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October 2012

Illegal Trade in Environmentally Sensitive Goods

Executive Summary

Key messages

 The illegal trade of goods such as wildlife and timber is a serious economic and 

environmental problem that can disrupt whole economies and ecosystems, undermine 

environmentally sustainable activities, and reduce future options for the use of resources. Although 

hard to quantify, the global value of this international environmental crime is estimated to be 

around USD 30-70 billion a year.

 The drivers of illegal trade are primarily economic, where the expected returns exceed the 

expected costs. More generally, illegal trade may also take place if the demand exceeds the 

supply of legal products. Strong demand from specific consumer countries may be a significant 

driver in some cases.

 The environmental and economic impacts of illegal trade vary from country to country and for 

different types of goods. Trade in natural resources (timber and fish) may have the most significant 

economic impacts, while illegal dumping of hazardous waste may have the greatest health 

impacts, and poaching may have the greatest impact on species survival. Illegal trade in ozonedepleting substances has slowed the resolution of a significant global concern. There can also be 

spillover effects. For instance, in fragile states illegal trade can undermine the rule of law and can 

fuel armed conflict.

 By its very nature, the size of illegal trade in environmentally sensitive goods is difficult to 

quantify and further efforts are required to address the data problem. Data comparisons between 

import and export statistics and licensing systems can be enhanced by further elaboration of the 

Harmonized System codes. Inadequate taxonomic information has been recognised as a problem, 

and the Global Taxonomy Initiative can help to overcome this barrier to conservation.

 Licensing schemes can be an important tool in helping to detect and regulate illegal flows

of environmental goods. Examples include the Convention on International Trade in Endangered 

Species of Wild Flora and Fauna, and the EU’s Forest Law Enforcement, Governance and Trade 

Initiative. While the schemes reviewed in this report have helped to address the problem of illegal 

trade, none work perfectly. A systematic analysis of their operation and successes and failures 

would be a useful measure, and there is also scope for improving the process for sharing 

information between the schemes, instituting independent verification of licensing, and exploring 

possible economies of scope.

 National environmental policy regimes can have a significant impact on illegal trade. The 

greater use of economic incentives can complement traditional command and control approaches 

to regulation, and may help to reduce illegal trade flows. The use of revenues can reinforce 

enforcement capacity and improve the incentives for longer-term management of the resource 

base. However, such mechanisms only work in a framework of good governance and law 

enforcement, and as part of a package of measures to address the full range of causes of illegal 

trade.
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Over the past three decades, the national and international framework for the protection of the natural 

environment has evolved rapidly. As legislation expands, however, so too have the incentives and 

opportunities for individuals and companies to evade restrictions on the exploitation or trade of 

environmental goods such as wildlife and timber. Deliberate evasion of environmental laws and 

regulations by individuals and companies in the pursuit of financial benefit can have serious 

transboundary and global impacts. Such international environmental crime is a major issue and presents 

significant challenges for national and international efforts to control the trade.

Five areas are generally considered to be of major importance: illegal trade in wildlife; illegal logging and 

its associated timber trade; illegal, unreported, and unregulated (IUU) fishing; illegal trade in controlled 

chemicals (particularly in ozone-depleting substances); and illegal disposal of hazardous waste. There are 

of course no accurate figures on the extent of these activities, but best guesses put their combined global 

value at about USD 30-70 billion a year, equivalent to perhaps 10-20% of the value of the illegal trade in 

narcotics or 15-30 % of the value of the trade in counterfeit goods. This illegal trade in environmentally 

sensitive goods often leads to environmental damage. Other commodities such as oil, diamonds and 

coltan are also the subject of illegal trade and while the scale is considered to be less significant, the 

environmental (and social) impacts can be significant.

This publication reviews the evidence on the key drivers of illegal trade in environmentally sensitive 

goods. It also provides an overview of the main economic, social and environmental impacts. The report 

reviews the data collected by customs and licensing schemes for selected environmentally sensitive 

goods, including wildlife, fish, timber, ozone-depleting substances (ODS) and hazardous waste, and 

examines the extent to which this information can be used to identify and measure illegal trade. The role 

of national and international policy mechanisms to reduce illegal trade flows is also assessed, with a focus 

on international licensing schemes (and associated trade restrictions). In addition, the role of national 

environmental policy measures on illegal trade is discussed, focussing on property rights-based systems 

and economic incentives.

