The Causes of Forest Decline
Arnoldo Contreras-Hermosilla

Introduction

According to the World Resources Institute, the world has lost about half of its forest cover. Most of this loss – about 450 million hectares -- has taken place during the last 30 years. Almost exclusively, modern deforestation takes place in tropical areas. Every year, tropical deforestation, reaching some 15 million hectares, generates 4.6 gigatons of carbon dioxide – equivalent to 20% of global emissions from fossil fuels – results in the degradation of some 12 million hectares of fertile land and the loss of 8,000 to 28,000 species. Tropical deforestation directly threatens some 400 million people -- including 50 million forest indigenous people -- depending on them for their daily subsistence.

Although deforestation in temperate and boreal areas apparently is comparatively negligible (hard information is lacking), in many places the rich old growth forest has been replaced by biodiversity-poorer plantations and by secondary forests. Primary forest has practically disappeared in Europe, although total forest cover in the continent has increased. Furthermore, recent evidence suggests that deforestation in many temperate and boreal areas may be increasing, particularly in North America and the Russian Federation.

In addition to deforestation, vast areas are being degraded by air pollution and forest fragmentation. It is estimated, for example, that the Chernobyl nuclear disaster contaminated some 4 million hectares of forests in Russia, Belarus and Ukraine. A survey of 29 countries has shown that more than one-fourth of the trees in Europe suffer from defoliation. With respect to fragmentation, only 40 percent of all remaining forests in the world are frontier forests, large tracts of natural and relatively undisturbed forests big enough to spontaneously maintain all of their biodiversity wealth. About 40 percent of these frontier forests are threatened.

Forest decline and the colossal human ability to alter large forest ecosystems are sources of intense conflicts between rural populations, governments, commercial interests and, increasingly, sectors of public at large.

Sources of forest decline.

Forest decline is caused by natural factors as well as human activity. Natural causes include hurricanes, floods, drought pests and fires, among others. However, there is no doubt that the main causes of deforestation and forest degradation originate in human activity (See attached figure). This paper will deal with the latter.

Immediate Forces.

Human-induced deforestation and forest degradation are mainly the expression of (a) forest exploitation, (b) intense and growing competition for land and (c) a number of failures or imperfections of the market, the policy and the institutional environment.

Thus, pressure on forest resources resulting from increasing demands for industrial products and fuelwood is still one of the main causes of deforestation in many countries. The pressure will grow in the future: demand for industrial wood is expected to expand by 56% in the next fifteen years. Logging is a main source of deforestation and degradation. But also agricultural expansion, including the growth of cattle ranching and of slash and burn agriculture, as well as the construction of roads and dams in forest areas, lead to forest decline. Further, the operations of commercial corporations conducting mining and oil extraction operations can result in substantial deforestation. Finally, human-induced induced deforestation unfortunately is also instigated by a number of underlying failures of the economic, policy and institutional systems.

Underlying Forces.

Underlying forces leading to forest decline are complex and numerous. A first set of causes includes population growth and the associated need for more food, industrialisation leading to increased air pollution, toxification and global warming. Inequitable distribution of wealth and income resulting in extreme poverty, and in some cases, civil unrest mass migration and war may also lead to resource deterioration. Some of these underlying causes are examined in companion papers and will not be discussed in the present note. Also, the Commission should not be overoptimistic that its potential recommendations for action on some of these topics, such as population growth, "excessive" consumption or the effects of war, will carry much weight. Thus, for example, Commission can produce general statements about population growth. However its capacity for in-depth analyses is minimal. These subjects are covered in much greater detail in other publications (such as those of the recent Independent Commission on Population and Quality of Life).

Another set of fundamental forces causing deforestation and forest degradation are more closely linked to decisions made in the forestry and related sectors and therefore more likely to form part of the Commission’s recommendations . This set relates mainly to some deficiencies of the market system, the policy environment and the institutional framework. These failures are the focus of the present note.

The picture: "causes of forest decline" is under construction

Market Failures.

