rural deforestation - columbia university

RURAL DEFORESTATIONRURAL DEFORESTATION

Presentation By Group 1

Ashutosh DikshitRama Chandra Reddy

Rama Kishan RaoMunir Hussain Kazmi

Alberto OviedoAshraf El Naggar

Harjiv Singh

Presentation OutlinePresentation Outline

• Problem and Extent

• Causes• Market Failures

• Government Failures

• Strategies and Solutions• National and global strategies

• Promising case studies

Rural DeforestationRural Deforestation

Problem and Extent

ProblemProblem

• World Average Annual forest loss 1990-1995 - 0.3%

• 10 countries account for 50% of annual deforestation rate.(Ex: Brazil, Indonesia, Mexico, Bolivia, Thailand, India, )

• 13.5 million hectares deforested annually in developingCountries during 1990-95

• Between 1990-2010, 85 million ha. of forests are expected to be cleared for agriculture

ExtentExtent

• Demand for forest products• 1.44 billion cubic meters of industrial wood

• 1.86 billion cubic meters of fuel wood

• Other non-timber products and services

• Supply• Total forest area of the world is 3.5 billion ha.

• Per capita consumption of forest products (industrialwood and fuel wood) is 0.6 cubic mt.

Average Annual Deforestation 1980-90Average Annual Deforestation 1980-90

Deforestation in TropicsDeforestation in Tropics

Average Harvest Intensity (m3/ha.)of forests

Period Africa Asia &Pacific

LatinAmerica

AverageHarvest

1961-65 14 42 7 17

1966-70 14 43 8 20

1971-85 14 35 8 20

1976-80 14 33 8 18

1981-85 14 32 8 18

1986-90 13 33 8 18

Deforestation in Cote d’IvoireDeforestation in Cote d’Ivoire

Period Forest Area(Million .ha)

% AreaDeforested

Cumulative

1900 14.5 -

1955 11.8 18.6 18.6

1965 9.0 19.3 37.9

1973 6.2 19.4 57.3

1980 4.0 15.2 72.5

1990 2.7 9.0 81.5

CausesCauses

• Market Failures

• Government Failures

Market & Institutional FailuresMarket & Institutional Failures

• Externalities– Domestic externalities

• Watershed replenishment

• Prevention of soil erosion

• Wildlife preservation

• Nutrient cycling

– Global externalities• Biological diversity

• Greenhouse gas mitigation

Price

•Q1 •Q2

•P1

•P2

• Forest exploitation

•S

•D

•D

•D’

•D’

•S

Institutional Setting of ForestsInstitutional Setting of Forests

Private Goods

Timber/fuelwood

Quasi-public goods

Recreation/tourism

M

C/A

C0

Non

-Riv

alR

ival

Riv

al

Natural Monopoly

ConcessionaryLogging

Forest plantations

BiodiversityClimate mitigation

Hydrological

Public GoodsMUs/MUi

Excludible Non-excludible

WHEN THERE ARE NO MARKETWHEN THERE ARE NO MARKETFAILURESFAILURES

INCREASING POPULATION PRESSURE AND URBANISATION

DEMAND FOR FUEL WOOD FUEL WOOD PRICE

MORE LAND UNDER FORESTS MARKET FOR FORESTS

WHEN MARKET FAILURES OCCUR

RESOURCE WHICH SHOULD HAVE BEEN CONSERVED GETS“DESTROYED”.

