Assessment of China s Green Public Procurement Policy for Forest Products

Transcription

1 Assessment of China s Green Public Procurement Policy for Forest Products Prof. Dr. LI Zhi-yong International Center for Bamboo and Rattan,Beijing, , P. R. China, zyli@inbar.int Dr. HE You-jun Research Institute of Forestry Policy and Information, Chinese Academy of Forestry, Beijing, , P. R. China, hyjun163@163.com Dr. SU Hai-ying Research Institute of Forestry Policy and Information, Chinese Academy of Forestry, Beijing, , P. R. China, suhaiying0724@163.com Abstract How to effectively meet the globally increasing demands for forest products and meanwhile put forest resources and eco-environment under better protection for achieving the balance between protection and growth is a long-term challenge in face of the international community. China is the largest country in forest products import/export in the world. In such sense, the realistic state and future orientation of China s forest product procurement policy will impose considerable impact on and play a significant role in forestry industry development in China as well as the global sustainable forestry development. In view of the state and trend of forest product procurement by Chinese enterprises, the paper analyzed the problems and challenges facing China s forest product green procurement based on the results of field survey carried out for different types of forest product processors, including customers weak awareness of green consumption, deficient green procurement resources of forest products, high prices of green procurement products, limited green procurement list of forest products, lack of laws and regulations for green public procurement and lack of policy support and green market planning. At the same time, by comparing and learning the experiences and lessons of the UK, Japan, France, Netherland and other countries in green public procurement of forest products, the paper, in line with the national and forest conditions in China, proposed some policy recommendations, e.g. strengthening dissemination and education for raising green consumption awareness, updating laws and regulations for government green procurement, adopting marketing means to encourage green enterprises development, upgrading green product lists to incorporate more green procurement enterprises into government green procurement program, establishing monitoring and execution mechanism for green procurement and enhancing the oversight of green procurement, with the aim to facilitate China s green procurement process of forest products and quicken China s pace of green socioeconomic transition. GT-6 1 of 15

2 Keywords: green public procurement, forest product, policy GT-6 2 of 15

3 Promoting transitional development to a green economy is the focus and direction of China s future strategy for sustainable development. Green public procurement is one of green development policy. The active facilitation of environmentally responsible green procurement actions and their integration into government procurement program are the vital measures to promote green transition. In 2006, the Ministry of Finance and State Environment Protection Administration of China officially released Opinion on Implementing Government Procurement of Environment Labeling Products and the first batch of Government Procurement List of Environment Labeling Products, explicitly defining the scope of green procurement, the list of green product and the time table for implementation. This marks that Chinese government officially subsumes environment criteria into its procurement pattern. The formation of green development concept, the upgrading of green development policy and the sustained demand for green products by international and national markets put Chinese forest product enterprises under market pressure and transition opportunities for green development and accelerate their shift towards green production, green consumption and green procurement. 1. Policy analysis on requirements of green public procurement of China s forest product China is the world s largest forest product importer and exporter. China Customs Statistics indicates that in 2011 China s total import-export value of forest products amounted to US$ billion, while the export was valued at US$ billion, up 18.3%, and the import at US$ billion, an increase of 37.5%, with the trade deficit of US$ billion. In general, China s forest products trade is still dominated by the trade of wooden forest products. China mainly imports logs, sawn-timber and pulp and exports furniture, paper, paper board, paper products, wood-based panel and profile. China s forest product procurement policy has important impact on the domestic forest industry development and the world s sustainable forestry development. Especially in recent years, the international society lists the combating of illegal logging and associated trade as the hot issue in world sustainable development, and attempt to employs legal means, such as the USA s Lacey Act and EU Timber Regulations, to minimize the risk of illegal timber. How to effectively meet the increasing global and domestic demand for forest products while effectively protecting forest resources and achieving the protection-development balance are the long-term challenge facing the international and national society. 1.1 Meeting the requirement to protect fragile resources and environment on the earth So far, human society development has brought significant consequences to ecological environment due to human activities and their means to survive on the earth, leading to irreversible change of environment. Since the United Unions Conference on Environment and Development in 1992, the connections between green economy, food security, ecological health and social equality have attracted wide concerns. In the Rio+20 Summit held in 2012, participants felt delighted to see the advancements in eco-environment protection during the past 20 years, and however, also worried about ecological environment issues such as climate change, GT-6 3 of 15