Drivers and Impacts of Illegal Trade 

It is important to understand what drives illegal trade and 

the circumstances that cause it to thrive, so that effective 

policies can be developed to counter it. As this publication

shows, the key drivers may vary over time and from one 

location or sector to another. 

Any form of trade (legal or illegal) arises when there are 

profits to be made for those involved. But illegal trade arises 

particularly when the expected returns are greater than for 

trade carried out within the law. For example, compliance 

with regulations concerning reforestation, waste disposal or 

the use of chemical products might incur costs that can be 

avoided by illegal trade. © Shutterstock

Even if the legal alternative is not more costly, illegal trade might emerge when demand exceeds the 

supply of legal products. This is often the case for timber. It would, of course, also arise if demand exists 

for completely banned products and no legal alternatives exist. This is common in wildlife crime, where 

major sources of demand include the exotic pet and flower trade. Often, the trade in environmentally 

sensitive goods is driven by changes in consumption. In the illegal wildlife trade, poverty has been found 

to be relatively unimportant, whereas strong demand from consumer countries may be.
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The impacts of illegal trade can be wide-ranging. These will, of course, vary from country to country and 

locality to locality, and the precise impacts will vary with the sector. Illegal trade in natural resources —

timber and fish — may have the most significant economic impacts, while illegal dumping of hazardous 

waste may have the biggest health impacts, and poaching may have the greatest impact on species 

survival. Illegal trade in ozone-depleting substances has slowed the resolution of a significant global 

environmental concern. 

The economic and environmental impacts of illegal trade can be sufficiently important to disrupt whole 

economies and ecosystems, undermining environmentally sustainable activities and reducing future 

options for the use of resources. There can be spillover effects, with indirect consequences. For instance, 

in fragile states illegal trade can undermine the rule of law and can fuel armed conflict. Any serious 

attempt to tackle illegal trade in the sectors examined here would benefit from a systematic evaluation of 

the impacts. 

Evidence of Illegal Trade

It should in principle be possible to identify illegal trade in some environmentally sensitive products by 

examining import and export data and analysing discrepancies between the two sources. Wide variations 

between different countries’ statistics may indicate illegal trade in some form. However, such an 

approach is imperfect, and there is great uncertainty about the scale of illegal trade in all areas. Such 

discrepancies may merely be a reflection of differing measurement methods, data inputting or 

conversion errors and inconsistencies.

In this publication three sets of data comparisons are undertaken:

 Between customs data and data recorded by licensing systems.

 Between customs data from importing and exporting countries.

 Between licensing-system data from importing and exporting countries.

Different methods need to be used for different sectors and products, depending on the nature of the 

goods concerned, the associated control mechanisms in place, and on the extent to which customs 

records distinguish controlled goods from uncontrolled goods. In the case of timber and fish, for instance, 

no international control system exists, so the analysis is normally confined to customs data. For 

threatened wildlife products listed on CITES appendices, licensing data for both exports and imports are 

sometimes available, but customs data are rarely sufficiently precise to be of use. For ozone-depleting 

substances (ODS), some licensing system data are available and some customs codes are sufficiently 

correlated to provide useful information. For hazardous waste, data are available on ‘movement 

documents’ issued by governments, and useable customs data are also available for certain categories of 

waste.

The general conclusion is that while more data could be analysed in some of these areas, it is by no 

means a straightforward task. The further elaboration of the Harmonized System codes would prove of 

use in many cases. In the area of biodiversity, inadequate taxonomic information has been recognised as 

a problem, and the Global Taxonomy Initiative has been launched to overcome this barrier to 

conservation (http://www.cbd.int/gti/). More generally, there is an ongoing dialogue between different 

international bodies such as the Secretariats of different Multilateral Environmental Agreements, the 

Food and Agriculture Organisation, the World Customs Organisation, and specialized bodies such as the 

International Tropical Timber Organisation. The benefits can be considerable, and examples in which this 

has been the case (e.g. Tanzanian timber) are provided. 
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Table 1. Types of impacts examined

IMPACT SECTOR EXAMPLES

Economic impacts

National level

Loss of government revenue, 

natural resource base, and 

value of goods traded 

IUU fishing Worldwide economic losses in 2003 estimated at 

USD 10-23.5 billion

Total value of IUU fishing in sub-Saharan Africa estimated to be 

USD 0.9 billion per year

Timber Global annual loss of USD 5 billion in government revenues

Tanzania: government losing up to USD 58 million per year in 

revenues (2007) 

