Environmental Valuation & Cost-Benefit News

Economic perspectives and analyses of multiple forest values and sustainable forest management
Pages 733-740
by Shashi Kant

Pluralism in the economics of sustainable forest management
Pages 743-750
by Sen Wang and Bill Wilson
Prevailing societal values have enthroned sustainable forest management (SFM) as a new paradigm governing forest practices. Calling for respecting a range of dynamic conditions instead of a single, static target, SFM differs from conventional forest management on account of its acceptance of plurality in management objectives, approaches and decision making processes. Forest economics has evolved accordingly, in response to the need for accommodating pluralism. This paper examines several issues of pluralism in the economics of SFM, principally: (i) multiple forest uses under extended forest rotations, (ii) the panarchy framework, and (iii) the stakeholder's approach. The merits and limitations of these approaches are discussed. The paper ends with some suggestions for future research.

Sustainable forest management, pecuniary externalities and invisible stakeholders
Pages 751-762
by Colin Price
Agreement of all stakeholders is crucial to sustainable forest management. But timber production may be an externality in participatory decision making. Reduced supply under local environmental constraints influences price and hence timber supply elsewhere. Such pecuniary externalities are generally ignored in cost–benefit analysis, but for questionable reasons. Modelling shows that they induce significant net distributional and technological effects: thus stakeholders exist outside the local participatory context. Quasi-markets for environmental and social effects, as in sale of certified timber, appear to internalise such effects, rendering spillovers from local decisions welfare-neutral. However, the nebulousness of certified markets makes this improbable: demand is for a symbolic warm glow, little related to either consequences for sustainability or costs of achieving them. Pecuniary externalities remain an unresolved problem in evaluating local decisions.

An evolutionary game-theoretic approach to the strategies of community members under Joint Forest Management regime
Pages 763-775
by Chander Shahi and Shashi Kant
Joint Forest Management (JFM) has been analyzed using an evolutionary-game-theoretic approach. The interactions between the different groups of a community, for forest use under state regime and JFM regime, are modeled as n-person asymmetric games, and the concepts of evolutionary stable strategies (ESS) and asymptotically stable states (ASS) are used to understand the variations in the outcomes of JFM program. The n-person game of forest use under the state regime has a unique Nash equilibrium in which the defectors or lawbreakers will continue to harvest forest resources illegally until the net returns from harvests become negative. The n-person forest resource use game under JFM regime has many Nash equilibriums, but has only one sub-game perfect defection equilibrium. However, the n-person game for JFM regime has four evolutionary strategy equilibriums: cooperators (C) equilibrium, defectors (D) equilibrium, defectors–enforcers (D–E) equilibrium and cooperators–enforcers (C–E) equilibrium, but has only two asymptotically stable (C–E and D–E) equilibriums. Implications of these results are discussed, and a need to enhance evolutionary game-theoretic formulation of JFM is highlighted.

Economic analyses of multiple forest values
A framework for developing marked-based policies to further biodiversity on non-industrial private forests (NIPF)
Pages 779-788
by Jagannadha Matta, Janaki Alavalapati and George Tanner
With the increasing concerns for healthy forests and enhanced habitat for wildlife, private landowner involvement has become a critical component of biodiversity conservation in the US. Since biodiversity conservation is largely a public good, landowners have little incentive to promote it at their own cost. Strategies to develop socially optimal policies for biodiversity conservation should however consider three aspects—identifying forest practices that best promote habitat for a wide range of species at landscape level, estimating the costs associated with adoption of identified practices, and assessing the adoption potential of the identified practices among landowners. In this paper, we developed a framework to achieve these three tasks, applying an analytical hierarchy process, a dynamic optimization model, and an attribute based contingent valuation technique, respectively. The framework was applied to the context of enhancing habitat for biodiversity on private forests in Florida.

