In the Agora: The Reforestation Premium

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December 06, 2006

The Reforestation Premium

Want a quick lesson in environmental economics? Well, here you go:

It is claimed that many environmental health indicators, such as water and air pollution, show the inverted U-shape: in the beginning of economic development, little weight is given to environmental concerns, raising pollution along with industrialization. After a threshold, when basic physical needs are met, interest in a clean environment rises, reversing the trend. Now society has the funds, as well as willingness to spend to reduce pollution.

And now for the case study:

A large and growing number of countries are reversing the longstanding trend toward destruction of their forests, a surprising new analysis has found . . .

A vast majority of the richer and more developed countries had more forest area and denser forests in 2005 than in 1990. In the United States and Western Europe the transition began decades ago, but it has increased rapidly in the last 15 years, the researchers found.

We've been over this before. But the fun part about environmental Kuznets curves is explaining them.

Environmental economist John Whitehead explains this by positing "that forests are normal goods (i.e., demand increases with income) and economic growth leads to reforestation." This is probably largely true. Prosperous individuals are more likely to have the time and money to preserve forested tracts of land, reforest, or lobby the government to do these things on their behalf.

But I think the picture is more complicated. As a second explanation, it's also likely that economic growth leads to superior substitutes for wood (as both building material and fuel) and better timber farming; third world consumers of wood probably lack tree farms and need more wood in the first place, especially for fuel. (However, if the reforestation the study found relies on these farms, which have low ecological value, the news isn't nearly so good.)

A third explanation is that forests provide valuable ecological services (such as erosion control and carbon sinks) we are only recently beginning to realize. A richer society is more likely to tabulate these vales and incorporate them into planning.

A fourth explanation is a common criticism of environmental Kuznets curves: we are simply "exporting" our deforestation to developing countries. Why cut down our own forests when the third-world will cut down theirs?

I suppose that to round out the theories I can add a final, far-fetched one: every country will have a minority of Loraxes, but only prosperous ones will have the means (mass media, non-profits, marketing departments) by which they can convince (or hector) the rest of us to value forests.

The bigger question is whether pulling the third-world into greater prosperity will lead to a similar reversal to reforestation. Since all the really nice forests are found there, I certainly hope so.

Posted by Zach Wendling at December 6, 2006 06:17 AM

Comments

"A fourth explanation is actually a common criticism of environmental Kuznets curves: we are simply "exporting" our deforestation to developing countries. Why cut down our own forests when the third-world will cut down theirs and ship them to us? "

Of course, here we could simply distinguish between "national" and "global" (or, more accurately, "local" and "general") EKCs. (The broader terms capture the pattern of development in, say, New York City better--Manhattan is a cleaner place than it was a century ago, but Jersey may well not be.)

The EKC is a compelling insight, but it tempts unwary conservatives and libertarians into believing that measured GDP growth is beneficial to the environment, when in fact unwieldy or unworkable property rights regimes in Third World and lack of pricing mechanisms for (most) pollution in the First should caution us against such Micawberism.

Posted by: PM at December 6, 2006 11:27 AM | permalink

I think one explanation could be the non-linear nature of human perception. I think when most people are poor, they perceive can't "afford" to consider much beyond their daily needs.
When most people are living comfortably, they are more likely to percieve second-order externalities like the state of the forests or the air around them to be more important than say, trying to get a meal.

Posted by: Dave S. at December 6, 2006 11:48 PM | permalink

December 06, 2006

The Reforestation Premium

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