4 desertification control, biodiversity conservation and water resources crisis. On 6 th June, 2012, the UNEP launched the fifth report of Global Environment Outlook. The report assessed 90 of most important environment goals and objectives, but found that little or no progress had been made in 24 goals and objectives, including climate change mitigation, fish resources protection and combating desertification and draught. The report also pointed out that if the current policies and strategies were altered and big-scale measures could be taken, it would be possible to realize a range of ambitious goals and objectives of sustainable development at the middle of this century. As for forest state, the data in the Global Forest Resources Assessment (2010) illustrates that forest logging and natural loss still rose at an astonishing rate, but with a slowdown in the overall trend. Most forest loss occurs to tropical countries and regions, while most increases in forest area are observed in temperate and cold temperate areas as well as in some emerging economies (FRA. 2010). China has made a progressive advance in forest protection. The 7 th National Forest Resources Inventory results show that nationally, the forest area is million ha, the forest coverage is 20.36%, the standing stock volume is totally billion m 3 and the forest stock volume is billion m 3. In nearly 30 years, the forest area and the stock volume in China have undergone a constant growth and the national forest coverage has risen steadily (Fig. 1-1). However, the forest coverage in China is only equivalent to 2/3 of the world average level, ranking the world 139 th (State Forestry Administration, 2010). The supply of forest resources distances amazingly itself either from the ecological demand or from the demand for forest products, especially for wood. The main forestry indicators in China are now far behind the level of developed countries, and also lower than the world average level. Overall, China is one of countries with deficient forest resources in the world (SFA, 2009). Forest areas (Unit :10 4 ha) First Third Fifth Seventh Times for forest resources inventory in history Fig. 1-1 Trend of the change in forest resources in China GT-6 4 of 15

5 Data source: SFA, 2010 In face of the ecological challenges in the globe, it is supposed to be proactive and useful to adopt green public procurement of forest products for protecting forest and improving eco-environment on the earth with joint efforts from governments, enterprises and consumers. 1.2 Meeting the requirement of international green trade In recent years, the international community has placed the illegal timber logging and associated trade issue as the hotspot in world sustainable development, and employed legislative means in attempt to minimize the risk to use illegal timber, such as the USA Lacey Act amendments and the EU Timber Regulation. In order to crack down on illegal logging and associated trade in a more effective way, some developed countries have embarked on developing public procurement policy, and required government agencies to preferably buy the legal and sustainable timber, i.e. the implementation of government green procurement policy for forest products (Li Xiaoyong et al 2008, 2009). China is a big country in forest product trade, which has progressed at a drastic rate (Fig. 1-2). In such sense, China is a significant participant of international green trade. The statistics from China Customs indicates that the forest product import-export trade was valued at billion USD; the export was billion USD in value, an increase of 18.3%, while the import value was billion USD, up 37.5%, with the trade deficit amounting to billion USD. Generally, Chinese forest product trade is still dominated by wood-based forest products. The imported wood-based forest products mainly consist of logs, sawn-timber, pulp, etc., while the exports are predominantly furniture, paper, paperboard, paper product, wood-based panel, plywood, etc. The differences in comparative advantage and international division make world forest product production and trade pattern take shape, in which Russia and some African countries are the material suppliers, North American countries and the Europe are the importers and consumers while China is the processor at the middle part of the chain. GT-6 5 of 15

6 Total value for import and export (10 8 USD Export Import Total Fig. 1-2 Total value of forest product import- export trade in (10 8 USD) Data source: SFA,2011 As a world center for forest product processing and trading, China is subject to the policies developed by the upstream and downstream countries. Chinese Government is also aware of the necessity to put in place sustainable forest management, and consider it indispensable to work together with other big timber consumers and timber producers to jointly solve the problems such as illegal logging and deforestation. Therefore, some measures, such as the research on China Timber Legality Verification System and related pilot work, have been taken to encourage people to use legal and sustainable timber. These measures lay a foundation for green procurement of forest products and provide some protections to shrinking forest resources due to illegal logging. 1.3 Meeting the requirement to promote green and transitional development of China Green trade develops on the basis of green development. During the reform and opening up lasting for more than 30 years, China has gone over a rapid socioeconomic development, and the GDP has long kept a high growth (Fig. 1-3). Promoting green and transitional development with an eye on the future is the keynote and direction of future sustainable development strategies in China. GT-6 6 of 15

