Forest sector market impacts of changed roundwood export tariffs and investment climate in Russia

The Russian Federation is the world's largest net exporter of roundwood. To encourage shift in exports from roundwood to value-added industrial products, Russia has set large tariffs on its roundwood exports, and announced that even higher ones would be introduced in the future. Using a global forest sector model, the EFI-GTM, we analyse how the Russian and global forest product markets will evolve towards 2020 under alternative tariff levels and assumptions on investment climate in Russia. Our results show that the tariffs decrease harvest and roundwood prices in Russia, but improve the speed of development in the Russian sawnwood and pulp industry. The results also suggest that policies which improve the investment climate in Russia are more vital than the tariffs for the Russian forest industry to develop favourably. Among the tariff settings considered, the prevailing one of 15€ per cubic meter with non-coniferous pulpwood exempted, seems most beneficial for Russia. With a tax of 50€ per cubic meter, its forest industry would not develop much stronger than in the 15€ case, but forestry would suffer from a drastic harvest decrease caused by a nearly complete stop in the Russian roundwood exports, and negligible tax income would be generated. Outside Russia, the main importers of Russian roundwood would experience significant wood price increases and decreased forest industry production. The decline in the forest industry output would be largest in Asia, due to scarce supply there of raw material substitutes for wood imported from Russia, whereas the highest relative increase in roundwood prices would take place in the EU.