m o n e y to pay fo r cap i ta l gains w h e n land is transferred to l inea l descendants, o r w h o harvest immature trees in order to reduce land va lues and cap i ta l gains payments. A g a i n , owners o f agr icu l tu ra l land can transfer land to l inea l descendants w i thout p a y i n g cap i ta l gains , and get a $500 ,000 deduct ion (per spouse) i f the land is s o l d outr ight. G i v e n the l ack o f latitude in reduc ing property taxes and federal j u r i s d i c t i o n over other taxes, the B C government shou ld cons ider encourag ing the use o f covenants and conservat ion easements. N o n - p r o f i t o rgan izat ions or government agencies c o u l d purchase the deve lopment r ights o f pr ivate forest landowners , and enter into agreements p rotect ing env i ronmenta l va lues . T h i s arrangement ensures the costs o f government env i ronmenta l p o l i c i e s are transparent and that landowners are compensated fo r any " regu latory t a k i n g . " 110 F i n a l l y , the B C government shou ld reassess p o l i c i e s that promote the d isappearance o f compet i t i ve l o g markets in B C , not o n l y fo r the i r ef fect on the ab i l i t y o f non - indus t r ia l forest landowners to market thei r t imber , but a lso because these p o l i c i e s hamper forest compan ies w i t h tenure o n c r o w n land , as w e l l as the ab i l i t y o f n e w w o o d products manufacturers to f i n d t imber suppl ies . I l l Chapter 8: Information and Education 8.1 Introduction P r o v i d i n g in fo rmat ion and educat ion on forest management to pr ivate landowners can pose a number o f p ract ica l and p o l i t i c a l d i f f i cu l t i es . E d u c a t i o n and in fo rmat ion programs are d i f f i c u l t to organize and coord inate , and can be expens ive to admin ister , w h i l e results are neither immed ia te nor eas i l y measurable . In add i t ion , there are a l w a y s d isagreements over the " f a c t s " and h o w to p rov ide sc ien t i f i c i n fo rmat ion on forestry and env i ronmenta l issues that is ob ject i ve and c red ib le . T h i s is espec ia l l y true as p u b l i c demands on pr ivate forest land have expanded f r o m s i m p l y ensur ing a stable t imber supp ly to the m u c h more subject ive and c o m p l e x issue o f address ing env i ronmenta l concerns . O n the other hand, research st rongly suggests that i n fo rmat ion and educat ion programs can have a s ign i f icant and last ing ef fect on h o w landowners manage their pr ivate forests, and whether they are w i l l i n g o r able to meet p u b l i c interests on pr ivate land ( B l i s s and M a r t i n 1989, B l i s s and M a r t i n 1990, St jernquist 1973, M a c y 1997). M o r e important ly , research shows in fo rmat ion and educat ion is a prerequis i te to the e f fect ive use o f other incent ive programs. T h i s chapter examines the mer i ts o f educat ion and in fo rmat ion programs in B C and other j u r i s d i c t i o n s , cons iders the p ract ica l and p o l i t i c a l obstacles to such programs, and appl ies th is k n o w l e d g e to the deve lopment o f future i n fo rmat ion and educat ion programs in the context o f pr ivate land forestry in B C . 8.2 What is information and education? T h e terms in fo rmat ion and educat ion are used interchangeably in m u c h o f the l i terature app l ied to pr ivate forest land and it is tempt ing , fo r the sake o f s i m p l i c i t y , to use o n l y one te rm or the other. T h e y are, however , subt ly d i f ferent terms. In format ion refers to k n o w l e d g e , facts or data and one ro le government can and has p layed is to make forestry related i n fo rmat ion ava i lab le to pr ivate landowners w h o choose to take advantage. E d u c a t i o n refers to systemat ic deve lopment or t ra in ing by inst ruct ion or study, and represents a more p ract ica l approach in w h i c h pr ivate forest landowners are a c t i v e l y encouraged to acqui re k n o w l e d g e . In format ion and educat ion programs therefore refer both to forestry - re lated k n o w l e d g e and to the act o f a c t i v e l y c o n v e y i n g such in fo rmat ion . T h e purpose o f i n fo rmat ion and educat ion - f r o m a p u b l i c p o l i c y po int o f v i e w - is to i n s t i l l in pr ivate forest landowners a desire and ab i l i t y to improve the stewardsh ip o f the i r l and in a w a y 112 that meets p u b l i c interests. In most j u r i s d i c t i o n s this has meant under tak ing reforestat ion and other s i l v i cu l tu re a imed at p r o v i d i n g a v i a b l e and stable future supp ly o f w o o d , so i n fo rmat ion and educat ion programs thus far have i nc luded s i l v i cu l tu re , m a p p i n g and p lann ing , harvest ing methods, equipment maintenance and operat ion , safety and s m a l l business s k i l l s . P u b l i c expectat ions have s ince expanded and in fo rmat ion and educat ion programs are b e g i n n i n g to i nc lude forest and w i l d l i f e eco logy , e c o l o g i c a l va lues p r o v i d e d by forests, recreat ion opportuni t ies , aesthetic va lues and h o w to adapt th is k n o w l e d g e to l oca l cond i t i ons and i n d i v i d u a l c i rcumstances . 8.3 Support for information and education C o n s i d e r a b l e ev idence suggests government i nvo l vement in i n fo rmat ion and educat ion programs is c r i t i c a l to the success o f government p o l i c i e s a imed at i m p r o v i n g stewardsh ip on pr ivate forest land. M u c h o f this research was done in the context o f non - indust r ia l forest landowners in C a n a d a and the U S , where studies s h o w landowners often engage in poo r forestry pract ices because they lack techn ica l expert ise ( B l i s s and M a r t i n 1990) and because m a n y peop le o w n pr ivate forest land as a p r i n c i p a l res idence rather than fo r forestry purposes ( N I W A 1994). S i m i l a r l y , landowners most in need o f i n fo rmat ion and educat ion in B C appear to be fanners , ranchers and owners o f res ident ia l forest land , though owners o f managed forest land , both n o n -industr ia l and indust r ia l , c o u l d a lso benef i t to v a r y i n g degrees. 8.3.1 Evidence from other jurisdictions O n e ear ly study on the ef fect iveness o f educat ion was done in S w e d e n (St jernquist 1973), where about h a l f o f a l l forest land is o w n e d by 250 ,000 non - indust r ia l landowners . T h e study compares t w o regions, one in w h i c h the " let ter o f the l a w " app l ied , the other i n w h i c h a c o m b i n a t i o n o f "educat ion and gentle p r o d d i n g " was used. T h e result s t rongly supports the educat iona l approach w idespread in S w e d e n . A look at S w e d i s h forestry ( H a l e y 1994) c o n c l u d e s that: "A successful forest policy requires a competitive forestry sector with enlightened landowners and managers of the forest resource who can make locally adjusted decisions." T h i s c o n c l u s i o n is supported by an extens ive r e v i e w o f studies in the southern U S and Grea t L a k e s states ( B l i s s and M a r t i n 1990), w h i c h conc ludes : 113 "Education has... the greatest and most enduring effect on [non-industrial private forest land] management." In format ion and educat ion programs are often i n c l u d e d in government programs that f und some c o m b i n a t i o n o f research, educat ion and d i rect f i n a n c i a l assistance, k n o w n a m b i g u o u s l y as extens ion serv ices (see sect ion 7.2). Research into the ef fect iveness o f these programs ind icates i n fo rmat ion and educat ion is a prerequisite to the adopt ion o f g o o d forest management pract ices (St jernquist 1973, C F S 1996, M a c y 1997), and that cont inued or increased f i n a n c i a l assistance, tax breaks or t e c h n i c a l assistance programs are o n l y e f fect ive once the d e c i s i o n to i m p r o v e stewardship has been made. Other research ( B l i s s and M a r t i n 1989, Jones et al 1995) ind icates educat ion y ie lds more " p u b l i c l y des i rab le management a c t i v i t i e s " than s i l v i c u l t u r a l f u n d i n g assistance and other incent ive programs. A n o t h e r interest ing ana lys is o f i n fo rmat ion , educat ion and pr ivate land forestry (Sa lwasser 1990) observes that k n o w l e d g e and techno logy b r i n g a f f luence, and a f f luence a l l o w s peop le to perce ive they can a f fo rd a better qua l i t y env i ronment and to support costs o f a c h i e v i n g it. F i n a l l y , the survey o f managed forest landowners s h o w e d a strong major i ty o f landowners saw the need for more in fo rmat ion and educat ion for a l l pr ivate forest landowners , e s p e c i a l l y n o n -industr ia l ones (see sect ion 2.4.3.5), and said there is a cor re la t ion between educat ion and stewardship . O n e f i na l note o f interest is that p r o m o t i n g stewardsh ip o f env i ronmenta l va lues o n pr ivate forest land may not a l w a y s be c o n d u c i v e to increased t imber p roduct ion . In F i n l a n d , w h i c h is 90 percent forested, wood - p r oduc t s f i rms have been fo rced to l ook outs ide the count ry fo r logs because many o f the 300 ,000 sma l l pr ivate w o o d l a n d owners , many o f them absentees w h o l i v e in c i t ies , have no desire to manage their land fo r t imber (Journa l o f Forestry , Sept 1985) p re fer r ing instead to mainta in untouched forest on thei r land. 8.4 Program design: Lessons from BC and other jurisdictions B a s e d on research ment ioned above and in terv iews and unpub l i shed papers f r o m fo rmer N e w B r u n s w i c k Forest E x t e n s i o n Serv ice d i rector J o a k i m H e r m e l i n , this sect ion out l ines the important features o f an educat ion and in fo rmat ion p rog ram appropr iate to B C . 