Tragedy Of Commons - Rural EconomyTragedy Of Commons - Rural Economy

Causes

Use of Dung as Fuel

Use of Crop Residues

Grazing Pressure

Fodder Collection

Excessive Timber Harvest

Social Cost /Externality

Decline in Yield

Soil Moisture Regime

Soil Erosion

Effect on Forest Growth

Down Stream Impacts

Comparative Economic Costs and BenefitsComparative Economic Costs and Benefitsof Dung used as a Fuelof Dung used as a Fuel

• Prices of dung in market

• Value of dung equated to farm gate cost of imported fertilizers

• Value of dung equated to incremental production when applied as fertilizer

44 - 60

20

52 - 119

$ / Ton

Farmers Apply sound logic in selling cow dung as cash crop

Rural Deforestation - Economic &Rural Deforestation - Economic &Ecological InterplayEcological Interplay

Stage VTotal Collapse Rural Urban

migration

Demand for Fuel Wood

Rate of timber harvestproduction

Over cutting

More Fuel wood & dungSold

Soil nutrient depletion

All tree cover removed

Decline in dry matterand dung production

Organic matter production zero

Land Abandoned

Stage INo Impact on foodproduction. Wood

main fuel

Stage IIDung & Straw MainFuel. Impact on Food

production begins

Stage IIIDung & Straw Main Fuel

Crop and live stock yield decline

Stage IVDung only Fuel source

Buffering capacityreduced

Government FailuresGovernment Failures

• Macroeconomic Policy• Trade Policy

– Currency Devaluation

– Export Promotion

– Trade and Financial Liberalization

• Fiscal Policy– Tax shelter on agricultural income

– Land allocation

– Tax credits and capital gains

– Subsidies


• Trade Policy• Trade policies that improve the terms of trade for agriculture and

timber sector, increase forest clearing and degradation.

Explanation: As agriculture is more profitable, more resourcesare allocated for its production, depleting the forests andutilizing additional land.

The same happens with timber. As timber becomes moreprofitable, more trees are cut down for sale, and when associatedwith other policy problems (tenure, government ownership),deforestation increases.


• Trade Policy

• With financial liberalization, credit costs increase, and the

result in the sector is ambiguous.

Explanation: The agricultural sector is less profitable and

people move to more profitable activities, but at the same time

they use the land more extensively.


• Trade Policy Results• In Bolivia, Indonesia and Cameroon forest clearing and degradation

has increased since trade policy reform.

• Bolivia’s sawn wood exports rose from 30,000 m3 in 1984 to 161,700

m3 in 1991.

• Cameroon produced 34% more logs in 1994, after a devaluation in

1993.

• Indonesia’s devaluation created opportunities in other sectors, but

migration has not been significant.


• Fiscal Policy

Taxes. Ex Brazil• Corporations can deduct up to 90% tax of their agricultural

income from tax liability.

On average the tax rate for the agricultural sector is 1.2%,compared with 35% and 45% in other sectors.


• Fiscal Policy Land Allocation. (Ex: Brazil)

• Had to be approved by the SUDAM (Superintendencia doDesenvolvimento da Amazonia).

• Land can be acquired by squatting on private and public land.

• The land acquired could be as much as 4 times the landcleared, and half of it can stay as forest.

• The forest land is considered unused, and it’s subject to highertax rates, therefore fostering deforestation.


• Fiscal Policy Tax credits. (Ex: Brazil)

Method: The corporations can take up to 50% in a credit forinvestment against the income tax liabilities.

• This credits were used for livestock projects (major cattle).

• The projects were economically not viable.

Subsidized credits• Subsidized credits increased the rate of return in crops that

wouldn’t be profitable otherwise. This fact leaded to an increasein deforestation.


• Fiscal Policy. Subsidies Ex. Indonesia.

• The cost of 1 cubic meter of plywood in 1983 was $109 (with asubsidy of 20% from the government). The price in theinternational markets was $100. The loss of the governmentwas $400 million.

