Value of deforestation?

Siddhartha Krishnan and Seema Purushothaman

Some questions over compensating for lost forests

The Union government has drafted the Compensatory Afforestation Bill, 2008 to establish a compensatory afforestation fund. Revenues collected from agencies that divert forests (even protected ones) for non-forest use will be pooled into this corpus. Net present value (npv) has been adopted as an economic tool to calculate the compensatory fiscal value of diverted forests. But there are two question marks over the move. Firstly, can forests, especially the protected ones, which provide vital ecological and cultural services, be assigned an economic value in lieu of their diversion? Second, is npv an appropriate fiscal tool to calculate the 'compensatory' value of functioning physical entities such as forests?

Let us first consider the issue of assigning economic value to forests. The issue at hand here is assigning a monetary value to goods and services provided by forests. Forest products mentioned in the bill include non-timber forest produce and water, and the services mentioned include grazing, wildlife protection; carbon sequestration and flood control. The bill also takes note of the cultural and educational services of forests. But can monetary compensation make up for the diversion of these services? Take the Shola-grassland ecosystem of the upper Nilgiri Plateau. Here evergreen forests occur amidst the folds of vast undulating stretches of grasslands. Post monsoons these Sholas release stored rainwater and regulate its flow to the Kongu plains below. If these grasslands or sholas were diverted for development could their complex structure and functions be compensated for by money alone?

Past actions in diverting grasslands for eucalyptus plantations that fed pulp for paper factories have irreversibly upset the hydrological dynamics of the Nilgiri plateau. Wild grass and insect diversities have declined remarkably. Since these grasslands also served for centuries as material and cultural pastures for the Toda people, conversion into plantations also had implications for their subsistence and rituals.

There are many such forests that continue to provide ecological and cultural services. Take, for instance, the forests of Billigiri Rangswamy Temple Wild Life Sanctuary in Karnataka. Its landscape is a diverse mosaic of tropical habitats. Ecologists see the species diversity of the forest and its functionality as adaptations to centuries of shifting cultivation by Soliga tribals. The forests continue to provide non-timber forest produce to the Soligas and water to people in the Chamrajnagar plains below. The forests have tigers and their prey base. How can the variety of creatures that rely on this ecosystem be compensated, if these forests were diverted? Forests, especially protected areas that contain biologically and culturally diverse values need to be conceived as possessing incomparable values.

NPV an appropriate tool?
npv of an ecological system should indicate all the costs and benefits involved in maintaining the system as such and in comparison to a next best alternative. Once we know this value--a challenge given the variety of scientific opinions about valuation methods--it could be calculated for the entire area to be deforested and remitted to the fund as required by the bill. But whether this amount will be enough to generate an equivalent value to that of benefits foregone in the diverted ecosystem is not under consideration. Compensatory funds should ensure the same npv in the 'compensated forest' areas. Spending the fund on much less valuable land raises questions on the use of npv.

Surya Sen

npv calculated with added weightage on infinite flow of ecological and cultural services in the context of climate change, may in fact permit conversion of the landscape. It may provide incentive for the department to raise resources through diversion of forests while low npv of unit area diverted may trigger greater demand for diversion.

The npv approach to compensating ecological loss has another problem a single consolidated value per unit area of a particular forest type inadequately reflects the multiple ecological, socio-cultural and financial costs and benefits. A segregated multi-criteria approach to npv can probably address the problem. Accepting this approach depends on the political will to compensate for lost socio-ecological benefits.

The authors are with ATREE, Bangalore. Opinions in this article are personal

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