Forests are commonly known for the goods that they provide - timber, fuelwood, fodder and other non-timber forest products. Less commonly known is the fact that forests also provide a number of crucial ecosystem services, for example, their role in sequestering carbon from the atmosphere, protecting upstream watersheds, conserving biodiversity and gene-pools for future generations and in providing landscape beauty. Forest environmental services also include regulation of the water cycle and climate, soil formation, nutrient recycling, and plant pollination. While the ever-increasing demand for forest goods is widely recognized, the increased demand and need for forest services is often not as well known.
One reason for this is the failure of markets, and society in general, to adequately value these services in economic or financial terms. Consequently, forest environmental services are rarely accounted for in national Gross Domestic Product (GDP) statistics and few well-developed markets exist for them. However, today there is growing awareness of the need to adequately acknowledge and measure the value of these services, so that decisions involving forest land use change are based on the true worth of forests, rather than on the immediate tangible goods that they provide. There is also an urgent need to develop appropriate mechanisms, market-based or otherwise, that can generate income flows to communities or institutions protecting forests and providing these services, so that there is a direct incentive for them to continue doing so.
Valuation and Incentives
Forest conservation and sustainable forest management has to make tangible economic sense to all the groups whose activities have the potential to impact on forests. Being able to demonstrate the full range of ecosystem values and their economic benefits is one part of this equation. Another is to find ways of equitably capturing these values and benefits over the long term, so that they can put in place incentives for local communities, private sector actors and governments to promote sustainable forest management.
Economic instruments can be wielded either to benefit or undermine conservation and sustainable management of forests. In recent years significant advances have been made in the development and use of economic incentives and valuation tools to promote forest conservation and sustainable forest management. Despite this, both economic and forestry planners and policy makers have limited awareness of the availability and use of these tools and methods.
Forests typically receive little or no compensation for the services that they provide from the beneficiaries of these services. Recognition of this flaw has encouraged the development of 'payment for environmental services (PES)'. The PES approach suggests those who provide environmental services should be compensated for doing so and those who receive the services should pay for their provision. On the ground, this equates to downstream users such as urban water supply or hydropower companies paying upstream communities and institutions involved in forest conservation activities for watershed maintenance. Similarly, it can be viewed as forest protection communities or institutions being paid for the global carbon sequestration benefits that their forest protection results in. The success of such mechanisms will however depend on the accurate valuation of these services and on establishing incentive structures and institutions that are both practical and equitable. Payments for environmental services should be regarded as one of many tools in the toolbox for good forest management and protection. Valuation and incentives should be viewed as a means to an end, and not as ends in themselves.
Forests are one of the largest repositories of biodiversity in the world. By some estimates they contain 60-90% of all terrestrial species found on the planet. Some of these could have widespread economic or medicinal uses that are still unknown to us, for example a cure for AIDS. The conservation of these valuable genetic resources for future options that are yet undiscovered is thus a valuable service that forests provide to us and to future generations.
The importance of generating adequate finances to protect these biodiversity values and the growing recognition of western governments' limited willingness to pay, lies at the heart of increased efforts by conservationists today to seek other innovative market-based solutions for the provision of biodiversity conservation services. These include mechanisms like bioprospecting rights, debt-for-nature swaps, conservation easements and biodiversity friendly products like shade-grown coffee. Developing and implementing these mechanisms in an equitable and practical manner is expected to form an important emerging area of work for the forestry sector.
Forests and Water Linkages
Water in theory is the most renewable of resources. Yet, careless use, population growth, and increasing demand all mean that provision of adequate safe supplies of water is now a major source of concern, expense, and even international tension. The links between forests and watersheds are complicated and vary with geography, weather patterns, and management. Forests in catchments generally result in cleaner water downstream, thus significantly reducing the costs of purification (to what extent depends on the level and type of contamination). In addition, particular forests such as tropical moist cloud forests appear to increase flow into catchments as well as ameliorate local flooding.
With water shortages increasing in many parts of the world, the importance of this link is being rapidly realized today. Twenty-eight per cent of the world's forests are located in mountains and these forests are the source of some 60-80% of the world's fresh water resources. They are also natural barriers for landslides, torrents, and floods. Tropical Montane Cloud Forests (TMCFs), which have unique hydrological values and high rates of species endemism, are today being lost faster than any other major forest ecosystem. However, nearly 30% of the world's major watersheds have lost more than three-quarters of their original forest cover.
Recognizing this problem, some countries have already started protecting or replanting trees on degraded hill slopes to safeguard their water supplies. Generating more knowledge on this forest environmental service, and developing appropriate payment or compensation mechanisms between upstream watershed service providers and the downstream beneficiaries, will be a key challenge for the forestry sector in the coming years.
Forests and Carbon Sequestration
Climate change has emerged as one of the most important concerns of the 21st century. Sea level rise, warming temperatures, uncertain effects on forest and agricultural systems, and increased variability and volatility in weather patterns are expected to have a significant and disproportionate impact in the developing world, where the world's poor are susceptible to the potential damages and uncertainties inherent in a changing climate. Since the inception of the Kyoto Protocol, the use of land use, land-use change and forestry (LULUCF) activities to combat climate change has been a topic of significant debate. Whether one is a protagonist or an antagonist on the issue, decisions taken within the UN Framework Convention on Climate Change (UNFCCC) have significant implications for the forest sector. Forests are both a source of carbon dioxide (CO2) when they are destroyed or degraded and a sink when conserved, managed, or planted sustainably. Forest vegetation and soils currently hold almost 40% of all carbon stored in terrestrial ecosystems. Much of this is stored in the great boreal forests of the Northern Hemisphere and in the tropical forests of South America and Africa. Further, forest re-growth in the northern hemisphere currently absorbs carbon dioxide from the atmosphere, creating a "net sink". However, in the tropics, forest clearance and degradation are together acting as a "net source" of carbon emissions. Though growth in plantations is expected to absorb more carbon, the likely continuation of current deforestation rates means that the world's forests will remain a net source of carbon dioxide emissions and a contributor to global climate change. Figure 1 shows the areas that are most responsible for this. However, there are also significant opportunities to develop innovative carbon sequestration forestry projects that generate positive synergies between forest restoration, mitigation of climate change and livelihood improvements for the poor. These need to be explored through mechanisms such as the Clean Development Mechanism of the Kyoto Protocol and the Bio-Carbon Fund of the World Bank. However, the success of such carbon trading initiatives will ultimately depend on the resolution of many outstanding issues, including clearly defining the legal ownership of the carbon, and also on the outcome of the negotiations for the next commitment period under the Kyoto Protocol. Nonetheless, in many countries, the prospect of trading carbon credits generated by the forestry sector has started influencing decision making in the forest industries of those countries and this can also have effects on future timber markets.
- FAO (2003) The State of the World's Forests, FAO Rome
- Landell-Mills, N. and I.T. Porras (2002) Silver bullet or fools' gold? A global review of markets for forest environmental services and their impact on the poor, London, International Institute for Environment and Development (IIED).
- WRI (2000) World Resources 2000-2001: People and Ecosystems. The fraying web of life, Washington, DC.
- WRI (2000a) Pilot Analysis of Global Ecosystems - Forest Ecosystems, World Resources Institute, Washington DC.
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