Utilization of timber harvesting residues for wood pellet production: A green strategy to improve timber concession’s profitability

Abstract

Production forests, which cover 70 million Ha or more than half of total Indonesia’s forest, should be actively managed in a sustainable way to avoid dangers of deforestation of tropical rain forests. A decreasing trend of numbers of operating timber concessions has been observed because of low profitability and supply issues. In an effort to reverse this tide, we conducted a comprehensive study by reviewing existing literature, analyzing financial details from six concessions and their three parent companies, and organizing workshop with multi stakeholders to improve the profitability of logging concessions through logging waste utilization for wood pellet production. Our study showed that timber harvesting waste utilization for wood pellet production is an attractive strategy to enhance profitability of timber concession because of supply availability, cost efficiency, and promising market for sustainable wood pellets in Japan. The waste wood is valuable but wasted resource, as 2.5 to 1 is the ratio of wood waste left behind to that of high value logs removed from the forest. In East Kalimantan, we estimated that the cost for wood pellet production, which corresponds to labor and equipment needed to remove and transport waste wood3, to be IDR 327, 250/m3 or USD 25 per m3. Further, we calculated that by selling the logging waste for the wood pellet production at the price of USD 37, a typical-sized concession of 50, 000 m3 annual timber production could make a profit of USD 570, 000 per year instead of losing USD 60, 000 under the current financial situation of the concession. This business is recommended for timber concessions with medium road hauls and less dependence on narrow, turbulent sections of rivers for rafting. Large-scale implementation of this strategy will be preceded by conducting a pilot project as a collaborative effort between The Nature Conservancy/Yayasan Konservasi Alam Nusantara and Indonesia Ministry of Environment and Forestry.