Calculating the net growth value of standing forest

Annika Laarmaa

The European Union budget is financed from own resources based on the gross national income (GNI). The task of Eurostat is to monitor that the Member States’ contributions to the EU budget are correctly calculated on the basis of the GNI. If Eurostat finds that a Member State could modify the methodology for calculating the GNI, it submits a precept and requires improvement of the methodology. By autumn 2019, Statistics Estonia will have to make changes in the time series of the Estonian national accounts. Standing timber will have to be recorded as inventory of work-in-progress continuously over the entire growth period. Whereas so far only felled timber was recorded in output calculations, starting from autumn 2019 forest growth is taken into account as well.

Data sources

The annual data on forest growth and felling was obtained from the Estonian Environment Agency and price data from the State Forest Management Centre (RMK). For the distribution of private forest between legal entities and private persons, a study1 conducted in 2015 by ForInfo for the Ministry of the Environment was used.

Forest growth and felling

Timber growth data from the Environment Agency are available for state forest (RMK manages approximately 40% of Estonia’s forests) and private forest. Statistics Estonia’s data on forest growth included only data on forest land. Although there are many other tree stands in Estonia (in parks, cemeteries, roadside hedges, etc.), these are not included in the growth calculations. In addition, only growth data of managed forests, i.e. without economic restriction, and forests with economic restriction are used. Information on the latter is used in the calculations to the full extent, but strictly protected forests are excluded, as no forest management takes place there.

Both growth and felling data are available separately for state and private forest with and without economic restrictions. Data on timber felling are available by tree species as well as by timber assortment, whereas the data on timber growth are only available for different tree species. The shares of timber assortments for every tree species are estimated using data on felling. The shares of timber assortments for forest increment are thus based on the final use of felled timber in a given year.

Data on forest increment and timber felling are broken down by tree species, i.e. pine, spruce, birch, aspen, black alder, grey alder, etc. Timber assortments are logs (diameter of 18 cm or larger), saw logs (diameter of less than 18 cm), pulpwood, fuelwood and forest residuals. Forest residuals include the parts of the stem that are not used as wood material, such as stumps, treetops and barks. In the calculations, these are considered reference values to ensure that wood material and residuals equal the total felling. The price for residuals is zero as they do not have a market.

Prices

In order to estimate the value of standing timber in its original place rather than after its removal, stumpage prices are used. The stumpage price is the amount paid per cubic metre of timber by the harvester to the owner of the timber resources. The stumpage prices are derived by deducting felling costs from the average roadside prices.2

The source for the average roadside prices of wood material is the price statistics of RMK. The price data from RMK are used for both owner types, since price statistics for private owners are not systematically collected and maintained. However, these average roadside prices cannot be used directly to calculate the value of standing timber, because they also include felling costs. The following methodology is used to exclude these costs.

Felling costs of marketable wood material are calculated according to appendix 6 of regulation 242 of the Government of the Republic3, which gives a detailed description of the process. The method uses data from the Environment Agency to find the average stem volume for felling along with geographic information system (GIS) queries to find the average transportation distance from the nearest roadside.

This gives the costs of felling and transportation of the wood material to the nearest roadside (altogether felling costs) for tree species and timber assortments annually for RMK and other owners.

The stumpage prices are received by deducting felling costs from average roadside prices, and are used for calculating forest net growth value.

Calculations

To obtain the value of standing timber, first, the net growth has to be calculated from timber growth data, and thereafter, multiplied by stumpage prices. The calculations are made for each tree species and timber assortment both for RMK and other owners. The calculations are illustrated by the following equation:

formula

Where

formula

First, the total volume lost due to natural death of trees is deducted from timber growth. According to the estimations of the Environment Agency, approximately 2.2 million cubic metres of wood per year is lost due to natural death. Therefore, the growth of every tree species is reduced by the share of this approximation from the volume of timber growth.

Thereafter, the remaining timber growth is distributed into timber assortments, using the assortment shares from the felling data, from which the volume of felling is deducted. The result of the calculations is the net growth for every tree species and timber assortment.

The value for the total net growth of standing forest of Estonia is obtained by multiplying the various net growths by their stumpage prices and by summing up across all the tree species and ownerships. This is illustrated by the following equation:

formula

The approach described above for calculating the value of net growth of standing forest is an estimation, as it does not account for the actual age structure of the forest. At the moment, there are no detailed data available to include the age structure of the forest in the calculations.

The specialists of the Estonian Environment Agency and RMK were included in the process of developing the methodology for accounting standing timber and they were contacted in case of any questions. For example, for some tree species and timber assortments there are data available on timber felling but no data on the average roadside prices. This means that the specific type of timber is sold rarely. In these cases, the decision was to use the prices of tree species that are the most similar.

 

Results

The calculations described above were made for the entire time series, i.e. starting from the 1st quarter of 1995. On the basis of consultations with specialists and international experience, it was assumed that as forest increment is seasonal, there is no timber growth in the forest in the 1st and 4th quarters.

Due to the change in methodology the output of non-financial corporations and households in the production side of national accounts statistics and the changes in inventories on the expenditure side will change.

For some years at the beginning of the time series, trees were felled in Estonian forests to an extent which exceeded the annual increment of the forest. In addition, in some cases, the negative stumpage prices of fuelwood had an impact, as compared to the value of fuelwood their transportation to the roadside was expensive. Therefore, the output for these years is negative. In the later years, the increment of the forest has exceeded felling, resulting in positive output.

1 Eesti erametsaomandi struktuur ja kasutamine 2015. aastal. https://www.envir.ee/sites/default/files/erametsaomandi_struktuur_ja_kasutamine_2015.pdf (in Estonian)

2Eurostat-OECD Compilation Guide on Inventories, 2017, pp. 155–158.
https://ec.europa.eu/eurostat/documents/3859598/8228095/KS-GQ-17-005-EN-N.pdf

3 RT I, 03.09.2013, 2. https://www.riigiteataja.ee/akt/103092013002 (in Estonian)