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Contents Foreword Boxes
Forests are the most extensive terrestrial ecosystem, and nearly 500 million people depend on forests for their livelihood. Since the World Bank issued its forestry sector policy paper in 1978, there has been growing concern about the accelerated rate of destruction of the remaining primary forests in various parts of the world. Currently estimates are that 17 million to 20 million hectares of forests are being lost every year, mainly in developing countries. Losses to tropical forests are now estimated at about 1 percent a year-clearly not a sustainable level of use. The need for protection and conservation of natural forests led to a substantial review of the Bank's policies and to the formulation of a new forest policy which is contained in the pages that follow. This policy paper identifies two key challenges: to slow the alarmingly rapid rates of deforestation, especially (although not exclusively) in the tropical moist forests, and to ensure adequate planting of new trees to meet the rapidly growing demand for fuelwood in developing countries. The Bank intends to move vigorously to promote the conservation of natural forests and the sustainable development of managed forestry resources. Our objectives include support for international efforts and legal instruments to promote forest conservation; assistance to governments in policy reform and institutional strengthening, creation of additional forest resources; and support for initiatives that preserve intact forest areas. Our forest policy review evoked widespread interest within and outside the Bank. We have learned a great deal from the experience of our borrowing governments. In addition, we invited the views of academics, researchers, concerned individuals, and representatives of nongovernmental organizations. These consultations have led to substantial changes in the Bank policy and approach toward meeting environmental and developmental concerns. The Bank is only one of many players in the world with respect to the environment. Big challenges lie ahead in moving collectively toward meeting the objectives outlined in The Forest Sector. I trust that this paper will contribute to a better understanding of the issues and to the building of a consensus for concerted global action. Barber B. Conable This report was prepared by Gershon Feder, Mikael Grut, Peter Hazell, Michael Jacobson, William Magrath, Raymond Rowe, Narendra Sharma, and Andrew Steer. Significant contributions were also made by Shawki Barghouti, Michael Cernea, John Dixon, Richard Meyers, and John Spears. The work was carried out under the direction of Michel Petit and the general guidance of V. Rajagopalan. The paper benefited enormously from consultations with others in and outside the Bank who are simply too numerous to list. Abbreviations CGIAR Consultative Group on International Agricultural
Research Since 1978, when the World Bank published its policy paper on forestry, the world's understanding of and concern about the forest sector of the developing world has increased substantially. It has become dear that forests and woodlands play an even more important economic and ecological role than had earlier been recognized. In particular, the importance of tropical moist forests in protecting biological diversity has become more fully appreciated, as has their role in the carbon cycle and in global climatic change. The Nature of the Challenge A critical feature of forestry activities that distinguishes them from most other primary activities is that private costs and benefits usually differ markedly from national and global costs and benefits. The existence of these externalities implies that the free interplay of market forces will not bring about socially desired outcomes. Some of these externalities are costs borne by the countries in which the forests are located-for example, soil erosion, desertification, degradation of watersheds, and threats to the cultural survival of indigenous people who traditionally live in or near the forests. Others, however, are costs that affect the ,international community (for example, loss of biological diversity and induced changes in the global climate). Because the people who cut or plant trees typically have no incentive for considering the environmental and social consequences of their actions, externalities inexorably lead to excessive deforestation and insufficient planting of new trees. Of the various challenges that arise from this divergence between private and social interests, two stand out as deserving special attention. The first is to prevent excessive rates of deforestation, especially in the tropical moist forests. The second is to ensure adequate planting of new trees and the management of existing tree resources to meet the rapidly growing demand for the products and services that forests and trees can provide for the rural poor in developing countries. Deforestation and Forest Degradation Forests in developing countries have declined by nearly half in this century, and the rate of deforestation is still increasing. Recent studies using remote-sensing data and extensive ground surveys have found that between 17 million and 20 million hectares of forest-mainly tropical moist forest-are being lost each year. In addition to the deforestation going on in the tropics, forest degradation, principally as a result of acid precipitation, is affecting large areas of temperate forests, especially in Eastern Europe. The loss of tropical moist forest is especially worrying because these forests have a much greater influence on the global climate than do the other main types of forest-tropical dry forests and temperate forests -- and because they are a major repository of biological diversity. Moreover, they are the most fragile forests in that their soils are easily degraded once deforested, and experience to date indicates that even if reforestation or selective felling is attempted, the original ecosystems cannot be fully renewed or sustained. Deforestation, including the cutting of woodlands and scattered trees, occurs because somebody finds it profitable. The individuals, communities, and corporations responsible for deforestation, and their primary motives for cutting trees, vary widely across regions and forest types. Although fuelwood gathering accounts for the largest share (80 percent) of wood use in developing countries worldwide, its impact is concentrated in the tropical dry forests and in non-forest wooded areas. The tropical moist forests are being lost primarily to agricultural settlement (about 60 percent of the area cleared each year), with the balance split roughly between logging and other purposes such as roads, urbanization, and fuelwood. Deforestation seldom involves only one type of decisiomaker, and the actions of one can lead to subsequent interventions by others. Incentives to cut trees have grown in recent years for four reasons:
Deforestation can contribute to short-term economic growth and to the alleviation of poverty,, but often it does so at the expense of other environmental and social goals. Some of the costs are incurred within the country and some are borne by the international community. If these costs were more fully reflected in the incentives facing those who cut trees, there would be significantly less deforestation today. Adding to the incentive to cut trees are weak property rights in many forest and wooded areas; high private discount rates (the rate at which individuals discount future costs and benefits), especially among poor people who encroach on the forests; inappropriate government policies that make conversion of forestland artificially profitable; and timber concession arrangements that unnecessarily encourage the "mining" of trees. The Growing Demand for Forests and Trees for Basic Needs The second major challenge is to meet the rapidly growing demand for firewood, fodder, and building poles and for the environmental services of forests and trees. Most of the world's future need for wood for industrial purposes can continue to be met by trees grown on a sustainable basis in the temperate forests. Understanding of the contributions that open woodlands, forest fallows, shrubs, and farm trees make to sustainable agriculture and to economic growth in rural areas greatly improved during the 1980s. Much has been learned about the potential, for example, of leguminous tree species that fix nitrogen and so improve soil fertility. Planting trees on farms and establishing shelterbelts can significantly increase crop and livestock yields, in addition to protecting soil and water resources. Forest-derived edible plants, fruits, insects, and wildlife contribute significantly to the nutritional requirements of rural populations. The sale of poles and other forest products is a significant source of cash