Tori Wong ECON-305 Final Paper

Economic Impacts of Deforestation Why Deforestation? I recently took a weekend trip across the Caribbean Sea to visit a friend in Honduras. On

the trip over, I was talking with some backpackers from Canada and Austria about the

environmental problems of Central America in comparison to other places around the world. One

of my new friends brought up an idea that really made me think about the world and the way we

operate when he said, “there is no such thing as an environmental problem; there are only

environmental issues with economic problems.” After this comment and passing field after

barren field of deforested land through Honduras (and parts of Belize), I was determined to

examine the impacts, history and possible solutions to deforestation as a problem that many

people mislabel as simply an “environmental problem,” without taking the economic impacts

into consideration.

Introduction Environmental issues effect every life on Earth from the smallest microorganisms to the

humans who have become the dominant mammals of the planet. A single disruption in the

Earth’s delicate balance can mean destruction of the habitat that supports many species and

ecosystem services vital to life on Earth. It is this fine line that divides environmental and

economic problems, and once crossed, it becomes very important (from an economic standpoint)

to either find alternatives to the services and species provided by the balance, or to begin

repairing and restoring the habitat as soon as possible. One specific issue that hits very close to

home for Belize and Central America, and requires immediate attention is deforestation.

According to Dr. Collin Young (2010), deforestation is the conversion of forest to another

land use or the long-term reduction of the tree canopy cover below a 10 percent threshold.

Deforestation implies the long-term or permanent loss of forest cover and its transformation into

another land use. To understand the effects and urgency of deforestation as an economic

problem, one must first understand the importance of forests to global ecosystems and the quality

of life that all species maintain. As Dr. Jocelyn Stock and Dr. Andy Rochen (2006) of the

University of Michigan stated, “Mother earth has given much responsibility to trees.” Tropical

rain forests alone provide a home for 90% of all organisms and biodiversity; many human

medicines and foods come from forests; trees improve the quality of the air and determine

rainfall and replenish the atmosphere--they cool and regulate the Earth’s climate in conjunction

with other such valuable services as preventing erosion, landslides, and making the most infertile

soil rich with life (Rochen and Stock, 2006). The importance of trees and forests will be further

discussed in the “Impacts of Deforestation” section of this paper.

This paper will take a local look at the history of deforestation and the legistaltion and

regulations in Belize, environmental and economic impacts of removing tree cover, and possible

solutions and alternatives to this environmental economic problem.

Deforestation in Belize There is limited and somewhat conflicting information on the status of forests in Belize.

Up until recently, the greatest threat to Belize’s rain forests came from small agricultural plots.

Although timber has traditionally been important to the economy of Belize, the method of

selective cutting practiced by local firms had a small impact on the forests. There are numerous

reserves which protect almost 30 percent of Belize, but these tend to be understaffed and suffer

from illegal cutting activities—sometimes by armed gangs (Butler, 2007).

In 1993, the Food and Agriculture Organization of the United Nations reported that since

Belize was 97% forested and only losing forest at 0.2% annually, Belize had not succumbed to

the massive deforestation suffered by most other Central American countries. That optimistic

estimate of forest cover and forest loss for Belize, however, was based on a model using only

one satellite image from 1979. More recent studies based on general land use maps indicate

forests in Belize now total only 59% of the total land cover (FAO 2001). While deforestation

rates in Central America remained similar between 1990-2000 at about -1.2% per year, the same

study showed Belize’s deforestation increased to -2.3% per year (FAO 2001). A more

conservative estimate, based on a study using high-resolution multi-temporal satellite imagery,

showed an annual clearing rate of -0.6% per year during the 1990s for Belize and an overall

forest cover in 1998 of 78.5% (Sader et al 2001). Although these reports vary in the extent of

damage, they both show dramatic increases in the destruction of Belize’s forests.

A 2002 study by Sonia Lucia Di Fiore found that forest cover along the Belize River

corridor was reduced from 40% of the total land area in 1989 to 31% in 2001. This is consistent

with the FAO finding in 2001, which states that Belize is only 59% forested, since the Belize

River corridor is much more developed than the country as a whole.

There are two main laws that establish and regulate protected areas in Belize. First, the

Crown Land Ordinance (1924) enabled the Minister to create “crown reserves” on an ad hoc

basis (IUCN 1992). The oldest crown reserve thus established is Half Moon Caye, which was

designated in 1928 (IUCN 1992). The second major law concerning protected areas was the

National Parks System Act No. 5 (1981), which allowed for the establishment of national parks

and other protected areas (IUCN 1992). This law has been updated with the completion of the

Belize National Protected Areas System Plan (Meerman and Wilson 2005).

Another regulation of significance is the Environmental Impact Assessment Regulation of

1995 (ELAW 2002), which was created to manage the environmental impact of logging

(Government of Belize 1999). This law has been challenged by the difficulty of enforcement in

remote areas (Litterer 1997).

