Why is it evil for dorfs to cut down trees and make crafts, while the armok-damned pointy-eared hippy tree-hugging bastards occasionally known as elves consider it moral to make wooden crafts, weapons, armor, and tools to sell to the dwarves?
Devil's advocate here: maybe that's because they cut and process the trees in a ritual way, much like some kinds of food aren't kosher as is but can become kosher after being processed/made a certain way, and inversely, some meals stop being kosher if you add or remove something. Also, several native American tribes used to ask forgiveness to the animals they hunted, and explain what every single part of their body would be used for after death.
Maybe elves pray for the trees they will cut. Maybe they determine which trees can be cut (in a specific area, diseased trees, a specific species, when trees reach a specific age, or some other mystical calculations). Maybe burning trees is a complete blasphemy for them, and that would be why they freak out when they see things made out of soap or glass. Maybe they plant another seed for each tree that has to be cut. Maybe they bless wooden objects they make to be "forgiven their crime". Maybe some other thing. Maybe a combination of the above.
And they are certain dwarfs just don't do wooden crafts the "right way". Why? Perhaps they're just uptight bastards. Or they believe only they have the ability of doing whatever they are doing, and it would be therefore pointless to educate other races. Or they just know you won't do the rituals even if you knew them, and let's be frank, if they allowed you to cut trees only if you planted the same seeds afterwards and danced in a circle, and only burn trees on a blue moon, and only craft wood after praying for 7 days straight... that would get old very quickly. And dwarfs just prefer defying whatever superior entities there are rather than doing silly ritual in the vain hope to be forgiven for cutting the goddamn goblin-cap that was arrogant enough to grow right in front of a pump.
[/anthropology student]