True Costs of Green Labeling

By Stephen Pociask
American Consumer Institute 

The familiar saying “you get what you pay for” applies in many circumstances. Under certain conditions, however, this statement can be very misleading. For example, when customers pay a higher price for wood and paper products with “green” labels, they may not actually be getting something that is better for the environment. A combination of misguided policies and organized pressure from environmental activists to elevate one forest certification program over all others is creating confusion in the marketplace. As a result, consumers are paying more for wood and paper products that may fall short of their “green” expectations.

The source of the confusion deals with an ongoing heated debate over forest certification programs, dubbed the wood wars. Forest certification takes place when landowners meet the established benchmarks of one of several organizations, thereby earning the right to put that organization’s eco-label on its products. There are more than 50 certification programs in the world, with the US most reliant on standards set by the American Tree Farm System (ATFS), Forest Stewardship Council (FSC) and the Sustainable Forestry Initiative (SFI).

With North America accounting for 40 percent of the world’s certified lands, the US is a leader in forest certification — but there is some bad news. The US’ edge in responsible forestry management is being forced to the sidelines by government actions and environmental activists that are working to establish one international standard, FSC, as the only legitimate standard in the US. Because over 90 percent of the world’s FSC-certified land is found in foreign countries, if the US adopts a monopoly standard, three-quarters of our nation’s certified lands could be excluded from the market. That exclusion could mean a significant reduction in domestic production, the loss of American jobs, and sending US dollars overseas.

The proper role for government and how it deals with forest certification lags behind the realities of the marketplace. A study released this week by The American Consumer Institute quantifies some of the costs of these government procurement policies have on businesses, consumers and the environment.
The study found several troubling consequences of this de facto monopoly that undermine the very sustainability goals of these certification programs. The study noted that the FSC program did not have consistent standards at all; instead they used benchmarks and requirements that differ from country to country. No surprise, under the FSC program, the US landowners face the strictest FSC standards in the world, while in more environmentally risky countries, such as Russia, landowners are allowed to game the system.

What does this mean for consumers? These added certification costs are passed on to US producers and ultimately American consumers of timber products in the price range of 15 percent to 20 percent. The study estimates that if an FSC standard becomes a controlling requirement for American forests, consumer welfare would drop by an estimated $10 billion for wood products and $24 billion for paper products each year.

Moreover, an FSC-only approach may incentivize the procurement of timber in environmentally risky locations, given the organization’s disparity in standards across the world. Furthermore, importing additional foreign wood increases both environmental and transportation costs. It may also encourage consumers to substitute away from wood products to less environmentally-friendly materials, including metals, plastics and concrete. This does not mean FSC has no environmental benefit, or that it is not a sound choice for some landowners and businesses, but it does mean that consumers are being misled by a system that promotes so-called environmentally superior products without the basis to support these claims or additional costs.

The imposition of a single standard through procurement requirements – such as the U.S. Green Building Council’s LEED rating system used many government agencies – creates significant costs without ensuring corresponding environmental benefits. It is irresponsible to allow the government to promote a monopoly on forest certification that will drive losses of tens of billions of dollars in domestic wood and paper markets, and the reduction of employment and tax revenues in local communities that follow – all in the name of sustainability that the policies do not ensure.

In order for consumers to be confident that “you get what you pay for” holds true for wood and paper products in the “green” market, an approach that levels the playing field for forest certification programs is needed. Such an approach is not only pro-consumer, but it is also pro-American jobs and pro-environment.

Stephen Pociask is an economist at the American Consumer Institute

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