This week, I’m featuring a guest blog by my colleague, Dr. Jeffrey Vincent, the Clarence F. Korstian Professor of Forest Economics and Management at the Nicholas School of the Environment at Duke University.
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Most people would agree that it’s a good thing to improve governance: to make governments more accountable, bureaucracies more efficient, corruption less common, and property rights and the rule of law stronger. Most people probably wouldn’t think about the effect of improved governance on the environment, but people in the environmental policy community do, and they think it’s good, too. The forest sector has been the focus of most of this attention. Over the last decade, a raft of international organizations have launched initiatives to improve law enforcement and combat corruption related to forest resources. If you haven’t heard of these initiatives, it might be because many are under the banner of one of the worst acronyms ever written: FLEGT.
There’s empirical support for the idea that improved governance can reduce deforestation. In 2000, UC Santa Barbara economists Henning Bohn and Bob Deacon published a paper in the American Economic Review that investigated the relationship between deforestation and ownership risk in 62 developing countries. They found significant evidence that countries where ownership risk was higher lost forests more rapidly between 1980 and 1985 than countries where this risk was lower.
One of my hobbyhorses is the belief that deforestation is caused by logging. This seems logical—if you cut down trees, then there’s no forest left, right?—but it forgets the fact that a forest is a renewable resource that has the ability to recover from disturbance. Although logging can sometimes lead to the permanent loss of forest cover, in most cases deforestation results not from demand by loggers for trees, but rather from demand by farmers for the land the trees grow on. When I heard Bob Deacon present a draft version of the AER paper at a seminar at Harvard in the late 1990s, I immediately began wondering whether the results applied to logging. Does improved governance reduce timber harvests, and not just deforestation?
An even earlier (1985) paper by another University of California economist, Hossein Farzin at UC Davis, in the Journal of Political Economy contained results that suggested the answer might not be yes. One of the two most important ideas in resource economics is Hotelling’s Rule, which implies that a higher discount rate causes resource users to shift extraction toward the present—to accelerate resource depletion. (You’ll need to guess the other idea. Hint: think “Tragedy of the Commons.”) Farzin pointed out that while this was true for a user who had already made the investment required for extraction, the opposite could be true for a potential user still deciding whether to invest. In the latter case, a higher discount rate would reduce the present value of profits from resource extraction, and this could reduce investment. With less investment, there would be less extraction. So, a higher discount rate has opposing effects on resource extraction, and the net effect can be either positive (extraction increases, if the Hotelling effect is stronger) or negative (extraction decreases, if the investment effect is stronger).
What does this have to do with governance? Improved governance reduces risk, and reduced risk reduces the discount rate. So, we can expect improved governance to mirror the effect of a reduced discount rate and to have opposing effects on timber harvests. In 2010, a decade after the Bohn and Deacon paper (research takes time!), my former PhD student Susana Ferreira (now at the University of Georgia) and I tested this hypothesis in a paper, “Governance and Timber Harvests,” published in Environmental and Resource Economics. We compiled annual data on timber harvests, governance, and other variables during 1984-2006 for 67 developing countries. The panel structure of the data enabled us to control for unobserved differences across countries that could potentially confound the effects of governance. If you take Prof. Bennear’s course, ENV 350, “Program Evaluation,” you’ll learn how to do this.
Consistent with Farzin’s paper, we found that improved governance sometimes reduces timber harvests but other times raises them. Interestingly, it tends to raise them in countries with the worst governance. In those countries, where corruption is the most pervasive and law enforcement the weakest, investment in the equipment, roads, and mills or port facilities required for logging is evidently so depressed that it outweighs the Hotelling effect, with the net effect being to reduce timber harvests. Improving governance reverses this and causes harvests to rise.
This is a disconcerting finding for organizations that are promoting improved governance in the forest sector. It suggests that their efforts could wind up raising timber harvests in the very countries they are most concerned about. Now, higher timber harvests provide some important economic benefits, such as increased employment, government revenue, and foreign exchange earnings. These organizations believe, however, that timber harvests are already excessively high and are causing undue environmental harm. Our results suggest that cleaning up governments could make these problems worse.
This is not to say that improving governance is a bad thing. Improved governance provides other benefits, and our results imply that it can indeed be expected to reduce timber harvests in countries with relatively stronger governance. The important lesson is that policy interventions can have unintended consequences. If this is known in advance, then it might be possible to modify the interventions to manage those consequences. In the case of timber, such modifications could include more careful monitoring of logging investments and logging activity. Just improving governance is not enough.
It was interesting to learn that improved governance may actually have adverse impacts on the natural resources. The lack of infrastructure for logging and inadequate access to markets for products may have actually been beneficial for a country’s ecological systems by restricting the volume of extraction from the forests. With improvement in governance, advanced infrastructure became available and markets were more accessible, which caused the people to take advantage of the improved opportunities and led to increase in harvest. One of the problems with logging is that forests are generally an open access resource and the property rights are not well defined. Thus, each person, acting out of self interest will harvest as much as possible to maximize his own net benefit. One of the ways to clearly define the property rights on the forests and set upper limit on the volume of timber that can be extracted in each period. Or would something like logging quotas also be useful? From what I’ve seen so far, attempt to control logging and manage forests effectively leads to a lot of conflict which has mainly to do with the ownership of the forests. So, such issues will need to be resolved before we can plan reduction in deforestation and management of timber production.