Deforestation and forest degradation are ultimately the result of decisions by private (GOVERNMENTS, MDBs, AID AGENCIES) entrepreneurs, corporations, shifting cultivators and communities. The immediate main actors in the process of deforestation and forest degradation mainly belong to the private sector. The decisions of these actors are strongly influenced by the desire to obtain a productive source for either their subsistence or for commercial profits. Commercial profits are determined by prices of goods and services from forests that can be sold in markets as well as by the costs of producing or extracting them. The problem is that many of the services provided by forests (as well as some of the costs of mismanaging these resources) have either no market price or very imperfect prices and therefore do not enter into the decisions of the main private sector actors. For example, a forest landowner in an upper watershed does not get paid for the services his forest provides to other producers located downstream. These may include services such as soil protection against erosion and protection of irrigation and hydropower dams against sedimentation. Nor does the landowner obtain commercial profits for capturing carbon, maintaining scenic beauty or for preserving biodiversity resources. In other cases, even if they exist, market prices are very imperfect due to factors such monopolic forces. In all these cases, the forest landowner may not obtain the full value of the services provided. Such services would then be produced at a level that is lower than the optimal from society’s point of view.

These local and global benefits of forest resources become non-market costs if we give them up. For example a slash and burn farmer does not pay for the global cost of increased carbon dioxide released into the atmosphere or for the increased costs of protecting dams downstream that result from his actions. Nor for the loss of biodiversity or aesthetic resources associated with the exploitation of his forest resources.

By considering only those products and services that can be sold in markets or that can directly benefit private actors, many of the non-priced or imperfectly priced environmental services of forests simply do not enter into the decision making equation of the private operator. Because they have no market value, there is no private incentive to protect forests for their environmental services. In all these cases there is a discrepancy between private and social costs and benefits. Benefits and costs that are important for the society as a whole are not important for the private individual that controls the management of forest resources.

Imperfect credit markets, or inadequately priced credit, are also often mentioned as possible causes of deforestation. If imperfect credit leads to inflated interest rates, farmers will prefer to undertake investments and activities that produce a quick yield, rather than invest in forest management. On the other hand, cheap credit has also caused deforestation in the Amazon as the expansion of the agricultural frontier has taken place in a way that would have not existed if adequate credit interest rates had prevailed. Also, some of the main actors in the process of deforestation, such as slash and burn farmers, are not subject of credit.

The question that arises is to what extent would decisions by private landowners change if it were possible to establish a market for those goods and services that presently have no established or imperfect market prices? Or to legislate behaviour so that private decisions are altered by policy decision to conform with social values? Changes in private behaviour would depend on the magnitude of the values involved and on the possibility of "internalising " them into the decision-making processes of the private actors, either by establishing markets or by government prescription.

On the first aspect, Pearce reviews different studies which have estimated different values of tropical forests. Results are displayed below. Although these figures should be interpreted with caution (because, among other reasons, of the great differences that could exist from location to location), it is clear that carbon sequestration prices dominate the overall picture of non-market values of forests.

Source: Adapted from Pearce, D. Blueprint 4. Capturing Global Environmental Values. Earthscan Publications Ltd., London 1995.

Non-timber products refer to resins, nuts, mushrooms, wildlife and other forest products, some of which have market values. Against popular mythology the potential economic value of developing medicinal drugs from tropical forests is low, because the probability of discovering such drug is very reduced in per hectare terms. Ecotourism and recreation can generate high commercial returns in very specific areas but in general, their economic potential is not comparable to that of timber or the value of carbon sequestration services. The same can be said with respect to watershed protection services. Option values relate to the non-market value of preserving forests for future use. Existence values, again another set of non-market values, relate to the value attached to forests by people even if they will not use these forest resource. Comparatively, both set of values are also low.

Thus, the answer to the question of to what extent would decisions by private landowners change if it were possible to establish a market for those goods and services that presently have no established market prices must be qualified on two grounds. First, local conditions are highly variable and it is possible that in many cases the non-market values described above may acquire local importance and therefore effectively influence decisions by local private landowners. Second, in general, of all non-market values of forests, the one that has a paramount importance is that associated with carbon sequestration. It is evident, therefore, that efforts to reduce deforestation and forest degradation and to improve forest management to bring it more in line with social priorities – as opposed to exclusively private preferences – must rely heavily on systems to capture carbon sequestration values. If for a moment we assumed that carbon sequestration values were not as high as current, and admittedly imperfect, estimates indicate, then there would be no economic rationale that would advocate for creating markets for presently non-marketed forest values as a way to arrest forest decline.