• Directed Settlement› Increase in pastures

› New Villages, towns &cities

• Frontier Settlement› Land Grabbers (Gilieros)

› Migrant workers 0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1970 1975 1980 1985

Pasture Forest Crops

Population Policy - (Ex: Brazil)Population Policy - (Ex: Brazil)

Development Policy -(Ex:- Brazil)Development Policy -(Ex:- Brazil)

• Infrastructure Development Policy

• Road Building Programs - (See Chart)

• Perverse Incentives To Industry

• Development of large scale, export oriented projects

• Examples: Forestry, Mining and Agricultural Products

Amazonian Road Network 1960-1985

0

20

40

60

80

100

1960 1965 1970 1975 1980 1985

Year

Th

ou

san

ds

of

kilo

me

ters

Federal roads State and local roads Total road network

BRAZIL

Satellite Image - Rondonia, Brazil (1975)

Satellite Image - Rondonia, Brazil (1986)

Forest Policy - (Ex: Indonesia)Forest Policy - (Ex: Indonesia)

Policies

• Timber Concessions

• Tax Holidays

• Subsidies

Impact

• Led to doubling of timber

harvest from 1970 - 1975

• Logging mills increased

• Lowest log conversion rates

• Mismanagement of Public

Forests

• Increased conversion of forests

to pasture

Strategies and SolutionsStrategies and Solutions

National and Global Strategies

Promising Case Studies

StrategiesStrategies

• Strategies for to account for externalities– Domestic externalities

• Improvements in the valuation of forest products and services

• Promotion of non-timber goods and services

• Incorporation of environmental value of forest into nationalincome accounts

• Policies aimed at value addition

• Market instruments

• Inter-sectoral resource transfers and investment in forestrysector


– Global externalities• Debt-for-Nature Swaps

• Extractive reserves

• Conservation easements

Benefit AppropriationBenefit Appropriation

* - Full appropriation possible

@ - Partial appropriation

# - Difficult to appropriate

Resource transfers

Valuation methodsMarket price

Shadow priceProduction function

Timber *Non-timber @

Consumptive value(Goods)

Valuation MethodsContingent valuationTravel cost method

Hedonic pricing

Ecotourism/ @Watershed @

Non-consumptive Value(services)

On Site Value(Local & National benefits

Valuation MethodsContingent valuation

Hedonic pricingReplacement cost

Biological Diversity @Climate Mitigation @

Off Site Value(Global benefits)

Current Use Value Future Use ValueOption Value #

Use Value

Total Value


• Strategies against tragedy of commons

– Management of village forests and commons

– Measures to promote private tree growing

– Rural energy policy focusing alternate fuel sources

Strategies Against Tragedy of CommonsStrategies Against Tragedy of Commons

• Joint Management Initiatives

• Enforcement

• Role of non-governmental organizations

• Successful in areas of high forest

dependence & homogeneous community

• High dependence indicates high marginal

utility of consumption (MU>1), low

discount rate

• Found to be effective in areas with limitedforest dependence and heterogeneouscommunity

Management of village and community forests

Private Tree GrowingPrivate Tree Growing

Credit and market support

Collaboration with industry

• Support to farm forestryprograms - Lack of marketintelligence led to the failure ofEucalyptus farm forestry inNorthern India

• Credit and market support - Ex.Success of poplar private treegrowing in Northern India

Rural EnergyRural Energy

• Rural energy policies

– Targeted subsidies onnatural gas and biogasto substitute fuelwooddemand

– Promotion of othernon-conventionalenergy sources likesolar energy

Government As Natural MonopolyGovernment As Natural Monopoly

SustainableForest

Management

• Long Term Logging Concessions

• Logging Contracts to cover

reforestation costs

• Deterrent penalties for logging damage

• Control of forest fires

• Certification of forest products

• Investment in forestry research

• Forest survey & inventory systems

Regulatory EnvironmentRegulatory Environment

• Legislative Support

• Enforcement &Regulation

• Check on diversion offorest land

• Institutional Mechanism tosupport public and privateforestry

• Resource Allocation

• Prevention of rent seeking

• Deterrence against forestoffences

Promising Case StudiesPromising Case Studies

• Malaysia Reduced impact logging

• India Property rights to products

• Thailand Property rights to land

• Costa Rica Resource transfers to protect

biological diversity

Tax exemption for plantation

• Nicaragua Credit for reforestation

• Chile Co-financing of inputs

rural deforestation - columbia university

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