This blog post is intriguing in that it illustrates a relationship which seems entirely counter-intuitive. However, I think it illustrates clearly a way in which an overreaching policy and somewhat of a top-down approach are not sufficient. By simply attempting to improve governance we cannot have control over the harvest of these forests. Rather we need more advanced forest management for each of these areas. As suggested by Sugandha we should attempt to solve the open access resource problem by capping the volume of timber which can sustainably be extracted from these forests. Perhaps if the governance encourages the purchase of forested areas by land trusts which can then conserve and allocate portions for timber production, we can more effectively attempt to control logging. However, as noted above, these techniques may be incredibly difficult in countries which lack the infrastructure and government structure. Logging is often associated with illegal activity and can happen frequently under a series of corrupt government which have little interest in the best management practices of the forested areas.
I think this post brings up a very good point that governance changes can have dynamic and unintended effects. I think something else that should be taken into consideration is the role that individual governments take on environmental issues. Increased governance may bring in more infrastructure and rule of law but the sway of those laws will be very important to the environment. If a government that supports environmental causes becomes more robust there should be an increase in forest protection, and hopefully a decrease in logging efforts, or at least more sustainable logging. On the other hand if a government which does not share these environmental ideals becomes more robust it may cause a decrease in environmental protection. With new infrastructure in place and lack of desire to enforce logging, things would be likely to get worse.
Even though this post was based on governance and logging, I was most intrigued by the fact that not logging, but the demand for cleared land for farming is more detrimental to the forest than logging. This seems logical after reading it, but I was unaware that this has a larger impact. I wonder if there has been any effort by governments (through improved goverance) to be able to direct farmers in such a way to sustainably clear for farming and reduce deforestation. I guess I’ll have to read Bohn and Deacon to find out. Additionally I found it interesting that improved governance had the uninetended effect of enhanced deforestation. The government must set regulations on tree removal within a specific area; but as we all know, countries with weak enforcement will have illegal logging. I agree with my colleagues that a top-down approach through improved governance is not the appropriate approach to regulate the deforestation issue. This is an interesting topic that I’d be interested in researching for alternatives beyond improved governance to reduce logging.
I, too, was struck by the magnitude of the agricultural industry on deforestation. Granted, it is fairly logical because, as Jeff mentioned, forests have regenerative capabilities. For example, in Duke Forest there are prescribed burns, which enable proper management of the forest. This burning would be considered a secondary succession, as would clear-cutting, etc. After a secondary succession, trees grow back, for example in the Piedmont region, Loblolly Pines and Sweetgum trees tend to be the first thing to seed and sprout. So, if the land was just harvested for timber, trees would grow back eventually. However, if an area is cleared for agriculture, then pioneer species (the first species that begin sprouting after disturbances) wouldn`t have the opportunity to grow. Therefore, the forest loses its natural regenerative capabilities.
I was also initially surprised that agriculture is one of the largest global drivers of deforestation. While in Mexico this past summer, I conducted surveys in rural areas as part of a project to assess the socioeconomic and environmental impacts of the national government’s Payment for Ecosystem Services program. At the beginning of the summer, I was confused as to why the surveys seemed to focus more on agriculture than forest use. Over the course of the summer, however, I came to understand the close tie between agriculture and deforestation.
Deforestation rates are highest in developing countries, where there are high poverty levels. In many of these countries, a large portion of the population survives off subsistence agriculture. Having little geographic or economic mobility, many people are limited to undertaking agriculture on the only accessible land- the land in their community. This may be marginal land poorly suited for agriculture, thereby requiring subsequent clearing of more land to maintain production and feed their families (as a side note, I recently read an interesting article discussing how outmigration and abandonment of agricultural field in rural Mexican communities is destroying the traditional agriculture-forest mosaic, thereby decreasing biodiversity).
Lack of strong land tenure exacerbates these problems. It leads to short-sighted exploitation of forest resources- a tragedy of the commons situation in which the forest is an open access resource. In some cases, clearing of land is used to make a case for legal land rights. For example, colonization rights in Brazil (and countless other countries) granted would-be landowners title to land three times the amount of the forest they cleared. Since tenure is so linked to deforestation, it is an issue repeatedly brought up in development of REDD policy (Reducing Emissions from Deforestation and Degradation). Many countries and organizations insist that for REDD to be effective, both agriculture and weak land tenure rights must be addressed as drivers of deforestation, with alleviating these issues as goals of the program.
I’m assuming that ‘improved governance’ as discussed in this paper includes land tenure. Although it is indeed unfortunate that improved governance might have more detrimental environmental effects than positive effects in corrupt countries, this seems that this may be a necessary evil- a stage to work through before emerging at more equitable, less environmentally damaging societies. Hopefully, these effects can be minimized with policy that aims to address governance, tenure, and agricultural as they relate to deforestation.
Rachel, you make a good point about improving governance being a necessary evil. It seems to me that because forests are renewable the policies that improve governance might increase deforestation at first, but perhaps we could improve governance to some tipping point where deforestation decreases below initial levels. I realize we should be concerned that deforestation is increasing, but maybe knowing that it will get worse before it gets better is valuable information for policy makers.