Policy Failures

If there is a discrepancy between private and social priorities, it may be argued that public intervention is needed to alter the decision making processes of private actors to achieve a greater degree of coincidence between their motivations and those of society as a whole. However, we will see that in some occasions, public intervention may compound rather than mitigate market imperfections. Another possibility is to create markets for the valuable environmental services of forests. To this possibility, we will come back later. We will now examine public intervention, or policy, failures that may contribute to deforestation and forest degradation.

Governments can influence the management and conservation of forest resources and pressures leading to deforestation and forest degradation in a number of ways, by:

Directly investing in the forestry sector or in related sectors

Imposing regulations that prescribe or prohibit certain private sector actions

Influencing private profitability through fiscal, monetary and price policies

Providing services that influence private investment decisions

First, Government can directly invest in the forestry sector -- in activities such as reforestation and forest protection -- or in related sectors such as in intensifying agriculture. Second, the Government can also dictate certain actions in the economy. Thus, for example, it can prohibit the export of logs, mandate replanting of harvested forests or impose forest management obligations on privately-owned forests. Third, Government also can influence the behaviour of the private sector by using fiscal instruments, taxes and subsidies, that alter the levels of private profitability and thus the propensity to invest in reforestation and forest exploitation. For example it is common to grant plantation subsidies, preferential credit, give away seedlings, share costs, grant export incentives or establish subsidised prices for public wood. Finally, public policies can also affect private sector behaviour by providing services such as land titling, research and technology dissemination. We will see that some of these policies sometimes produce "perverse" results, i.e. results that either were not expected or that are in conflict with the original intent of the policy. In short, in many cases, government interventions generate outcomes that are even less efficient than the operation of (imperfect) markets.

The Box below lists examples of some common policy failures affecting the management of forest resources. The impact of these failures can be very substantial. Thus for example, forest pricing policy failures in Indonesia may have resulted in large losses, possibly reaching US$ 1 to 3 billion a year.

Direct investment by Governments in roads into forest areas, such as the Transamazon highway, have led to deforestation and degradation. The policy objective has been to "develop" new areas and to provide lands for the landless and the rural poor. In reality, these policies often led to environmental deterioration instead. And since many of the forest soils are not suitable for permanent agriculture, roads policies do not necessarily solve the problem of rural poverty either. Mahar and Schneider contend that "road building is the single most powerful element in the deforestation of frontier areas in Latin America". Some 400 to 2000 hectares may be deforested by each kilometre or new road built into forest areas. In the Brazilian state of Para, deforestation as a consequence of road construction increased from 0.6% to 17.3% of the state’s area between 1972 and 1985. Proposed roads in the Russian far east would threaten previously inaccessible large forest areas. The population pressure derived from the completion of primary roads, usually increases demands for secondary and feeder roads, thus compounding the initial deforestation effect. Also, direct government investment in dams for energy generation and irrigation can flood large forest areas.

Command and control measures also may lead to unwanted results. The imposition of forest management plans, for example, has frequently led to the abandonment of forest resources by landowners or to the conversion of forest lands to other, less regulated, uses

Prohibitions to export logs have frequently reduced the price of wood in domestic markets and increased the propensity to dedicate forest lands to other, more profitable, alternative uses. In certain cases, knowledge of the intention of the Government to declare certain private areas as protected has led private landowners to deforest to avoid having their lands transferred to the protected area system. Also, logging bans have had unexpected results internationally. Thus, the imposition of a logging ban in Thailand in 1989 led to increased cut and deforestation in Laos, Myanmar and Cambodia, countries that were eager to supply the powerful Thai forest industry.