8.4.1 Consultation wi th professional foresters M o s t landowners surveyed said the best educat iona l opt ion for non - indust r ia l l andowners is one -on -one consu l tat ion w i t h a pro fess iona l forester. M a n y respondents consu l ted w i t h a 114 pro fess iona l forester under the F R D A program (see sect ion 7.2), w h i c h de l i ve red t e c h n i c a l adv ice through W o o d l a n d E x t e n s i o n Foresters contracted to the C a n a d i a n Forest Se rv ice . D u t i e s were to p rov ide i n i t i a l consu l ta t ion w i t h c l ien ts , prepare reconnaissance surveys a n d inventory , d iscuss l ogg ing plans and s i l v i cu l tu ra l improvements , mon i to r projects and l ia ise w i t h landowners . O n e l andowner w h o took part in the F R D A program, d i scont inued in 1996, s u m m e d up the fee l ings o f many other non - indus t r ia l l andowners : "The most instructive two days I spent was going out with a forester and looking at the forest through the eyes of a forester. I really benefited from that." Preference for one -on -one consul tat ions is consistent w i t h research in the U S . O n e study in W i s c o n s i n inc ludes a l iterature r e v i e w ( B l i s s and M a r t i n 1989) o f studies in other U S states, and conc ludes one -on -one consul tat ions are "perhaps the most power fu l external incent ive to forest management . " In a later study ( B l i s s and M a r t i n 1990), the authors a lso f o u n d that, w h e n forest landowners were asked to chose o n l y one o f three opt ions , t e c h n i c a l assistance, cos t - shar ing o r tax incent ives , they u n a n i m o u s l y chose techn ica l assistance f r o m pro fess iona l foresters. T h e report conc ludes : "Professional foresters can take pride in the fact that, of all incentives offered NIPF [non-industrial private forest] owners, active managers value most highly the advice and assistance ofprofessional foresters. This should send a clear signal to policy-makers as they decide which programs to expand or cut. " T h e W i s c o n s i n state government p rov ides 60 p ro fess iona l foresters upon request, free o f charge. In format ion p r o v i d e d inc ludes forest reconnaissance, management p lann ing , t imber m a r k i n g , pest con t ro l adv ice , product market ing and u t i l i za t ion , and ava i lab le programs. S i m i l a r programs a lso ex ist in other U S states (notably Oregon ) , the European U n i o n and , to a lesser extent, in C a n a d i a n p rov inces under j o i n t f e d e r a l / p r o v i n c i a l f u n d i n g arrangements s i m i l a r to F R D A . T h e p rob lem w i t h one -on -one consu l tat ions is that they are expens ive , and demand a l w a y s seems to outstr ip the resources ava i lab le ( H e r m e l i n 1998). 8.4.2 Program coordination T h e f i rst step for n e w in fo rmat ion and educat ion programs, or n e w sub -programs, is to get the attent ion o f forest landowners . A survey o f forest landowners o n V a n c o u v e r Is land ( N I W A 1994) shows that 7 3 % o f respondents were u n f a m i l i a r w i th the forestry extens ion serv ices l is ted i n the quest ionnaire . S i m i l a r l y , o n l y about 10% o f e l i g i b l e pr ivate forest landowners in B C took 115 advantage of FRDA (CFA 1996). Initial communication is usually done through pamphlets, posters, newspapers or radio. Television would be a good medium but is expensive. The next step is to build a relationship with interested landowners through newsletters and in-house newspapers, then provide educational opportunities through any combination of books, videos, modular courses, workshops and seminars. Computers are also playing an increasing role and provinces such as New Brunswick are looking at distance education options (Hermelin 1998). Issues covered vary widely, but generally include harvesting, safety, silviculture, shelterbelts and windbreaks, small-scale woodlot equipment, taxation issues and small business skills, and more recently forest ecology, integrated land management and continuous cover silviculture systems. Providing knowledge in this way helps ensure landowners are able to make the most of their time with professional foresters. The logical progression from basic education, to one-on-one forester advice to financial assistance is common to many extension programs. Experience and education varies considerably among landowners, so the system must be flexible and voluntary. 8.4.2.1 Making the most of professional foresters One way to use professional foresters more efficiently is to make use of conferences, workshops and field demonstrations, so they can pass their knowledge on to a large audience. Many landowners, however, are reluctant to attend functions away from home. Some jurisdictions have addressed this problem by offering special training to volunteer woodland owners, who in turn pass their knowledge on to other landowners. This is supported by evidence that landowners prefer to learn from their peers. In Oregon, this initiative is called the Master Woodland Manager Program (Macy 1997) and includes a 85-hour "train-the-trainer" instruction. From 1983 to 1991, 5700 people have been reached by these volunteers. Wisconsin has a similar initiative (Bliss and Martin 1990). Given the experience and education among landowners in the survey, there is plenty of knowledge that could be passed on to other private forest landowners, as well as professional foresters. Another way to improve access to professional foresters, and among landowners, is through the Internet, including websites, bulletin boards and "chat rooms." 8.4.3 "One-stop-shopping" A number of non-industrial forest landowners surveyed noted that much of the information i they required to effectively manage their forest land was available, as long as they are prepared to invest considerable time and effort to obtain it from government agencies, forest companies, educational institutions, or sift through vast amounts of information on the Internet. Difficulty in 116 obta in ing usable in fo rmat ion can be a s ign i f icant imped iment to learn ing , but can be addressed through the creat ion o f a centra l o f f i ce to p rov ide " o n e - s t o p - s h o p p i n g " fo r i n fo rmat ion . S u c h an o f f i c e can p rov ide an in i t i a l contact fo r landowners and c o u l d p rov ide a range o f add i t iona l i n fo rmat ion , or at least po int landowners in the r ight d i rect ions . Severa l j u r i s d i c t i o n s have taken notable steps to p rov ide one -s top -shopp ing . Forest E x t e n s i o n Serv ices in N e w B r u n s w i c k ( H e r m e l i n 1995) has a centra l l end ing and d is t r ibu t ion l ib rary - o r W o o d l o t R e s o u r c e Cent re - used by staff, i nd i v idua ls and groups i n v o l v e d in w o o d l o t educat ion and p u b l i c educat ion , p r o v i d i n g wr i t ten mater ia l , m o d u l a r courses and v ideos fo r i nd i v idua ls o r fo r use in c lasses , w o r k s h o p s and seminars . T h e o f f i c e a lso coord inates t ra in ing for p ro fess iona l and t e c h n i c a l staff, as w e l l as interested landowners . A computer -based distance learn ing f a c i l i t y is be ing deve loped . In S w e d e n , research conso l ida ted around S K O G F O R S K , w h i c h takes a " h o l i s t i c a p p r o a c h " to studies in harvest ing, s i l v icu l tu re , e c o n o m i c s , human resources, o rgan izat ions , and env i ronmenta l and e c o l o g i c a l issues. T h i s in fo rmat ion is made ava i lab le to forestry f i e l d w o r k e r s and the forest educat ion c o m m u n i t y through sc ien t i f i c reports, reports fo r f i e l d use, news bu l le t ins , v ideos , handbooks , pamphlets , manuals and other mater ia l . T h e forest l a n d o w n e r can tap into the research d i rec t l y o r through forest l andowner organizat ions , government extens ion serv ices, and educat iona l inst i tut ions. N o r w a y has a cent ra l i zed system cons i s t i ng o f the p u b l i c Forest Se rv ice , the pr ivate Forest O w n e r s ' A s s o c i a t i o n and a pub l i c / p r i va te partnership in the Forest E x t e n s i o n Institute, w h i c h is a j o i n t venture a m o n g 30 forestry organ izat ions and sc ien t i f i c inst i tut ions. G e r m a n y has coord inated research, i n fo rmat ion and educat ion in the Fo rs t l i che V e r s u c h s - und Forschungsansta l t (Forestry Research and E x p e r i m e n t a t i o n Institute). M e a n w h i l e , Eu ropean efforts are coord inated in the European Forestry Institute. 8.4.3.1 US s tates a n d O r e g o n U S states can take advantage o f a partnership between the federa l Department o f A g r i c u l t u r e , land grant un ivers i t ies w h i c h admin is ter research, i n fo rmat ion and educat ion , and l oca l governments w h i c h p rov ide what is k n o w n as Coope ra t i ve E x t e n s i o n Se rv ice a imed at agr icu l ture , forestry and w i l d l i f e and f isher ies . O n e o f t -c i ted examp le is O r e g o n w h i c h has, in terms o f facu l ty and budget, the largest Forestry E x t e n s i o n P r o g r a m in the U S ( M a c y 1997), c o m b i n i n g educat ion , techn ica l assistance and tax incent ives . 