This is a fascinating example of the potential for well-intentioned policies to have startling and unintended consequences. In Environmental Law, we have come across all sorts of examples, from TRI to CERCLA to ESA, where policies result in outcomes that were not designed intentionally. Some of these are good: for example, TRI was a greater success at changing industry behavior than expected. However, in cases like CERCLA, industry learns to deal with new regulation in crafty and disingenuous ways that can be harmful. In the case of forests, if a country develops just enough infrastructure that the capital costs of forest harvest is no longer prohibitive, it is easy to imagine the scenario that Professor Vincent describes playing out. Suddenly, it is easy to harvest timber but your government does not have the safeguards in place to ensure that you do it in a responsible manner. It seems that given this knowledge, international organizations that care about sound governance and protecting the environment could develop strategies to overcome this part of the governance improvement curve where resources are not protected, perhaps by putting international monitoring efforts in place during the transition or working closely with countries to develop natural resource protection and enforcement measures as part of improved governance.
You mention international organizations playing a role in monitoring governance and environmental policies. However, the issue of sovereignty is a significant obstacle to the effectiveness of international organizations. Countries and their governments have the power of sovereignty and are certainly not going to hand it over to an IGO or NGO without a fight. Furthermore IGOs and NGOs don’t really have the authority to impose consequences when misbehavior occurs. They may be effective at starting a dialogue or providing information and training, but they will never be truly effective monitors in the sense you are implying. There simply is too much at stake for poor countries to forgo the potential of increased agricultural yields in favor of protecting the environment. A great deal of the countries who are major contributors to deforestation due to agricultural development are experiencing high levels of poverty and hunger. How can you really convince a starving person that saving the forest is more important than having crops to feed their family?
It is interesting to think that improved governance does not necessarily lead to reduced timber harvests. It makes sense that in the countries with the lowest governance, improving governance causes timber harvests to rise; improved infrastructure seems like it would be a large driver of this increase. This reminds me of the environmental Kuznet’s curve. (The environmental Kuznet’s curve depicts resource degradation increasing as GDP increases, up to a certain point, and then degradation begins decreasing with additional GDP increases.)
In Dr. Vincent’s blog, he mentions that most deforestation is the result of farmers clearing land to use for agriculture, rather than loggers clearing the forest to remove timber. To me, this seems to suggest that the effect of governance on logging is less important than the effect of governance on overall deforestation. If improved governance improves other outcomes, then its possible negative effect on logging may be less important.
It is extremely interesting to see how the relationship between governance and timber harvest is not as clear and intuitive as one would have originally thought. I understand the idea that logging is not necessarily a problem, and that changing land use is – this can actually be seen in land use plans across the country such as the California Coastal Act. When a parcel of land is designated as “prime ag land” for instance, it is very difficult to convert that land for any other use. Once the land use itself has changed, it becomes very difficult and sometimes impossible to convert back to the original state.
As a side note, one of my inspirations for joining the environmental movement was the death of a nun from my high school, Sister Dorothy Stang in 2005. She had spent 30 years in the Brazilian Amazon working to help stop the illegal loggers. To read more on Sister Dorothy – http://www.dorothystang.org/
I think this article is a very good real-world supplement to what we have learnt in class. In the class, the optimal logging decision is just based on tree values and discounting rate. However, in real world, we also have to count in costs of other equipment, roads and facilities, as well as benefits of increased job, government revenues and foreign exchanges. Change in governance will result in fluctuation of interest rate and in turn influence all the elements mentioned above. Moreover, it is also interesting to know that loss of forest at most time results from demands for farm lands. This claim reminds me of my undergraduate research on LULC in urban surburban areas. I came up with another idea that improved governance may even accelerate urbanization, in which process land covers will be changed rapidly. This might be another interesting aspect to look at.
Yifei, I was intrigued to learn of your undergraduate research since it provides another example of Professor Vincent’s point that under certain circumstances improved governance can provide the opposite effect one would expect. With both your Land Use, Land Cover (LULC) work and in the area of deforestation and timber harvests, I am interested in understanding better which situations lead to the Hotelling effect out weighing the investment effect and vice versa. I’m wondering how difficult it is to predict which effect will be stronger under a given set of circumstances, and if those predictions are industry specific. Given Jordan’s musings about applying the concepts from this article to fisheries, I am wondering if a prediction methodology could be universally applied across many sectors from forestry, to LULC, to fisheries.
This is an interesting analysis of the unintended consequences of improved governance, a seemingly good thing, on the environment. However I must admit that the thought of leaving countries in a state, “where corruption is the most pervasive and law enforcement the weakest, investment in the equipment, roads, and mills or port facilities required for logging is evidently so depressed that it outweighs the Hotelling effect, with the net effect being to reduce timber harvests,” personally made me cringe. I think environmentalists need to be incredibly sensitive to the unfortunate tensions between protecting the environment and alleviating human suffering or else they will face the risk of marginalizing their causes even further. While I understand that the article does eventually acknowledge that “improved governance provides other benefits,” I believe that the aforementioned tensions need to be addressed head on whenever addressing the general public. I would be very interested to hear more about the modifications, as mentioned in the last paragraph, that can be made so that improved governance and environmental protection are not in conflict with one another and I wish that had been the greater focus of this blog post.
