How Many Benefits Does Commercial Forestry Provide?

by Emil Morhardt

Forestry economists worry about whether foresters can claim more societal benefits, including offsetting the effects of climate change, from forestry than merely the increased supply of trees; in econ-speak, “…what change in human well-being results from increasing, reducing or qualitatively varying…” the supply of ecosystem services commercial forests provide? Colin Price (2014) addresses this question largely in the abstract by providing an overview of eight general approaches to valuing non-market effects, which, although they break little new ground, provide an extremely clear overview of a generally murky subject.

Marketable benefits that are created or lost elsewhere in the economy include such things as shelter from the wind in the lee of a planted forest, usable, for example, by cattle to reduce their winter heat loss, hence their food consumption, increasing their net value. An example of financial costs that could be avoided by forestry includes the avalanche protection afforded by Swiss forests. Costs of past decisions might be positive or negative; an example is the lowering of a water table thanks to planting a Sitka spruce forest—a mire (bog) dominated by Sphagnum moss suffered ecological damage leading to the question of whether the ecology or the spruce were worth more, not something easily determined by economists, even with plenty of ecological opinion on the side. Maybe some of the value of the mire could be provided by a similar one in a park or botanical garden, letting the foresters off the hook. It is not totally clear how this might be determined. Maybe the value of the mire could be determined by how much money ordinary citizens paid (or said they might be willing to pay) to afford it some protection—we know more-or-less how much they paid, or would be willing to pay, for spruce at the lumber yard. Or maybe we could just depend on the opinions of experts on how much people would be prepared to pay. Finally, are houses worth more (or less) if they are near a commercial forest? Or the mire that the forest displaced?

Price notes that people proposing a value for things like forests or mires might really be placing value on their knowledge that such things exist, rather than on any concrete or monetary value to themselves—what he calls a warm glow for behaving ethically. Is this good or bad? Maybe, he suggests, it represents a wild guess as to the value of the mire—not a satisfying result for quantitative economists.

And if you were thinking that the carbon sequestration value of forests was at least one unarguable point, Price would disillusion you of that as well. If the relative damage caused by a ton of carbon released into the atmosphere were higher in a decade or two when the forest is harvested and the carbon released back into the atmosphere [if it were], then the carbon sequestration value of the forest would have been negative.

But he concludes that “Economic valuation of ecosystem services [his professional interest] is “not intrinsically hostile” to the idea of protecting forests for their non-market values. It just might show the perceived value to be illusory.

Price, C., 2014. Regulating and supporting services and disservices: customary approaches to valuation, and a few surprising case-study results. New Zealand Journal of Forestry Science 44, S5.

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