Carbon credits and management of Scots pine and Norway spruce stands in Finland
Pages 789-798
by J. Pohjola and L. Valsta
Carbon storage in forests can be increased to reduce carbon dioxide in the atmosphere. We use a joint production model of timber production and carbon sequestration to analyse the financially optimum silvicultural strategies for Scots pine and Norway spruce at the stand level in Finland. This study expands the earlier analyses by taking into account thinnings as measures to increase carbon stocks in forests, in addition to lengthening the rotation age. The results indicate that, in joint production, both the growing stock level and rotation length are increased, compared to pure timber management. The results show clearly the importance of including thinnings in the analysis. For Scots pine stands, a major share of the increase in average carbon storage during the rotation period was obtained by modifying thinnings while lengthening the rotation age had a minor impact, with carbon prices of 10 and 20 €/t CO2. On the other hand, in the case of Norway spruce, delaying the clearcutting provided most of the increase in average carbon storage. The carbon tax/subsidy programme was found to increase discounted net revenues to the forest owners considerably. The carbon tax/subsidy programme had a positive impact on the average timber yield in a fully regulated forest framework due to the considerable increase in the yield of sawlog, whereas the yield of pulpwood was somewhat decreased.

Shadow prices and input-oriented production efficiency analysis of the village-level production units of joint forest management (JFM) in India
Pages 799-810
by Dinesh Misra and Shashi Kant
Joint forest management (JFM) has emerged as the most promising institutional arrangement for sustainable forest management, and village-level organizations (production units) are responsible for all the productive activities of JFM. Employing a parametric linear programming approach, a deterministic input distance function is estimated characterizing the production structure of JFM organizations, in the Gujarat state of India, using the production data from 50 organisations. The distance function includes economic, biological and social outputs, and neo-classical – land, labour, and capital – as well as non-neo-classical – social, political, institutional, and organisational – factors. The results are used to calculate the production efficiency and shadow prices of neo-classical as well as non-neo-classical factors of different village-level JFM organizations. Policy and management implications of production efficiency and shadow prices are discussed.

Selection of tree species for plantations in Japan
Pages 811-821
by Ichiro Fujikake
The selection of species used for planting is an important factor that affects how plantation forests ecologically benefit society. Sugi (Japanese cedar, Cryptomeria japonica) and hinoki (Hinoki false cypress, Chamaecyparis obtusa) are the two main plantation species in Japan. Although sugi was once the favored species in many regions, forest owners have increasingly opted to plant hinoki. We examined the effect of economic factors on the choice between these two species. We modeled the proportion of sugi planted in each prefecture in Japan using a generalized estimating equations method. The results suggest that changes in stumpage prices and forestry wages are the cause of changes in the choice of species. These findings agree with theoretical predictions derived using a Faustmann-type rotation decision model. Forest owners in Japan thus appear to choose species for planting according to current trends in economic desirability. In terms of carbon sequestration and soil conservation functions of forest, hinoki forest is considered to be somewhat inferior to sugi forest. Thus our observation implies that the Japanese forestry has shifted to the species that is desirable from the economic perspective at the expense of the ecological functions of forests.

Economic analysis of sengon (Paraserianthes falcataria) community forest plantation, a fast growing species in East Java, Indonesia • Pages 822-829
by Ulfah J. Siregar, A. Rachmi, M.Y. Massijaya, N. Ishibashi and K. Ando
Despite strong efforts to rehabilitate degraded forests and lands in Indonesia, successful cases of reforestation are rare. A previously identified problem was unclear land tenure in certain forest areas creating conflict between local communities and other forestry stakeholders. Although communities claim to be interested in forestry, encouraging them to conduct reforestation or establish forest plantations has proven to be very difficult because it is regarded as non-profitable. In Kediri, East Java, sengon (Paraserianthes falcataria) mixed plantations are usually found because they are profitable and give more routine income to communities. Sengon is mixed mostly with pineapple, and planted with a density of 800 trees/ha. Pineapple is planted only once, and then harvested every year for 4 years. Within the 8 year rotation age of sengon, a farmer can harvest pineapple 4 times before cutting the trees. To analyze whether mixed plantations give more income to communities than planting pure sengon, the Net Present Value (NPV) and Benefit–cost Ratio (BCR) of mixed plantations were calculated. Using an interest rate of 17.53% as a Minimum Acceptable Rate of Return (MARR), the result showed that mixed plantations are profitable, however community decisions were influenced by the amount of land owned, the cost of mixed plantations, the timber price and the period of gaining the income of harvesting that is difficult to cover monthly living cost. The importance of other factors in determining community interest in reforestation is discussed.