I find this blog post to be a very interesting perspective on the logging industry and how governance and environmental economics play a large role. In conjunction of taking Resource Economics, I am also taking Environmental Law. Throughout the semester, It has been increasingly interesting how much economics and policy overlap and influence each other throughout the environmental arena. In the case of Dr. Vincent’s blog post, I was intrigued by the fact that increased governance could in addition increase logging. However, in certain scenarios governance could help other sectors of a corrupt government and this could help the country’s overall stability. I am interested in what other factors could influence increased logging, such as GDP per capita, geography data, history of political instability, and other influential variables. Also, I am interested in what assets the government spent the logging investments on? I agree with Ashley that I would have liked more information on the last paragraph. This would have helped me understand in greater detail the research that Dr. Vincent had conducted. However, a cliff hanger is always a good way to get people to pick up your research paper and go through the details on their own. Overall, I found this blog post to be very interesting and directly related to the content we are currently covering in class.
I also enjoyed reading this article. It is interesting to consider the adverse impacts of improved governance on the environment and people in developing countries. This reminds me to always consider policies with a holistic view. What works for some countries won’t work for all. The more I learn about the environment, economics, law, and everything else we are learning here, the more I realize why our environmental problems today are so difficult to solve. There is no one big solution, but every problem must be handled relative to the individual situation. Knowing very little about forests, when I started reading this article, I also thought the policy was a good solution. However, I was not considering developing countries political situations. I also hadn’t considered the effect agriculture is having on deforestation. I continue to enjoy learning about the interconnectedness of the world we live in and how to address our problems.
It ‘s not rare that the policy designed to prevent environment from deterioration has adverse effect on the environment.
One example I’ve learned and studied in college is charging mechanism dealing with waste dumping. By measuring the weight, the policy aims to reduce waste generated
It had been implemented in some countries in Europe and finally led to even more illegal dumping.
Not only hoteling rule and discount rate should be taken into account, as mentioned in the blog, the cost of policy implementation weighs heavily in decision-making.
In the case referred in the blog, the poor infrastructure and limited access to the market in developing countries could be considered as one type of regulation cost.
The Bad performance of a government always indicates less disclosure of information and poor transparency, even though the policy is misinterpreted when localized, which dooms the distortion the original objective.
Concurrently with this Resource Economics class, I am taking Dan Richter’s Travel Seminar course. For that class we visited a land trust property managed by Triangle Land Conservancy (TLC). Although it’s a little far fetched to extract lessons learned from a triangle area conservation easement property to international deforestation, it appears that the underlying economic problem is providing incentives for conservation as a form of governance. In the face of corruption, I can see how some means of governance would trigger faster consumption of resources, but in a system where monitary incentives are used, the landowner plainly benefits and there is no need to depart from the system. I think that even in a place with less corruption like the Triangle Area, governance with conservation incentives is a useful method. The landowner from the TLC site put her land under an easement to alleviate the pressure on her and her children to sell her land to a developer. I recognize that in places with more serious deforestation problems there will be a need for much greater funding and monitoring for this approach. Which brings us back to the question of how well governance can be implemented, unfortunately.
This was an interesting blog entry, I had never thought about increased governance as having a potentially negative environmental impact. As someone who spends the majority of my time thinking about environmental issues through a coastal and marine lens, it naturally led me to wonder whether these findings are transferable to other environmental issues beyond forest clearcutting.
For instance, would improved governance in countries that had little to no governance to begin with lead to increased fishing pressure in those countries? Would it lead to increased shoreline development? Would it lead to increased clearing of mangroves for shrimp farming? My guess would be that the phenomenon Dr. Vincent has described here would in fact hold true across the board (but I’m not an economist so I’m just guessing). It would be really interesting to find out. If this were the case, then these findings could hold a significance far beyond the realm of forestry.
To me it is a relatively simple solution (at least until you get into the issue of how to discount for the net present value of environmental protection). The issue Dr. Vincent describes is a problem of short-sighted governance. Most of the environmental policy we see in the states today, and in US policy in general, is retroactive as opposed to proactive, and prioritizes in such a way that addresses immediate concerns like economic boosts or short elected term lengths. The US has fortunately achieved a balance, more or less, in its deforestation/timber harvest, but it was a slow process and a long and brutal fight for environmental protection to get to where we are today. The majority of it also occurred in the 1970s and 80s, long after our country could be considered developed. Developing countries have an incredible opportunity because they can leap-frog over the slow-going path to development that countries like the US took when we didn’t have prior examples to look to. New technologies and successful established forms of environmental protection allow countries to make better decisions regarding their resources also, so that they don’t have to fit retroactive and reactive plans to their environmental problems, but can look to longterm projections and case examples for help in establishing a means to develop sustainably.
In my environmental law class, we are learning that, to echo Dr. Vincent, good policy isn’t just written well, but enforced well. Professor Salzman frequently cites highway 15-501 as a prime example for why enforcement is so necessary to what would otherwise be effective law (to explain, those of us with lead feet are pretty satisfied with the enforcement levels on 15-501). Ideally, a policy for governance will include a plan for enforcement.
A factor I am curious was considered in Ms. Ferriera’s study is the rapid growth of ecotourism today. I would be interested to see whether this was a consideration in the study and if not, why it was left out because it seems to me this would be an extremely large explanatory variable in the effect that overall economic development has on a developing country’s natural resources. I think this is also a fortunate phenomenon that the developed world has created and the developing world can (and is) capitalize on as a means to leap-frog. Costa Rica for instance has protected nearly 75% of its land by leveraging its natural resources as a form of income for its citizens. By looking into the longterm productivity of well-maintained rain- and cloud forest tourism, the government has established stringent regulations for this land and provided many jobs for its citizens in the process. Similarly, Ecuador has seen heavy investment in ecotourism opportunities in the form of a skyrocketing number of college graduates from the country’s ecotourism universities. I am looking forward to learning more about what countries will do to address this counterintuitive issue of the negative effects of government policy on natural resources, which luckily has come to light and hopefully will result in increased sharing of ideas between developed and developing governments.