117 Under this system, Oregon State University does environmental and forestry research, trains foresters, provides educational material and administers the program, while the one-on-one technical assistance is provided through the Oregon Service Forestry Program, a section of the Oregon Department of Forestry. Organizers of the Oregon program emphasize that they provide information in response to needs expressed by learners and that feedback mechanisms ensure the service is constantly evolving. The program includes 35 faculty at the university campus, who provide research and support, and in county offices, where faculty work directly with landowners. The program has an annual budget of $2 million: 50% state, 25% federal, 15% county and 10% from grants and other sources. About 35% of forest land in Oregon is privately owned. 8.4.3.2 Coordinating legislation Landowners are often as confused by the array of programs and policies that apply to private forest land as they are about sources of forest management information. The survey (Chapter Two) suggests the same is true in BC, where federal, provincial and local government regulations apply. That means landowners are affected by the federal Department of Fisheries and Oceans and Environment Canada, the provincial Ministry of Environment, Lands and Parks and Ministry of Forests, BC Assessment and the Forest Land Commission, various local administrations and municipal by-laws, as well as organizations such as the Islands Trust. A study in Wisconsin (Bliss and Martin 1989) shows landowners find a variety of government agencies address narrow concerns rather than broad management needs. This results in a "confusion of programs, requirements, procedures and personalities." Even in Oregon, where information and education is highly centralized, information about new regulations and services is provided by other government agencies. Most landowners would prefer a single government agency that interacts with the private forest landowners. 8.4.4 Neutrality and objectivity While a central repository of information and education is desirable, there must be assurances that no industry, government agency or other organization gain control over content, so that information is seen as objective. As the author of a recent study in BC puts it: "[Education should] provide the means and capacity for landowners to make informed management decisions appropriate to local conditions and individual circumstances. It must do so in an atmosphere of credibility and neutrality (Macy 1997, p48)." 118 O b j e c t i v i t y and neutral i ty is espec ia l l y important in the area o f research. A c c o r d i n g to a S w e d i s h paper on educat ion (Sa lwasser 1990), researchers have an ob l i ga t ion to p rov ide ob ject ive and unambiguous in fo rmat ion on what is poss ib le , to he lp deve lop sound strategies to meet goals , and to s h o w the costs and consequences o f a l ternat ive strategies. T h e object ive , is to he lp landowners meet thei r o w n needs. T h e in fo rmat ion p rov ided shou ld i nc lude more than j u s t forest management , and shou ld inc lude a k n o w l e d g e o f the humani t ies and " the b igger p ic tu re . " O n e poss ib le p r o b l e m associated w i t h cent ra l i za t ion is stagnation and l ack o f n e w innovat ions , so ob jec t i v i t y can be enhanced by p r o v i d i n g access to mater ia l f r o m a range o f sources. T h e Forest E x t e n s i o n Serv ice in N e w B r u n s w i c k w o r k s together w i t h l oca l groups and w o o d l o t o w n e r assoc iat ions , as w e l l as research units in other countr ies , and has agreements w i t h extens ion staf f in Eastern C a n a d a and U S to exchange free educat iona l mater ia l . ( H e r m e l i n 1995). N e w members are w e l c o m e as long as it is a " t w o - w a y street." In fo rmat ion shar ing a lso helps reduce costs , a usefu l idea in B C where the number o f pr ivate forest landowners is l i m i t e d . 8.4.4.1 Objectivity in administration L i k e research, the organ izat ion or o rgan izat ions admin is te r ing in fo rmat ion and educat ion programs must be seen as ob ject ive and c red ib le . U n i v e r s i t i e s o r other re la t ive ly neutral inst i tut ions are usefu l in this regard - as in O r e g o n , S w e d e n and G e r m a n y - e s p e c i a l l y c o m p a r e d to government agencies, w h i c h are constra ined by a range o f p o l i t i c a l , env i ronmenta l , s o c i a l and e c o n o m i c issues. O f ten the actual f i e l d w o r k is done by foresters or other t ra ined p ro fess iona ls on contract to government or landowner assoc iat ions , but it shou ld a l w a y s be poss ib le fo r landowners to consu l t d i rec t l y w i t h research staf f and to access to o r i g i n a l research. It shou ld be noted that the ob ject i v i t y and neutra l i ty argument has been c o m p l i c a t e d by increas ing p u b l i c demand fo r protect ion o f e c o l o g i c a l va lues p r o v i d e d by forests. T r a d i t i o n a l i n fo rmat ion and educat ion encompasses issues l i k e p l a n n i n g and mapp ing , harvest ing techn iques , safety, adaptat ion o f fa rm equipment to s m a l l - s c a l e forestry, so i l conservat ion , reforestat ion and other s i l v icu l tu re , sma l l business management s k i l l s and other re la t ive ly unambiguous top ics . M o r e recent i n fo rmat ion and educat ion has begun to inc lude more c o m p l e x and subject ive issues such as v i s u a l qua l i ty , habitat protect ion and maintenance o f b iod ive rs i ty . 8.4.5 Continuity In fo rmat ion and educat ion programs shou ld be as cont inuous as poss ib le . L o c a l and internat ional market cond i t ions are constant ly chang ing , as are consumer preferences and p u b l i c demands on pr ivate forest land. Forest land often changes hands at least once d u r i n g a rotat ion , 119 and new landowner may not have the same experience and education as the previous owner. In addition, scientific research continues to change the way we view forest ecosystems and new knowledge should be translated into practice. Such changes make it likely that both non-industrial and industrial forest landowners can benefit from ongoing access to information and education. Again, Internet access and website development could be used to enhance continuity. Unfortunately, information and education programs in BC have been sporadic and haphazard. The main program, FRDA, was discontinued in March 1996 and no successor has emerged. Some information and education is available through various community colleges, the Ministry of Forests or Forest Renewal BC (Macy 1997) but efforts are not coordinated, extensive or continuous. This mirrors trends in other jurisdictions in Canada and the US, where fiscal restraints are reducing government commitments to such programs (Hermelin 1998). Lack of funding is exacerbated by the lack of immediate and quantifiable results provided by information and education, which makes it difficult for politicians to enhance their re-election efforts. 8.5 Program delivery The issue of program delivery is largely about the degree of government involvement in information and education. Funding is usually provided largely by government - though landowners also provide funding, often through levies on timber sales - so government not surprisingly wants to maintain a degree of control, not least over new jobs created. There are, however, three reasons to minimize government involvement. First, government involvement tends to foster costly bureaucracy, a trend witnessed by many forest landowners in BC over the life of the FRDA program. Second, landowners do not trust government and prefer to learn from their peers or professional foresters. One study on Vancouver Island (NIWA 1994) shows twice as many people would prefer to contact the North Island Woodlot Association than the Ministry of Forests for assistance in managing their forest land. The study is supported by the managed forest landowners survey, which shows landowners who also have Woodlot Licenses on crown land believe MoF staff - currently the main source of information - do not understand the attitudes, objectives and constraints of private forest landowners. Third, government programs tend to be centralized (Macy 1997), and "a centralized delivery agency cannot respond as readily or as economically to current or future needs of the diverse group of landowners." Jurisdictions such as Oregon and Sweden have chosen a centralized 120 admin is t ra t ion fo r research and a centra l repos i tory o f i n fo rmat ion , but have made p rogram de l i ve ry as l oca l and decentra l i zed as poss ib le , usua l l y through landowners assoc iat ions . 8.5.1 Options for BC M a c y says the best opt ion fo r B C is to de l i ve r i n fo rmat ion through the Federa t ion o f B C W o o d l o t A s s o c i a t i o n s - c o m p o s e d o f 22 l oca l assoc iat ions f r o m V a n c o u v e r Is land to the Peace R i v e r - w h i c h has the advantage o f be ing k n o w n , l oca l and decent ra l i zed . T h e Federat ion is cur rent ly i n v o l v e d in " e v o l v i n g d i a l o g u e " w i t h the M o F over extens ion serv ices to those i n v o l v e d in the W o o d l o t L i c e n s e program, m a n y o f w h o m a lso o w n thei r o w n forest land . O the r l andowner associat ions c o u l d be a lso become i n v o l v e d . There is a lso a ro le for the B C Forest ry C o n t i n u i n g Studies N e t w o r k , w h i c h is connected to var ious post -secondary inst i tut ions, yet mainta ins a degree o f au tonomy i n its operat ions. Instructors are genera l ly l oca l and c o u l d use in fo rmat ion and courses f r o m a centra l repos i tory to deve lop c u r r i c u l a suited to l oca l needs. T h e network a lso has exper ience in adul t educat ion , w h i c h can d i f fe r cons ide rab ly f r o m more f o r m a l educat ion i f the part ic ipants have f a m i l i e s , w o r k f u l l t ime , often have cons iderab le exper ience , want to learn, and have l i t t le t i m e grades, exams or cer t i f icat ions . A n o t h e r opt ion ( M a c y 1997) is to o f fer i n fo rmat ion and educat ion through the M i n i s t r y o f A g r i c u l t u r e , F o o d and F isher ies ( M A F F ) . T h e m in i s t r y a l ready has D i s t r i c t A g r i c u l t u r a l i s t s p r o v i d i n g adv ice on f ood crops , and s ince m a n y non - indust r ia l landowners a lso o w n fa rmland , add i t iona l t ra in ing in forestry c o u l d make them more versat i le . A t the moment , however , M A F F is f a c i n g reduced f u n d i n g and is expected to cut 80 pos i t ions by end o f 1998. S t i l l , a j o i n t approach w i t h agr icu l ture makes sense, in terms o f research, admin is t ra t ion and de l i very . 