Integrated Environmental and Economic Accounting: An Application to the Forest Resources in India

Forests contribute to the economy in several ways. While forests are a source of timber with market values, they also influence local and regional climate, preserve soil cover on site, and in the case of watersheds, protect soil downstream from floods –functions, which are not in the production boundary of SNA. Further, the net value added in forestry sector does not reflect sustainability of forest resources, because it ignores the consumption of natural capital (depletion) that occurs when forests are harvested or converted to other uses. The only costs of depletion considered in the national accounts are the extraction costs and records the potential loss in forest wealth as other changes in assets that have no effect on Gross Domestic Product (GDP). The study tries to incorporate forest resources into the national accounts and adjust the Gross Domestic Product (GDP) for the depletion of forest capital, using the Satellite System of Integrated Environmental and Economic Accounting (SEEA). The value of net accumulation (positive or negative) of forests is calculated and the net Domestic Product is adjusted for the depletion of the forest resources to get Environment adjusted Domestic Product (EDP). The results show that the EDP equals 98.4% of the adjusted net domestic product in 1993–1994. A proper accounting framework would better reflect not only the long term value of the state's natural wealth but also its immediate contribution to the state economy in the current accounts.     

Natural resource accounting for Indian states — Illustrating the case of forest resources

Our main objective is to set out and apply a SEEA-based methodology to reflect the true value of forest resources in India's national and state accounts. We establish that a “top-down” approach using available national databases is both feasible and desirable from a policy perspective. In this paper, we address four components of value creation in forests: timber production, carbon storage, fuelwood usage, and the harvesting of non-timber forest products. The results of our analysis suggest that prevailing measures of national income in India underestimate the contribution of forests to income. The income accounts of the Northeastern states in particular are significantly understated by these traditional (GDP/GSDP) measures. We are also able to identify some states which performed poorly in the context of our sustainability framework, reflecting natural capital losses due to degradation and deforestation. Our results highlight the need to integrate natural resource accounting into the national accounting framework in order to generate appropriate signals for sustainable forest management and for the conservation of forest resources which are widely used by the poor in India, as well as being significant stores of national wealth.     

Ecosystem services, agriculture, and rural poverty in the Eastern Brazilian Amazon: Interrelationships and policy prescriptions

Policymakers seeking to modify financial incentives to increase the flows of ecosystem services in and around tropical moist forests must consider where to focus their attention and what collection of incentives can effectively achieve policy objectives. In most cases, policymakers focus on extensively forested areas where the flows of ecosystem services between agriculture and the environment is generally characterized by massive flows of carbon and soil nutrients from forests to agriculture. In these forest margin areas the stock of primary forest is eventually exhausted and the cheap ingredients provided by nature to agriculture become increasingly scarce. At this point, policy interest generally wanes, and agriculture and the environment begin slow declines in ecosystem service exchange, often with negative consequences for rural poverty. How does one promote increased flows of ecosystem services from agricultural lands without increasing poverty when forests and soils have been depleted? Can the standard instruments, e.g., payments for ecosystem services, be effective in such situations, and if so, do the costs to society of securing these services increase? Here we focus on the flows of ecosystem services at the end of the cycle of converting primary forest to agriculture. Primary data from the Bragantina area in the southeastern Brazilian Amazon, an area cleared of primary forest decades ago, are used to characterize smallholder production systems, to describe the flows of ecosystem services into and from these systems, and to develop a bioeconomic model of smallholder agriculture capable of predicting the effects of several types of policy action on ecosystem services provided by and to agriculture, and on-farm household incomes and food self-reliance. Of particular interest is the Proambiente Pilot Program in Brazil, which uses smallholder payment schemes to induce farmers to manage land and forest resources in ways that generate more ecosystem services. Baseline results suggest that smallholder agriculture leads to a gradual loss of ecosystem services (mainly above-ground and root carbon) provided by secondary forest fallows, and that reduction in fallow age leads to reductions in plant diversity. Intensifying agricultural activities accelerates this process, but considerably increases smallholder incomes. Paying farmers for ecosystem services linked to the retention of secondary forests and the Proambiente program both increase area in forest fallow, but the latter substantially reduces farm income because of input use restrictions. In general, programs aiming to promote the production of ecosystem services should not limit farmers' choices of ways to provide them. Employment and food self-reliance issues associated with policy options for increasing on-farm stocks of carbon and plant biodiversity are also explored.     