Policy instruments for managing multiple forest values

Policy instruments to enhance multi-functional forest management
Pages 833-851
by Frederick Cubbage, Patrice Harou and Erin Sills
Sustainable forest management has become the salient cross-cutting theme in forestry throughout the world today. This paradigm recognizes that forests are managed for a wide variety of ecological, economic, and social benefits. This explicit recognition of many outputs and services as management objectives has recast our economic analyses on the values of forests. Similarly, our policy tools must adapt to achieve the goals of multi-functional forestry across a broad range of ownerships and values. We review factors that affect forest policy selection, including the nature of goods and services, social values, and economic values. We then discuss traditional and newly developing natural resource policy tools in this context and discuss their applications in meeting the objectives of forest landowners and society in achieving multi-functional sustainable forestry goals in the future.

Efficiency and equity of forest policies: A graphic analysis using the partial equilibrium framework
Pages 852-861
by Pere Riera, Leticia Aranda and Robert Mavsar
The paper examines efficiency and equity implications of three types of forest policies –forest subsidies, forest certification, and command and control measures–, using some Spanish data. First, the three types of forest policies are analyzed for efficiency; the winners and the losers are identified and the net welfare for the society as a whole is examined. Next, the analysis is undertaken in income distributional terms; the distributional implications for the Spanish society are examined using a Lorenz curve. The results depend largely on the assumptions. In general, subsidies seem to provide greater welfare improvements than the other two policies, being command and control measures the most questionable. The income distribution analysis yields less clear results, although it shows the circumstances under which each policy would result in a more equal income distribution.

Do certified tropical logs fetch a market premium?: A comparative price analysis from Sabah, Malaysia
Pages 862-868
by Walter Kollert and Peter Lagan
The controversy about the benefits of certification to timber producers has centered on the “market premium” and “market access” arguments. Some studies claim evidence that consumers are willing to pay a market premium between 2% and 30% for sustainably produced, certified timber products. Others doubt or flatly deny this notion. Most of these studies are based on willingness-to-pay surveys of consumer demand leaving aside the crucial question whether or not the producers of certified logs, which bear the costs of forest certification, obtain a financial reward for their efforts.

The paper contributes quantitative evidence to the on-going debate. Time series of prices of certified and uncertified logs (2000 to 2004) provided by three forest management units from Sabah, Malaysia, were examined in a comparative analysis (ANOVA) of 6 species groups. The results suggest that forest management certification achieves a market premium for certified logs. In particular high quality hardwoods (e.g. Selangan Batu, Keruing) destined for the export market fetch a price premium of 27% to 56%. Lower quality timbers (e.g. Kapur, Seraya) also fetch a price premium, however the difference is less pronounced (2% to 30%).

Forest environmental incomes and the rural poor
Pages 869-879
by Paul Vedeld, Arild Angelsen, Jan Bojö, Espen Sjaastad and Gertrude Kobugabe Berg
To what extent do rural people in developing countries depend on forest environmental income? This study addresses this question through a meta-analysis of 51 case studies from 17 countries. Cases were selected on the basis of a broad literature search, focusing on (i) data on household environmental income as well as other income sources; (ii) productive assets and socio-cultural information; and (iii) information on contextual variables that are likely to influence the use of forest sources of income. Results reveal that forest environmental income represents on average 22% of the total income in the population sampled. The main sources of forest environmental income are fuelwood, wild foods and fodder. Forest environmental income has a strong equalizing effect on local income distribution. Income diversification declined with total income; diversification did, however, increase with dependence on forest resources up to a point, beyond which diversification declined. The partial or complete omission of environmental income in current poverty assessments may lead to an underestimation of rural income and, under certain circumstances, to flawed policies and interventions.

Edited by S. Kant
Forest Policy and Economics via Elsevier Science Direct www.ScienceDirect.com
Volume 9, Issue 7, Pages 733-882 (April 2007)
Special Issue: Economic perspectives and analyses of multiple forest values and sustainable forest management
http://www.sciencedirect.com/science/journal/13899341