Costs, benefits, forest, and water


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Trying to put a dollar value on the environmental services forests provide has become a veritable cottage industry. Many advocates claim such studies will help convince policymakers to conserve or create forests. However, the more rigorous studies often generate surprisingly small figures for most of these environmental services, except carbon sequestration.

Personally, I don’t believe much in applying traditional cost-benefit analysis to determine a forest’s worth. Such exercises typically come up with low values for many of the same reasons that market prices do not fully reflect forests’ true contribution. Huge uncertainties plague the results. Rather than favor conservation, they could justify the massive elimination of natural vegetation. Opinion polls consistently show that the public does not want that.

Among those who do believe in such approaches, Bruce Aylward is one of the best in the business. His ’Economic Analysis of Land-use Change in a Watershed Context’ reviews both the developed and developing country literature on the value of the hydrological services forests provide. That literature focuses on the role of forest cover in avoiding the sedimentation of reservoirs, rivers, coastal areas, harbors, and irrigation systems. Less sediment often means more useful space for water in the reservoirs, easier navigation, lower dredging, turbine maintenance, and water treatment costs, and less damage to aquatic ecosystems. The size of the benefits varies widely. Exaggerated and poorly documented claims abound.

Aylwards points out that few people have studied the economics of how forests affect annual water yields, flooding, dry season water flows, and ground water levels. Among those that have, several found that the absence of tree cover can actually provide major benefits since it increases the total amount of water flowing into reservoirs and lakes. Most studies that show forest cover significantly reduces flooding damage and the cost of dry season water shortages use weak data and questionable methodologies. Unproven assumptions frequently drive their results. Our existing knowledge does not allow us to say much about the economics of how deforestation or reforestation affects flooding or dry season water shortages. Future research in this area should address these issues and not just focus on sedimentation.

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Further reading

To obtain a free electronic version of Aylward’s paper or send comments, you can write Bruce Aylward at