There are also numerous examples of fiscal policies that lead to deforestation. Subsidies to cattle ranching have arguably precipitated the conversion of forest lands to pastures. These incentives can be substantial. Although the aggregate effect of these subsidies has been exaggerated , local deforestation impacts may have been important: in Panama, as much as 10 percent of deforestation, much of it in a few remnant areas of high environmental value, has been attributed to cattle ranching subsidised official credit. Subsidies to agricultural production also encourage the conversion of forest lands. These agricultural subsidies are very substantial. Pearce mentions that agricultural subsidies in Mexico, Brazil and South Korea ranged between 10 and 55 percent of the value of production in the mid 1980’s. These magnitudes are also common in advanced countries. Recent evidence shows that agricultural subsidies in OECD countries in 1995 averaged 41% of the value of production. Finally, also subsidised wood prices applied in timber concessions encourage deforestation by attracting larger numbers of potential concessionaires and by promoting wood waste. Some examples of forest subsidies are described in the Table below.

Ironically, excessive subsidies to plantation forestry with the stated purpose of relieving pressure from natural forests have frequently resulted in the opposite effect. These subsidies have sometimes led forest landowners to cut their natural forest to dedicate lands to the much more profitable forest plantations.

In many countries agricultural income is either exempt from taxation or taxed at very low rates while ("unutilised") forests lands are taxed at a higher rate. This fiscal policy encourages conversion of forests to agricultural production. Individuals and corporations tend to invest in agricultural production as a tax shelter.

Governments have also guaranteed minimum prices for some agricultural products. This has encouraged agricultural production that would have not taken place without these minimum prices, and thus fostered conversion of forests lands to agriculture. Similarly, controlled maximum fuel prices have favoured agricultural production and deforestation of remote forest lands by artificially reducing the transport cost between frontier lands and the market.

Source: Pearce, D. Global Environmental Value and the Tropical Forests: Demonstration and Capture. Paper prepared for Forestry and the Environment: Economic Perspectives, Alberta, Canada, October 1994.

Macroeconomic policies, particularly structural adjustment policies, target economic reforms and thus may generate conditions that favour deforestation. For example trade policies that foster exports, may do so at the expense of forest resources. However, some economists argue that also the opposite effect may take place if, for example, adjustment policies eliminate subsidies that would favour competitive uses of lands. Evidence to date is not definitive.

With respect to the supply of government services, while it is often argued that securing land titles would help investments in forest conservation, in some cases the immediate effect of land titling policies is exactly the opposite. This is because the launching of land delimitation and titling policies has been observed to precipitate the occupation of public, often forested, lands. Furthermore, in several countries an established method to prove land occupation and therefore to have access to legal land titles has been to show proof of deforestation. Mahar and Schneider point out that in Brazil the land titling agency used to determine the extent of land occupation, and therefore entitlement, by multiplying deforested areas by a factor three . In Costa Rica, until recently, occupants could have easy access to legal titles if more than 50% of their land were deforested . The incentives to deforestation created by these policies are obvious.

Also, governments have indirectly encouraged deforestation by promoting the occupation of border areas to increase national security. This has been a main motivation to occupy and deforest many remote border areas in, for example, Brazil, Peru and Ecuador.

Another example of unintended effects is pointed out by Southgate. He mentions that, due to generous government incentives, land prices in South Brazil, as compared with those in the North of the country, rose rapidly during the 1970s and 1980s. These policies encouraged land ownership concentration and the adoption of capital-intensive methods of production. Some of the farmers displaced by mechanisation and the concentration of land ownership migrated to frontier areas in the Amazon. Thus, we can see that policies implemented in areas that are relatively distant from forest and in other sectors may have a substantial impact on the rates of deforestation and forest degradation.

It is surprising that so many policies fail as often as they do. Naturally, the question that arises is why should happen so frequently. A first plausible reason is that policy designers often do not even attempt to understand the values and priorities of the different actors affected. If the government policy-making framework is heavily influenced by the narrow objectives of a particular group, those other groups that are negatively affected will tend to resist the application of the policy and eventually cause its failure. Thus, as mentioned above, the Government policy to impose management plans on private forest lands may in fact lead to deforestation as private forest landowners clearcut their forests to avoid the complication of complying with intricate regulations and prefer to dedicate their lands to unregulated uses instead. Had the Government considered the interests of private landowners and implications of the application of the forest management plans policy, it would have perhaps foreseen its imminent failure. Trivial as it may sound, these effects are seldom explored in actual policy making exercises.

