Published on Let's Talk Development

Valuing preservation of the Amazon rainforest

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An ambitious research project aiming to map the value of preserving the Amazon rainforest is just getting started at the World Bank. Why is it important to value the Amazon rainforest? Consider the perhaps most fundamental dilemma for conservation policy, with two opposing views. A “conservation” view is to assume that the rainforest should always be protected. A “development” view implies that the rainforest should always be converted to alternative uses (such as agriculture) when such conversion implies clear and readily measurable financial gains. Very often these two views cannot be reconciled, as the value attributed to forest protection by each of them can be dramatically different.

Economic valuation can potentially reconcile these two views by explicitly assigning economic values to all measurable impacts of converting a given part of the forest. Sometimes the opposing views still cannot be fully reconciled, as the assessed losses from deforesting (per ton carbon released; per species lost; etc.) may still differ widely between the two opposing views, even after attempting to quantify them. The weight placed on uncertainty may also be considered very differently (e g, conservationists placing more emphasis on the very possibility of species losses, even when probabilities are small). In our project, such assigned values will represent not the preferences of conservationists or development proponents, but instead wider regional and even  global considerations of such economic impacts. Disagreement can then be substantially reduced and boiled down to differing views on a smaller number of parameters important for calculating total values.

Rainforest protection gives rise to three main value categories : (1) The global climate benefits of locking carbon in the forest: (2) A wide range of benefits to the regional population from the forest and its ecosystem services; and (3) The benefits to other (mainly high-income) countries, manifested by the willingness to pay for forest protection in these countries. The project described here aims to capture values (1) and (2). Item (3) is the subject of another on-going line of research in the World Bank, and assessing such benefits is essential for natural resource accounting to be complete.

Our project represents a first attempt at comprehensive and differentiated valuation for any major rainforest system. Our valuation process involves two main steps. The first is the geographical mapping of all major impacts—including carbon stock, ecosystems and biodiversity, hydrology, tourism potential, and sustainable harvesting of forest products—when forest is lost. The second step involves economic quantification of these impacts. While a lot of work has already been done on the first step, less work has to date been done on the second, or to combine the two steps. Herein lies the main challenge for our project.

Given limited conservation funds, geographically differentiated valuation of rainforests is particularly useful for understanding which parts of the forest should be given more, and which less priority, in protection efforts and for understanding who will lose and who benefit, and by how much, when particular parts of the rainforest are lost. Such differentiation is generally necessary for evaluating costs and benefits of forest protection programs.

For example, for programs with the principal aim of reducing carbon emissions from deforestation and forest degradation (“REDD” programs), such valuation can help quantify the net benefits of individual programs. It can also provide guidance as to where payments for environmental services (PES) schemes ought to be focused and what levels of payments ought to be.

At a more macro scale, the project can serve to evaluate larger programs to protect the Amazon rainforest. A prominent example is the current collaboration between the Norwegian and Brazilian governments, with Norway funding US$1 billion for rainforest protection purposes, as “payment upon delivery” when aggregate rainforest losses in Brazil are reduced below pre-set baselines.  The efficiency of this program can be gauged by approximating how much of the actual rainforest areas were saved by the program, and by specifying the geographically differentiated values within those forests.

The reality still remains that such valuation is highly complex, and the outcome of our geographically differentiated valuation process is uncertain. Uncertainties and inaccuracies apply to all stages: physical impacts of forest losses (for hydrology, biodiversity, etc.); economic valuation of given impacts; and opportunity values including agricultural returns from converted lands. Moreover, neither impacts nor economic values are stationary but change continuously over time. Many types of impacts are today not well known; such as impacts of Amazon forest losses on global climate and vice-versa, and the possibility of more catastrophic reductions in the rainforest cover (“dieback”) is difficult to predict with any level of accuracy. 

The fact that these values are and will remain uncertain should not hinder us in this work. Our fundamental belief, based on economic science, is that economic valuation of natural resources such as the Amazon forest is feasible: methods today exist to derive approximate but largely unbiased values. Our project is only a start, not the end, of a process toward more realistic and precise valuations of rainforests, and can contribute to more informed and enlightened decisions about saving such forests.



Jon Strand

Economist and World Bank consultant

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