income for many rural households. Indirectly, such income contributes to improved food security. In many developing countries small-scale wood-using industries in rural areas are among the second or third most important activities in terms of employment potential and added value. In some of the most heavily populated countries the availability of fuelwood is a matter for concern; demand is growing rapidly, and supplies are increasingly obtained by mining the available stock of natural trees. Fuelwood gathering contributes to land degradation, especially in agricultural regions with limited wooded areas, and to loss of forest near densely populated areas. These effects are most severe in tropical dry forests and in non-forest areas. Growing awareness of the importance of trees in rural areas was an important factor in the World Bank's 1978 decision to give greater support to people-oriented forestry. Many of the same social and economic-dc forces that induce excessive deforestation also reduce the incentive to plant trees, either for fuelwood or for timber. As with any crop, a farmer's willingness to plant trees win depend on the crop's profitability. Planting is discouraged when the price of wood is depressed by open access to natural forests and by poorly defined property rights to forests. There also has been relatively little progress in developing higher-yielding, faster-growing trees for farm rather than plantation conditions, and the high discount rates of poor farmers make it particularly unattractive for them to tie up scarce capital for the relatively long payoff period involved in growing trees. The establishment of large-scale industrial plantations is similarly restricted by low profitability. Strategies for Forest Development The challenges faced by the world community in addressing forestry issues are enormous, and progress in arresting the current trends requires concerted efforts by governments and many international organizations, of which the Bank is only one. Government policies and programs need to be directed toward changing the incentive and institutional structures that are leading to excessive deforestation and that discourage rural people from planting trees and practicing good forest management. In addition, global externalities, particularly those related to the preservation of tropical moist forests, need to be internalized into local actions through international cooperation and assistance. Protecting the forests A fourfold strategy is required to check deforestation. POLICIES TO ALLEVIATE POVERTY. Policies to protect the forests or to slow deforestation seem doomed when pitted against a growing tide of poor people who need land to survive. General economic development, including increased diversification of the national economy, reductions in inequality and poverty, and slower population growth, are necessary for a long-term solution to the forestry problem. But in the interim, priority must be given to increasing agricultural productivity in poor, densely populated areas, especially those adjacent to forested areas and those from which most forest encroachers originate, and to expanding non-farm employment opportunities in these target areas. In the long run, even if economic development takes place, specific policies will still be needed to deal with problems of externalities. FOREST ZONING AND REGULATION. Part of the forest will have to be protected through specific legislative and regulatory measures, especially in tropical moist forests. Decisions on zoning and regulation should be based on an understanding of what is expected of the land and a realistic assessment of what is technically feasible in light of local capacities and incentive structures. Given the likely limitations on resources and the desirability of increasing the size and number of protected areas, countries must develop workable priority criteria for setting aside specific forest areas that will be protected from any intrusion and for managing areas designated for different uses. This involves undertaking appropriate surveys of natural resources in the forested areas and determining which areas are of special value for their ecological diversity, which are essential for protecting indigenous forest dwellers, and which protect sites that are environmentally fragile, such as hillsides and watersheds. Available resources for protective purposes can then be focused on these priority areas. Commercial logging can be contained through a strict policy that limits the extent of timber concessions and allows them only in areas that can be put under sustained timber management systems. Given the practical difficulties of achieving sustained management in tropical forests and the related environmental costs, governments should be cautious in allowing such activities and should give priority to the preservation of intact tropical forests. In all types of forests, high priority should also be given to reforesting degraded areas, and new timber concessions could be tied to the successful replanting of degraded lands. Because these areas may have become the source of livelihood for some communities I the interests of these people need to be considered when reforestation is undertaken. CORRECTIVE PRIVATE INCENTIVES . Enforcement of zoning and other regulations is likely to be ineffective unless private incentives are also changed. In many instances government policies systematically under-price forest concessions. This, together with governmental reluctance to offer long-term concessions, increases the incentive for quick "mining" of trees. Timber concession systems can be modified in several ways. Stumpage fees or area concession rents can be increased to reflect the real value of the trees. Felling leases or licenses and logging rights can be allocated by competitive bidding (through auction or tender) that is open to the private sector, nongovernmental organizations (NGOs), and local communities and is adjusted as necessary to take account of externalities. And concessions can be made long term and, with appropriate controls, transferable. Incentives for agricultural settlers have sometimes been distorted by policies that actually encourage deforestation (for example, subsidies for livestock ranching in the Amazon and the tying of land titling to land clearance). AR such distortions should be removed. Customary land rights of forest dwellers need to be formalized and respected, to protect both forest dwellers and resources against excessive agricultural encroachment or exploitation by outside interests. PUBLIC INVESTMENTS. Access to forests needs to be carefully controlled. Many infrastructural projects, such as roads and reservoirs, inadvertently open up forestlands to settlers. Public investments need to be preceded by much more careful environmental assessments and, where possible, should be directed toward preservation. Substantial expenditures are required to strengthen forestry institutions so that they can better protect designated forest areas; to develop improved systems of silviculture, forest management, and policymaking; to conduct forest research and development; and to carry out afforestation and replanting, especially on degraded land. Policies to meet basic needs for forest products and services The achievement of a more sustainable balance between supply and demand requires actions to reduce the demand for fuelwood and other local wood uses and to increase supply by encouraging the planting and husbandry of trees. REDUCING DEMAND. As wood becomes scarcer, more widespread and more efficient markets are likely to develop, and price increases will become more important in reducing the growth in demand. Because of environmental externalities and inadequate property rights, however, market prices will generally not reflect the full social value of wood. Hence, direct interventions to encourage conservation and the use of more efficient technologies are necessary. These should include research and training to improve the fuel efficiency of household stoves, brick and charcoal kilns, and other wood-burning equipment. In addition, more efficient markets for alternative fuels such as kerosene need to be developed. Investment subsidies may also be appropriate in the initial stages to encourage individuals to purchase the necessary equipment for converting from wood-burning technologies, particularly when new and innovative technologies (such as solar stoves) are involved. IN SING SUPPLY. Most wood users in developing countries live in rural areas, and the best way of satisfying their demand for wood and for the services that trees provide is to mobilize their own resources for tree planting and for better management of existing trees. Supply of rural wood through large-scale commercial operations is not likely to be viable on the scale required, nor is continuation of widespread wood gathering