8.5.2 Private initiatives Severa l industr ia l landowners surveyed sa id they share techn ica l expert ise w i t h non - i ndus t r i a l landowners in return fo r preferent ia l access to t imber p roduced on thei r land . T h i s type o f arrangement is c o m m o n in the U S , espec ia l l y southern states such as G e o r g i a , M i s s i s s i p p i , A l a b a m a , F l o r i d a and L o u i s i a n a , where major m i l l s and manufactu r ing fac i l i t i es w h o do not have enough forest land to meet their requirements o f fer "manage assistance p rog rams" ( B l i s s and M a r t i n 1990). T h e c o m p a n y prov ides pr ivate forest landowners w i t h a 5 -year management p lan , i n c l u d i n g stand acreage and vo lumes , harvest ing estimates, and pro jected i n c o m e and expenses fo r that per iod . T h i s management p lan , p lus subsequent superv is ion o f harvest ing and s i l v i c u l t u r a l act iv i t ies , is at no cost to landowners , though they do pay fo r seedl ings and p lant ing . 121 W h i l e the p r imary focus is t imber p roduct ion , c o m p a n y foresters w i l l a lso w o r k w i t h owners on recreat ion and w i l d l i f e management issues. O n e th ing to remember is that landowners are compet i to rs and might not a l w a y s cons ide r it in the i r best interests to share in fo rmat ion . There are advantages, however , e s p e c i a l l y for indust r ia l landowners . O n e , it helps ensure a supp ly o f t imber to manu factu r ing fac i l i t i es , e s p e c i a l l y w h e n c r o w n t imber supp l ies are inc reas ing ly restr icted. S e c o n d , industr ia l landowners can use thei r expert ise more w i d e l y and poss ib l y der ive add i t iona l i ncome . T h i r d , forest p ract ices on s m a l l l andho ld ings ref lect on a l l pr ivate forest landowners and the investment can he lp a v o i d add i t i ona l government intervent ion . 8.6 E d u c a t i n g the p u b l i c E d u c a t i o n and in fo rmat ion serv ices shou ld inc lude some f o r m o f p u b l i c educat ion . It is in governments ' interest to keep the p u b l i c appr ised o f measures taken to i m p r o v e s tewardsh ip on pr ivate land. M o r e important ly , though, l andowners have an interest in i n f o r m i n g the p u b l i c o f t i m b e r and non - t imber benef its p rov ided by pr ivate forest land and what measures landowners are t a k i n g to protect those benefits. T h i s educat ion is b e c o m i n g more important as countr ies become more urban ized and people lose their connec t ion to the land (Sa lwasser 1990). In B C , m a n y people are not even aware o f the ex istence o f large areas o f pr ivate forest land. L a n d o w n e r s c o u l d a lso benef i t f r o m efforts a imed at c h a n g i n g p u b l i c attitudes about the w a y pr ivate forest land is regulated, in par t icu lar c o n v i n c i n g the p u b l i c that heavy -handed c o m m a n d -and -cont ro l measures are not the best w a y to ach ieve p u b l i c ob ject ives o n pr ivate land (see sect ion 5.7.2) In S w e d e n , p u b l i c educat ion begins ear ly , through a spec ia l program c a l l e d "Fo res ts in the S c h o o l " that has fo r 28 years o f fered educators forestry components to i nc lude in thei r e x i s t i n g c u r r i c u l a ( H e r m e l i n 1995). T h i s approach a l l o w s teachers to i nc lude forestry examp les in every th ing f r o m mathemat ics to geography to s o c i a l studies, w i t h m i n i m a l ef fort and d is rupt ion . S i m i l a r p rogram have been set up fo r N e w Z e a l a n d schoo ls and the fo rmer head o f T i m b e r W e s t , a N e w Zea lander n o w w i t h M a c m i l l a n B l o e d e l , wants to do the same fo r B C schoo ls . A g a i n , there c o u l d be cons iderab le disagreement over forestry and env i ronmenta l " f a c t s . " 8.7 C o n c l u s i o n s F u n d i n g f o r i n fo rmat ion and educat ion programs is not a l w a y s popu la r a m o n g po l i t i c i ans . T h e effects o f such programs are never immediate and results are hard to quant i fy , even over 122 t ime , so there are not m a n y p o l i t i c a l advantages. In fo rmat ion and educat ion programs are a lso d i f f i c u l t to o rgan ize a n d admin ister , w h i l e d e c i s i o n s o v e r what i n fo rmat ion to p rov ide c a n be subject ive and cont rovers ia l . H o w e v e r , ev idence strongly suggests that i f the p u b l i c wants to improve the leve l o f s tewardsh ip on pr ivate land , an investment in i n fo rmat ion and educat ion programs can go a l o n g w a y to a c h i e v i n g that result. In fact, research shows that l o w levels o f s tewardsh ip a m o n g landowners are often the result o f a lack o f expert ise and that i n fo rmat ion and educat ion programs are the most e f fect ive remedy, more e f fect ive even than financial incent ives . A t the very least, i n fo rmat ion and educat ion is a prerequis i te to f i n a n c i a l incent ive programs, and to ma in ta in ing the l andowners ' f reedom to manage. Research in B C and other j u r i s d i c t i o n s shows landowners most va lue one -on -one consu l tat ions w i t h p ro fess iona l foresters. H o w e v e r , th is approach is expens ive , so m a n y j u r i s d i c t i o n s try to first p rov ide i n fo rmat ion through wr i t ten mater ia ls , v i d e o s , courses , seminars and workshops so landowners have the background to make the most o f one -on -one consul tat ions . T r a i n i n g some landowners to then pass their k n o w l e d g e on to other landowners is a lso a cost e f fect ive approach. T h e Internet, i n c l u d i n g webs i tes , bu l le t in boards and chat rooms , c o u l d be used to make in fo rmat ion transfer more e f f ic ient . In format ion and educat ion program design shou ld a lso cons ider other c r i te r ia . O n e , there shou ld be centra l admin is t rat ion and repos i tory o f i n fo rmat ion , so landowners k n o w where to turn , as w e l l as one government agency dea l i ng w i t h pr ivate forest land . O n the other hand , t ra in ing opportun i t ies shou ld be decent ra l i zed where poss ib le . Second , i n fo rmat ion shou ld be seen as neutral and ob ject ive , so research f r o m univers i t ies and other independent sources is c r u c i a l . N e u t r a l i t y is a lso important in p rogram de l i ve ry , and one reason actual t ra in ing is best done by contracted pro fess iona ls through l andowner or w o o d l o t associat ions . T h i r d , p rograms shou ld be cont inuous , so n e w landowners can ga in access to i n fo rmat ion and other landowners can keep up w i t h market changes and sc ien t i f i c deve lopments . F i n a l l y , landowners shou ld be proact ive in educat ing the p u b l i c about the va lue and e c o l o g i c a l funct ions o f pr ivate forest land , and the advantages o f a lternat ives to heavy -handed regulatory approaches l i k e the Fores t P ract ices C o d e . 123 Chapter 9: Final Conclusion and Recommendations 9.1 Final Conclusion T h e B C government plans to regulate forest pract ices on pr ivate land in the p rov ince , la rge ly in response to p u b l i c pressure. T h e stated a im is to ensure a long term and stable t imber s u p p l y and , o f more immediate p u b l i c concern , to protect env i ronmenta l va lues . T h o u g h it is b e y o n d the scope o f this paper to j u d g e the merit o f n e w regulat ions, the proposed leg is la t ion w o u l d address t w o structural p rob lems c o m m o n to forestry w o r l d w i d e . F i rs t , the length o f t ime taken to g r o w trees to marketable age often d iscourages landowners f r o m adequately c o n s i d e r i n g future t imber suppl ies , and governments have often stepped in to ensure adequate reforestat ion and protect ion o f forest land f r o m c o n v e r s i o n to agr icu l ture o f urban development . S e c o n d , our current e c o n o m i c system tends to ignore or underest imate n o n -t imber benef i ts p r o v i d e d by forest land , i n c l u d i n g c lean water, so i l conservat ion , fish and w i l d l i f e habitat, ca rbon sequestrat ion, no ise abatement, recreat ion and v i s u a l qua l i ty . R a p i d l y g r o w i n g p u b l i c concern over non - t imber benef i ts is f o r c i n g governments to recons ider the t rad i t iona l bias in favour o f t imber p roduct ion . There us no doubt that the B C government has the legal author i ty to regulate forest pract ices on pr ivate land. C a n a d a ' s legal structure c l e a r l y a l l o w s the B C government a lmost comple te latitude in rest r ict ing land use o r forest pract ices on pr ivate forest land , and there appears to be no legal requirement to p rov ide compensat ion in the event o f regulatory taking. O n the other hand , such regulat ion is an in f r ingement o f the pr ivate property r ights centra l to our e x i s t i n g e c o n o m i c structure and f l o u t i n g those laws can undermine the system, as w e l l as al ienate pr ivate property owners rather than gain thei r cooperat ion in a c h i e v i n g p u b l i c ob ject ives . C o m p e n s a t i o n fo r regulatory t a k i n g c o u l d offset such in f r ingement , but the costs w o u l d be h igh and c o u l d prevent po l i t i c i ans f r o m enact ing env i ronmenta l leg is la t ion . Whatever the arguments for and against regulat ion , p u b l i c pressure has c o n v i n c e d the government to p roceed w i t h p lans to regulate pr ivate forest land. T h e purpose o f th is paper is to propose a regulatory system that e f f i c ien t l y and e f fec t i ve l y ach ieves p u b l i c ob ject ives o n pr ivate forest land. 9.1.1 Seeking efficient regulation T h e centra l hypothes is o f this paper is that a regulatory system based on encouragement and reward is a more e f f ic ient approach than a regulatory system based on c o e r c i o n and pun ishment . 