7 GDP(trillion CNY) Year Fig. 1-3 GDP growth trend in China in Green public procurement is a component of green development policy. The progressive initiatives of environmentally responsible green procurement actions and the inclusion of the actions into government procurement plans are the important measures to promote green transition. In 2006, the Ministry of Finance of China and the State Environment Protection Administration officially issued the Opinions on Implementing Government Procurement of Environment Label Products and the first Government Procurement List of Environment Label Products, which explicitly provide the scope of green procurement, the list of green products and the implementation timelines. This indicates that Chinese Government has formally included environment codes into its procurement model. The green development conception, the implementation of green development policy and the increased demand for green products from international and national markets put Chinese forest product enterprises under the market pressure for green development and also bring them opportunities for transitional development (Fig. 1-4). This also precipitates forest product processor moving towards green production, green consumption and green procurement Number of 150 forestry enterprise 100 s 50 0 First Second Third Forth Fifth Sixth Seventh Eighth Ninth Lists Fig. 1-4 Statistic of the number of forestry enterprises in government GT-6 7 of 15

8 procurement lists (1-9) for environment label products 2. Policy assessment on the problems of green public procurement of China s forest product With the view to better analyzing and researching the current state and trend of green forest product procurement by Chinese enterprises, the national soft science project of China Green Public Procurement Policy for Promoting the Market Development for Environmentally Friendly Tropical Forest Products was launched in 2009, and aimed to carry out research on China s green procurement policy. The project team from the Chinese Academy of Forestry carried out the field investigations on forest product processors manufacturing logs, flooring and plywood. The results show that green forest product procurement in China is still challenged by many problems, such as people s weak awareness in green consumption, lack of laws and regulations relative to green public procurement, short of green procurement sources, limited scope covered by green procurement list of forest products, and high prices of green procured products. 2.1 Weak social awareness in green consumption Engel s Coefficient is an important index internationally used to measure citizens livelihood level and household consumption orientation, which generally drops with the rising household income and livelihood level. Since the reform and opening up, Engel s Coefficient of urban and rural households in China has retreated from 57.5% and 67.7% in 1978 to 35.7% and 41.1% in 2010 (Fig. 2-1). Judged by the Engel s Coefficient and livelihood standard set out by the United Nations, China is at the stage of fast development and relative wealth. This means that people s consumption level and quality are overall improved but there is a room to improve in terms of consumption value and ecological view. The green consumption awareness that is an indication of high literacy is still rather weak. Engel s Coefficient () Year Fig. 2-1 Engel s Coefficient development trend for urban citizens in China in Green procurement is a critical means to facilitate green consumption. The GT-6 8 of 15

9 investigation carried out by the above mentioned project shows that the real green consumers currently account for only one quarter in China, non-green consumers are approaching one third, while the quasi-green consumers represent nearly one second. A large number of people have little awareness of green consumption. The investigation conducted at the Nature Flooring Company indicates that Chinese consumers have fair recognitions towards green timber products, but they have deficient knowledge of green consumption in terms of energy saving, environment protection, health and low carbon. Obviously, only when material suppliers, producers and end users uphold and put green consumption conception into practices, can green development of forestry industry be really realized. 2.2 Uncompleted legislative system for green public procurement The practices at domestic and abroad show us that legislation provides important guarantee to promote green public procurement. The world main forest products trading countries, especially developed countries, all formulate laws to implement green forest product procurement policy. For example, the forest product procurement policy put into effect by France in June 2003 is a part of national sustainable development strategy. Denmark published Tropical Timber Procurement: Environment Guidelines in June 2003, and also developed a series of guidance documents and tool package for government green procurement. In addition, Japan, the UK, Dutch, the USA and the more developed and implemented laws and regulations in relation to green forest product procurement(bao Yingshuang et al.2010; Araya Akihiko 2010; Wang Xiuzhen et al.2011; Japan Legal Timber Website. At present, China also developed some laws and regulations relative to green public procurement for progressively promoting environmentally friendly and resources-saving consumption, and executed environment labeling, environment certification and government green procurement (Table 2-1). But these laws and regulations are comparatively uncompleted. The Chinese legislative framework for government procurement only provides the summary and guiding requirement to related aspects, lack of explicit statement of green procurement and implementation bylaw. The existing laws cannot embody the requirement and connotation of green procurement. For instance, though setting out the environment protection objectives of government procurement, Government Procurement Law of China provides no detailed stipulations and descriptions in respect to implementation regulations and bylaws for government green procurement, and makes no statement on detail issues such as how to embody the objective of environment protection and how to balance the weight of environmental products in a specific procurement. In such sense, the Law fails to provide explicit and detailed systematic restraints and policy guidance for government to implement green procurement. The Management Measures for Government Procurement and Ordering of Independent Innovation Products developed by the Ministry of Finance also fails to propose explicitly the management measures and requirements for government green procurement. In the Measures, there are no detailed descriptions of related system and short of operational provisions and implementation mechanisms. GT-6 9 of 15