Impacts of Deforestation There are many environmental impacts of deforestation including soil erosion and

nutrient loss, climate change, and loss of biodiversity. Although the world’s tropical forests

appear to be thriving and lush, the underlying soil is actually rather poor; almost all the nutrients

of tropical forests are bound up in the vegetation, and once the forests have been cut down,

essential nutrients are washed out of the the soil all together, leading to intense soil erosion

(Rochen and Stock, 2006). Another serious consequence of deforestation is its role as a catalyst

in climate change. The most effective way to moderate Carbon Dioxide (the most prominent

green house gas) is through plant life; live trees and plants naturally absorb Carbon Dioxide and

regulate the Earth’s climate. With a decrease in plant life due to deforestation, it becomes much

harder to moderate CO2 levels, and therefore climate. In addition, deforestation and land-

clearing activities emit about 1.7 billion metric tons of carbon per year into the atmosphere

(Djoghlaf, 2007). Deforestation and the increase in the speed and intensity of climate change

both have a direct influence on the loss of biodiversity of forests. Forests cover a third of the

Earth's surface, and are estimated to contain as much as two thirds of all known terrestrial

species (Djoghlaf, 2007). Many of these species that are now facing extinction are of enormous

potential to humans in many areas; especially medicine. According to the World Health

Organization, as much as 80% of the world’s population relies at least partially on traditional

medicine, which relies on forest plants. So, by contributing to the extinction of multiple species

of plants and animals, we might be destroying the cures for many of the diseases that plague the

human race today. This is the line that converts environmental issues into economic problems.

The local economic value of medicinal forest products of Belize was studied by two

scientists who evaluated the sustainable harvest from two forest plots of all the medicinal plants

that could be sold to local herb healers and pharmacists (WWF 1994). On a sustainable basis (30

year harvesting rotation), the herb harvest was worth $294 and $1,346 per acre on the two plots.

In comparison, clearing rainforest land for agriculture was worth $117 per acre in Guatemala and

$137 in Brazil (WWF 1994). Medicine is just one of the many examples of productive resources

of the forest.

By looking at the productive resources of the forests, one can see the economic impacts of

deforestation are quite pressing and spread across several economic sectors including:

agricultural, food and beverage, forest product, and other services. Resources of the forest exist

as both stock-flow (able to be harvested and saved) and fund-service, making the forest, and its

role in the market an interesting economic tool. Though timber has typically been considered the

“ultimate” forest resource, forests are increasingly valued for a wider range of products like food

and medicine (stock flow resources) as well as ecosystem services like climate regulation and

water filtration (fund service resources). The next international climate change agreement will

likely contain incentives for countries to limit deforestation. New regulations in end markets

such as the European Union and United States will seek to limit imports of illegally harvested

timber. For example, retail customers may be concerned about the reputation risk associated with

procuring products that may have come from illegal or unsustainably managed forests. Several

certification schemes (like the Forest Stewardship Council) differentiate among sustainable wood

products in the marketplace. These certifications however, are often costly and would represent

an additional burden on the agricultural sector of Belize. Other economic impacts of

deforestation include losses due to pollution and siltation of water used for drinking, agricultural,

commercial and industrial purposes; destruction of fisheries and aquatic habitat; flooding;

siltation of waterways and dams; loss of top soil and soil fertility; climate change; reduction or

loss of non-timber harvests; and loss of recreational resources that attract tourists (WWF 1994).

Based off the sharp contrasts of the pre-analytic view of neoclassical and ecological

economists, it is expected that they will have very different opinions on the issue of

deforestation. Neoclassical economists believe that natural and created capital are substitutes,

that the ultimate means is innovation of human knowledge, that consumers inherently want to

increase total utility while producers strive to maximize profits, that the market can achieve an

equilibrium that can efficiently allocate resources, and that nature is resilient. Ecologicals on the

other hand, believe that natural and created capital are complements (one can not exist without

the other), that the ultimate means are those natural resources that humans rely on but can not

recreate, that natural capital is a limited resource, that the earth is a source (of resources) and a

sink (for wastes), and that as natural resources are depleted, human welfare will degrade as well.

Neoclassical economists would believe that deforestation (and the accompanying land

degradation) occurs because there is a disturbance in the natural equilibrium of the marketplace.

In a perfectly competitive economy, markets acting on the instincts of “rational” individuals

(who, as stated above, are self-interested and utility maximizing) determine efficient allocation

of resources under certain conditions. When the markets fail, like in the case of deforestation, the

government is often inclined to intervene in the marketplace. Neoclassicals, however would

believe that there is no need for intervention, because even if the forests’ resources are depleted,

they believe that human innovation is bright enough to get us out of any problem we’re faced

with. To neoclassicals, created substitutes for any forest products (timber, medicines, etc) will

come with time and the development of human innovations. Ecological economists take a more

pessimistic, though somewhat more realistic, approach to viewing environmental issues. I

believe most ecologicals would support regulation protecting the forests and the environmental

services that can not be replaced.

