Part IV. Renewable Resources

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Part IV. Renewable Resources

1. Fish
2. Forests tropical
3. Water
4. Biodiversity

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A. Tropical Forests

• Chapter 13

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Introduction

• Tropical deforestation is an area of
  environmental degradation that has captured media
  attention perceived as a metaphor for and
  indicator of the decline in the biosphere.
• While tropical deforestation is not a new
  phenomenon, the pace has increased.
• This chapter examines the economic and ecological
  relationships that shape the answers to questions
  concerning tropical forest policy.

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Introduction

• As defined by the Food and Agricultural
  Organization, tropical forests are areas located
  between the Tropics of Capricorn and Cancer where
  at least 10 of the area is covered by woody
  vegetation.
• Tropical rain forests receive over 100 inches of
  rain per year, with the wettest areas well over
  twice that amount.
• Tropical dry forests are semi-arid with a mixture
  of grassland and forests.

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Tropical Rain Forests

• Dominated by broadleaved evergreens, with
  completely interlocking canopies, with some giant
  trees rising above the canopy.
• These giant trees, called emergent trees, support
  the growth of vines that try to reach the
  sunlight.
• Below the canopy there is an understory of
  shrub-like plants, and a series of non-woody
  plants that occupy the forest floor.

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Diversity

• Rich diversity of species, with up to 95 of the
  world's plant and animal species found in rain
  forest habitat.
• According to Perry (1990), as many as 10 to 30
  million yet to be discovered species live in the
  rain forest (only know about 2 million now).
• Rain forest rivers are correspondingly more
  diverse than their temperate counterparts.

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Tropical Dry Forests

• The tropical dry forest has decidedly less rain
  and biomass per unit acre than the wet forest.
• This also results in a greater ratio of nutrients
  in the soil than in the trees, although the ratio
  is still less than that in temperate forests.

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Benefits of Tropical Forests

• Primary importance source of ecological
  services, including the maintenance of
  hydrological and nutrient cycles, sequestration
  of carbon, and the provision of habitat for a
  variety of species, including humans.
• An additional benefit harvested to supply wood,
  which can be used in construction of buildings or
  furniture, or the manufacture of paper and wood
  products.
• Tropical dry forests serve as an important source
  of fuel for the majority of people who inhabit
  the tropics.

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Global public good

• One of the major market failures associated with
  management of rainforests involves the public
  good properties of the rainforest, which create
  social benefits that the landowners can not
  capture.
• However, the domestic country tends to consider
  only domestic costs and benefits when making
  choices about rainforest use.
• As a result, because tropical forests constitute
  a global public good, deforestation rates which
  are optimal from a forested countrys point of
  view may not be optimal from a global point of
  view.

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Potential market failure

• Tremendous potential for two-tiered market
  failure.
• The rate of harvest within the country may exceed
  the socially optimal rate however, policies
  designed to correct this would likely not
  consider the benefits derived by citizens in
  other countries.
• In other words, even if countries choose
  internally efficient policies to address market
  failure, they may not be globally efficient.

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Activities that Lead to Deforestation

• The 3 activities that are primarily responsible
  for tropical deforestation include
• Cutting trees for timber
• Cutting trees for fuel
• Conversion of land to crop or range land
• In addition, mining and urbanization are sources
  of deforestation, but not to the same extent as
  the other 3 activities.

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Sustainable harvesting

• While timbering is a major source of
  deforestation, sustainable harvesting could
  mitigate its impact.
• Sustainable harvesting is a method of timber
  harvesting where disturbances caused by
  harvesting are similar to natural disturbances.
• There are two basic methods to accomplish this
  goal
• strip harvesting
• selective harvesting.

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1. Strip method

• The strip method identifies small finger-like
  areas and cuts all the trees within this area.
• The total quantity cut represents 6 to 10 of
  the volume of wood in the general area where the
  harvesting activity takes place.
• After harvesting, the entire area is left
  unharvested and undisturbed for a minimum of 30
  years.

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2. Selective harvesting

• Harvest of individual trees, not a small
  clearing.
• These individual trees would be scattered across
  the entire acreage and would comprise less than
  6 to 10 of volume of wood in entire acreage.
• Again, once harvest was complete, the entire
  acreage would be left undisturbed for a minimum
  period of 30 years.

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Why is most timbering activity destructive to the
rain forest?

• Even though it is technically possible to harvest
  wood in a rainforest in a manner that keeps the
  rainforest intact, virtually all commercial
  harvesting of rainforests results in destruction
  to the rainforest.
• Due to a series of market failures, poorly
  designed government policies and a divergence
  between private and public benefits associated
  with changing harvesting methods.
• Figure 13.4 illustrates the difference between
  the income paths of a sustainable and
  non-sustainable forestry.

