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

Afforestation and reforestation projects have been included under the Clean Development Mechanism (CDM) of the Kyoto Protocol. This paper discusses the policy and institutional issues involved in operationalization of forestry activities under CDM in India. The paper also addresses the following issues: additionality and baseline, non-permanence, leakage, measurement, monitoring and verification of carbon stocks and transaction cost for implementing forestry projects in the Indian context. The strategy includes definition of eligible land categories, potential activities, size and scale of projects, institutions for implementing them, and capacity building needs and activities. India has implemented a large afforestation and reforestation programme covering an area of 1.0 to 1.2 Mha annually in the past two decades. Despite this large baseline afforestation and reforestation activity, there is a large potential for forestry projects under CDM. The Government of India should initiate proactive regulatory as well as promotional measures to attract CDM projects in the forestry sector. Intensively planned, implemented and monitored CDM projects in the forestry sector are likely to provide maximum socio-economic and environmental benefits. India has vast degraded or wasteland available for forestry projects, which can halt degradation, create rural employment, conserve biodiversity and ultimately enhance the livelihoods of rural and forest dependent communities. The Government of India will have to play a proactive role in promoting CDM projects by creating an enabling environment; a simple and transparent institutional structure, and approval processes. Through proactive planning and appropriate guidelines, the Ministry of Environment and Forests should ensure that CDM projects contribute to sustainable development and reinforce national sovereignity. A large number of CDM projects, implemented in different regions of India, incorporating innovative technical, institutional and financial interventions, could lead to a large positive impact on programmes aimed at forest conservation and regeneration, reclamation of degraded land and socio-economic development of rural communities, in a participatory way