in forests sustainable or environmentally acceptable. It is increasingly recognized that wood production issues should be dealt with at the farm level. Forestry departments need to be reoriented in light of this recognition, and the special capabilities of nongovernmental organizations concerned with the alleviation of poverty and with environmental conservation should be mobilized to help users organize themselves for tree planting. Achieving the level of planting and management required will be possible only if economic incentives and the abilities of farmers are enhanced. Promoting awareness of the role of trees in retaining soil fertility and averting degradation will also help reduce tree cutting and foster better management. This Will require extension and training services, a ready supply of tree seedlings and other inputs, and, in some cases, improvements in rights to land and trees. Past attempts to increase tree planting for fuelwood and other rural uses were based on community woodlots established on lands managed under common-property tenure regimes. They often failed because local communities were inadequately organized for collective action and were unable to reward adequately those who provided labor. Future efforts need to be focused on smaller and more tightly defined groups of local actors, including the poor, who have a common interest in planting and raising trees. Recent programs based on family farm forestry and group farm forestry have shown promise. Strengthening forestry institutions Governments are increasingly recognizing that the scale of demands for conflict resolution and mediation now placed on forestry agencies was never adequately anticipated. Governments must recognize and act on the critical need to reorganize forestry institutions and introduce greater accountability and higher performance standards into the public sector. Creative use of private sector contractors and consultants as auditors and monitors and more rigorous inter-sectoral oversight by agriculture, environment, planning, finance, and other relevant ministries are effective devices for improving the performance of government forestry agencies. Commitment at the highest levels of government is necessary for introducing these reforms. The role of the international community The international community must support developing countries in achieving their own national goals for the management of forest resources and must help find ways of better incorporating the value of global externalities from forests into incentive structures for local action. International legal instants, being discussed currently in various forums, demonstrate the wide interest in these objectives for international action. The adoption of such instruments could facilitate the transfer of resources to promote the conservation of tropical forests. There are three main areas in which the international community can play an important role. TECHNICAL ASSISTANCE, RESEARCH, AND INSTITUTION BUILDING. Developing countries need assistance in (a) undertaking the detailed resource inventories that are essential for establishing priority forest protection areas and demarcating areas for sustainable commercial forestry or agriculture, (b) developing appropriate criteria for forest use plans, (c) providing training and specialized skills for forest management, and (d) strengthening local institutions in their forest planning, protection, and management functions. International mechanisms for providing this assistance need to be strengthened by, among other steps, revising the Tropical Forestry Action Plan and reorienting the Consultative Group on International Agricultural Research (CGIAR) toward greater emphasis on sustainable forestry. FINANCING. Special mechanisms may be needed to finance policy reform and investment. From a financing perspective,. measures to correct policy and market failures fall into three categories:
The availability of financial support from international agencies such as the World Bank can reinforce the benefits of such policy adjustments. Concessional financing for supporting initiatives that have global benefits (for example, debt-for-nature swaps) can also be helpful. Such funds, however, should be in addition to existing levels of official development assistance. The recently established Global Environment Facility represents a useful mechanism for testing innovative financing approaches, and the experience gained in its operation may lead to follow-up initiatives. INTERNATIONAL TRADE REFORMS. Only a very small share of the wood that is cut from primary forests each year enters international trade, but the share is much larger for high-value and rare species. Experience with other products suggests that consumers will modify their behavior substantially if they are given information on the ecological sustainability of the production process. For this reason, the international community should encourage organizations such as the International Tropical Timber Organization (ITTO) to develop programs of green labeling to permit preferential market treatment for wood grown under sustainable conditions. In addition to lowering the overall demand for wood produced by unsustainable practices, such a scheme would remove the disincentive for adopting improved management practices that might otherwise diminish competitiveness. A more contentious issue is that of trade taxes on tropical timber. Such measures may be desirable to the extent that (a) taxes (whether import or export) could be targeted to those species that are culled exclusively from primary forests, (b) taxes would apply equally to processed wood and to logs, and (c) revenues raised would be returned to developing countries to be used for forest protection activities. if these conditions are not fulfilled, however, trade taxes are likely to create additional distortions by discouraging new planting and plantation agriculture and by protecting inefficient domestic wood-processing industries, thus placing an unfair burden on countries heavily dependent on timber exports. More research is needed on these issues before such taxes should be supported. The Role of the World Bank Since its inception, the Bank has financed ninety-four projects in the forest sector, with total commitments of nearly $2.5 billion. Lending ha.; grown rapidly since the publication in 1978 of the policy paper on forestry, and there has been greater emphasis on social forestry and, lately, on environmental issues. Bank lending for other projects, particularly tree crops, agricultural settlements, and infrastructure, has sometimes had an undesirable impact on forest resources. According to the recent review of this experience by the Operations Evaluations Department (OED) of the World Bank, the Bank needs to strengthen its forest sector work and to link it more strongly to other country economic and sector work, to improve the technical performance of projects, and to design social forestry projects with a better understanding of local social dynamics and the motivations of different social actors in tree planting and management. Moreover, because the scope of forestry problems faced by developing countries has char dramatically and understanding of their causes and implications improved, a reformulation of the Bank's forest policy is required. Principles of future involvement The World Bank's involvement in the forest sector will be designed component of a multi-sectoral approach, in line with the lessons learned from the OED review. To relieve the fundamental pressures on the forest over the longer term, the Bank, through its normal mechanisms, will continue to support population policies, agricultural intensification, the alleviation of poverty, and the creation of employment opportunities in other sectors. The Bank will give closer attention to infrastructural other land-using projects and will minimize their potentially negative effects. In its efforts directly related to the forest sector-aid coordination, country dialogue, sector work, and lending -- the Bank will focus on the following areas. INTERNATIONAL COOPERATION. The Bank supports the adoption of international legal instruments conducive to sustainable forest development, and conservation. The Bank will encourage international initiatives for the transfer of concessional resources to assist projects that protect globally important biological diversity. It will continue to explore the feasibility of using global transfers to protect forests for their carbon sequestration. POLICY REFORM AND INSTITUTION STRENGTHENING. The Bank will assist governments to identify and rectify market and policy failures that encourage deforestation and inhibit sustainable land use. The Bank will assist governments in completing resource inventories and establishing systems for continuous resource assessment. Efforts will be made to improve