10 Table 2-1 Catalog of laws and regulations relative to green procurement in China No. Laws and policies Time to issue or put into effect 1 Government Procurement Law Decisions of the State Council on Fulfilling 2005 Scientific Development Conception and Strengthening Environment Protection 3 Several Opinions of the State Councils on 2005 Accelerating Recycling Economy Development 4 Opinions on Implementing Government 2006 Procurement of Environment Label Products, Government Procurement List of Environment Label Product 5 Recycling Economy Promotion Law Short of green procurement sources of forest product Presently, China s forest products are mainly sourced from Malaysia, Indonesia, Carbon, Laos, Vietnam and some African countries (Fig. 2-2). Some areas in these countries are predominantly haunted by illegal logging, which induces the questioning on the legality of forest products from these countries or regions. For example, in , China s imports of tropical log presented a dropping trend in amount, but a rising trend in the import value (Figure 2-3), while the log which cannot be proved as from legal and sustainable sources occupied a rather large share in markets. The strict requirements on legal source narrows the scope of wood available for forest products production, and bring large limits on government public procurement. The narrowing selection scope will result in supply bottlenecks to some extent. Log Imports amount (10000 m 3 ) Countries Fig.2-2 Sources of China log imports in 2010 GT-6 10 of 15

11 Import amount (10000 m 3 ) Import value (10 8 USD) Year Amount Value Fig.2-3 Changes in China tropical log imports, Note: Data are sourced from China Customs. 0 After carrying out the investigation on Jiansu Suntian Lihua Wood (Industry and Trading) Co., Ltd. that specifically engages in plywood production and trade, the project team got the finding that in the international trade, the documents or evidence issued by China covering logging permit and transport permit to demonstrate the legality of timber cannot get full accreditation of the EU and the North America as well as related bodies, and these markets require other certifications. This caused some difficulties to the production and sale of green forest products from China. In the meanwhile, the stringent supply and rising prices of certified material haunt the markets as China has a small amount of forest achieving FSC certification. 2.4 Limited scope of tropic forest products in Green Procurement List The EU and the North America are the main destinations of China s tropic forest products. China has a small number of tropical timber processors which pass forest certification or have proof to demonstrate the legal source of timber. These certified or verified enterprises export products mostly to the European and North American markets based on make-to-ordered production. Domestically, green procurement is still in a static state, giving less impetus to these enterprises to produce green products. This also limits the scope of government green procurement and increases the difficulties for procurers. But, in general, the number of forestry enterprises in the government procurement lists of environment label products presented a climbing trend in (Fig. 2-4). Among the categories, the number of furniture manufacturers remains a surging trend, the number of wood-based panel and wooden flooring processors began to fall in the third lists, while the number of light wall form manufacturers remains stable without great change (Fig. 2-5). GT-6 11 of 15

12 Number of enterprises First Third Fifth Seventh Ninth Wood-based Panel Wooden flooring Furniture Light wall form Total Lists Fig.2-4 Total number of forestry enterprises in 1-9 government procurement lists of environment label products 140 Number of enterprises Lists Wood-based panel Wooden flooring Furniture Light wall form Fig. 2-5 Statistics of the number of forestry enterprises in the 1-9 government procurement lists of environment label products It should be noted that processors to supply green forest products need to purchase certified timber or the timber with evidences to demonstrate the legal sources. The products made from these certified timber cost more than average products. According to statistics, the cost of certified forest products will increase by 20%-30%, which will create some pressure on enterprises. In China, public GT-6 12 of 15

13 procurements are mostly carried out in a form of bidding and tendering, in which price is an important reference indicator. In such sense, green products are hard to win bids. As a result, the conflicts between procurement policy and actual practices arise. 3. Policy design on green public procurement of China s forest product in the future With an eye to China s national and forest conditions, international experiences and lessons in terms of green procurement are compared and learned. It is supposed to innovate and update policies, raise green consumption awareness by bolstering education and dissemination and upgrade the legislative system for government green procurement. It is expected to promote China s green forest product procurement process and precipitate the pace of green socioeconomic transition in China, by encouraging green enterprises to develop by virtue of market means, updating green product lists to cover more green procurement enterprises, putting in place green procurement monitoring and implementation mechanisms and strengthening policy design and execution in relation to green procurement supervision. 3.1 Upgrade legislations relative to green forest products procurement From the experiences of developed countries in green forest product procurement policy, it can be seen that mandatory implementation of green forest product procurement policy through legislations is the most effective approach. It is feeble to rely on private environment forces, corporate social ethics and the self-disciplinary actions of timber exporting countries to implement green forest product procurement. It is a must to promote the green procurement through legislations at national level and to push forwards green forest product procurement with national will and law authority. It is needed to pin down the procedure, process, technical norms and standards of procurement in mandatory law documents and include them into environment requirements through developing a series of guiding documents and tool packages. 3.2 Set up green procurement standard for forest products The development of green procurement standards is the centerpiece of government green procurement. The guidelines for products under government green procurement should be developed on the basis of environment label products, which require government to buy environment label products. Hence, it is needed to connect environment label products with products under government green procurement at the time of preparing green procurement standards for forest products. Moreover, the standards should be further extended at a faster speed to provide a good environment for the growth of green products and green industry, which also benefits government to conduct green procurement in a more regulated and more operational way. Taking the national soft scientific research project of China s Green Public Procurement Policy for Promoting the Market Development for Environmentally Friendly Tropical Forest Products(2009GXS5B081) executed by the Research Institute of Forestry Policy and Information under the Chinese Academy of Forestry GT-6 13 of 15