Possible Solutions to Deforestation

Several possible solutions to deforestation exist within the economic context. They can

complement each other and can be used to maximize the benefits from forests. Improved

planning, policy and regulations, and training and education (along with local participation) are

all excellent examples of possible solutions.

Planning is used in many countries, from the national to local levels, to minimize the

environmental damage resulting from deforestation and forestry activities. Typical plans relating

to deforestation include land use planning, natural resource planning, park and recreational

planning, and harvest planning. For example, Madagascar is currently undertaking a major

national planning effort to preserve the remaining 20% of its forested areas and is studying the

potential of nature tourism in these areas (WWF 1994). At a local level, the State of California,

United States precludes any person from conducting timber operations unless a timber harvesting

plan, prepared by a registered professional forester, has been approved by the Director of

Forestry. The plan must be based on site-specific characteristics including vegetation type,

topography, and stream characteristics (WWF 1994).

A wide variety of policy statements, and legislative and regulatory measures have been

established to protect forests and prevent pollution. Two reference volumes allow country-by-

country analysis, IUCNs Protected Areas of the World: A Review of National Systems, and

FAOs Forest Legislation in Selected African Countries. A review of legislation specifically

pertaining to Biodiversity is contained in the World Conservation Monitoring Centre’s Global

Diversity.

Training and education of stakeholders helps people understand how to prevent and reduce

adverse environmental effects associated with deforestation and forestry activities, and take

appropriate action when possible. It is important to keep in mind the importance of local

participation when discussing the prevention of deforestation. Many case studies of local

participation show that where populations live in or near forests, local participation has been

found to be essential to the successful prevention of deforestation.

Conclusion

Forests cover almost a third of the earth’s land surface (WWF 1994), providing many

environmental benefits including a major role in soil conservation, prevention of climate change,

and preservation of biodiversity. Forest resources can provide long-term national economic

benefits. However, deforestation, particularly in the tropical moist forests, is proceeding at a very

rapid rate. The negative economic impacts of deforestation are substantial, but many of these

impacts can be avoided or controlled through the use of prevention and control options, and

through planning, monitoring, and increased education.

The World’s Forests (from a conservation perspective)

Source: World Research Institute (http://www.wri.org/map/worlds-forests-restoration-perspective) This map shows the world’s forests as they used to be and as they are today. Green areas are the landscapes of today’s forests. Intact (large undisturbed) forests appear in dark green, and managed or fragmented forests in lighter shades of green (dense forests in medium green have a canopy cover of at least 30% while sparse, open forests in light green can be as low as 15%). Brown areas represent estimates of historical forest cover. These are areas where climate conditions are believed to have allowed forests to grow at some point after the latest glaciation, but where forests have been replaced by developed land and croplands (dark brown) or pastures and grasslands (light brown). Red areas show recent (2000 to 2005) tropical deforestation.

Works Cited Butler, Rhett. 2007. Deforestation rates in Belize: Statistics for Belize. Accessed April 12, 2010. http://rainforests.mongabay.com/ Di Fiore, S.L. 2002. Remote Sensing and Exploratory Data Analysis as Tools to Rapidly Evaluate Forest Cover Change and Set Conservation Priorities Along the Belize River, Belize. Columbia University. Djoghlaf, A. (2007). Biodiversity and Climate Change. Convention on Biological Diversity. Environmental Law Alliance Worldwide (ELAW). 2002. Belize- Environmental impact assessment regulations, 1995-- Statutory Instrument No. 107 of 1995. Accessed Apr. 2010. http://www.elaw.org/node/1820 FAO. Food and Agriculture Organization of the United Nations. 2001. The global forests resource assessment 2000 summary report. Committee on Forestry Paper 8b. Rome. Government of Belize. 1999. Ministry of the Environment press release. Accessed Mar. 2010. http://www.governmentofbelize.gov.bz/press_release_details.php?pr_id=154 IUCN. 1992. Belize. In Protected areas of the world: a review of national systems. Volume 4: nearartic and neotropical. IV World Congress on National Parks and Protected Areas. Caracas, Venezuela. p 119 –126. Litterer, J. 1997. ICE Case Study No. 12: Belize logging conflict. American University, The School of International Service. Washington, DC. Accessed Apr. 2010. http://www.american.edu/ted/ice/belize.htm Meerman, J. C. and J. R. Wilson. 2005. The Belize National Protected Areas Systems Plan. Accessed Apr. 2010. http://www.biodiversity.bz/find/resource/profile.phtml?dcid=23430 Rochen, A. Stock, J. (2006) The Choice: Doomsday or Arbor Day. Retrieved on March 17, 2010 from http://www.umich.edu/~gs265/society/deforestation.htm World Wildlife Fund (WWF) & United States Environmental Protection Agency (EPA). (1994).

Deforestation Technical Support Package. Young, C.A. (2010). Deforestation: Introduction to Tropical Rainforests [PowerPoint slides].

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