As the consequences of climate change become more pronounced, certain locales, such as California, are expected to see more frequent and severer wildfires. Wildfires aren’t often seen as good news, as they cause danger to life and property. Nonetheless, however grim, growing numbers of wildfires are also likely to expand revenues for three groups of forest industry stakeholders.
Private Wildfire-Fighting Firms
Most people probably didn’t know until recently that private wildfire-fighting firms existed – when Kanye West and Kim Kardashian caught headlines for hiring a team to protect their California home. But use of private firms is increasing among government agencies and insurers. The National Wildfire Suppression Association estimates that about 40% of wildfire-fighting resources across the US are provided by private contractors. The appeal of private contractors grew over the last decade, as government agencies realized they could reduce their full time staff and associated labor costs by outsourcing some wildfire-fighting functions.
Forest Resilience Bonds
Innovation in the financial sector offers a way for municipalities to have the funds needed to reduce the risk of wildfires. For example, the World Resources Institute, in partnership with the nonprofit Blue Forest Conservation, is offering “forest resilience bonds”. Investors hand money upfront to municipalities, which use the money to clear out forest areas at risk of severe wildfires. Municipalities then repay the bond over time, using the money they would have had to spend on combating a major wildfire. Spending by municipalities on forest advisory, management, and fuel treatment (hardening an area against wildfire by removing small trees and brush and carrying out controlled burns) will also be a growing revenue stream for forestry firms, especially if forest resilience bonds gain in popularity.
Finally, wildfires also encourage salvage logging, though there are some caveats. After wildfires burn through an area, some timber may still have value. Timber harvested through salvage logging generally sells at a significant discount, offering salvage loggers a tremendous competitive advantage in the marketplace. However, some scientists and conservationists have expressed concerns that removing timber sets back forest recovery for decades. As a result, injunctions against post-fire salvage logging may reduce revenues in the future.
Want to Learn More?
We have you covered! For additional information and analysis of US industry trends, see Forestry: United States, a report published by the Freedonia Focus Reports division of The Freedonia Group.
This report forecasts to 2024 US forestry revenues in nominal US dollars. Total revenues are segmented by activity in terms of:
- support activities
- timber tract operations
- forest products and nurseries
To illustrate historical trends, total revenues and the various segments as well as the number of firms, establishments, and employment are provided in annual series from 2009 to 2019.
Firms whose primary revenue streams are derived from sales of Christmas trees, wood pellets, or maple syrup are excluded from the scope of this report. In addition, revenues of real estate investment trusts (REITs) that manage timberland are not in scope.
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About the Author
Owen Stuart is a Market Research Analyst with Freedonia Focus Reports. He conducts research and writes a variety of Focus Reports, and his experience as an analyst covers multiple industries.