14 as an example, the project team studied and formulated the code of action with regard to the procurement relation between Chinese consumers and tropical forest product suppliers, which is translated into the Green Public Procurement Guidelines on Tropical Forest Products in China (GPGT). The Guidelines provide a detailed description of green procurement standards for tropical forest products in terms of consumers requirements on quality system (pertinent to consumers), requirements for tropical forest product supply (pertinent to suppliers), legal procurement (pertinent to consumers and suppliers), environment assessment (pertinent to suppliers and consumers), social responsibility (pertinent to supplier and consumers), risk assessment (pertinent to consumers and suppliers), validation procedure (pertinent to consumers and suppliers), sales of procured products (pertinent to traders) and control of procurement cost (pertinent to consumers and suppliers). The Guidelines will provide guidance to all parties in their compliance with various procurement requirements in relation to tropical forest products and therefore promote the green procurement process. 3.3 Step-wise implementation of green procurement process The rapid economic growth in China imposes increasing consumption demands for timber. At present, China is the second big timber importing country and the big consuming country in the world, and China s timber imports account for approximately 35% of the total supply amount. China can set the phased objectives and resort to step-wise implementation for gradually achieving green procurement. For example, state-owned and responsible large enterprises should take the lead in the implementation to guide forest product import on the track of green procurement, and thus lead related agencies, departments and other enterprises gradually on the road of green procurement. 3.4 Enhance the capacity building for green forest product procurement Authority third party certification need to be introduced to verify whether the timber used comes from sustainably managed forest or whether the forest products procured come from legal sources. Therefore, it is important to establish national certification system and bodies. The setup of specific organizations in charge of green forest product procurement and green procurement network, the publication of detailed guiding manual on forest product procurement and hiring full-time employees will help the full use of information from all sources and therefore save resources. It is pleased to see that the SFA has embarked on relative work. After researches, experts from the Chinese Academy of Forestry came up with the China Timber Legality Verification System, and related policy evaluation and pilot work will be carried out when conditions grow mature. 3.5 Release preferential policy for enterprises to procure green forest products In order to provide preferential conditions for enterprises implementing green procurement policy in terms of import duty and value-added tax, the form of subsidy is adopted to reduce the costs of enterprises in timber import, with the aim at providing assistance in finished product development and enterprises fund-raising. At GT-6 14 of 15

15 the same time, government agencies should give precedence to forest products produced by enterprises implementing green procurement policy when they procure, thus stimulating enterprises to actively participate in green procurement, facilitate green production and consumption and forward the management of forest ecosystems, green economy and inclusive society References Araya Akihiko. Countermeasures against illegal logging and green procurement law in Japan. China Wood-based Panel, 2010,(2): Bao Yingshuang, Su Haiying, He Youjun. Green forest products procurement policy and its practice in Dutch. World Forestry Research, 2010,23(5):64-6. FRA Japan Legal Timber Website. Li Xiaoyong, Chen Xiaoqian, Hou Fangmiao. Evaluation of government green procurement policy for forest products. Journal of Beijing Forestry University (Social Science Edition), 2009,8(4) : Li Xiaoyong, Hou Fangmiao, Wen Yali, et al. Emergence and development trend of government green procurement of forest products in developed countries. Forestry Economics, 2008 (8) :78-80 SFA, qc7 Wang Xiuzhen, Chen Jie, HE Youjun (corresponding author). Impact analysis of green procurement policy for forest products in France and its reference. Chinese Forestry Science and, 2011, 11(3): Japan Legal Timber Website. CPET, WWF, TTF. Where does your timber come from? 2009 CPET, The UK Government Timber Procurement Policy, 2009 Timber Trade Federation, The Responsible Purchasing Policy Annual Report, 2010 CPET. Government procurement of timber in France GT-6 15 of 15