the technical performance of government forestry institutions. Pilot projects designed to gain insights into the merits of alternative approaches will be undertaken. RESOURCE EXPANSION AND INTENSIFICATION. The Bank will increase its efforts to finance the creation of additional forest resources and the expansion and intensification of management of areas suitable for sustainable production of forest products. In addition, the Bank win promote a continued reorientation of forestry toward participation by rural people in tree planting and conservation of indigenous woodlands. In the past, social forestry projects have had mixed results, primarily because they relied on community groups that were not adequately motivated and organized to carry out collective actions. Greater emphasis will be given to farm family and farm group forestry, including women's groups. Where the scope for plantations outside areas of intact forests is sound from a social, environmental, and economic perspective, the Bank will assist in the establishment of plantations to reduce pressure on the existing forest resource base and to ease the transition to sustained-yield forest management. The primary target areas for new plantings will be potentially productive degraded forests, wastelands, forest fallows, shrublands, and abandoned farmlands. The interests of communities that depend on such areas will have to be considered in setting target areas. PRESERVATION OF INTACT FOREST AREAS. The Bank will support initiatives to expand forest areas designated as parks and reserves and to institute effective management and enforcement in new and existing areas. In tropical moist forests the Bank will adopt, and will encourage governments to adopt, a precautionary policy toward utilization. This policy is motivated by the uncertainties regarding full valuation of environmental services, the inadequacy of knowledge concerning sustainable management systems, and the irreversibilities associated with the loss of tropical moist forests. Specifically, the Bank Group will not under any circumstances finance commercial logging in primary tropical moist forests. Financing of infrastructural projects (such as roads, dams, and mines) that may lead to loss of tropical moist forests will be subject to rigorous environmental assessment as mandated by the Bank for projects that raise diverse and significant environmental and resettlement issues. A careful assessment of the social issues involved will also be required. The Bank will continue to place more emphasis on support to programs that involve institutional development, forest protection measures, and income-generating projects not dependent on forest resources and that have as their primary objective the preservation of tropical moist forests. In implementing this strategy, the Bank will pay special attention to the twenty countries (accounting for 85 percent of tropical moist forests) whose forests are seriously threatened by encroachment and destruction. In these countries special efforts will be made to support economic development in poor, densely populated areas around the forests or in the origin areas of forest encroachers. The Bank will also support the amelioration of forest damage caused by acid rain through projects for rehabilitation, reforestation, and abatement of industrial pollution. Conditions for Bank involvement In all countries, and for all types of forests, lending operations in the forestry sector will distinguish between projects that are clearly environmentally protective (such as reforestation to protect watersheds) or which are oriented toward small farmers (for example, farm and social forestry) and all other forestry operations (for example, commercial plantations). The first two types will be considered on the basis of their own social, economic, and environmental merits. Other lending operations in the forest sector will be conditional on governmental commitment to sustainable and conservation-oriented forestry. Such a commitment entails:
If these conditions are present, projects will be judged on their individual merits. If they are not present, Bank support in the forest sector will be restricted to operations that directly help countries to achieve them. Such operations will be appropriately limited in scope, sequenced, and specifically targeted at helping countries meet the stated conditions. Since the publication in 1978 of the Bank's policy paper Forestry, there has been a profound increase in the world's understanding of and concern about the forest sector of the developing world. All the problems and opportunities that drove the current policy are still important today. Fuelwood scarcities continue to impose terrible burdens on women and children, opportunities for the environmentally sound industrial utilization of a valuable form of capital are still being missed, and, above all, deforestation continues and has even accelerated in many countries. As our understanding has deepened over the intervening years, it has become clear that forests and woodlands play an even more important economic and ecological role than had been recognized earlier. The importance of non-wood forest products in providing employment, incomes, and sustenance to forest dwellers and the rural poor is now more fully appreciated, as is the importance of tropical forests in protecting biological diversity. The role that forest ecosystems play in the world's carbon cycle and climatic conditions was scarcely recognized in 1978. The growing awareness of the value of forests makes it all the more urgent to address the continuing high rates of deforestation. Negative ecological and social consequences can accompany deforestation in any type of forest, but loss of the tropical moist forests is uniquely costly because of their extraordinary richness of biological diversity, their apparent significance in regional and global climatic patterns, and the vulnerability of their soils under other forms of land use. Although scientific knowledge in this area is imprecise, it is clear that tropical moist forests are qualitatively different from other forest types because of the magnitude and the irreversibility-in terms of natural habitats and ecological systems-of the losses accompanying deforestation. For these reasons the problems of the tropical moist forests are given a priority, although by no means an exclusive, emphasis in this paper. Parallel with improved understanding of the ecological aspects of forests has been deepened understanding of human behavior with regard to trees-and of why this behavior is often not in accord with national and global interests. A wide range of analyses and policy research over the past decade has shed light on the determinants of the effective demand for land and wood (the cause of deforestation), the importance of tenure arrangements, and the links between government policies and the forest sector. The use of government policies to influence behavior in the sector will be a principal theme of this paper. The paper is organized as follows. Chapter 1 describes the two most important challenges in the sector-excessive deforestation and inadequate afforestation and reforestation-and highlights the extent and the causes of the problems. Drawing on the analysis of the causes of excessive deforestation and inadequate planting, chapter 2 discusses policies and programs directed toward overcoming those underlying causes. Finally, chapter 3 discusses the role of the World Bank in supporting governments' efforts to implement these policies and programs. 1. Challenges for the Forest Sector Forests, which cover more than one-fourth of the world's land area, are the most widespread terrestrial ecosystem. They are also an important feature of the environment and economy of the developing world. Nearly 500 million people, most of them poor, live in or near forests and depend on them for food, fuel, fodder, timber, and income. Worldwide consumption of wood totals nearly 3.4 billion cubic meters a year, of which about 50 percent is consumed as fuelwood and building poles in developing countries. Figure 1 summarizes the area, density, and types of forest in different regions of the world. A more detailed description of the importance of forests and trees in natural and social systems is found in appendix A. A critical feature of forestry activities that distinguishes them from most other primary activities is that private costs and benefits usually diverge markedly from national and global costs and benefits. The existence of these externalities implies that the free interplay of market forces will not bring about socially desired outcomes. These failures have become more acute, and world opinion has become increasingly aware of them in the past decade. They also lead to varied and sometimes conflicting challenges for the sector. Of these challenges, two stand out.