Indonesian government estimated in 2003 to be losing 

USD 3.7 billion per year 

Wildlife Caspian Sea range state governments estimated to be losing 

USD60 million due to the illegal trade in caviar in 2001

Undermining legitimate 

industry 

Timber Global annual loss of over USD 10 billion in market value of 

timber due to illegal trade 

Depression of global prices of timber due to illegal trade 

estimated at 7–16 %, costing US firms USD 460 million in 

foregone exports

Honduras: illegal felling of mahogany jeopardising the commercial 

viability of community forests

ODS Reduced incentives for industry to introduce substitutes and 

replacement technologies

Hazardous waste Undermining the legitimate waste treatment and disposal 

industries

Loss of income and 

employment in related 

industries and activities

IUU fishing Illegal fish catches from Liberia being imported to Côte d’Ivoire 

for sale and processing 

Local level

Provision of income for rural 

communities 

Wildlife Vietnam – income from the wildlife trade for rural communities 

Low income for producers Timber Nicaragua – forest owners and local cooperatives receive 5–10% 

of timber’s value

Indonesia – rural communities receive less than 10% of export 

value of merbau

Low profitability of illegal 

production 

Timber Cameroon – outlawing of small-scale logging in 1999 increased 

informal taxes and reduced market prices

Unsustainable profits Wildlife Vietnam, Pu Mat National Park – decline in hunters following 

crash in wildlife populations (in 1990s)

Undermining local / 

subsistence livelihoods 

Wildlife Mongolia – illegal trade in animals has undermined subsistence 

hunting and impacted local economy

Loss of future opportunities Wildlife Poaching undermining potential for wildlife tourism
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Environmental impacts

Loss of biodiversity IUU fishing Depletion of fish stocks and reduction in biodiversity due to poor 

fishing practices, e.g. use of small mesh-size, longlines, 

destructive fishing practices (e.g. explosives), fishing in protected 

areas and over quota, etc.

Wildlife Decline in populations of rhino, elephant, etc. from poaching

Damaged ecosystems Timber Degraded forests are less productive, and so less effective at 

carbon storage; they are also more vulnerable to other factors 

(e.g. pests; invasive species; fire)

Deforestation results in carbon emissions, and loss of habitats 

and biodiversity. 

Pollution ODS Damage to the ozone layer – increased UV radiation damages 

organisms and affects ecosystem productivity

Hazardous waste Soil and water contamination from hazardous waste can damage 

ecosystems

Social impacts

Corruption Timber Honduras, Nicaragua – collapse in civil governance associated 

with illegal logging

Organised crime Wildlife Use of the same smuggling networks for smuggling arms, drugs 

and wildlife; laundering of drug money through the wildlife trade; 

growing involvement of organised crime syndicates in ivory trade

Hazardous waste Involvement of crime syndicates in trafficking hazardous waste 

from Italy to eastern Europe and west Africa

IUU Fishing Russian crime syndicates earn as much as USD 4 billion a year 

from the illegal export of seafood

South Africa: illegal fishing of abalone has strong links with illicit 

trade networks, drug trafficking and money laundering 

Conflict Timber Illegal trade of timber provided a source of funds for Khmer 

Rouge, Cambodia

Unregulated timber trade financed the Liberian civil war and 

rebels in Sierra Leone

Livelihoods Timber Tanzania: small-scale traders of illegal timber bearing the brunt of 

enforcement efforts

Clashes between local communities and illegal loggers

IUU fishing Loss of livelihoods, particularly in coastal small-scale fisheries, 

clashes between artisanal fishers and illegal fishers, e.g. coastal 

areas of Africa

Health IUU fishing Abuse of crew and bad working conditions in illegal vessels

Wildlife Risk to poachers of being shot or imprisoned

Spread of diseases carried by smuggled animals

Hazardous waste Harmful effects of electronic waste – e.g. lung and kidney disease, 

lead poisoning, cancer

Case of Trafigura – illegal dumping of chemical waste in 2006 in 

Côte d’Ivoire 

ODS Higher levels of radiation linked with suppression of the immune 

system, increased incidences of skin cancer and eye disease
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International Licensing Schemes and Trade Restrictions

The growth both in the volume of international trade and in the practice 

of containerisation renders it increasingly more difficult to detect illegal 

trade. Licensing schemes can be an important tool in helping to detect 

and regulate flows. They have become increasingly common in recent 

years and can be regarded as an attempt to regulate particularly 

problematic trading sectors in a world where trade barriers are steadily 

being removed. They can also have important ancillary benefits, such as 

improving levels of governance and domestic policy.