124 T h i s does not mean government has a c h o i c e o f t w o extremes. Rather , a range o f cho ices ex is ts on a c o n t i n u u m between the t w o extremes. T h e hypothes is suggests there are benef i ts to both regulators and regulated in m o v i n g a l o n g the c o n t i n u u m , a w a y f r o m the current b ias in f avou r o f c o e r c i o n and pun ishment t o w a r d more reward -based regulatory systems. Th ree areas o f research have been e x a m i n e d to test this hypothesis : O rgan i za t i ona l Behav iou r , a survey o f pr ivate forest landowners , and regulatory exper iences in other j u r i s d i c t i o n s w i t h temperate forest. Research in O rgan i za t iona l B e h a v i o u r examines , a m o n g other th ings, h o w people are best mot i va ted to ach ieve organ izat iona l goals . T h o u g h m u c h o f this research has been done in the context o f c o m m e r c i a l organizat ions , the f i nd ings are app l i cab le to mot i va t i ng pr ivate forest landowners to address p u b l i c ob ject ives . O f par t icu la r interest is st rong ev idence that incent ives and rewards have s ign i f i cant advantages over c o e r c i o n and pun ishment i n m o t i v a t i n g human behav iour . Pun ishment -based mot iva t iona l systems tend to require constant superv is ion to ensure c o m p l i a n c e , often al ienate those be ing mot iva ted , focus attention o n what is w r o n g rather than on what is r ight, and channe l human creat iv i ty t oward de te rmin ing h o w best to c i r c u m v e n t ru les and a v o i d punishment . In the context o f pr ivate forest land regulat ion , pun ishment -based regulatory systems such as the Forest P ract ices C o d e are c o m p l i c a t e d and expens ive to admin ister , create an adversar ia l re la t ionsh ip w i t h those regulated, are out o f touch w i t h des i red p u b l i c ob ject ives , and focus human innovat ion to evad ing rather than a c h i e v i n g stated p u b l i c ob ject ives . Pun ishment -or iented systems, k n o w n in government p o l i c y c i r c l e s as " c o m m a n d - a n d - c o n t r o l , " a lso in f r inge more on pr ivate property r ights. In contrast, reward -based systems requi re less superv is ion , foster cooperat ion , f ocus on what is r ight, and promote innovat ion and creat iv i ty . In the context o f pr ivate forest land , that means l o w e r admin is t rat ive costs, more cooperat ion between regulator and regulated, a c lear f ocus on env i ronmenta l and t imber supp ly ob ject ives , and the channe l i ng landowners ' c reat i v i ty and innovat ion t o w a r d a c h i e v i n g those ob ject ives . R e w a r d - b a s e d systems, k n o w n fo r the purposes o f this paper as "educat ion -and - i ncen t i ves , " a lso mean less in f r ingement o n pr ivate property r ights . 9.1.2 Political opposition to new regulatory approaches Desp i te the apparent advantages o f us ing rewards to mot ivate people , governments have t rad i t iona l l y chosen c o m m a n d - a n d - c o n t r o l approaches to regulat ion . Forest P ract ices C o d e is a g o o d example . Research f r o m p o l i t i c a l sc ience ind icates this c h o i c e is more the result o f 125 perceived political and personal advantages than an effort to determine the most effective and least costly solution to a problem. Politicians like command-and-control regulations such as the Code because it creates a perception that government is "doing something" immediate and "getting tough" with transgressors. In addition, regulatory costs are often well-hidden among general government expenditures, and new public sector jobs are "created" for people who might in future vote politicians back into power. Political scientists also suggest bureaucrats often prefer command-and-control approaches because they are familiar with this approach and have expertise in this area. Both bureaucrats and politicians seek to avoid the risks associated with radical new regulatory approaches. Instead, changes tend to be slow and incremental. 9.1.3 Survey of private landowners Organizational Behaviour also offers insight useful to the creation of reward-based motivational systems. Such a system must be developed in conjunction with those being motivated, must be fairly and consistently applied, requires clear and attainable goals, and must provide a clear link between the attainment of goals and subsequent rewards. Most importantly, such a system requires the identification of rewards desired by those regulated. The survey of private forest landowners was designed to obtain in-depth knowledge of the goals, values and capabilities of those being regulated, so we know what they covet and so how they might best be motivated. The survey also served as an opportunity for landowners to share ideas and suggestions on proposed regulatory policies. Only private forest landowners in the managed forest tax category were surveyed. Perhaps the most revealing conclusion from the survey is that, while there are significant areas of overlap, the goals, views and capabilities of small or non-industrial landowners often differ from the goals, views and capabilities of large or industrial forest landowners. This differentiation is especially apparent when discussing landowners' motivations for owning and managing forest land. Industrial landowners are companies that manage forest land for profit, so financial considerations are paramount. Non-industrial landowners also want forest land management to be viable but are also strongly motivated by lifestyle, independence and emotional attachment to their forest land. The survey also found that almost all forest landowners surveyed believe the public has at least some legitimate interest in forest practices on private land, especially water quality and soil 126 conservat ion and, to a lesser degree, f i sh and w i l d l i f e habitat. F e w cons ider v i s u a l qua l i t y a legi t imate p u b l i c interest. M o s t do not object to p u b l i c access fo r recreat ional purposes, but cons ide r it more p r i v i l ege than a right. A l l l andowners , indust r ia l and non - indus t r ia l , sa id they be l ieve they are a l ready manag ing thei r forest land to h igh standards. W h i l e landowners recogn ize some p u b l i c interest on pr ivate forest land and see a need fo r government to ' d o s o m e t h i n g " to deal w i t h " b a d app les " a m o n g pr ivate forest landowners , they st rongly oppose the app l ica t ion o f the Forest Pract ices C o d e , o r other government intervent ion cons idered " i n f l e x i b l e , " "bu reaucra t ic , " " w a s t e f u l " and " e x p e n s i v e . " Instead landowners , espec ia l l y indust r ia l landowners , want a regulatory system based on f i n a n c i a l and other incent ives that w o u l d promote stewardship but leave landowners a h igh l e v e l o f independence, o r freedom to manage the i r land. F o r most , that means d e f i n i n g ob ject ives the p u b l i c w o u l d l i k e to ach ieve on pr ivate land , then leav ing landowners f reedom to ach ieve those ob ject ives in w a y s sui table to their par t icu lar s i tuat ion. T h i s is often referred to as a resu l ts -or iented system. R e w a r d s for a c h i e v i n g stated results shou ld be in the f o r m o f tax breaks, m a i n l y on property tax but a lso other taxes. M o s t landowners sa id d i rect subs id ies encourage landowners to reforest and manage thei r land , but a lso say such programs tend to become bureaucrat ic and w a s t e f u l , and of ten fund act iv i t ies landowners w o u l d do a n y w a y , a lbeit more s l o w l y . M a n y non - indust r ia l landowners sa id those w h o ach ieve h igher env i ronmenta l standards shou ld a lso rece ive add i t iona l incent ives . A l l l andowners sa id n e w regulat ions shou ld app ly to a l l pr ivate forest land , not j us t land in the managed forest tax category. M a n y sa id g i v i n g forest landowners agr icu l tu ra l status w o u l d p rov ide add i t iona l tax and other incent ives . 9.1.4 An education-and-incentives systems for B C M a n y o f the f i nd ings f r o m Organ i za t iona l B e h a v i o u r and the l andowners ' survey are supported by research o f pr ivate forest land regu lat ion strategies in other j u r i s d i c t i o n s , i n c l u d i n g other C a n a d i a n p rov inces , A m e r i c a n states, E u r o p e a n countr ies and N e w Z e a l a n d . U s i n g O rgan i za t i ona l B e h a v i o u r , i n fo rmat ion f r o m the survey and examples f r o m other j u r i s d i c t i o n s , it is poss ib le to out l ine a educat ion -and - incent i ves based approach to regu lat ing pr ivate forest land in B C . T h e proposed system focuses on three m a i n areas: educat ion , f reedom to manage and f i n a n c i a l incent ives . 