Figure 1. Typology of World Forests
The second challenge is especially severe in densely populated areas, mostly outside the tropical moist forest zone. This chapter briefly reviews the extent of these challenges and the causes of the problems. The Extent of the Problem Standing forests can be thought of as providing five principal sets of services:
Cutting down trees may or may not bring about the loss of these services. If the land is converted to an alternative use, such as pasture, food crops, or urban development, most of these forest services will be lost. If trees are replanted after cutting, or if cutting is highly selective, some or most of these services may remain, depending on the resilience of the forest type. Forest typologies Different forest types provide different combinations of the five services and have different potentials for tolerating and supporting human intervention and utilization. Although there is enormous variation in forest types, for analytical purposes four types can be distinguished: tropical dry forests, tropical moist forests, temperate forests, and degraded forestlands (which overlap the other types). There is considerable variation within all four types, and all are capable of sustainably providing flows of some combination of goods and services. For example, all serve as carbon sinks, and all perform highly site- and time-dependent hydrologic functions. The outputs of a particular forest depend greatly on management and silvicultural intensity, on natural events such as rainfall, and on the level and type of human interference. Tropical moist forests account for 1.5 billion hectares and are the densest terrestrial ecosystems, containing the greatest biomass of any forest type. Nearly two-thirds of tropical moist forests are in Latin America, mainly in Amazonia. The remainder are split between Africa and Asia (figure 1). Approximately 1 billion hectares of tropical moist forest are considered to be intact or primary forest in which human activity has had little impact on the ecosystem. In the remaining 500 million hectares human interference, including logging and agriculture, has resulted in damage that ranges from slight to severe. Tropical moist forests provide all five of the services listed above, but they are especially valued as repositories of biodiversity. Although tropical moist forests cover only 7 percent of the earth's land area, they contain about one-half of the 1.9 million named species in the entire world biota, as well as innumerable species as yet unnamed. They fill a relatively small but significant niche as a source of industrial wood. Although only about 15 percent of total world consumption of industrial wood originates in tropical moist forests, the special characteristics of tropical woods make them especially valuable. The capability of land under tropical moist forests to support alternative land uses is highly variable but is generally poor. Experience indicates that even when reforestation or selective felling of trees is attempted, most of the services of these forests are lost. Tropical dry forests, 75 percent of which are in Africa, total 1.5 billion hectares, about half of the total tropical forest area. They are mostly open woodlands and forest fallows and contain far less biomass per unit area than tropical moist forests. Their principal economic uses are for livestock grazing and fuelwood collection by rural people. Their biodiversity is small in comparison with that of tropical moist forests, but many unique species are adapted to the harsher conditions of the ecological zones where tropical dry forests are found. Temperate forests, three-quarters of which are in developed countries, are the world's primary source of industrial wood. In total, they cover about 1.6 billion hectares, or one-third of the world's forest area. In the developing world, temperate forests cover large areas of China, southern Latin America, and the Mediterranean region. The biodiversity of temperate forests is considerably less than that of tropical forests. Temperate forests are well suited to industrial utilization; the relatively small number of species present in a typical temperate forest makes it an easily managed source of raw material. Much of today's agricultural land in developed countries was once under temperate forest. Degraded forestlands, along with open woodlands, forest fallows, and on-farm trees, account for most of the tropical forest area. Overexploitation (which in the case of tropical forests could result from even light intervention) can cause severe forest degradation, including soil erosion, weed infestation that eventually ends in conversion to grassland, increased susceptibility to fire and insect attack, and, in some areas, desertification. Of 3 billion hectares under tropical forests and woody vegetation, 2 billion hectares (two-thirds of the total), including essentially all of the tropical dry forest and approximately 550 million hectares of secondary and fallow tropical moist forest, fall into this category. These areas are utilized extensively by millions of small farmers and local communities which are highly dependent on patches of woodland, forest fallow vegetation, natural shrubs, and planted on-farm trees for their fuelwood, fruit, fodder, building poles, and other basic needs. Depending on the inherent quality of the site, market conditions, and technology, degraded lands may be suitable for restoration as forest plantations or for conversion to other uses. Deforestation and degradation Developed and developing countries differ sharply in the status of their forests. Following an earlier era of significant deforestation, the forest area of many developed countries has stabilized and in some cases has even increased during this century (figure 2). In contrast, forests in developing countries have declined by nearly half in this century, and the rate of loss is still increasing. Estimates from the early 1980s concluded that 11.4 million hectares of tropical forest (moist and dry) were being cleared annually for other uses. The largest annual losses were occurring in Latin America (5.6 million hectares). The corresponding figures for Africa and Asia were 3.7 million and 2.0 million hectares, respectively. More recent studies using remote sensing data and extensive ground surveys have found that the rate of deforestation is currently about 17 million to 20 million hectares a year. Just as deforestation accompanied the economic development of many of today's developed countries, so deforestation cannot be slowed significantly in the developing countries without some sacrifice of short-term economic growth. Deforestation allows alternative use of forested land for agriculture, urbanization, and infrastructural investments such as roads and dams, as well as for timber. Such short-term economic gains may involve serious costs in terms of environmental and social goals, particularly where alternative uses of forest land are not sustainable. This tradeoff between narrow economic pursuits and preservation of intact forests lies at the heart of the challenge of preserving the world's forests. To complicate matters further, part of the environmental costs are borne by the global community at large and not just by the countries that own the forests. Figure 2. Deforestation and Reforestation: Annual Average Rates in the 1980s