This blog is yet another illustration of why we as environmental managers need to use a systems approach when thinking about all the moving parts of an ecosystem. A majority of the students have already made comments about the importance of looking at several connected factors, such as politics, regeneration rates, etc., so I will not continue harping. I will say that I do not think the solution is not as simple as placing a cap on the mass of timber harvested in a given time period. That is a far too static solution for such a dynamic monster. How will these limits be enforced? Will there be a harvest police? What about all the remote forests? And most importantly, how can society avoid the mistakes learned from fishing quotas and the “race to fish” because of these daily limits. All of these concerns need to be taken into consideration when dealing with the management of natural resources.
This blog is a good supplement for our class. In class I learnt that a higher discount rate will lead to faster extraction,now I know it may also lead to less extraction for investors who are deciding whether to invest. It also makes me informed that the improved governance could lead to negative impacts on forests. The logic is all based on discount rate, so I’m wondering in our real world, what is the exact discount rate we should look at, or is it just conceptual?
When reading the comments, I recalled the blog of fisheries. I agree with Jessica that simply capping the volume could lead to more fierce competition of logging. What’s more, I don’t think define the property right is a good way to solve this problem, since privatization emphasizes the freedom of markets and we cannot ensure people’s reliability. If we define the property right to individuals, they may want to maximize their own interests and thus neglecting the potential interests or conflicts among individuals,corporations and the country.
This was a very surprisingly interesting read for me about forests and the unintended outcome of increasing governance. Like the title says, “Be careful what you wish for.” This post has really left me hanging and more interested in the overall benefits of increased governance when it has an adverse effect than what individuals may want or predict. I believe that in this case a lot of attention must be paid to outside factors that are related both directly and indirectly to the harvesting of forests.
I really enjoyed reading this article and find really interesting the relationship between governance and timber harvests. In developing countries we always try to solve the governance problems and think of it as the only solution to all problems. While it is true that poor governance has negative effects in development, environmental management, and many other things, it is also important to realize that poor governance and corruption are consequences of other problems. I ask myself if it is the lack of incentives what makes people behave the wrong way. It seems to me that generally the laws and policies do not consider that incentives are what drive people’s behavior, whether they are economic or from other kinds.
It could be that those countries that have the worst governance, do not consider the importance of providing incentives in order to reduce harvesting or any other harmful activities. As Dr. Vincent mentions, timber harvests provides many economic benefits that are important incentives for the people involved in this activity. In developing countries where governance is so poor, people have fewer opportunities and therefore governance has less impact on their immediate decisions. Although promoting good governance is really important in developing countries, I think that it is even more important to think why people take decisions the way they do, and the role that economic aspects play in any policy or change.
As was pointed out in the beginning of this post, logging does not necessarily lead to deforestation if the forest is allowed to regenerate. Furthermore, logging can have positive impacts on forest health if done sustainably — it can thin out unhealthy trees and provide space for shade-intolerant species to grow. Therefore, I believe there could be positive results if forest extraction increases in some developing countries through improved governance, as long as the improved government also regulates for sustainability. I’m not sure how exactly one goes about cleaning up governments but if it is done with an emphasis on sustainable development it could be very beneficial for that country’s economy and environment. As the post claims that it is the countries with the worst governance that see this increase in extraction, they could prove good opportunities to create a sustainable economy from the ground up. With so little regulation already in place it is possible to make sure sustainability is integrated into all new policies. Of course, the political situations in these countries are extremely complicated and it’s never a simple task to build good government, but the point that increased governance can lead to more resource extraction doesn’t have to be a bad thing.
The part of this entry that most struck me was the mention of organizations doing work in developing countries to discourage future timber harvesting. These countries have a strong mission and great intentions, but if they attempt to protect forests by strengthening and improving the management and governance systems, they may be unknowingly facilitating the development of the very industry they contest. Better governance, in this case, is not the answer.
This causes me to question how many non-profit or other initiatives have originated in energy and passion for a cause but ultimately lacked a sound, market-based foundation for action. I estimate that it occurs more often than we might realize. Our actions reverberate in the world and affect change that we could not predict or comprehend. We must acknowledge the power of our enthusiasm and honor our good intentions, but take care to assess and truly understand the consequences of our actions.
With COP17 coming up, this blog has me thinking about Reducing Emissions from Deforestation and Forest Degradation (REDD), an international initiative to create financial value for carbon stored in forests. The intent of REDD is to reduce emissions from deforestation. However, the idea that more governance may lead to more deforestation can also be seen in this policy with the benefits of REDD going to governments and logging companies who are responsible for deforestation in the first place. There is concern that these groups will use REDD to obtain control over old growth forests, but then actually cut them down for industry. It will be interesting to see how forests, climate, and people are taken into account in discussions about REDD at COP17.
