Introduction
With the development of biomass power generation in Japan, wood pellet imports from Vietnam in Japan have been increasing since around 2018; by 2022, Japan’s imports of Vietnamese wood pellets will amount to about 2.18 million tons, accounting for 53.5% of total Japanese imports.
Since forestry and the manufacture of wood and wood products are major industries in Vietnam, there are raw materials for wood pellets such as thinned wood, forest residues, and offcuts. On the other hand, the Vietnamese government is actively promoting the development of sustainable forests as a national policy. For example, it has implemented various policies that contribute to forest protection, such as acquiring FSC certification, developing Vietnam’s own forest certification system, and joining the World Wide Fund for Nature (WWF).
In this report, following the previous article, “Consideration and Fact-Based Discussion on Vietnamese Wood Pellets and Forest Certification System,” we would like to organize and discuss the facts about the trends of wood pellets produced in Vietnam. Specifically, we would like to discuss the policy trend of sustainable forest development by the Vietnamese government and the production trend of wood pellets from Vietnam on a factual basis.
【今後ベトビズで扱う記事テーマ】
- Vol. 2 (this article): Vietnamese government’s sustainable forest development policy and production potential of certified wood pellets
- Vol. 3: Trend of wood pellet export industry and forest certification by Vietnam
- Vol. 4: Explanation of key points for Japanese companies to enter the wood industry in Vietnam, and how to monitor Vietnamese companies.
In this second report, we will focus in detail on the development of sustainable forestry in Vietnam and the production potential of certified wood pellets.
Status of Sustainable Forest Development in Vietnam
From around the 1990s, deforestation associated with the Vietnam War and the post-war economic recovery led to a significant decrease in the forest area and resources in Vietnam. At that time, the Vietnamese government implemented a number of forest development policies to restore the forests. The following policies are some of the major examples.
- Policy of allocating forest land to farmers.
- Prohibits the burning of forests for rice paddies and fields. Enactment of policies that explicitly protect forests
- Implementation and promotion of afforestation activities throughout Vietnam
- Policy to plan and develop forest land to grow artificial forests for industrial use
- Slogan to plant 10 million trees throughout Vietnam
- Policy to totally prohibit logging of natural forests, etc.
As an effect of the various forest development and restoration policies described above, the area of planted forests in Vietnam and the national forest cover ratio are increasing annually. The area of planted forests will increase by 17% from 2015 to 2021, reaching 4.57 million hectares. The national forest coverage increased from 40.8% to 42.02%.
As far as the currently available statistics are concerned, the forest damaged area in Vietnam is on a decreasing trend in 2011-2020 due to Vietnam’s forest development and protection policy.
In the 2011-2015 period, the average annual forest damaged area across Vietnam was 2,924.2 hectares. However, in the period 2016-2020, the average annual forest damaged area was 2,347.9 ha, which represents a 20% decrease compared to the previous period. This is also the result of measures implemented by the Vietnamese government to protect the country’s industries of wood and wood products processing and forestry, and to continue sustainable development.
Sustainable Forest Development Policy by the Government of Vietnam
In February 2007, the Prime Minister of Vietnam issued Decision No. 18/2007/QD-TTg, approving the Vietnam National Forestry Master Plan for 2006-2020, which includes sustainable forest development. The decision approved the National Forestry Master Plan for 2006-2020, which includes sustainable forest development.
Following the Vietnam National Forestry Master Plan for 2006-2020, the Vietnamese government formulated the Vietnam National Forestry Master Plan for 2021-2030 (a plan with a vision for 2050 and a development strategy for Vietnam’s forestry industry from 2021 to 2030) with a vision for the year 2050. The Master Plan is a plan that defines the development strategy of Vietnam’s forestry industry from 2021 to 2030 with a vision for 2050. This Master Plan has a stronger focus on sustainable forest development. Specifically, the following goals are identified
- 100% of forest area managed in a sustainable manner by 2030, when the forest owner/manager is an organization rather than an individual
- 10% of the area of natural forest by 2021-2025 and 20% by 2026-2030 to be managed in a sustainable manner to improve forest quality
- 500,000 hectares of forest certified by 2025 and 1 million hectares by 2030
In addition, the Vietnamese government promotes the development of sustainable forests through the following policies
- Promote forest certification and sustainable forest management and development in line with international standards. Promote the active participation of local government agencies, private organizations, forest owners/managers, and farmer households in sustainable forest management and development for forest certification.
- Complete policy and technical guidelines for the promotion of sustainable forest management and forest certification, including detailed provisions on land ownership, use rights, and taxes for each target group, such as individuals, households, and communities.
- Focus on the development of industrial forest concentration zones for sustainable forest management and development. At the same time, more accurately control imports of timber and wood products to minimize dependence on imported timber.
- Build Vietnam’s export wood brands produced from legal and forest certified wood.
In accordance with the Vietnam National Forestry Master Plan, on July 12, 2022, the Government of Vietnam issued Decision No. 809/QD-TTg, approving a sustainable forestry development plan for the period 2021-2025. With this decision, the Vietnamese government aims to achieve a forest coverage of about 42% during the period 2021-2025, while maintaining the current forest area for sustainable forest development. In addition, the goal includes improving the quality of forests.