A second reason is that, even if the expertise is available (which is not often the case, particularly in developing countries), often it is extremely difficult to predict the final effects of a policy. For example, in recent years, there has been a great deal of discussion about the actual effects of a log export ban. The intent of the export ban is to reduce total demand by closing the external market and thus alleviate some of the pressure on domestic forest resources. However, it is frequently argued that demand contraction would lead to a reduction in wood prices and therefore to a lower level of profitability of forest investments. Investors may therefore tend to choose alternative, non-forest, uses of land. The original policy objective -- to reduce deforestation -- may not only not be achieved but, even worse, exactly the opposite effect may materialise as investors convert forest lands to other uses. The final policy effect will depend on the strength of these opposing forces, the reduction of the propensity to harvest forests due to the lower profitability of exploitation activities, on one hand, and the reduction of the propensity to invest in forest resources management due to the lower profitability of investments in plantations and forest management operations, on the other. It s difficult to predict the final result of these contrasting economic forces.

Also, there is debate about the net effect of agricultural intensification on deforestation. On one side, agricultural intensification reduces pressure on land and therefore pressure to obtain new lands for agriculture through deforestation. On the other hand, agricultural intensification increases the profitability of agriculture and therefore agricultural expansion. Policies may fail simply because sometimes it is difficult to predict their net effects.

Third, policies fail because they create opportunities and incentives to corruption. Every time the government issues regulations, the possibility of corruption arises. This possibility increases when the salaries of comptrollers are low, when there is limited transparency and weak monitoring systems prevail. These conditions are present with more or less intensity in the majority of the tropical countries and in many of the emerging economies. Harvesting permits, the certification of forest management plans that determine access to subsidies, wood transit controls, etc., are examples of policies that open opportunities to corruption and defeat the original objectives of those policies.

Fourth, much too often, policies do not give adequate consideration to the practical implications of their implementation. As consequence, many well intentioned policies fail simply because they cannot be implemented. The weakness of the public forest administrations in many countries is well known and thus, their capacity to implement policies, particularly complex ones, is very limited. It is evident, for example, that forest protection objectives are difficult to achieve because the forest administrations cannot possibly manage the vast areas included in the national systems of protected areas.

Institutional Failures

The management of a large proportion of the forest resources in many countries is entrusted to the Government. However, the institutional weaknesses of many of the Government agencies, particularly in developing countries, are well known. Very few technical and managerial staff with limited implementation equipment and facilities are asked to plan, manage and monitor developments in millions of hectares of forest resources often subject to a number of intense external pressures. It is no wonder that in many cases, but particularly in developing economies, forest resources are, for all practical purposes, considered as resources with "open access", with nobody exerting effective property rights on them. Peuker states that about 60 of farms lacked titles in the early nineties in Costa Rica and that where there were titles, often there were competing claims. Ozario de Almeyda indicate that only 11 percent of the Amazon land had legal titles in the early eighties. The lack of enforcement of property rights induces landless peasants and others to use forest resources as a free resource. Land in these conditions is essentially valueless from the point of view of private operators. It is in the best interests of the settlers to practice slash and burn agriculture, to "mine" the forests and lands and then move on to clear new land when the first plot has become depleted. Private costs to the slash and burn farmer do not include the value of the environmental damage, local and global, caused by his operations but he can reap most of its benefits. The incentive for deforestation is clear. Thus, deforestation is encouraged by weak or non-existent ownership rights.

But perhaps one of the most important institutional weaknesses is the vulnerability of government officials to corruption, understood as "the sale by government officials of government property for personal gain" . Transparency International states that "corruption involves behaviour on the part of officials in the public sector, whether politicians or civil servants, in which they improperly and unlawfully enrich themselves, or those close to them, by the misuse of the public power entrusted to them".

Corrupt acts include the concealed or secret sale of harvesting permits, below the market pricing of wood in concessions, false certification of species or volumes cut in public forests, allowing illegal logging, providing confidential information about government policies and competitors, etc. Some of the most common corrupt practices in the forestry sector are described in the box next page.