Correcting for the Missing Rich: An Application to Wealth Survey Data

It is a well‐known criticism that if the distribution of wealth is highly concentrated, survey data are hardly reliable when it comes to analyzing the richest parts of society. This paper addresses this criticism by providing a general rationale of the underlying methodological problem as well as by proposing a specific methodological approach tailored to correcting the arising bias. We illustrate the latter approach by using Austrian data from the Household Finance and Consumption Survey. Specifically, we identify suitable parameter combinations by using a series of maximum‐likelihood estimates and appropriate goodness‐of‐fit tests to avoid arbitrariness with respect to the fitting of the Pareto distribution. Our results suggest that the alleged non‐observation bias is considerable, accounting for about one quarter of total net wealth in the case of Austria. The method developed in this paper can easily be applied to other countries where survey data on wealth are available.     

Natural carbon capture and storage (NCCS): Forests,land use and carbon accounting

The use of forests as natural carbon capture and storage sinks is considered by introducing carbon sequestration benefits’ accounting in a multi-vintage partial equilibrium land-use model, under different carbon price scenarios. The consequences to timber and land markets and to the profile of the carbon sequestration time path are examined in the short-run, long-run, and transition. Following IPCC, three carbon accounting methods are considered: the carbon flow, the ton-year crediting and the average storage. A full proof of long-run optimality of steady-state forest is provided. Numerical simulations are performed and results discussed illustrating the setup's potential.     

Net national emissions, CO2 taxation and the role of forestry

The concept of net national emissions suggests that accumulation of carbon in forestry should be taken into account when countries buy CO₂ permits or pay CO₂ taxes. The paper analyses the question of the correct tax/subsidy programme for giving proper incentives to forest owners and utilizers of wood. The analysis uses a dynamic general equilibrium model with productive capital and the stock of forests as state variables. It turns out that in a decentralized economy forest owners should be subsidized and CO₂ emissions should be taxed independently of whether they originates from wood or fossil fuels.     

Legal exclusions,private wealth and livelihoods: An analysis of work time allocation in protected areas

Do exclusionary forest access regimes have an unequal impact on livelihood activities? This paper analyzes primary data on time allocation to livelihood activities by forest communities in the Indian Himalayas to investigate this question. Estimation results are consistent with the hypothesis that forest access regimes affect both forest extraction behavior and other livelihood strategies. Residents of sanctuary forests, experiencing higher restrictions on forest use, decrease the proportion of time allocated to forest extraction and livestock activities, but compensate by increasing their time allocation to agriculture in comparison to residents of state-controlled protected forests. However, wealthy residents of the wildlife sanctuary expend a higher proportion of their time in managing livestock and extracting forest resources in comparison to its less affluent residents. Thus wealth enables circumvention of access restrictions despite legalization of exclusion. Findings of this study have implications for design of biodiversity conservation and carbon sequestration policies.     

Barriers to Massachusetts forest landowner participation in carbon markets

U.S. forests, including family-owned forests, are important carbon sinks and sources for carbon sequestration. Family forest owners constitute a significant portion of the overall forestland in the U.S., but little is known about their preferences for participating in carbon sequestration programs. The goal of this research is to understand what motivates Massachusetts family forest owners to participate in carbon markets. The study estimates the probability these landowners would engage in carbon sequestration programs using data from a survey of 930 Massachusetts family forest owners. Results from a random effects ordered probit indicate that under a carbon scenario similar to the current voluntary scheme, very few of these landowners would be interested in participating. Supply analysis indicates these landowners are more influenced to participate by factors other than price. Regression analysis results suggest that survey respondents are concerned about early withdrawal penalties, additionality requirements, and contract length. Forest owner harvesting plans, opinions about forest usage, and beliefs about climate change all play a significant role in the decision to participate. The study suggests that policy makers should consider the reasons behind these low participation rates, because private forest owners could play a pivotal role in the carbon sequestration potential of forests.     

