July - September, 2010
Forest Economics
Forest economics is plagued by valuation problems, partly because forests provide so many benefits. A UN-backed project in 2005, the Millennium Ecosystem Assessment, identified 24 main ecosystem services, most of which are found in forests: from preventing natural hazards, such as landslides, to providing the eco- in ecotourism. Yet most relate to forests’ role in the carbon and water cycles and in safeguarding biodiversity. And almost none is priced on markets. Forests are usually valued solely for their main commercial resource, timber, which is why they are sometimes over logged or cleared.
This leads to a profusion of damaging outcomes such as forest fires and lost ecotourism revenue that happen because those responsible are not obliged to pick up the tab. Forest fires in Indonesia alone in 1998 are estimated to have cost over $5 billion in timber alone. According to another UN-backed effort, The Economics of Ecosystems and Biodiversity (TEEB), “negative externalities” from forest loss and degradation cost between $2 trillion and $4.5 trillion a year.
A draft TEEB report on the Amazon rainforest exemplifies its approach. It estimates the forest’s contribution to the livelihood of poor forest-dwellers, of whom there are at least 10m in Brazil alone, at between $500m and $1 billion a year. That is based on the estimated market value of the fish and thatch they take to subsist, and the gums, oils and other goods they harvest for cash. On a regional scale, TEEB estimates that the rainforest’s role in avoiding siltation in hydro-power reservoirs is worth anything from $60m to $600m a year.
Source: The Economist Magazine