The General Directorate of Forestry of Vietnam is the most senior management agency in charge of forestry in Vietnam and is responsible for preparing an annual plan for 2023. Among its goals is to certify 90,000 new hectares of forests. It then directs the regional agricultural and rural development authorities to prepare and implement sustainable forest management plans; provides guidance and cooperation for the effective implementation of forest certification applications in accordance with the VFCS/PEFC forest certification system; and provides guidance and assistance to the Vietnamese Natural Rubber Group (VNRG) to ensure that its forests are certified in accordance with the VFCS/PEFC forest certification system. And cooperate with Vietnam Natural Rubber Group (VRG) to increase the forest area to be certified under the VFCS/PEFC forest certification system.
Thus, the development of sustainable forests in Vietnam today is highly focused by the government. In particular, the Vietnamese government’s development of a domestic CO2 credit market and a demonstration project for the sale of forest-derived CO2 credits on the international market will have a positive impact on sustainable forest development in order to achieve the goal of carbon neutrality (virtually zero CO2 emissions) declared at COP26.
The area of forests with forest certification in Vietnam is likely to increase in the future. This will also increase the possible production of VFCS/PEFC/FSC certified wood products and timber.
Production Status of Wood Pellets in Vietnam
So far, we have described policy trends related to forestry by the Vietnamese government, but these plantations grown in Vietnam support the global market for timber, wood products, and wood fuel.
In the second half of this article, we will continue our focus on wood pellets and look at the extent to which wood pellets can be produced from forest land planted in Vietnam.
Export Status of Wood Pellets from Vietnam
Vietnam is the second largest exporter of wood pellets in the world after the United States on a global scale, and according to information from the Vietnam Wood and Forest Products Association, almost all of its exported wood pellet material comes from domestic forest land. The main export markets are Japan and South Korea, which exported 4.88 million tons of wood pellets in 2022, according to Vietnamese government statistics. Among them, 2.18 million tons were exported to Japan, accounting for 51% of total exports, and each year, exports to Japan account for 40-50% of total exports.
Import Status of Wood Pellets in Japan
Japan imports 2.18 million tons of wood pellets from Vietnam in 2022, which accounts for 53.5% of total imports by country.
Japan’s wood pellet imports are shown in the following chart.
Potential Production Volume of Wood Pellets Produced Wood from Certified Forests in Vietnam
In the wood pellet industry in Vietnam, the sources of wood as raw material can be classified and organized as follows. First, wood harvested in Vietnam can be classified into FSC certified wood, PEFC certified wood, and non-certified wood.
The maximum production potential of wood pellets from certified forests in Vietnam is the amount of FSC- and PEFC-certified wood that can be used for wood pellet production, which Vietbiz’s own research estimates to be about 4.49 million tons. We would like to add that the maximum production potential does not include the production potential from controlled wood (CW).
Forest area data was obtained from FSC-certified wood area and PEFC-certified wood area in Vietnam, and several experts involved in the Vietnamese forestry industry were interviewed to estimate the possible wood pellet production per area.
Vietnam’s Wood Pellet Production Potential
While Vietnam’s potential production of wood pellets derived from certified wood (excluding controlled wood) per year can be estimated at 4.49 million tons, the actual export volume to Japan is 2.18 million tons.
In October 2022, FSC announced that it would investigate the wood pellets sold by AVP due to a possible quantity discrepancy, but VietBiz’s own research suggests that this is not a structural problem in the Vietnamese forest industry.
In addition, Vietnam’s main export destinations for wood pellets are Japan and South Korea, but there are some differences in the status of FIT systems as an import incentive for wood pellets produced from certified forests. In Korea, there is no FIT system as a preferential measure for wood products with forest certification, and certified wood is not required for biomass power generation. On the other hand, Japan’s FIT system requires legality certification as typified by the PEFC/FSC certification system.
In other words, Japan needs to import wood pellets produced from certified forests, but this is not the case for Korea. In addition, according to VietBiz’s own research, it is extremely likely that many of the wood pellets imported by Korea from Vietnam are inexpensive and non-certified.
In this case, one factor that supports the fact that the volume of wood pellets that Japan imports from Vietnam is large enough to fit into the available production capacity of certified wood pellets in Vietnam.
Summary
This report describes and discusses the sustainable development of forestry in Vietnam from two major perspectives. The first half of the report describes the background of Vietnam’s focus on sustainable forestry development, the actual measures Vietnam has taken, and the actual increase in the amount of forests in Vietnam.
In the latter part of the study, estimates were also made on how much wood pellets could be produced from forest lands in Vietnam.
In fact, the Vietnamese government has enacted and implemented a policy of sustainable development for forestry, which is upstream from the country’s leading industry, the timber and wood products processing industry, in order to make it sustainable.
We also found that the amount of certified wood production that could be produced in Vietnam, estimated based on objective statistical data and specialized information, would be sufficient to cover the amount that Japan imports from Vietnam. It is important to emphasize that in addition to Vietnam’s forestry industry, the country is also experiencing healthy growth in its wood pellet production and export business, which is located downstream from the supply chain.
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