Wealth Accounting,Exhaustible Resources and Social Welfare

The empirical literature on natural resource accounting uses methods which implicitly or explicitly entail measuring changes in total resource asset value when an exhaustible resource is depleted. In contrast, the growth theoretic literature on saving, social welfare and sustainable development is built upon a central finding, that the change in real wealth (as measured by net or ‘genuine’ saving) is proportional to the change in social welfare. We show that the change in total wealth exceeds the change in real wealth in optimal and non-optimal models of resource-extracting economies. This suggests that the change in social welfare is over-estimated when the change in total resource asset value is used as the measure of depletion. A simple empirical exercise, using World Bank data on ‘adjusted net saving’, reinforces the results from theory.     

The progressivity of equalization payments in federations

We investigate the conditions under which an inequality averse and additively separable welfarist central government would choose to set up a progressive equalization payments scheme in a federation with local public goods. A progressive equalization payments scheme is a list of per capita net (possibly negative) subsidies – one such net subsidy for every jurisdiction – that are decreasing with respect to jurisdictions per capita wealth. We examine this question in a setting where the case for progressivity is a priori the strongest, namely: all citizens have the same utility function, inhabitants of a given jurisdiction have the same wealth and are not able to move across jurisdictions and there is no cross-jurisdiction competition in the setting of tax rates. We show that the central government favors a progressive equalization payments scheme for all distributions of wealth and population sizes if and only if its objective function is additively separable between each jurisdiction's per capita wealth and number of inhabitants. When interpreted for a mean of order r social welfare function, and assuming the absence of congestion in the local public good, this condition is shown to be equivalent to the requirement that the individual indirect utility function be additively separable between wealth public good price and be raised at the power 1/r before its agregation by means of the mean-of-order r social welfare function. Some implications of this restriction to the case where the individual's direct utility function is additively separable are also derived.     

An Operative Framework for Total Hicksian Income Measurement: Application to a Multiple-Use Forest

A methodology for estimating total hicksian income in multiple-use forests is presented. The approach consistently incorporates commercial as well as non-commercial economic values and enables the measurement of national accounting aggregates taking into account variation in man-made and natural capital. Innovative solutions are developed (i) for the estimation of non-market values, such as recreation, where an attempt to determine exchange values has been made simulating markets, (ii) for timber, where standing timber valuation methods have been extended to cover uneven stands, and (iii) for carbon fixation valuation, where only permanently fixed carbon after 1990 has been taken into account. The methodology is applied to a multiple-use pinewood in the Guadarrama mountains, near Madrid (Spain). Timber, cattle grazing, hunting, recreation, carbon fixation and conservation values are measured and integrated in the accounting system, using primary microeconomic data from the case study. Results indicate the importance of non-commercial income, which accounts for 51% of the total income, and the social relevance of the analysed forest, implying that only 31% of the total income generated is appropriated by the forest owner.     

Timber harvesting versus forest reserves—producer prices for open-use areas in German beech forests (Fagus sylvatica L.)