In the publication six licensing agreements are reviewed: the Convention 

on International Trade in Endangered Species of Wild Flora and Fauna 

(CITES), the EU’s Forest Law Enforcement, Governance and Trade 

Initiative (FLEGT), the Convention on the Conservation of Antarctic 

Marine Living Resources (CCAMLR), the Rotterdam Convention on 

chemicals, the Montreal Protocol on ozone-depleting substances, and the 

Basel Convention on hazardous waste.

© iStockphoto

None of the schemes reviewed have worked perfectly, although all can claim some measure of success. It 

will be interesting to see how the FLEGT licensing scheme performs, as to a certain extent it has been 

designed with an eye to overcoming some of the other schemes’ weaknesses. The following measures 

would be helpful in improving licensing schemes further:

 A systematic analysis of their operation and successes and failures; although in general most of 

the systems seem to be working, there are relatively few comprehensive data.

 A process for sharing information among those responsible for operating the systems, perhaps 

via the Green Customs Initiative, the UN Environment Programme (UNEP), or the G20. This 

could be of particular value to those systems new or just coming into existence (e.g., the 

Rotterdam Convention, FLEGT).

 Independent verification of the issuance of licenses, increased cross-checking of licenses, and a 

switch from paper-based electronic systems could increase the effectiveness of the majority of 

licensing systems studied. More resources could usefully be targeted at these functions. 

 There may also be some potential for the realisation of economies of scope, with some 

organisations carrying out the same functions for more than one agreement (e.g., the WCMC 

could play a central monitoring role for CITES).

Implications of National Policy Measures for Illegal Trade

Policies introduced at the national level can have implications for illegal trade in environmentally 

sensitive goods. The effects of national environmental policy regimes on illegal trade depend largely upon 

the incentives for sustainable (or unsustainable) management of the resource or pollutant generated by 

the policy. A regulatory system which imposes costs on those exploiting the resource or emitting the 

pollutant will generate price differentials, which can provide incentives for non-compliance, with some of 
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the output entering into international trade flows. This is, of course, a function of national enforcement 

capacity, supported in some cases by the international licensing schemes discussed above.

In recent years increased interest has been expressed in using economic incentives in the pursuit of 

environmental objectives, for example, to reduce pollution, protect biodiversity and habitats, and 

promote the sustainable use of natural resources. Such an approach is in contrast to, or complementary 

with, more traditional command-and-control regulatory approaches. In this publication the focus is on 

the effect of such measures on illegal trade.

While the evidence is partial there is some reason to suppose that the use of economic incentives at the 

national level may reduce illegal trade flows. On the one hand, some of the revenue generated by 

economic instruments (i.e. environmental taxes) can be used to reinforce enforcement capacity. On the 

other, the ‘formalisation’ of property rights implicit with the use of economic instruments can provide 

incentives for a longer-term view of resource management, and can even provide incentives for selfenforcement among those exploiting the resource. 

However, the use of economic incentives is not a panacea and in order to ensure that their 

implementation does not lead to illegal trade it is important to note that: 

 Economic incentives can only work fully in a framework of good governance and law 

enforcement. Otherwise they risk exacerbating illegal activity, creating new opportunities for it, 

or shifting it to other regions or countries.

 As well as general good standards of governance, new governance structures can prove 

effective — e.g. community-based natural resource management, where local communities are 

given incentives to protect and manage the resource. Security of tenure or other forms of 

resource ownership will be an important factor.

 Economic incentives will be more effective when they form part of a co-ordinated range of 

interventions — e.g., where alternatives to illegal behaviour are provided (e.g. legal alternatives 

to poaching, or legal means to dispose of waste).

 Where international trade is a factor, co-ordination with other countries is an important means 

of ensuring the effectiveness of economic incentives, either to avoid displacement of illegal 

activities or to facilitate the creation of new incentives.

In general, when designing national environmental policy measures it is imperative that the potential for 

encouraging illegal behaviour (including trade) is considered, so that the consequences can be assessed 

and considered (e.g. whether ivory sales are likely to lead to increased poaching) and enforcement 

activities and other possible interventions can be better targeted.
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Illegal Trade in Environmentally Sensitive Goods

is available at http://www.oecdbookshop.org

For further information, please contact:

Nick Johnstone Anthony Cox

OECD Environment Directorate OECD Environment Directorate

Tel.: +33 (0)1 45 24 79 22 Tel.: +33 (0)1 45 24 98 70

Email:Nick.Johnstone@oecd.org Email: Anthony.Cox@oecd.org