I fear that the ideas in this blog will lead people to believe that better governance is a bad thing (as evidence by some of the above comments). Better governance allows for improved living standards and lifts people out of extreme poverty. From my reading of the blog, better governance only promotes more timbering when going from an extremely low level (i.e. non-existent) to some minimal level. My take away from the blog is that we should support governance improvements that go beyond some minimal threshold and also strive to inform these weaker governance system about the economic benefits of controlling the rate of harvest. It seems unlikely that these governments will have the enforcement and monitoring capabilities to successfully implement any sort of quantity limitation (if we really are discussing countries that currently have the lowest levels of governance). In addition, we need to remember that we are talking about sovereign nations, and we can’t force whatever system we think is best upon them.
I found Jeff Vincent’s blog post about how improved governance might affect the deforestation due to logging in less-developed nations to be very thought-provoking. Particularly, I am intrigued by his description of how improved governance decreases risk, which, in turn, decreases the discount rate for the economic model of a forest stand, leading to more timber sale deforestation in these countries. Although deforestation is bad in any situation, I wonder if this increased governance that potentially leads to more forest clearing by logging is a better option when compared to forest clearing by slash-and-burn agriculture, which has a multitude of social and environmental repercussions. In the case of increased governance coupled with the more careful monitoring of logging investments and logging activity that Vincent calls for at the end of his post, there might be an opportunity to both provide jobs and income for local peoples while taking the environmental impacts of logging into account through replanting or other responsible and conscientious management practices.
The blog main idea mentioned that according to Vincent’s latest study, improving government can have both the Hoteling effect and the Investment effect on logging, thus if some organizations want to protect the forest only by improving government (or by reducing the discount rate), they might meet with some undue consequences, such as losing the forest more faster because of the increasing investment in logging with the improvement of government.
From my personal opinion, there is a way that can help to predict these undue consequences. It is social survey. In this case, the reason why the consequences are out of prediction is that some research studies ignore the Investment effect. The reason why the investment effect is ignored is that the researchers fail to take into account those who have not invested in logging but may be interested in. A well-designed social survey can help the researchers and organizations learn more about all kinds of people’s potential response to a new policy. For this logging issue, we might carry out a social survey asking people whether a change might take place in their decision of logging or not, if yes, what the change is. Besides, some individual interviews might help to learn better about the fact because they can show the specific thoughts people have.
Of course, only social survey is far from enough. What I want to say is that when we study some things, we should also think from a qualitative angle as well.
I actually worked at the Duke Forest over the summer. This was an interesting post and gave me a different perspective. I actually saw forestry on the ground from inventory to timber cruising. I thought little about policy while I was there other than just simply wondering how it all worked. It’s interesting to think about forests as a renewable resource. Thinking about the size of the Duke Forest, I was amazed at how it was managed sustainably. This post made me look at it from an international perspective, a lot different than being in the woods in Durham County. The takeaway from the post that policy interventions can have unintended consequences is critical. Like Jessica mentioned a systems approach is needed and understanding the nuances to those decisions is why I’m here.
People always think that through improved management on the environment, especially on forestest, the environment will be better and there will be damage. But the reality will be contraray. Part of reason, I agree with Dr. Jeffrey Vincent’s view that reduced risk would lead the decrease of interest rate and thus the logging is actually encouraged. The other reason is, in the forming process of a log market for developing countries, the market is nor robust and unstable, there will be a lot non-standard behaviors and irration decision and investment, which might lead to unexpected high harvest spead and the replant action is really in doute.
However, as Dr. Jeffrey Vincent pointed that “logging can sometimes lead to the permanent loss of forest cover, in most cases deforestation results not from demand by loggers for trees, but rather from demand by farmers for the land the trees grow on. ” So if we the governance really reduce the interst rate for logging, then the demand of logger will increase. Will this increase the competency between farmer and logger for land and finally lead to decrease the demand by farmers for the land the trees grow on? If so, the governanc might still reduce the deforestation.
I find it interesting that improved governance for the more corrupt countries results in more timber harvest. As Jeff pointed out, this has implications for the sort of policy interventions that are being used that are founded upon the assumption that better governance may result in increased timber harvests. However, I believe that it is difficult for me to understand that these results mean that cleaning up governments could make timber harvesting problems worse. This is partly because I know initiatives that strive to improve local forest governance because it results in more sustainable extraction of resources. However, these systems tend to falter when the federal government gets involved because these dynamics are decreased. So, the type of governance and at what level seems like it would play a factor in this overall suggestion that is made.
Overall, I agree that just improving forest governance is not enough. Although cleaning up governments may have costs or benefits, there are other incentives at work that push people towards timber harvesting. These are probably more nuanced to each country or even sub-nationally and this result provides a great platform from which to begin systematically seeking out what other nuances come into play that incentiviez timber extraction.
As a native Oregonian, I can’t say how many times I’ve driven to the coast, looked out the car window, and lamented the increasing amount of clear cutting. I’ve always been saddened with the amount of logging and always find the sight of trucks carrying trees depressing. For this reason Dr. Vincent’s blog intrigued me- the though of agricultural pressures having more deforestation impact than logging is surprising. It does however, make sense. I believe in Oregon we have a decent rotational schedule in place that allows areas to regenerate before being cut down again. There is no such regeneration in an agricultural area.
It seems that an improvement of governance resulting in an increase in deforestation might be caused by poor, short term planning. It is intuitive that improving governance leads to the increase in industry, profits, employment, and so on. I would expect that there would not be an increase in deforestation because in theory, there are improvements being implemented all around. However, if a country is looking to make as much profit as possible, it is certainly not out of the realm of possibility for short sighted decisions to be made, such as over harvesting resulting in detrimental impacts on the environment. This is a scenario where looking to the long run is so incredibly important. We tend to forget or brush off the fact that today’s actions can and will have large impacts in our future.