n.a. : Not applicable. Although much of the current environmental concern relates to the humid tropics, temperate forests, particularly in Eastern Europe, have also been subjected to environmental stress caused by a combination of acid rain and past silvicultural practices-for example, the plaiting of close-espacement conifer monocultures on inappropriate sites. In the and tropics desertification has been widely attributed to deforestation of tropical dry forests. In fact, the causes of dryland deterioration are quite complex, involving a combination of increasing human and livestock pressures and erosion of traditional systems of woodland and range management, often exacerbated by drought. Nevertheless, the badly degraded woodlands of the savannas do play a key role in soil conservation and in providing essential grazing fodder, fuelwood, and many other basic needs. Tropical moist forests present special problems with regard to deforestation. First, if tropical moist forests are converted to other land uses, the costs in loss of biodiversity and other forest services may be extremely high and irreversible. Second, loss of tropical moist forests may have a serious effect on regional and global climatic patterns. Tropical moist forests play a special role in influencing the distribution of moisture in the atmosphere and hence affect regional, and possibly global, rainfall patterns. Because of their high per unit density of biomass, tropical moist forests account for 55 percent of the world's organic carbon, and their clearance by burning contributes significantly to atmospheric loadings of carbon dioxide, accelerating the buildup of greenhouse gases. This source of pollution, however, is still much smaller than the 5 billion to 6 billion metric tons a year attributable to the consumption of fossil fuel. The growing demand for forests and trees for basic needs The second major challenge is to meet the growing demand for fuelwood, fodder, and building poles and for the environmental services that forests and scattered trees provide to poor rural populations. Global consumption of wood is split almost evenly between industrial use (sawnwood, panels, and pulp and paper) and use as a source of energy (mostly domestic firewood in developing countries). Nearly 80 percent of industrial wood is harvested sustainably from temperate forests, and approximately 15 percent is essentially mined from the tropical moist forest. The demand for industrial wood in both developed and developing countries will continue to increase. Since, however, supplies from temperate forests are reasonably elastic and there is considerable scope for substituting temperate for tropical wood, no serious supply problems for industrial wood are foreseen. Understanding of the contributions that open woodlands, forest fallows, shrubs, and farm trees make to sustainable agriculture and to economic growth in rural areas greatly improved during the 1980s. Much has been learned about the potential, for example, of leguminous tree species that fix nitrogen and so improve soil fertility. Planting trees on farms and establishing shelterbelts can significantly increase crop and livestock yields, in addition to protecting soil and water resources. Forest-derived edible plants, fruits, insects, and wildlife contribute significantly to the requirements of rural populations and to wildlife nutrition. The sale of poles and other forest products is a significant source of cash income for many rural households, and such income contributes indirectly to improved food security. In many developing countries small-scale wood-using industries in rural areas are among the second or third most important activities in terms of employment potential and added value. In some of the most heavily populated countries there is concern regarding the availability of fuelwood; demand is growing rapidly, while supplies are increasingly obtained by depleting the available natural stock of trees. Nearly 3 billion people depend on wood as their main or only source of household energy, and it is especially important to rural households and to the poor. As tree stocks diminish, women and children spend increasing amounts of time gathering firewood from more distant sources and have less time to spend in other vital activities. Fuelwood gathering contributes to land degradation, especially in agricultural regions with limited wooded areas. It also contributes to deforestation in forests adjacent to densely populated areas, mostly tropical dry forests. Growing awareness of the importance of trees in rural areas was an important factor in the World Bank's 1978 decision to give greater support to people-oriented forestry. The Causes of Deforestation and Degradation Policies and programs in the forest sector need to be targeted to the underlying causes of the problems to be addressed. A strategy for countering excessive deforestation must be based on the answers to three questions: Why do individuals, companies, and communities cut down trees? Why and how do the private interests that drive deforestation differ from national interests? Why and how do national interests differ from global interests? This section discusses these questions. Private incentives for deforestation Deforestation, including the cutting of forests and scattered trees, occurs because somebody finds it profitable. The types of agents (individuals, communities, and corporations) responsible for deforestation and forest degradation vary widely across regions and forest types, as do their primary motives for cutting trees. Although fuelwood gathering accounts for the largest share of wood use in developing countries, it is concentrated in densely populated areas, tropical dry forests, and non-forest wooded areas. Tropical moist forests are being lost primarily to agricultural settlement (about 60 percent of the area cleared each year), with the balance split roughly between logging and other uses (roads, urbanization, fuelwood, and so on). In reality, however, as described in box 1, deforestation seldom involves only one actor or decisionmaker. In much of the Amazon region, the main actors causing deforestation have been livestock ranchers, whose primary objective has been to convert the forest to pasture. In many of the tropical moist forests of East Asia, logging companies are the primary tree cutters, and often their interests are short term and do not extend to replanting harvested areas. In many land-scarce countries (for example, in Central America, parts of Central and East Africa, and South Asia) small-scale agricultural settlers are the prime cause of change, often encroaching illegally onto government-owned forestland. Fuelwood gatherers are another important group of actors; their impact is especially severe in the tropical dry forests of Africa and South Asia. Box 1. The Dynamics of Deforestation The conversion of forest to other land uses or to wasteland takes a variety of forms and seldom involves only one actor or decisionmaker. Common forms of deforestation include deliberate clearance and conversion, degradation and subsequent clearance following logging, and gradual conversion as a result of the shortening of fallow cycles in shifting cultivation. Direct conversion Mechanical or manual techniques are sometimes used to remove completely the existing forest vegetation and to prepare the site for a subsequent use. Both public and private efforts to identify and utilize forestland for alternative uses have historically been significant contributors to this form of deforestation. The success of conversion in establishing a new and sustainable land use varies widely. Much of the world's most productive agricultural land was once under forest cover, and more suitable land doubtless remains for future conversion. Serious n-mistakes have been made, however, in attempting to convert forestland to other uses. Forest soils, despite their ability to support vibrant forest ecosystems, are often extremely poor in nutrients and when cleared may be subject to excessive erosion and other forms of soil degradation. The reasons for the conversion of forests to inappropriate uses include policies that excessively subsidize alternative uses, efforts by project planners to meet project targets, and ignorance of the true potential of the land. A special case of deliberate conversion is the replacement of natural forests with plantations of forest trees. This, typically, is part of planned