Market Segmentation by Certification: Quantity effects on tropical timber production

Eco-certification standards are increasingly used by industrial countries to impose import restrictions on goods produced by foreign suppliers. Import restrictions on eco-certified goods that prevent the trade of goods derived from unsustainable practices serve to segment global markets served by foreign producers into a conventional market and a certified market, altering market structure and equilibrium prices in a manner that potentially works against sustainability goals. In this paper, we examine the effect of forest certification on tropical timber production in Central Africa. Using panel data of timber production in Cameroon from 2003 to 2009, we show that conventional timber producers substantially increase harvest rates in response to eco-certification standards, and that this effect is strongest in less competitive timber markets. Moreover, we find eco-certification shifts production to forests with higher extraction costs and potentially higher marginal damages from timber extraction, exacerbating economic inefficiency.