A strong demand for nature conservation can be ascertained in Germany. Several nature conservation groups argue that in order to provide nature conservation in considerable parts of the forest area forestry should sacrifice timber harvesting. For example, the abandoning of harvesting altogether is supposed to enhance and protect the species richness. This fact and the very low profitability of forestry in Germany motivated the writing of this paper. The paper explains a methodology for deriving producer prices involved in forest reserves, where harvest benefits are sacrificed totally. Such methodology can be useful to form a basis for private contracts between forest owners and nature conservationists, who demand forest reserves. The results of this methodology can also be integrated in financial programs for species and habitat conservation.In a basic theoretical consideration, it is demonstrated that a stand-by-stand evaluation approach may only serve as an initial step in deriving compensation prices for forest reserves. Due to the stochastic character of forest management, a nonlinear programming approach (NLP) was adopted to find an optimal operational plan for a hypothetical beech (Fagus sylvatica L.) forest. In both the constraints and the objective function, the nonlinearity is considered by integrating stochastic components. Additionally, only virtual homogenous forest reserves are considered. Firstly, a basic NLP solution for the hypothetical forest with the objective “maximise the net present value (NPV) of timber harvests adjusted to risk” was obtained when considering several constraints subject to stochastic variation of net revenues and timber harvests without considering forest reserves. Secondly, other solutions allowing for forest reserves were computed. The decrease of the objective function when forest reserves were increased in periodic increments seemed well suited to mirror the opportunity costs of forest reserves.The results showed that a stand-by-stand approach gave much greater compensation prices than the NLP approach. The reason for this lay in the consideration of a nonlinear objective function as well as the nonlinear constraints in the case of NLP. The first 42-ha forest reserve was priced at 11,494 Euro/ha or, 483 Euro/ha/year expressed in infinite yearly compensation. The yearly compensation price for the last forest reserve had an increase up to 607 Euro/ha/year. A stand-by-stand approach, however, resulted with compensation prices from minimally 609 up to maximally 709 Euro/ha/year.Various interest rates (3.2% and 5.2%) caused different compensation price curves. The slope of the curves increased when the interest rate decreased.The limits of the approach, the problem of deriving a demand for forest reserves and the opportunities for applying the presented approach to state forests are discussed.     

The Gender Wealth Gap in Europe: Application of Machine Learning to Predict Individual-level Wealth

This article provides comparative estimates of the gender wealth gaps for 22 European countries, employing data from the Household Finance and Consumption Survey. The data on wealth are collected at the household level, while individual-level data are needed for the estimates of gender wealth gaps. We propose a novel approach using machine learning and model averaging methods to predict individual-level wealth data for multi-person households. Our results suggest that random forest performs best as the predicting tool for this exercise, outperforming elastic net and Bayesian model averaging. The estimated gender wealth gaps tend to be in favor of men, especially at the top of the wealth distribution. Men have 24 percent more wealth than women on average. We also find that a high home ownership rate is associated with a smaller country-level gender wealth gap. Our estimates suggest that the individual-level wealth inequality is on average 3 pp higher than the household-level wealth inequality in multi-member households.     

Converting Forests to Farms: The Economic Benefits of Clearing Forests in Agricultural Settlements in the Amazon

Agricultural expansion into tropical forests is believed to bring local economic benefits at the expense of global environmental costs. The resulting tension is reflected in Brazilian government policy. The national agrarian reform program has settled farm families in the Amazon region since the 1970s, with the expectation that they will clear forests in order to farm the land. On the other hand, recent Brazilian policy initiatives seek to reduce deforestation to mitigate climate change. We contribute to the policy debate that surrounds these dual goals for the Amazon by estimating the marginal effects of new agricultural land on the full income and assets of farm settlers over a 13-year period from 1996 to 2009. Using micro panel data from agrarian settlements where forest was being rapidly cleared, and controlling for factors that would otherwise confound the relationship, we estimate the effect of converting forest to agriculture on total household income to estimate the opportunity cost of conserving forest. Our measure of income reflects any re-allocation of resources by utility maximizing households and any productivity effects due to loss of forest ecosystem services. The estimated effect of new agricultural land on income is positive, but small relative to the income per hectare of previously cleared land. However, we show that income increases investment in physical assets, which raises households’ income generating capacity and future accumulation of assets. Thus, while there is only a small immediate income gain from clearing more forest, the long-term effects on wealth are still substantial. This demonstrates that given the right conditions, conversion of forest to agricultural land can be an impetus for asset accumulation by smallholders. It also highlights the importance of considering the indirect and long-term welfare benefits of new agricultural land when assessing the opportunity costs of forest conservation.     