I think this post marks the first time where, after a summer partially spent grappling with cash flows and now with a semester of ENV 270 under my belt, the term “discount rate” has assumed some iota of tangible meaning for me beyond the oft-tossed around and very abstract “how much you value your money now versus how much you value the use of that money later.” It’s like, I could never relate to “how much I value my money in the present vis-a-vis the future” because I’ve never in my life operated with more money than what is required to get me through the quotidian struggle.
That being said, the discount rate has always made sense conceptually and I get that it allows you to evaluate different investment opportunities. But where does it come from? Who sets it? What does it measure? This summer I was, amongst other things, working to develop a 2 MW solar farm and found it crazy how the discount rate could make or break our investment decision. We’d come out with a negative NPV with a higher discount rate, but if you made the discount rate juuuussst a little bit lower, Voila!…a positive NPV! Invest invest invest! Can’t we just set the discount rate to a level of our liking, one that would allow us to invest?
Linking the discount rate with the inherent risk of investment is the first time I can think of where the discount rate actually, like, MEASURES something (sorry for the colloquial tone). And the example provided in the post checks out logically: if the risk of investment, and thus the discount rate, is high, this will lead to an increasingly lower net present value the longer the time horizon you’re considering, so if you’ve already invested your money you want to extract as fast as possible to maximize your returns. If you haven’t invested your money already, the high discount rate (high risk) will deter people from making large, long-term investments, leading to lower overall extraction. When “how you value your money in the present versus the future” is equated with a prolonged period of high risk, the discount rate is something I can grasp.
How can this risk-based perspective of the discount rate be applied to the solar farm example, then? The risks associated with developing a solar farm include the durability and longevity of the equipment, the cost-competitiveness and reliability of the product (solar power vs. conventional generation), and the ability of the developer to service the debt, all over the life of the project, which for solar installations generally runs between 20 and 25 years. The embedded risk stemming from these three areas is pretty low–PV panels require low maintenance and usually carry 20-year warranties; solar power is becoming increasingly cost-competitive and provides a supply of power at times of peak demand, lessening the need for large, capital-intensive peaking facilities; and most entities should be financially sound enough to service the debt over 20 years, otherwise they wouldn’t be in a position to pursue solar projects in the first place. These three things taken together result in a low overall risk of investment. An independent financial analyst however was telling us we needed to work with a discount rate of 6%. Clearly the discount rate was taking more into account than simply the risk of investment….perhaps “alternative investment opportunities,” an equally abstract notion when you’re looking at a very specific investment opportunity like clean power. Sigh. It looks like the discount rate will continue to keep me up at night for the time being.
I found this blog post very interesting because I do not know much about forests or about policies with respect to forests and deforestation. This blog post also demonstrates the importance of making an effort to consider all aspects and effects of a policy before implementing it. Unless one takes a systems approach when implementing an environmental policy, it is likely that the policy will have unintended consequences. I think this is something that we all need to remember in the future.
Frequently, it appears that there is a simple, clear, solution to a problem and one wonders why it has not yet been implemented. However, such an apparently simple solution is likely not to be quite as simple as anticipated, and it is likely to have effects that one has not considered. I think it is great that we are getting the training at school that will prepare us to be aware of potential unintended consequences and to take a systems approach to a problem before jumping into a solution.
On a side note, I find it very interesting that most of the deforestation issues are not the result of logging, but instead, are the result of the pressure to use the logged land for farming. Although this is not something that I would have thought about previously, it does make sense. Also, I think this raises a bit of an ethical issue. Most people believe that deforestation is wrong and should be prevented through the re-growing of harvested trees, whenever possible. Clearly though, such replanting often does not take place because the land is being taken over for farming.
Many of the most deforested countries are developing nations that suffer from a scarcity of food. Because deforested land in those countries is used to grow food and prevent hunger, this conversion to farming could be viewed as a good thing. Thus, if people were more aware of how the deforested land was used, they might be less opposed to deforestation. Nevertheless, I think the optimal situation would be to have some land, converted to use for farming, while preserving other forests, which can act as habitats for different species and function as carbon sinks among other things. Also, if forests are harvested in a sustainable manner, a lasting source of revenue for the country will be created, which hopefully will assist that country in moving toward a more economically viable future, overall. Such a process would require planning that takes both individual and societal needs into account.
The part of this post that resonates most with me is the part about modifications that can be made to the governance/policy structure surrounding the natural resource (in this case timber). It baffles me that there are still regimes of natural resource policy that do not use adaptive management. This is one of the most important ways to ensure that the natural resource management structure your governance system has implemented minimizes unintended consequences.
That being said there is no amount of adaptive management that can help a natural resource market when you have corruption within your system. You can work outside the systems as much as possible, making as many recommendations on ways to change the system; but, if there is a lack of enforcement and corruption within the overarching governing structure there will be no change. Corruption causes overexploitation.
I found this article to be very interesting. I wouldn’t have thought that improving governance could have the effect of increasing timber harvests. While I know this is not within the scope of this article I think it would be interesting to know how other resources may be affected by improved governance. In particular, activities that require improved infrastructure like mining of precious metals. I wonder if there would be similar effects. Could this idea extend to other non-related sectors?