9.1.4.1 Information and education L a n d o w n e r s surveyed stressed the importance o f educat ion . T h i s assessment is supported by research in other j u r i s d i c t i o n s that shows educat ion can great ly improve both the w i l l i n g n e s s and 127 ab i l i t y o f landowners to meet p u b l i c ob ject ives on thei r pr ivate land. In fact, educat ion appears to be prerequis i te to the ma in ta in ing f reedom to manage and to the e f f ic ient and e f fect ive use o f f i n a n c i a l incent ives . Desp i te the apparent advantages, i n fo rmat ion and educat ion in areas o f forestry , s m a l l bus iness management and related s k i l l s is not p o l i t i c a l l y popular . P rog rams can be d i f f i c u l t to o rgan ize and coord inate , and expens ive to admin ister , w h i l e results are neither immed ia te nor eas i l y measurable . In add i t i on , there are a lways disagreements over forestry and env i ronmenta l " f a c t s , " and over p u b l i c versus pr ivate con t ro l , admin is t ra t ion and fund ing . These obstacles c a n , however , be addressed. A c c e s s to one -on -one consu l tat ions w i t h v i s i t i n g p ro fess iona l foresters is the i n fo rmat ion oppor tun i ty most desi red by landowners , in B C and e lsewhere . Un fo r tuna te l y , th is k i n d d i rect o f access is a l so expens ive , so educat ion and in fo rmat ion programs must ensure landowners first have access to pamphlets , reports or v ideos , then attend seminars , courses, field days and w o r k s h o p s . C o s t s o f p ro fess iona l forester consu l tat ions can also be reduced by c o n s u l t i n g in groups, or through so -ca l l ed w o o d l a n d manager programs, w h i c h t ra in s m a l l groups o f landowners , w h o then pass the k n o w l e d g e on to thei r peers. T h e Internet, i n c l u d i n g websi tes , bu l le t in boards and chat rooms is so far underu t i l i zed as an educat ion m e d i u m fo r pr ivate forest landowners . In fo rmat ion and educat ion programs shou ld have one centra l admin is t ra t ive l oca t ion , so landowners k n o w where to start. In contrast, admin is t ra t ion o f courses and t ra in ing shou ld be decent ra l i zed , and coord inated as m u c h as poss ib le by l andowner groups, in cooperat ion w i t h government and us ing contracted p ro fess iona l foresters. Educators shou ld str ive fo r neutra l i ty and u t i l i ze independent sources such as un ivers i t ies fo r up-to -date research. P rog rams shou ld be cont inuous and coord inated , so landowners can keep up w i t h market changes and sc ien t i f i c developments . E d u c a t i o n shou ld i nc lude an ef fort to educate the p u b l i c on the e c o n o m i c and e c o l o g i c a l va lue o f pr ivate forest land, stress the costs o f c o m m a n d - a n d - c o n t r o l approaches such as the Forest P ract ices C o d e and out l ine the merits o f a l ternat ive regulatory systems. 9.1.4.2 Freedom to manage Pr ivate forest landowners in B C , as e lsewhere , tend to va lue thei r independence, l i fes ty le and ove ra l l f reedom to manage their forest land. Educa t ion increases both the desire and a b i l i t y o f landowners to ma in ta in this f reedom. N o n - i n d u s t r i a l landowners are e s p e c i a l l y anx ious to a v o i d 128 regulatory approaches they regard as bureaucrat ic , i n f l e x i b l e and an unacceptable in f r ingement o n pr ivate property r ights. Industr ia l l andowners a lso oppose intervent ion but seem most concerned about regulatory costs. A n approach advocated by industr ia l landowners and supported by many non - indus t r ia l landowners is that government c lear l y state the s o c i a l l y - d e s i r e d env i ronmenta l ob ject ives g ive landowners cons iderab le lat itude in a c h i e v i n g those ob ject ives . S u c h a re la t i ve ly simple results-oriented system, proponents argue, c o u l d ach ieve the same env i ronmenta l ob ject ives as process-oriented systems l i k e the Forest Pract ices C o d e , but at l o w e r cost to both landowners and p u b l i c . T h i s is because it w o u l d not be necessary to admin is te r act iv i t ies in such deta i l . In add i t i on , resu l ts -or ientat ion w o u l d promote innovat ion and in f r inge less on pr ivate property r ights. Resu l ts -o r ien ta t ion w o u l d have been re la t ive ly s t ra ight forward in the past, w h e n the p r i n c i p a l p u b l i c ob ject ive was to prevent overcut t ing and to promote reforestat ion. N o w that p u b l i c ob ject ives inc reas ing ly inc lude a range o f env i ronmenta l va lues , resu l ts -or ientat ion is a greater cha l lenge . S c i e n t i f i c uncerta inty makes it d i f f i c u l t to def ine and measure env i ronmenta l outcomes , and our i nab i l i t y to ident i fy the re lat ive importance o f d i f f e r i n g e c o l o g i c a l funct ions makes it d i f f i c u l t to ass ign pr ior i t ies . In add i t ion , it can take a l o n g t i m e fo r env i ronmenta l p rob lems to b e c o m e apparent. O n the other hand, the same sc ien t i f i c uncerta inty and va luat ion p rob lems face any regulatory approach that a ims to address env i ronmenta l concerns , and regular government audits o f forest pract ices can catch env i ronmenta l p rob lems , such as potent ia l lands l ides and e ros ion , before disasters occur . M a i n t a i n i n g autonomy, respons ib i l i t y and f reedom to manage fo r pr ivate forest landowners is in i t se l f a reward for meet ing p u b l i c ob ject ives . T h i s is espec ia l l y true fo r non - indus t r ia l landowners , w h o have a strong attachment to the land and the i r independence, and of ten a l ready engage in h igh levels o f stewardship . A d d i t i o n a l l y , these landowners can be mot ivated by n o n -f i n a n c i a l rewards, such as p u b l i c recogn i t ion . S o m e j u r i s d i c t i o n s have used a w a r d ceremon ies to reward h igh levels o f stewardship . 9.1.4.3 Financial incentives M o n e y is a p o w e r f u l mot ivator and f i n a n c i a l rewards shou ld be used to p romote stewardsh ip on pr ivate forest land in B C . Survey results s h o w f i n a n c i a l rewards are e s p e c i a l l y important to indust r ia l landowners , though non - indust r ia l landowners can a lso be f i n a n c i a l l y mot i va ted to meet p u b l i c ob ject ives . 129 F i n a n c i a l incent ives have l o n g been used in other j u r i s d i c t i o n s to encourage forest l andowners to reforest and keep thei r land in forest p roduct ion rather than conver t ing to other uses such as agr icu l tu re o r deve lopment . I n i t i a l l y intended to ensure a stable t i m b e r supp ly , tax breaks a n d d i rect f i n a n c i a l assistance have success fu l l y encouraged reforestat ion, other s i l v i cu l tu re , m a p p i n g and p lann ing , and he lped prevent c o n v e r s i o n o f forest land to other uses. M o r e recent ly , governments have begun u s i n g f i nanc ia l incent ives to encourage landowners to protect env i ronmenta l va lues , such as c r i t i c a l fish and w i l d l i f e habitat. 9.1.4.3.1 Direct financial assistance O f t e n grouped w i t h i n fo rmat ion and educat ion into what are k n o w n as extension p rograms, d i rect financial assistance has been e f fect ive in p r o m o t i n g reforestat ion, other s i l v i cu l tu re and p lann ing , but exper ience has s h o w n such programs are sporad ic and dependent o n p r e v a i l i n g p o l i t i c a l cond i t i ons , and c a n become inc reas ing l y expens ive and bureaucrat ic . R e s e a r c h a lso shows di rect financial assistance often amounts to a subs idy because it pays fo r s i l v i c u l t u r a l w o r k landowners w o u l d a n y w a y have to undertake to produce t imber . D i r e c t financial assistance m a y be better suited to the more recent goa l o f encourag ing env i ronmenta l w o r k , such as stream protect ion , bu f fe r zones and maintenance o f c r i t i c a l habitat, because these are not act iv i t ies landowners undertake in the course o f t imber p roduct ion . D i r e c t financial assistance a lso has the advantage o f be ing transparent i n terms o f costs . 9.1.4.3.2 Preferential tax treatment M o s t governments , i n c l u d i n g B C , use tax breaks to encourage stewardsh ip o f pr ivate forest land . T h e most c o m m o n concess ion is l o w e r annual property taxes i n return f o r a harvest o r severance tax w h e n trees are harvested. T h i s m e c h a n i s m reduces the cost o f h o l d i n g forest l and un t i l trees are cut and cash generated. P r i vate forest land zoned fo r res ident ia l purposes is taxed annua l l y on both the land and t imber va lues , resu l t ing in the harvest o f immature trees. P roper ty taxes are o f cons iderab le interest to industr ia l l andowners , w h i l e non - i ndus t r i a l l andowners genera l ly cons ider current property taxes fa i r . U n l i k e property taxes, i n c o m e taxes are m a i n l y a federal matter, so the B C government is restr icted to ad just ing the p ropor t ion o f i n c o m e tax that accrues to the p rov ince . T h e B C government shou ld w o r k w i t h the federa l government to p rov ide a l l o w a b l e i n c o m e tax deduct ions f o r l andowners w h o invest in conservat ion . D e d u c t i o n s are cu r rent l y o n l y a l l o w e d fo r improvements that p romise to y i e l d future prof i ts , such as reforestat ion, other s i l v i cu l tu re , n e w bu i l d i ngs and equipment . 