Rainforest Case Study

Rainforests or tropical temperate forests are a bastion of biodiversity, with 50% of all species on just 7% of Earth's land. With such biological wealth, forestry in these biomes and the subsequent habitat destruction has been a hot, global topic in modern times and continues to be a pressing issue. The question is whether that wealth can be translated into monetary value used to balance out the considerable incentives many people have for clearcutting this land for lumber, pulp, or to convert it to arable land.

Should Rainforests be Valued, and if Yes how should they be Valued?

1. Local Values of Rainforest

•  Provide housing and an environment for many tribes of indigenous people who often get non-timber resources like medicines and food from the rainforest.

•  Many of these tribes and nearby poor populaces also either clear the timber for fuel or to develop the land for farming.

2. National Benefits

• Rainforests serve to prevent devastating landslides by preventing erosion and regulating the watershed
• They provide nutrients for necessary plant growth
•  Regulate local and regional climate by providing a cooling effect on surrounding atmosphere
• Pest-Control through the rainforests role of host to biodiversity: many of these species are natural predators of pest species and their existence helps to perpetuate the balance of nature.

3. Global Benefits

• Rainforests act as a Carbon Sink, with their lush flora absorbing a lot of C02
• Conversely, the deforestation of rainforest can be valued as as damaging cost. Forestry contributes around one-fourth of all global greenhouse gasses: the practice puts out about a 30% of all carbon dioxide, 25% of all NO2, and through the redevelopment of forests into pastureland and rice paddies, 40% of all methane emissions (Hanley, 220).
• As said earlier, rainforests are sources of abundant biodiversity. People who are far removed from the rainforests still might draw some existence value from them, knowing that the rainforests and all within it is being preserved. They can also get some more direct, non-use value by visiting these sites as eco-tourism spots.

The Problem

• Rainforests make up a little more than half of global forest cover, with most of the rainforests being located in Latin America. The deforestation present in Central and South America has been the main focus of the campaign to save the rainforests, but problems in Asia and Africa have also come to the forefront.
• The amount of tropical forest lost has been substantial in recent years: one-fifth of it in thirty years (1960-1990).
• There has been some issue whether this is even a problem, with Third -World countries (where most rainforests are) complaining of a double-standard: First-World countries have in the past been able to clearcut their land in order to expand their soveriegnty and their economies. Some in these tropical countries believe they should be allowed the same beneficial activity; otherwise, it would be unfair to them. While this is an valid point, most people still see deforestation as large problem.

Why are we having this Problem?

There are two models which explain in economic parlance why the resources of rainforests are being depleted.

1. Frontier Model

• This is based off of the concept of capital investment: small farmers, entrepreneurs, and corporations all utilize the rainforest in order to get some form of return:like crops, real estate, or wood for furniture. The forest is an open-access resource, where the farmers face a strong incentive to clear their patch of rainforest, often using the quick but unsustainable slash-and-burn technique. Thus, they can extract the resources before larger interests, like global lumber companies, enter the picture.

               2.   Immiserization Model

• This model's key factors for explaining rainforest depletion are an increasing population and an impoverished populace. There's not much available to dirt-poor farming for a livelihood besides clearing the land.
• After the initial over-exploitation of the land, the model predicts that there will be a level of economic development substantial enough to prevent future depletion of the natural resource. 

Which model to use depends on the nation in question: its state of economic development, its geography, and other factors.

Policies for the Problem

Local and National Policies

• Any policy, national or international, relies upon the implementation relies at the ground level. Policies about rainforests are no different, in that enforcement of the regulations must be strictly and uniformly applied without any corruption. The 'perverse incentives' such as farming and logging subsidies should be done away with. In their stead, disincintives against the continued practices of logging and farming should be instituted.
• If there is sufficient government will to stop the logging and farming of lands and provide people with alternative means of livelihood, then they stand a good chance of success in the institution of recognized parks encompassing these forests. With these parks comes tourism from abroad and that brings foreign dollars. This has been the approach of such countries as Madagascar, an island with an abundant cornucopia of organisms off the eastern coast of Africa.

International Policies

• This is the primary tool used for the preservation of the rainforests, since its at this level that the nature of national policies can be decided upon. In practice though, these agreements have been rather weak.
  
• Numerous international organizations have as their goal the protection and sustainable harvesting of rainforests. Their tactics include using side payments to host countries; setting logging and other timber-related industry uniform standards concerning the use of rainforests; and the forgiving of the hosts nation's debt in return for their protection of their rainforests in what is called a debt-for-nature swap.
  
• Unfortunately, most of these international agreements have been grandiose in their scope, but haven't been successful in addressing the problem.

Source: Hanley, Nick, Jason F. Shogren, and Ben White. Introduction to Environmental Economics. 2001. Oxford University Press, NYC.