development of timber-based industries that rely on a steady stream of particular combinations of raw material. (Pulp and paper operations, for example, require a particular balance of long- and short-fiber feedstocks.) Logging Logging of natural forest, by itself, seldom brings about total deforestation and conversion to other uses. In tropical forests only a relatively small proportion of the standing volume consists of merchantable trees worth the costs of felling and extraction. This is especially true for veneer and sawlog operations but also holds for lower-value products such as pulp logs. Only when forests are close to towns and cities is conversion of logging residue to charcoal economically viable. Recommended systems of tropical forest logging also involve limits on the removal of small-diameter trees as a means of ensuring regrowth for subsequent harvest. In practice, these limits are often ignored, and smaller trees are felled. Clear felling is not usually practiced in moist tropical forest logging. Even so, the residual stand suffers significant damage. Construction of logging roads and trails, clearance for yarding, and other operations entail considerable additional felling and soil disturbance. These intrusions and the influx of laborers and other people lead to subsequent damage to the forest, as partially disturbed sites can be converted much more easily to agriculture than can natural forest. Further damage results when loggers, unable to control access, accelerate their reentry to previously logged sites. Girth diameter limits are respected even less in these circumstances, and the site is made even more vulnerable to intrusion by agriculturalists. The potential for further damage by fire is increased by changes in moisture regimes and by ranchers' attempts to combat the invasion of low-quality grasses by burning pastures. Shortened fallow cycles Shifting agriculture is now clearly understood to be a sustainable system of food production, provided that the land base is large enough to allow regeneration of soil fertility. As population pressures increase and fallow periods become shorter, however, the ability of forest cover to reestablish itself is endangered. Increased farming pressure on the forest creates the same conditions as logging, and eventually the integrity and viability of the forest ecosystem are lost. In the absence of strong systems of control, demand for
fuelwood and other forest products by rural people and for charcoal by urban dwellers can
also lead to deforestation. This problem is especially severe in tropical dry forests. Incentives to cut trees have increased in recent years for four basic reasons. These are interrelated and sometimes mutually reinforcing, although not all of them are operative everywhere.
Why private interests differ from national interests If deforestation and tree planting are left to the market, will countries arrive at socially optimal levels of forests and woodlands? Win the right types of land be cleared? Will that land be put to its best use? There are several reasons why these questions must generally be answered in the negative in developing countries and why the problem is worsening over time. The problems cut across forest types and sometimes appear in combination, heightening the need for multisectoral analysis and integrated policy reform. First, important externalities lead to a divergence between private incentives to cut or plant trees and the real economic costs and benefits of these actions for the nation. These externalities arise because some forest products, particularly forests' environmental protective functions and role in sustaining indigenous peoples, are not valued in the marketplace. For example, individuals who cut trees do not consider the economic costs that others may incur as a result of land degradation, soil erosion, or siltation of rivers and dams. Again, forest loss can threaten the cultural survival of indigenous groups who have traditionally resided in or near forests, yet these people have little influence on the activities of intruders. Because the values of externalities are not incorporated in private decisions, inevitably too many trees are cut. Second, individuals who have access to forests and forestlands often have insufficient property rights to take a long-term interest in the land or the trees. Inadequate property rights are found in areas encroached on by illegal squatters, in common-property and open-access areas, and when timber concessions to logging companies have too short a duration. Third, government policies, which should be directed at moving private behavior into conformity with social interest, sometimes do the opposite. Policies such as those that subsidize tree cutting, underprice concessions to logging companies, or link land-titling procedures to land clearing effectively drive a wedge between private behavior and the common good. Macroeconomic policies can affect the perceived benefit of keeping trees on land. The consequences of these policies are, however, complex, and their net impact needs to be evaluated case by case. Fourth, the private discount rate-the rate at which future costs and benefits are discounted-may be too high. There are two elements here. Poor people, who, through encroachment, are responsible for a significant share of the annual loss of forests, have higher discount rates than society as a whole because of the urgency of their current needs. And today’s population, on average, may undervalue the longer-term benefits of investments in forests, which would only accrue to future generations. Over time, increasing population and development pressures can exacerbate some of the factors that lead to a divergence between private and social interests. For example, as land becomes scarce, property rights on communally held land are more likely to break down, and the traditional rights of indigenous people are more likely to be challenged. And increasing land scarcity often pushes encroachment and settlement into more marginal, environmentally fragile areas. The divergence between national and global goals In most developing countries more trees are being cut than is desirable for national economic welfare. One of the priorities for domestic policy must be to correct these imbalances. But even if this can be achieved, the global net loss of trees, particularly in the tropical moist forests, will still be excessive from a global perspective. At least two of the five main forest services discussed earlier-preservation of biodiversity and regulation of global climatic patterns through evapotranspiration and carbon sequestration-are of value to the world as a whole and not just to the countries in which the forests are located. Global interests thus call for a greater preservation of forests, especially tropical moist forests, than do national interests. Incorporating global interests into decisionmaking may be expensive for individual countries if they have to forgo alternative uses that in some instances would bring higher living standards to their own citizens. Of the total area covered by tropical moist forests, 85 percent is in twenty developing countries, most of which have serious poverty problems. The global externalities from maintaining intact tropical moist forests cannot be measured with accuracy but are probably substantial. They are also undoubtedly increasing as the remaining global stock of tropical moist forests declines. Tentative estimates (summarized in box 2) indicate that the potential value of carbon sequestration in the Amazon is high. Many observers believe that the value of biodiversity protection is even higher. Great uncertainty will surround an estimates of global externalities until the complex ecology of tropical moist forests is better understood. In the meantime, on precautionary grounds alone, the international community needs to actively support the preservation