130 N o n - i n d u s t r i a l forest landowners c o u l d a lso benef i t f r o m changes to cap i ta l ga ins tax regulat ions , w h i c h n o w require cap i ta l gains to be pa id even i f the property is passed on to l i nea l descendants. B o t h industr ia l and non - indus t r ia l l andowners support g i v i n g forest landowners agr icu l tu ra l status, w h i c h w o u l d g ive them l o w e r property taxes, l o w e r i n c o m e taxes and exempt ions f r o m cap i ta l ga ins tax. I f th is is cons idered , government s h o u l d ensure add i t iona l f i n a n c i a l i ncent ives are l i n k e d to env i ronmenta l per formance. 9.2 Recommendations 1. Improve inventory of private forest land, i n c l u d i n g total pr ivate forest area, site qua l i ty , and c o n d i t i o n and extent o f current forest cover . A p p r o p r i a t e p o l i c y changes need a basis in an accurate inventory . S o m e o f this w o r k is cur rent ly be ing done by the Forest L a n d C o m m i s s i o n . 2. De-politicize the policy development process, to ensure dec is ions over whether and h o w to regulate are made as ob jec t i ve ly as poss ib le . P o l i t i c a l cons iderat ions appear to be the m a i n impetus for c o m m a n d - a n d - c o n t r o l regulatory opt ions . R e v i s i t research and recommendat ions made by the Forest R e s o u r c e s C o m m i s s i o n . 3 . State clearly, and be able to justify, reasons for regulatory intervention o n pr ivate forest land. E n v i r o n m e n t a l va luat ion methods shou ld be more thorough ly invest igated and app l ied to this quest ion . A d d i t i o n a l research is requi red , both in B C and e lsewhere . 4. Be able to justify a chosen regulatory approach by ob jec t i ve l y c o n s i d e r i n g the f u l l costs and benef i ts o f d i f ferent regulatory opt ions . 5. Respect private property rights and ensure p o l i c y opt ions m i n i m i z e in f r ingement o f pr ivate property r ights where poss ib le . Se r i ous l y cons ide r appropr iate compensat ion fo r " regu latory t a k i n g , " p o s s i b l y through outr ight purchase o f deve lopment o r t imber r ights in some areas, o r the use o f covenants and conservat ion easements. A l s o , recogn ize that regu lat ion o f forest pract ices on c r o w n land d i f fers f r o m regulat ion on pr ivate land. 6. Research the beliefs, values, goals and abilities of all private forest landowners. M o s t research has i n c l u d e d o n l y managed forest landowners (such as this paper) , e s p e c i a l l y 131 landowners on Vancouver Island and the Gulf Islands. Much more information is needed on farmers and ranchers who own farmland forest, especially on their motivations for owning and managing forest land. 7. Recognize the drawbacks of punishment in motivating human behaviour, while acknowledging that at least some rules and supervision are needed to enforce minimum standards 8. Recognize the advantages of reward in motivating human behaviour, particularly in encouraging people to innovate and develop new ideas. Ensure a reward-based system provides clear and attainable goals, linked to financial and non-financial rewards coveted by private forest landowners. Acknowledge that a regulatory structure will need to employ some combination of punishment and reward. 9. Ensure maintenance of freedom to manage for private forest landowners who meet the public interest on their land. Create a system that reduces freedom to manage only for landowners who continually engage in bad forest practices, and increases freedom to manage for those who do well. 10. Consider the merits of results-oriented regulatory systems over traditional process-oriented regulatory systems. Expand research on the use of results-orientation in achieving environmental objectives in other jurisdictions, particularly in forestry. 11. Apply regulations equally to all private forest landowners. Currently, only managed forest land is regulated, while other private forest land remains unregulated. Proposed new legislation is intended to apply only to managed forest land. 12. Avoid the use of direct financial assistance to encourage stewardship, in favour of preferential tax treatment. Consider direct financial assistance only to protect environmental values, as compensation for lost productivity. 13. Apply taxes equally to all private forest landowners. Create a single property tax category for managed, unmanaged and farmland forest. Residential forest landowners should be able to join this tax category, and tax concessions can be recouped if and when the property is 132 deve loped . R e s i d e n t i a l forest landowners shou ld a lso have the opt ion o f p a y i n g annual property t a x o n l y on the va lue o f the i r land , then p a y i n g a harvest tax w h e n trees are cut. 14. Ensure local governments apply a fixed ratio of tax rates to managed, unmanaged and res ident ia l forest land , to ensure that tax benef i ts fo r i m p r o v e d stewardsh ip are ma in ta ined . 15. Consider giving forest landowners agricultural status, i n return for i m p r o v i n g c o m m i t m e n t to stewardship . In add i t i on to address ing recommendat ions 13 and 14, th is w o u l d address non - indus t r ia l forest l andowners ' concerns over cap i ta l ga ins tax. 16. Ensure forest landowners have the information and education they need to ach ieve p u b l i c ob ject ives o n the i r propert ies. E s t a b l i s h a centra l repos i tory fo r forest management in fo rmat ion , and share in fo rmat ion w i t h other j u r i s d i c t i o n s . Ensure i n f o r m a t i o n and educat ion is ob ject ive and con t i nuous l y ava i lab le . T a k e advantage o f inst i tut ions such as un ivers i t ies to p rov ide neutral admin is t ra t ion and research. 17. Provide access to professional foresters, o r exper ienced and educated peers. A c c e s s shou ld be preceded, i f necessary, b y learn ing f r o m other sources such as wr i t ten mater ia l , v i d e o s , seminars and workshops . 18. Minimize direct government involvement i n i n fo rmat ion and educat ion and m a x i m i z e l o c a l con t ro l o f educat ion and in fo rmat ion by u s i n g forest l andowners ' assoc iat ions . Ind i rect government invo lvement is needed to ensure i n f o r m a t i o n and educat ion adequately addresses p u b l i c ob ject ives o n pr ivate land. 19. Do not use established government agencies such as the M i n i s t r y o f Forests o r M i n i s t r y o f E n v i r o n m e n t , L a n d s and Parks to regulate pr ivate forest land. These agencies are too r i g i d and bureaucrat ic to cons ide r n e w and innovat i ve regu latory methods. T h e Forest L a n d C o m m i s s i o n is one alternat ive. T o a v o i d c o n f u s i o n , ensure landowners deal w i t h o n l y one agency . 20. Establish mechanisms to ensure new approaches are adequately documented and monitored, so that p rob lems encountered and lessons learned can be used to make systemat ic improvements . 133 Appendix A: Forest Land vs Agricultural Land A . l Introduction D u r i n g m y research, i n c l u d i n g the managed forest landowners survey, a recur r ing theme has been agr icu l tu ra l status fo r forest landowners . Trees w i t h short rotat ions, such as hyb r id pop lars , are a l ready treated as agr icu l tura l crops and a s ign i f icant por t ion o f B C ' s pr ivate forest land is a l ready i n the A g r i c u l t u r a l L a n d Reserve (see table 1). T h e p r o v i n c e c o u l d inc lude other forest lands by g i v i n g agr icu l tura l c rops status to other tree species. A g r i c u l t u r a l des ignat ion w o u l d p rov ide s ign i f icant f i n a n c i a l benef i ts to forest landowners ( though O t t a w a might w e l l have someth ing to say about federal tax revenue losses) and c o u l d be used to reward landowners fo r h i gh standards o f pract ice o r as compensat ion fo r the i r i n c l u s i o n in the Forest L a n d Reserve . A.1.1 Tax advantages • M o s t important ly , annual property tax on agr icu l tu ra l land is , o n average, o n l y about one -th i rd the rate a p p l i e d to managed forest land and trees harvested on agr icu l tu ra l land i n B C are not subject to a harvest tax. W h e n the managed forest tax category w a s estab l ished in 1987, the government p romised tax rates that w o u l d "app rox imate ex i s t i ng f a rm rates." • A g r i c u l t u r a l landowners pay no res ident ia l tax rates on land o c c u p i e d b y thei r res idence(s) . • A g r i c u l t u r a l landowners rece ive a 5 0 % reduct ion on s c h o o l , hosp i ta l and some other taxes. • A g r i c u l t u r a l landowners can leave or gi f t land or property used in f a r m i n g business o r shares in f a m i l y fa rm partnership to a c h i l d o f l i nea l descendent, w i thout p a y i n g cap i ta l ga ins tax. T h i s is k n o w n as a " r o l l o v e r p r o v i s i o n . " Farmers a lso qua l i f y fo r a $500 ,000 cap i ta l ga ins exempt ion i f they se l l agr icu l tura l property, though some restr ict ions app ly to land after June 18, 1987 ( V e r s i 1995). N e i t h e r o f these benef i ts are cur rent ly ava i lab le to forest landowners . • L a n d removed f r o m the Forest L a n d Reserve - w h i c h inc ludes a l l managed forest land - fo r non- forest purposes is subject to a "recapture t a x " re f lec t ing tax sav ings accrued in th is preferent ia l tax category. M e a n w h i l e , land w i t h d r a w n f r o m the A g r i c u l t u r a l L a n d Rese rve can be w i t h d r a w n w i thout a "recapture t a x . " ( H o p w o o d 1996). • F o o d farmers rece ive some sales and fue l tax exempt ions . • L o s s e s f r o m a f a r m i n g business can be car r ied back three years and car r ied f o r w a r d ten. L o s s e s f r o m other businesses, i n c l u d i n g forestry, m a y o n l y be car r ied back three years and f o r w a r d seven. 