Economic cost of deforestation in semi-deciduous forests — A case of two forest districts in Ghana

The ecological, economic and socio-cultural roles of forests are under threat in Ghana due to the high rate of deforestation. Efforts are being made to combat this problem through rehabilitation measures. However, the costs of deforestation and restoration benefits are not adequately estimated. This paper fills in the gap in knowledge by providing an empirical estimation of the cost of deforestation in monetary terms. Primary data collected regarding timber, non-timber forest products and soils in semi-deciduous forests were analyzed using opportunity cost and replacement cost techniques. The results emphasize differences in the value of these forest goods and services lost annually. The largest losses were in stumpage fees, edible fruits, and avoided carbon emissions values. The results show that US$133,650,000 gross revenue, equivalent to 2.6% of the 2008 agricultural sector Gross Domestic Product, is lost annually. It can be concluded that restoring the degraded forest lands would bring benefits particularly to the local communities through increased stumpage revenues and harvest of non-timber forest products, as well as additional funds from carbon credits. It is recommended that stakeholders of forest resources are made aware of these costs in order to raise awareness of what they are losing through deforestation.     

Depletion: Bridging the Gap Between Theory and Practice

Adjusting national income for depletion is important in order to send correct signals to policy makers. This article reviews a number of depletion measures that have been recently brought forward in the context of environmental accounting (‘practice’) and green accounting (‘theory’): depletion as change in total wealth; depletion as ‘using up’ of the resource; depletion as net savings; or, depletion as net investment. The differences in assumptions between these measures are clarified by contrasting their approaches with the classic theory of a firm engaged in extraction. All measures are evaluated using a time series of data on Dutch natural gas reserves. Our main findings are that correcting for the cost of depletion would lead to significant adjustments of both level and growth rates of Dutch net national income, with a strong dependency on the chosen measure.We counter criticism that accounting in practice would necessarily underestimate depletion. The choice for a depletion measure should be determined by the context of use: measurement of social welfare or sustainable income. The physical measure put forward in the SEEA Central Framework can be justified by its consistency with the income concept that underlies the SNA.     

At a crossroads: consequential trends in recognition of community-based forest tenure from 2002-2017

ABSTRACT

Insecure, contested, and unjust forest tenure arrangements undermine forest investment and protection, fuel conflict, and jeopardize Indigenous Peoples’, local communities’, and indigenous and community women’s rights, livelihoods, and development prospects. While legally recognized community forests tend to have lower rates of deforestation, store more carbon and benefit more people than forests managed by either public or private entities, evidence shows over two-thirds of forests remain controlled by governments – a significant portion of which is contested by indigenous and local communities who traditionally own, manage, and depend on these forests. It is therefore all the more critical that governments support and advance communities’ forest tenure rights. Using longitudinal tenure data and analysis of global forest ownership trends developed by the Rights and Resources Initiative, this article details the distribution of statutory forest rights across 58 countries covering nearly 92% of global forests over the fifteen-year period from 2002–2017.     

Public Open Access and Private Timber Harvests: Theory and Application to the Effects of Trade Liberalization in Mexico

A common popular assertion is that trade liberalization encourages deforestation. But whether this is true depends on how trade policies affect the allocation of land among competing uses and how they influence illegal cutting of public forests. A model is presented that allows for forests to be either public or private, and public forests are divided into protected (or managed) and threatened categories. Effects of price changes are shown on each part of the forest. An empirical version of the model is applied to the case of Mexico with NAFTA. Most scenarios considered show that NAFTA will have positive long-run effects on forest cover in Mexico but that this is net of losses on private lands.     

A Note on the New Rule for the Current Account

In this note, we show that the two main concerns against the new rule for the current account are flawed. The new rule states that the impact of a transitory income shock on the current account is given by the savings generated by the shock multiplied by the ratio of the net foreign asset position to domestic wealth. First, we adapt the new rule to distinguish between gross and net foreign asset positions. Second, we demonstrate that the results for the new rule are driven neither by an accounting‐based “approximate” regression nor a steady state.     

试论森林环境资源核算

环境资源核算是当前国际社会最关注的热门课题之一,作者指出了现行国民经济核算体系的缺陷,论述了世界环境资源核算的研究现状及发展前景,重点介绍了环境资源核算研究的指导思想、环境资源核算的新概念及其分类、价值和计算方法、环境产业问题等,并对我国开展森林环境资源核算研究提出了几点建议。