I’m curious about the lack of mention of a correlation between corrupt governments and illegal logging. Many weak governments, even including those of Indonesia and Malaysia, have huge problems with illegal logging. While they attempt to reduce their deforestation, they in fact have little control over it because of the simple fact that they don’t even know how much of it is happening because the majority is illegal and unreported. This seems like it would significantly influence the variables used in the tests, and may explain why why countries with weak governments have less harvesting of forest timber–they may only have less reported harvests while in fact they have much higher harvests (with lower investment costs considering the land is never purchased by illegal harvesters).
I think Britta brings up a great point, that while it may seem that a lack of governance is best when it comes to deforestation, perhaps that conclusion is just a red herring for the fact that lack of governance can also lead to poor record-keeping. In reality, these countries could have just as much deforestation, but no one is taking note because the government infrastructure is not in place to do so.
Though, even if what I wrote above proves to be false, I thought the post was very interesting and definitely counter-intuitive. It’s also hard to think of a solution because there are, like Yifei said, many factors at play here. The left-wing part of me wants to say “government enforcement on everything!” But this seems like one case where that would prove to be a bad thing.
I was wondering this too! Illegal logging is a big problem in some developing countries.
While I’m surprised that improved governance is associated with increased timber harvests, I’m wondering if this is necessarily a bad thing. Are forests replanted more consistently with better governance? It seems logical that better governance comes hand in hand with better forest management, and therefore higher harvest rates coupled with higher replacement rates.
To me, this blog is an extended study for the class of Renewable Resources. From Env.270, we learned that according to Faustman Formula, the rotation length of timber harvest will be shorter as discounting rate is larger. But this simple model is based on the assumption that the timing of timber harvest only responds to the price of timber and the harvesting cost. In real world, problems are more complicated. The way that increased discounting rate affect timber harvest will be different between the situations of post-investment and ante-investment. Thus improved governance which reduces risk will not necessarily lead to reduced deforestation. Moreover, improved governance is usually at the risk of temporally increased unemployment and more government expenditure. So improving governance is not a foolproof solution. The key is to understand under certain situation, the relative weight between investment effect and Hotelling effect, so we can correctly estimate the results of improved governance. In some African countries where governments are not bounded by law, as discussed in the blog, these are the exact countries where improved governance will lead to increased timber harvest. How to change the result, by updating regulations about timber harvest accordingly? I’m very interested in this question and may continue to study about it.
This is very intuitive as an extension of the class that besides the Hotelling’s Rule, we also need to consider the investment effect. Actually I thought of this question when we were learning the Hoteling’s rule, and now it clarifies my thought. Moreover, the idea of how improved governance could affect the deforesting is very attractive. However, there is still one question left. As was mentioned in this blog that “in most cases deforestation results not from demand by loggers for trees, but rather from demand by farmers for the land the trees grow on”. Than how can we explain the improved governance can affect the land use of forest? My guess here is that improved governance may lead to a better society with more advanced technologies and industries, than the forest land use by farmers should be recovering from that decreasing agricultural population. It seems that the blog only interpreted the result from the perspective of relationship between improved governance and logging decisions.
Last but not least, I always expect an improved governance is associated with better environmental management skills, which hopefully will lead to a better usage of the forest resource and also all the other resources.
This blog remind me one of my research in the summer of 2008, the research was about returning farmland to forest in Shanxi Province, China, I didn’t do research about other developing countries, But most deforestation area of China are caused by people’s demand of land for farming, but not logging. In those areas, the poverty is the biggest issue, people can merely sustain their living; also because of the low quality of the land, the productivity of the land is very low. So they need more land to farm, so they can sustain their living. The ownership risk in those area are very low; the land including the forest are all assigned to each household, the farmers turned the forest to farming land were just out of the need to feed their family. But certainly, higher ownership risk would accelerate the speed of deforestation because the theory of tragedy of common for the nature of forest as an open access resource. Also the blog raised a very interesting perspective that the improved governance would have adverse effect on the forest, the governance intervention could result in unwanted effect because in the real world, the situation is more complicated, the change of governance will lead to the change of cost and benefits of harvesting effort, but just the theory we learned in class.
This blog post provided an intriguing example of how economic development is often at odds with environmental protection, and serves as an important reminder of how “improving governance” alone is not enough. It makes sense that the relationship between improved governance and timber harvests is greatest in those countries that were the most corrupt and incompetent to begin with. I would be interested to see what improved governance in these countries actually entails. Improving governance could include the provision of necessary infrastructure for development and stronger rule of law, which makes a country more investment-friendly, and yet governments could still be focused on exploiting natural resources for development and have little concern for environmental protection. While it would be most ideal to enact policies that improves governance in such a way that allows for sustainable development, given that the subset of countries we are talking about are likely among the poorest and most corrupt in the developing world, opening up the markets to investment may indeed be a necessary prerequisite to development, especially if improving governance leads to increased levels of investment in the local economy, job creation, and poverty alleviation. Of course, the adverse effects of deforestation are also intimately associated with poverty, so it would be in the interest of these countries to incorporate policies and regulations to mitigate the environmental impacts of excessive logging and other consequences of economic development. I would be interested in how these (corrupt) governments could be incentivized to monitor and deter logging activity and balance economic development with environmental protection, especially since efforts to reduce logging likely affects the economic interest of corporations. Perhaps this is where IGO and NGOs can play a role in advising governments and corporations on what good governance should entail.