Problem related to the illegal logging is repeated continuously in mass media, but honestly, it looks that nobody wants to solve this problem forever. After I read article about Norway as a first country in the world to be deforestation-free, I decided to express my opinion why such programs do not work, will never do and even act completely contrary to planned expectations. I propose a solution that will end illegal logging forever.

Recently, the parliament of Norway implemented a policy to ensure that public procurement will not contribute to deforestation of the rainforest. Interesting, but hard to meet in the practice in my opinion.

Honestly speaking, I think that it is not going to work, the same as any other strict requirement concerning drugs trafficking or illegal prostitution. You may ask, why? Answer is simple: big money and terrific, corrupted supply chain. People involved in such activities earn huge risk premium due to illegality.

All programs that impose strict requirements fail, because they lead to the increase of the price of the illegal products. That is where the shoe pinches. Illegal products make huge profits for people who trade them. Therefore, the solution for the problem of illegal logging or other types of illegal activities is to make them cheap. Doing so, it will reduce the profits of the producers and in consequence, they will have a higher opportunity cost. In other words, they will be indifferent if they should produce illegal products or have legal work where they can get equally much money. The risk free option is more reasonable in such a case.

How to make illegal products cheap?

In economics, we have two solutions to decrease the price of the product. If we recall the supply and demand curves from the high school, we can easily notice that we can either decrease demand or increase the supply (see graph).

According to many programs against illegal logging, the target is to increase demand for timber from responsibly managed forests. However, the problem often is that illegal logs are mixed with legal ones, what is probably well controlled by timber mafias in tropics. I argue that targets that consider demand side do not work.  Nevertheless, I can only admit one method that may decrease the demand for illegal logs and it is called – education. I have here in mind the education of people from countries that import illegal products, not countries that export. People from exporting countries cannot be blamed as they belong to two different groups. First group is poor and economically dependent from such products and second group can be describe as well-organized timber mafias. In both cases the education will not work. Only education of people in developed countries may work, but still in the limited scope. Unfortunately, often people who buy products from tropics are not even aware that they come from illegal sources. Therefore, fighting against demand side is out of work.

All programs that are now in use predominantly play with the supply side, but they head often the wrong direction. For instance, programs such as FLEGT, try to prevent the import of illegal timber. However, preventing black market logs import is nothing more than increasing its price, by reducing supply. Simple economy!

Let us focus on the supply side that is more interesting.

Legalize all activities in tropics i.e. let us buy everything from tropics what flows in.

In the long perspective, the price of logs will decrease and it will not be so profitable for “logs traffickers” to smuggle them to Europe or North America. We should keep in mind that transportation costs are quite high to Europe or North America, and only expensive illegal logs pay offs these costs. Cheap legal logs will cut off the problem, as the profit will decrease significantly.

The biggest benefit is that the trade will be legal and under control. Consumers will require high quality and cheap price while people from tropics will have to put much more effort to satisfy them. It may lead to the case that logging in tropics will shift to logging in plantations that will be treated as investment.

Now we can observe high corruption in developing countries, where trees are harvested from public open source. Of course, in the short perspective, there can happen horrible things such as rapid deforestation, as market for legal logs from tropics will be released. But, in my opinion, only by this mechanism we can start putting some values on the tropical forests and make people from developing countries aware that these resources have high value. So far, I think that all mechanisms such as forest certification, FLEGT program or REDD program simply does not work in tropics and will never work under any circumstances. None of them reduces the prices of the products from illegal activities, and even contradictory, they increase these prices. In consequence, such programs indirectly make this illegal business more attractive.

Why so simple market mechanism has not been introduced so far, for all kind of illegal products (wood, drugs, prostitution etc.)?

For me, it looks that there is simply a lot of people down the supply chain, who earn a lot of money on such activities and have enough power to keep the status quo. Those powerful people will never support such a solution because they will lose the source of their major income.

Finally, people do not have courage to make drastic decisions in short time perspective to succeed in long one.