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The above description summarises forest values, but this
does not necessarily imply that economic decisions take account
of all these values of tropical forests. Economic values derive
from markets, and most of the values of tropical forests are
not currently marketed. This is one of the main reasons why
unsustainable forestry and deforestation remain highly profitable,
and why the value of forests is consistently underestimated
in national statistics. For example, in Indonesia, official
data show that forests contribute 1% to 2% of GDP, whereas
the World Bank estimates that the potential value of forests
to that economy to be closer to 15% to 20% of GDP (source)
.
Several steps are required to ensure that all values of forests
are taken into account when economic decisions are taken.
One is that a value must be placed on the cost and benefit
of each alternative use scenario for the forest, and this
information should be fully considered by decision-makers
in the choice between alternative actions. Mechanisms should
be developed to capture such values (creation of markets).
Existing markets, such as the one for timber, should be made
more efficient: the prevailing pricing system for standing
timber in the form of stumpage and concession fees used in
developing countries, often established by government decrees,
has led to serious under-valuation of timber and forests.
Revenues to forest owners, usually the State, often amount
to only 10 - 20% of those achievable under true market conditions
. Finally, mechanisms should be developed ensuring that access
to these markets and values is equitable and just.
Total economic value is popularly distinguished in the following
taxonomy
There are three main types of measure by which forest
values can be approximated: direct market prices; indirect
market prices or values; and non-market estimates (hypothetical)
of value. The first two measures are based on an estimate
of exchange values where buyers and sellers exchange goods
or services for money or for other goods or services. In the
case of indirect market prices, assumptions have to be made
regarding proxy market conditions and how buyers and sellers
will behave under different circumstances. Non-market values
typically estimate the willingness of "buyers" to
purchase or pay for specific goods or services under defined
hypothetical conditions, but do not attempt to establish the
exchange value that might be established between buyers and
"sellers". Thus, non-market value estimates (values
to users) are not directly comparable with market-based (exchange)
values. Many different techniques exist to obtain such non-market
values:
Valuation approaches in relation to type of forest goods
and services. Source
S. Kengen (1997).
| Measures |
Valuation techniques |
Example |
| Direct market prices |
- Market surveys, use of statistics
- Direct observation
- Experimental markets
|
Used to value all market goods and services from the
forest unless there are market distortions. The most
common cases of distortion is when there are imposed
minimum prices or ceilings on goods and services (in
such cases, indirect market price techniques are used)
|
|
Indirect market prices: |
|
|
|
Residual values |
Use of market prices for final goods and intermediate
inputs plus some measure of profit to arrive at residual
value
|
Stumpage value of timber is derived by looking at market
prices for finished lumber and subtracting costs from
harvesting through processing to lumber sale
|
|
Value of production increases as minimum measure of an
input |
Use of market prices of production increases to provide
proxy measure of the value of one or a set of inputs
|
Increased market value of crop production with a windbreak
over what it would have been without a windbreak provides
a proxy minimum gross value for the windbreak. Associated
costs of the windbreak are then subtracted to arrive at
net value |
|
Surrogate prices and replacement or avoided costs |
Use of market prices for close substitute as a proxy
measure of value for the unpriced good or service being
valued. Both are converted to a common denominator (e.g.
heating or protection value)
|
The maximum value of fuelwood in a new market is estimated
on the basis of the value of alternative fuels, e.g.
kerosene, after adjusting for the calorific value of
the two fuels
The maximum value of a watershed management programme
focused only on containing sediment in a downstream
reservoir is equalled to the alternative market cost
of dredging the reservoir of the additional sediment
that would occur without the programme
|
|
Opportunity cost |
Use of market prices for the best alternative foregone
provides a measure of the minimum value for a good or
service. This is essentially a cost measure used to
provide minimum value for a benefit
|
The minimum value of a wilderness park is estimated on
the basis of market priced value of the goods and/or services
forgone (e.g. timber, mineral, grazing) |
|
Differences in travel costs as the measure of value of
an area, facility or activity |
Per caput measures of participation from different
distance zones are used to derive estimates of the value
of an area, facility or activity
|
Differences in market-priced costs of trips by different
users to a reserve are used to value nature-based tourism
on the basis of differences in use rates in relation to
differences in trip costs |
| Non-market value estimates |
Contingent valuation or surveys of stakeholders'
willingness to pay for a given event, area, facility,
activity (this is a measure of value in use) |
Value of a certain wildlife
population is inferred from a survey of environmentalists'
willingness to pay to save the population |
In a paper published in 1997 in Nature by Costanza et al.,
many of the approaches listed above were put to the task of
estimating the value of goods and services provided by ecosystems
worldwide. This analysis (which is by default approximate
and subject to much criticism) put the economic value of the
world's ecosystem services at $33 trillion, compared to the
"classical" GNP of $18 trillion. Forests accounted
for an annual $4.7 trillion of this amount. Little of this
amount goes around in formal markets.
The authors estimated that at least 70% of these values are
generated in developing countries.
Many efforts are currently directed at developing mechanisms
to capture forest values that are not currently marketed and
mechanisms to transfer these values from those willing to
pay to those providing the services. This is of particular
importance for those forest values, which are mainly benefiting
the global community (biodiversity protection, climate regulation),
while maintaining these values bears a high opportunity cost
for local communities. A large number of mechanisms have been
proposed, which are summarised below. Another overview is
in ETFRN
Classification of financial incentive mechanisms (Source:
Richards, 1999)
| |
Mainly Domestic |
Mainly International |
| Transfer Payments
Approach |
Fiscal market-based instruments (MBIs) and subsidies
‘polluter and beneficiary pays’
taxes;
‘ecological VAT’;
differential land use taxes;
forest pricing (including concession bidding,
performance bonds);
tree planting subsidies |
International transfer payments:
debt-for-nature swaps
Global Environment Facility;
National Environment Funds or conservation trust funds;
international timber trade taxes;
area-based payments to forest management units;
other international taxes |
|
Market Approaches based on Public Good Benefits |
|
carbon offset trading;
fair trade;
certification of forest products;
bioprospecting deals;
Forest Protection and Management Obligations |
|
Private/Public Investment Flows |
micro-finance to local users |
channelling private international flows, especially portfolio
capital;
multilateral funds to stimulate private investment and
public/private financing |
| Property Rights Approach |
clarifying existing property
rights;
creating community usufruct rights;
tradeable development rights (TDRs);
overlapping property rights;
service concessions |
international TDRs, franchise agreements and conservation
easements;
intellectual property rights |
Many of these proposed mechanisms are in embryonic stage,
but much is expected for several of them, particularly carbon
trading under the Kyoto protocol.
|
TBI sources
Verweij,
P.A. (ed.) (2002).Understanding
and capturing the multiples values of tropical forest. Proceedings
of the International Seminar on Valuation and Innovative Financing
Mechanisms in support of Conservation and sustainable management
of tropical forest
|