This force leading to forest decline is substantial. For example, it is estimated that in the 1980s the Philippines lost about US$1.8 billion per year from illegal logging. In Malaysia log exports to Japan in 1993 were under-declared by as much as 40%. In Ghana, 11 foreign companies were implicated in fraud and other malpractices, costing the economy about US$50 million. The Commission of Inquiry Report, the "Barnett Report", the most comprehensive and objective study of forest-related corrupt activities in a developing country, investigating corruption in New Ireland, Papua New Guinea stated that

"It would be fair to say, of some of the companies, that they are now roaming the countryside with the self-assurance of robber barons; bribing politicians and leaders, creating social disharmony and ignoring laws in order to gain access to, rip out, and export the last remnants of the province’s valuable timber. These companies are fooling the landowners and making use of corrupt gullible and unthinking politicians…..It is doubly outrageous that these foreign companies….have then transferred offshore secret and illegal funds… at the expense of the landowners and the PNG Government"

The report concludes that:

"There can be no doubt that the timber industry, by its very nature, is conducive to acts of a criminal nature and acts contrary to law and proper government ministration"

The WWF estimated that virtually all timber exports from India, Laos, Cambodia, Thailand and the Philippines are illegal, that a third of those of Malaysia may also be illegal and as much as 95% of exports from Indonesia not wholly legal . The World Bank estimated that by 1992 about 500,000 hectares of tropical forests were being illegally logged every year; and this is likely to be a substantial underestimate of the extent of the problem as in that year Indonesia alone lost some 300,000 hectares of forest because of "improper" practices. And corrupt practices are not confined to developing countries. For example in 1994 the European Union charged several corporations for corrupt practices. A decade before the Union had fined 40 of the major pulp and paper producers for similar reasons.

There are certain activities that are more susceptible than others to corruption. These are activities that (i) take place in remote places, away from public scrutiny, but that involve important economic values; frequently, this is the case of valuable wood, flora and fauna in national parks, reserves or wildlife refuges; (ii) are difficult to quantify: the availability of valuable wood in remote parks or reserves is normally not known as detailed inventories are seldom available; (iii) offer a great deal of discretionary power to unsupervised decision-makers: verification by a local officer of plantation establishment that determines important plantation subsidies to the landowner is a case in point; (iv) lead to large procurement orders. Also, other conditions such as low salaries of responsible government staff, highly centralised government and a weak press and democratic institutions facilitate corruption.

Source: Adapted from Corporate Power, Corruption and the Destruction of the World’s Forests. Environmental Investigation Agency, 1996.

While corruption is pervasive and highly costly to many countries, it is difficult to combat. There are some initiatives to fight corruption in general that could be assimilated to situations in the forest sector. The most notable are the Inter-American Convention Against Corruption of the Organisation of American States and the US Foreign Corrupt Practices Act. The Convention is the first anti-corruption treaty in the world and was signed by 23 countries in Caracas, Venezuela in March 1996 (See box). The US Act is the only one in the world that prosecutes bribes to foreign officials, in marked contrast with prevailing practices in many countries which typically and openly allow companies tax deductibility for bribes paid overseas.

Because corruption is believed to be pervasive and leading to substantial degradation and deforestation, and also because other bodies are reluctant to deal with this issue, it deserves special attention by the Commissioners.

The Inter-American Convention Against Corruption

The Convention calls for a range of measures:

* Establishment of standards of conduct for the correct, honorable and proper fulfillment of public functions....to prevent conflicts of interest....

* Systems for registering the income, assets and liabilities of persons who perform public functions in certain posts as specified by law.

* Systems of hiring and procurement of goods and services that assure the openness, equity and efficiency of such systems.

* Government revenue collection and control systems that deter corruption.

* Laws that deny favorable tax treatment for any individual or corporation for expenditures made in violation of the anti-corruption laws of the States Parties.

* Systems for protecting public servants and private citizens who....report acts of corruption.

* Oversight bodies with a view to implementing modern mechanisms for preventing, detecting and punishing corrupt acts.

* Deterrents to the bribery of domestic and foreign government officials, such as mechanisms to ensure that publicly held companies and other types of associations maintain books and records which...reflect the acquisition and disposition of assets...and enable officers to detect corrupt acts.

* Mechanisms to encourage participation by civil society and non-governmental organizations in efforts to prevent corruption.

* The study of further preventive measures that take into account the relationship between equitable compensation and probity in public service.

Source, Sizer, N. op.cit.