of tropical moist forests. Forest destruction and degradation, especially in the temperate forests of Eastern Europe, can also be the result of global externalities arising in other sectors. For example, acid precipitation caused by emissions of by-products from use of fossil fuels in some countries has been associated with forest decline in other countries. Box 2. Sequestering Carbon in the Amazon There has been considerable discussion about the role of forests in removing, or sequestering, carbon dioxide from the atmosphere. It is widely recognized that mature forests, particularly tropical moist forests, with their large amount of biomass per hectare, contain a great deal of carbon that is released when these areas are cleared or burned. In the Amazon region of Brazil, land clearing and burning to create agricultural land and develop pastures have received worldwide attention. Since land uses after conversion produce less biomass per hectare, the net result is an addition to the global atmosphere of up to 125 tons of carbon per hectare. The release of carbon from these actions is considerable; estimates for the peak year of Brazilian deforestation (1987) have ranged as high as 80,000 square kilometers. Recent evaluations indicate that the deforestation rate in the Amazon is now about 20,000 square kilometers a year (Schneider 1991). Over the 197"9 period an average 21,000 square kilometers of native Amazon forest was cleared each year. This is equivalent to potential releases of up to 260 million tons of carbon a year as a result of forest destruction (Feamside, Tardin, and Meira Filho 1990). In comparison, during this same period in Brazil, combustion of fossil fuels-primarily oil, gas, and coal-accounted for less than one-fifth this amount, or an average of 50 million tons of carbon a year (Boden and others 1990). The total potential contribution to global carbon dioxide emissions of forest burning worldwide is about e.6 billion tons a year -- about 30 percent of the approximately 5.5 billion tons from all fossil fuels burned during a year. Of the grand total of 7.1 billion tons of carbon released, therefore, deforestation accounted for about one-quarter of thetotal,andtheamazon contributed about 15 percent of the forest-related share, or 4 percent overall (Schneider 1991). Although there is considerable uncertainty about the forest numbers, other estimates are similar. According to Houghton (in Myers 1989), total global carbon emissions from burning amount to 1.4 billion tons a year, and in the Amazon an average 50,000 square kilometers are burned each year, with each hectare containing 90 tons of carbon. An economic analysis can be carried out to see whether forest preservation is a cost-effective way of reducing carbon emissions and the associated costs of global climatic change. The costs of damage from climatic change can be compared with the costs of reducing carbon emissions. Nordhaus (1 990) estimates the annual cost to the world economy of carbon emissions at $3 to $13 per ton of carbon emitted. Therefore, if an average hectare of Amazonian forest contains 125 tons of carbon, the sequestered value of carbon in an undisturbed hectare may be in the range of $375-$1,625. These amounts are considerably larger than current land prices of $2G-$300 per hectare in the Amazonian state of Rondonia in Brazil. It has also been estimated that modest reductions in carbon emissions in the energy sector of developed countries would cost about $10 a ton. Again, the carbon sequestered in new or preserved forest cover is an economically attractive alternative for reducing total carbon emissions. Thus, opportunities exist for trades between developed
countries and owners of Amazonian and other forest resources. Whether forest cover is used
to reduce total carbon in the atmosphere or to offset emissions elsewhere, it appears
economically efficient for outsiders to pay owners of Amazonian land not to deforest their
land and to preserve the natural forest cover. In addition, there are other important
environmental benefits from undisturbed forests, such as preservation of biodiversity and
wildlife habitat, watershed and sedimentation benefits, and potential recreational uses.
Whether such international transfers can actually be made and enforced depends on a
complex and difficult set of issues, including land rights, institutional and economic
factors, and national sovereignty, all of which require further analysis. The causes of poor management and inadequate new planting Many of the same social and economic forces that induce excessive deforestation also reduce the incentive to plant trees, either for fuelwood or for timber. From the point of view of tree planting, it is useful to consider trees primarily as an agricultural crop. As with any crop, a farmer's willingness to plant trees will depend on the value of the crop, the available technology, and the speed with which his or her initial investment is recovered. There are disincentives for planting on all three counts. First, the price of wood tends to be depressed by open access to natural forests and by poorly defined property rights to forestland. Second, there has been relatively little progress in developing higher-yielding, faster-growing trees for farm rather than plantation conditions. Third, the high discount rates of poor farmers make it particularly unattractive for them to tie up scarce capital for the relatively long payoff period involved. Faced with a choice between using scarce family labor for planting and protecting trees or for gathering wood from a receding forest, poor farm families will exploit the commons until the forest is severely degraded. Evidence now accumulating in Kenya, Nepal, and other countries shows that farmers do respond to scarcity of wood by planting trees but that this response is muted and delayed by open access to the forest. Moreover, even when wood prices do increase, they do not adequately reflect externality benefits that can arise from planting trees, such as protection of watersheds, improvement of soil fertility, and the arrest of desertification. The establishment of large-scale industrial plantations is similarly restricted by the prospects for profitability. Supplies of underpriced timber as a result of cheap access to natural forests will discourage private investment in industrial production of timber in the same way that farmers are discouraged from growing their own firewood and poles. Farmers' interest in tree planting is also often stifled by public policies and regulations that effectively limit their rights to trees. Limitations on rights to harvest privately owned trees are common in developing countries. Although the original motivation for such restrictions was sound environmental concern, their application to small-scale woodgrowing activities retards incentives for replanting. Similarly, restrictions on log transport, often originally instituted because of forestry agencies' inability to control access to the forest effectively, are the equivalent of a tax on private forest investment even when such investment is carried out in an environmentally sound manner. Extensive public sector involvement in certain aspects of the forestry sector of developing countries has also discouraged replanting by the private sector. Government ownership of forestland has been widely interpreted as requiring public sector production. Public corporations have frequently had the responsibility for plantation establishment and management but have not been subject to the discipline of private sector competition. At the same time, underinvestment by the public sector in the development of forest technology, including improvement of the genetic base, and the unresponsiveness of government systems for supplying seeds and seedlings have further lowered the relative profitability of forestry. |
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