134 • Farmers can deduct a l l expenses in the year they were pa id , unless they are c l e a r l y cap i ta l i n nature, such as the purchase o f land , equ ipment and so on . There is one tax p r o v i s i o n that m a y favour forest landowners over agr icu l tu ra l landowners . Forest landowners can deduct forestry related expenses f r o m other i n c o m e , as l ong as thei r is a " reasonab le expectat ion o f p ro f i t . " F o r a part - t ime farmer, losses that c a n be c l a i m e d against other i n c o m e are cur rent ly l im i ted to the f i rst $2 ,500 , p lus 5 0 % o f the next $12 ,500 o f losses, fo r a m a x i m u m deduct ive loss o f $8 ,750. T h i s p r o v i s i o n w a s intended to af fect s o - c a l l e d h o b b y farmers w h o used thei r landho ld ings to deduct large losses f r o m other i n c o m e ( V e r s i 1995). A f u l l - t i m e fanner w h o s e c h i e f source o f i ncome is f r o m f a r m i n g is a l l o w e d to deduct the ent ire fa rm loss against other sources o f i ncome. A.2 Rationale for differences A.2.1 Frontier mentality T o determine the v a l i d i t y o f equal treatment o f agr icu l tu ra l and forest landowners , it is important to cons ide r the background o f tax benef i ts app l ied to agr icu l ture . Part o f the impetus seems to be a l i nge r ing " f ront ie r menta l i t y " that p rov ides f i n a n c i a l incent ives to peop le w h o c lea r the forest for agr icu l tura l cu l t i va t i on . U n t i l re la t i ve ly recent ly , B C p r o v i d e d forested land v i r tua l l y free o f cost, p r o v i d e d n e w settlers p rompt l y c lear the land for agr icu l ture . These "ag r icu l tu ra l lease l ands" in the p rov inces northern areas have often p roven to be marg ina l agr icu l tu ra l land and are n o w p r ime candidates fo r d i rect f i nanc ia l assistance to encourage reforestat ion (see sect ion 7.2.1.1). A.2.2 Preservation of farmland B C has had preferent ia l property tax treatment for fa rms s ince 1930 ( G r e e n w o o d and W h y b r o w 1991). Interest ingly, there is strong ev idence that preferent ia l property tax treatment in i t s e l f does not result in the preservat ion o f f a rm land ( G l o u d e m a n s 1974, C u r r i e r 1978, D u n f o r d 1980, D u n c a n 1987) because there is s i m p l y not enough lat itude fo r cuts in the face o f more lucrat ive alternat ives such as res ident ia l deve lopment . That is w h y some U S states and C a n a d i a n p rov inces have instead chosen land use z o n i n g to preserve both agr icu l tu ra l and forest land. T h e best opt ion might be to p rov ide tax concess ions as a quid pro quo f o r land use restr ict ions ( G r e e n w o o d and W h y b r o w 1991). 135 T h e reason more tax benef i ts accrue to agr icu l tu ra l landowners , one argument goes, is that f ood is essent ia l to human ex istence and that f ood s e l f - s u f f i c i e n c y can be c r u c i a l in t imes o f war , drought and famine , o r s i m p l y because a g r o w i n g human popu la t ion makes fa rm land an inc reas ing ly scarce resource. O n l y about 4 % o f B C is cons ide red arable, and at the t ime o f the creat ion o f the A g r i c u l t u r a l L a n d Rese rve in 1972, B C w a s i m p o r t i n g about 6 5 % o f f o o d needs ( G r e e n w o o d and W h y b r o w 1991). T h i s factor is p robab ly less important to a current generat ion o f Canad ians that have never exper ienced depr iva t ion and be l ieve f o o d comes f r o m the supermarket. Instead, greater importance has been p laced on "green space" p rov ided by agr icu l ture and en joyed by urban residents. F i n a l l y , many C a n a d i a n s seem to trace their roots back to the fa rm, perpetuat ing a certain empathy fo r f a m i l y f a r m i n g and the rura l l i fes ty le . A.2.3 Preservation of forest land F i n a n c i a l support fo r forestry has t rad i t iona l l y been intended to encourage reforestat ion and promote a stable and cont inuous supp ly o f t imber to the economy . B C has had a bas ic tax break ava i lab le for reforestat ion s ince 1948. It seems strange to p rov ide incent ives to de- forest one area, w h i l e o f fe r i ng incent ives to re- forest another, espec ia l l y s ince forest land of ten prov ides the same secur i ty , amen i ty and s o c i a l va lues as fa rm land and c o u l d w e l l be treated equa l ly . F o r example , even i f trees are p lanted on what is n o w agr icu l tu ra l l and , forest land can i f necessary be read i l y converted fo r intensive agr icu l tura l use. In add i t ion , forest land p rov ides the same (or better) green space va lued by urban residents. In fact, forest land p rov ides cons iderab le p u b l i c benef i ts as recreat ion areas, f i s h and w i l d l i f e habitat and carbon s inks . It is easy to forget, l o o k i n g at t idy green f i e lds and neat red barns, that the usual f i rst step in f a r m i n g is to obl i terate the ex i s t i ng ecosystem. M o d e r n f o o d f a r m i n g a lso tends toward the intens ive use o f natural and a r t i f i c i a l fe r t i l i zers , pest ic ides and herb ic ides , w h i l e green space va lues are eroded by the in t roduct ion o f greenhouses and other bu i l d ings . O f course, intens ive tree f a r m i n g can have m a n y o f the same d r a w b a c k s , i n c l u d i n g the use o f c h e m i c a l s , w h i l e p r o v i d i n g m i n i m a l habitat o r recreat ion opportuni t ies . H o w e v e r , even a managed forest prov ides env i ronmenta l benef its that do not ex ist i f the area is not forested at a l l (Sa lwasser 1990). A.2.4 Unintended consequences F a v o u r i n g f o o d f a r m i n g over forestry causes can promote undesi rable env i ronmenta l consequences. F o r example , m a n y landowners , e s p e c i a l l y in the inter ior , let an ima ls graze in thei r forest in order to qua l i f y fo r fa rm status ( H o p w o o d 1996). T h i s can have negat ive env i ronmenta l consequences, par t icu la r l y on the coast, in terms o f streambank stab i l i ty and water 136 qua l i ty . T h e tax system a lso promotes monocu l tu res and intens ive c u l t i v a t i o n over c o m b i n a t i o n s o f forestry and fa rming , k n o w n as agroforestry ( W i l l s and L i p s e y 1998), that can p rov ide more env i ronmenta l and e c o n o m i c benef i ts to the p u b l i c . D i f fe ren t ia t ion between food f a r m i n g and forestry a lso creates an expens ive admin is t ra t ive burden. T h i s is pa r t icu la r l y true fo r Revenue C a n a d a , w h i c h devotes cons iderab le resources to d i f fe rent iat ing between f a r m i n g and forestry operat ions fo r i n c o m e and cap i ta l gains taxat ion purposes. T h e l ine between the t w o is quite b lur red . F a r m i n g is de f ined , under the Income T a x A c t , as " t i l l a g e o f the s o i l , l i ves tock ra i s ing o r e x h i b i t i n g , m a i n t a i n i n g o f horses f o r rac ing , ra i s ing o f poult ry , fu r f a rming , da i ry f a rm ing , f ru i t f a r m i n g and the keep ing o f bees" ( V e r s i 1995). In add i t ion , f a r m i n g inc ludes short rotat ion crops , such as h y b r i d poplars and C h r i s t m a s trees ( M a c y 1997). T o further c o m p l i c a t e matters, i n c o m e f r o m w o o d l o t s is cons ide red f a r m i n g i ncome i f revenue f r o m the sale o f logs, lumber , po les , f i r e w o o d or C h r i s t m a s trees is less then the i ncome der ived f r o m fa rming . T h e same admin is t rat ive c o m p l i c a t i o n s are present at the p r o v i n c i a l l eve l . B C A s s e s s m e n t must d i f ferent iate between fa rm and forest operat ions in v a l u i n g land fo r property tax purposes. In add i t ion , separate government agencies cur rent ly admin is te r the A g r i c u l t u r a l L a n d Reserve and the Forest L a n d Reserve , even though they are very s i m i l a r in structure and intent, and o c c u p y m u c h o f the same o f f i ce space. It seems to make cons iderab le sense to s i m p l y add "tree f a r m i n g " to the d e f i n i t i o n o f agr icu l ture , thus p r o v i d i n g forest landowners w i t h the same tax benef i ts n o w a p p l i e d to agr icu l tu ra l land . T h i s w o u l d create a leve l p l a y i n g f i e l d and a l l o w landowners to choose the c o m b i n a t i o n o f plants and an ima ls most appropr iate to thei r personal and b i o g e o c l i m a t i c cond i t ions , i n c l u d i n g t rad i t iona l fa rm crops and l i vestock , h y b r i d and natural tree species, and less t rad i t iona l products l i k e mushrooms, sala l o r m e d i c i n a l herbs. A skept ic might argue that the tax benef its shou ld not accrue to either f a rm or forest landowners . R e a l i s t i c a l l y , however , it is m u c h harder to d ismant le ex i s t i ng benef i ts than to establ ish new ones and tax incent ives can , w i t h some j u s t i f i c a t i o n , be v i e w e d as compensat ion fo r the loss o f pr ivate property r ights associated w i t h the A g r i c u l t u r a l L a n d Reserve and Forest L a n d Reserve . A l s o , it w o u l d be strange to have an agr icu l ture / forest ry land use z o n i n g that prevents res ident ia l , c o m m e r c i a l or industr ia l deve lopment , w i thout ensur ing that these act iv i t ies are f i n a n c i a l l y v iab le . 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