Potential Recommendations by the Commission

First, the Commission must recognise that all deforestation is not necessarily "bad". Clearly, there are cases in which the benefits of land conversion to other non-forest uses, including benefits that are hard to measure, may well exceed the costs involved. Within this context,

Market failures. A number of policy reforms can be implemented to create economic conditions that would lead to a closer coincidence between private decisions and those that are desirable from the point of view of society, national and global, as a whole. These can be implemented through sound regulation, such as the forced elimination of monopolies, through the creation of appropriate incentives by adequately manipulating fiscal tools, taxes and subsidies and other government tools. There reforms are well discussed in the literature and will not be examined here.

As we have seen, in the case of non-market values, a solution to market failures rests to a great extent on the possibility of creating markets to capture the value of the non-market goods and services of forests. Among these, it is clear that the main one, by far, is the global value of carbon sequestration. Joint implementation schemes include a wide range of possible interests between two or more countries leading to projects that seek to improve global environment by reducing some form of discharge. In the case of the forestry sector, JI projects relate to the global reduction of green house emissions through reforestation. Other mechanisms already in existence to capture global values of forest resources include the Global Environment Facility (GEF), the creation of markets for "green" products, the purchase or leasing of "exotic" capital (such as the Merck-INBio agreement in Costa Rica), debt for nature swaps and so on. Refer to the document by David Pearce for an analysis of these possibilities.

Policy failures. The Commission should recommend action by Governments to:

Eliminate subsidies, such as cheap credit, and other incentives -- such as the requirement to show deforestation as proof of land occupation to obtain ownership -- to undesirable forest land use conversion.

Eliminate subsidies and other incentives that would artificially lead to capital-intensive agriculture in non-forest areas and displace labour that is likely to migrate to frontier forest areas.

Evaluate the impacts of roads and of logging, mining and oil exploration activities in forest areas in terms of their likely effect on further population penetration into these areas. This implies greater attention to be given to the intersectoral linkages between forest management and activities in other economic sectors.

Carefully evaluate the impact of command and control measures such as log export bans on the incentives of private landowners and their associate propensity to manage and conserve forests.

Establish pricing mechanisms in forest concessions that would reflect true values.

 

In relation with institutional reforms, clearly there is much that need to be done to strengthen the capacity of the government to manage the large expanses of forest resources under their responsibility. International agencies have issued a long list of possible action to combat institutional weaknesses. However, the Commission may wish to make emphasis on the following:

Governments should carefully evaluate their capacity to administer forest resources. In some cases control could be devolved to indigenous peoples and local communities or other actors of the private sector. In most cases it may be advisable to recognise traditional rights rather that superimpose totally new systems of land tenure. Governments should assess the possibility of disseminating joint management schemes in which the Government is a landowner partner fostering the customary use of forest lands by individuals or communities.

Priority should be given to establish clear land ownership rights of these communities, forest settlers and others users of forest lands. Public ownership needs to be strictly enforced in order to avoid the consequences of open access.

Because deforestation and forest degradation will not be mitigated without the willing co-operation of local people, mechanisms for ensuring effective local participation are also necessary. This may need a change of attitudes in government staff and a better co-ordination among government agencies.

Dealing with corruption .

The Commission should consider to:

Support the application of the principles of the Organisation of American States Inter-American Convention Against Corruption and those of the US Foreign Corrupt Practices Act to situations in selected countries belonging to the 20 most forested nations in the world.

Support other initiatives such as those of the World Bank and Transparency International, to combat corruption in the forestry sector. Promote the establishment of "hot lines" in institutions such as Transparency International to facilitate reporting about corruption cases, if necessary, in an anonymous manner. Promote the creation, in these institutions, of investigative bodies to analyse forest-related cases in the countries mentioned and corroborate reports, particularly anonymous reports.

In order to apply the principles mentioned above in the forestry sector, define a set of international standards against corruption on the basis of intense consultation with leading companies interested in promoting them as well as with leaders of Governments of the top forested countries of the world.

Promote adoption of Corporate Codes of Conduct from leading interested companies that would be willing to take firm action on this matter.

Blacklist companies that practice corruption.

Promote the standardisation of procedures for awarding concessions. Promote the use of performance bonds.

back to UC Process