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• Non-sustainable gives an initial high level of
  income, but low levels of income into the future.
• Sustainable forestry management provides lower
  levels of income for greater periods of time.

• Unfortunately, firms may focus on the short term
  income rather than the long term sustainability.

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Concessionaire agreements

• Even where the tropical forest is publicly owned,
  the forest might be harvested in a destructive
  fashion.
• One of the major reasons is the way that
  countries issue leases (concessionaire
  agreements).
• The length of the leases is too short a time
  period and as a result companies harvest at a
  faster rate than optimal and have no incentive to
  reduce the environmental damage associated with
  the harvest activity.

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Concessionaire agreements

• Granting the firms long term harvesting rights,
  which they can either exercise or sell, creates
  an incentive to maintain the productivity of the
  forest.
• If the actions of the firm result in a reduction
  of the productivity of the forest, then the firm
  bears the cost.
• However, long term leases do not give the firms
  an incentive to protect the flow of ecological
  services into the future.
• Economists have suggested that better management
  of the forest resource could be accomplished by
  changing the fee structure of the lease for
  harvesting.

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Area-based fee

• Fee structures can be based on area, revenue
  earned, undifferentiated volume, or
  differentiated volume.
• Fee based on the number of hectares in which it
  operates. This type of fee would give the firm an
  incentive to clear cut that area.
• In addition, this fee structure also provides an
  incentive for the firm to harvest species of
  trees with the highest profit (high grading)
  and fundamentally change the stability of the
  ecosystem.

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Revenue-based fee

• Charges the firm a fee based on a fixed
  percentage of total revenue.
• This type of fee reduces the incentive to clear
  cut but still retains an incentive for the firms
  to high-grade harvest because the fee is based on
  revenue and not profits.
• It also gives the firm an incentive to harvest in
  lower-cost areas such as in the proximity of
  roads and rivers.

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Volume-based

• An undifferentiated volume-based fee charges the
  firm per cubic meter of wood harvested.
• The fee is constant across all types of wood
  harvested and will lead to problems of
  high-grading
• A differentiated volume-based fee charges a
  different fee for each type of tree species.
• If the fees are set properly this type of fee
  will remove the incentive to high grade.
• However high administrative costs

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Other policies how to harvest

• While a fee system can influence how many trees
  are harvested, and what type of trees are
  harvested, it can not influence how the
  harvesting activity is conducted.
• As such, fee systems do not provide incentives to
  ensure that the rain forests are not destroyed by
  the process of harvesting.
• To ensure that harvesting methods are consistent
  with the recoverability of the forest, the
  government has choices between 2 broad categories
  of environmental policy
• direct controls
• economic incentives.

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Direct controls

• Specify the techniques that harvesters would be
  required to use and place restraints on their
  activities to protect the rainforest.
• For most economic problems direct controls are
  associated with lower monitoring and enforcement
  costs as compared to economic incentives, this is
  not true for forestry.
• It is possible for firms to engage in hit and
  run harvesting where the firm goes out into the
  forest, harvests intensively and destructively
  and then disappears before penalties can be
  enforced.
• Since the assets of the firm are highly mobile,
  it is difficult to locate and seize these assets.

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Economic incentives

• Economic incentives work better because they can
  be configured to provide an incentive that exists
  even before the cutting begins.
• The most useful incentive for environmental
  management of forests is a performance bond,
  where money is collected from the firm before it
  begins its activities.
• The money is placed in an escrow account, if the
  firm complies with the environmental regulations
  during harvesting, the money is returned.
• If not, the performance bond monies are
  forfeited.
• The focus of performance bonds in this context is
  not to remediate damage (as in strip mining) but
  to prevent large scale disturbances.

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Alternative patterns of harvest

• Forest has better chance of regenerating if
  following conditions are met
• Large ratio of undisturbed cleared area
• Cleared area has high ratio of the edge of
  cleared surface area cleared
• Goal is to design economic incentives to ensure
  timbering activities conform to these requirements

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Summary

• Tropical forests are diverse ecosystems that
  provide many benefits, including consumable and
  nonconsumable benefits.
• Microeconomic conditions, such as poorly defined
  property rights, and macroeconomic conditions,
  such as high foreign debt, have contributed to a
  high rate of deforestation of tropical forests.
• Improved economic conditions can reduce
  deforestation.
• Of particular importance are policies which
  provide an incentive for sustainable alternatives
  to current activities.