Valuing forests: a review of methods and applications in developing countries

This report focuses on recent advances in the economic evaluation of forestry activities and, in particular, on how techniques for valuing non-timber forest benefits in monetary terms can assist the development of forest policy and management systems.The report presents the empirical literature which suggests that non-timber and non-market values of forests in developing countries are often significant, when compared to the market value of forest land for timber extraction and agricultural production.It argues that information on the economic significance of non-timber forest benefits can and should be incorporated in private property rights, forestry regulations and pricing policy. It suggests that this potential has not yet been realised largely due to political and institutional barriers but also because of the lack of regular, reliable information on the use of (and changes in) non-timber benefits.An important priority is thus to develop routine systems for monitoring and evaluating nontimber forest benefits on a national and local scale. The bigger challenge, however, is finding ways to “internalise” non-market forest values in local, national and international decisionmaking. Economists need to focus more attention on the institutional requirements and transaction costs of bringing non-market forest values into the market-place, including efforts to estimate the marginal costs to forest land-users of shifting from their current behaviour to more environmentally-friendly land use practices.Recommendations to forest managers and policy-makers:assess the current and expected future economic importance of non-timber benefits at the level of the forest site, region and nation, and under different land use and management regimesmake informed trade-offs between the marketed and non-marketed benefits of forestry activities, both at the level of national or regional land use planning and in the management of particular forest sitesdevise regulations and incentives which lead forest managers and land users to account more fully for non-market benefits in their decision-making. Where non-timber values are held mainly by foreigners, this may imply the need for innovative mechanisms for international financial transfers for environmental benefits