1185243 What are the causes of tropical deforestation? How can National Government Policies affect deforestation?

The rate of change of forest cover in the past few decades has been alarming (deforestation was at its highest rate in the 1990s, when each year the world lost on average 16 million hectares of forest )1. In this essay I will attempt to delve into the issues of what the actual causes of tropical deforestation are and the actions that the government can take to affect deforestation.

The initial issue that needs to be tackled is to firstly establish what deforestation actually is, and then the negative (as well as positive) implications it can cause. The literal term deforestation, as the word implies, just means the removal of a forest in order to exploit the land for a non-forest use. All over the world, forests are giving way to plantations for oil palm, rubber, coffee, tea, and rice among many other crops. The exponential increase in world population has caused great trepidation in the fate of forests. With available land growing scarce in response to the high number of births and low mortality rates that have become custom over time, pressure is being put on the world on how to actually meet the demands of the growing populace. A main growing concern is the increasing popularity for biofuels; as the prices of traditional fuels soar, biofuels are becoming a very viable alternative, the problem however is that biofuels are derived from oil extracts planted typically on forest land that has been cleared.

Graph 1

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Graph 1 shows the population increase over a 400 year time span for both the developing world and the developed world. The most alarming issue at hand is the rate of increase in the population in the developing world in the 1950 2150 (if the trend stays true to predications). To meet this increase in demand, we must boost agriculture and make the sector more appealing. In order to do this the government offer subsidies to reduce costs for farmers, thus making the sector more lucrative as well as attractive.

Graph 2

Graph 2 shows that when a subsidy is introduced, supply increases and the activity becomes more profitable. As a result current producers begin to produce more, and new producers enter the industry due to the potential profits that can be made. Subsidies however act as a double edged sword; the major qualm with this approach is that in order to accommodate this increase in supply, current forest area must be felled in order create this new farming space.2

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Graph 3 In response, to an increased demand for land conversion, forest owners can increase their supply and sell at a virtually identical price at a higher quantity

Throughout this essay, the thought of deforestation has been discussed in a semi pessimistic manner; the truth of the matter is that a zero level of deforestation is also not desirable; we have what is known as an optimal level of deforestation. We must remember that for deforestation to occur, there must be some demand or some economic benefit gained from this activity; we must weigh up these benefits with the costs of deforestation. Unfortunately quantifying the costs of deforestation is a very difficult task. The economic system fails to identify the true value of a rainforest and many functions of a rainforest are not marketed and thus ignored in decision making. For example forests act as substantial carbon sink; In Mexico, the resulting carbon balance from land use change represented approximately 40% of the estimated annual total carbon emissions for 1985 to 19873; furthermore this not only affects Mexico, but in actuality the whole world too due to the issue of global warming. The matter of global warming is only one of many, but because these properties are not valued properly, cost benefit analysis may neglect these issues when deciding an optimal level of activity, thus making the optimal lower than the socially efficient.

1185243 Typically, when weighing up costs and benefits, the optimal level of activity occurs where the marginal cost is equal to the marginal benefit, however in cases such as deforestation, where the act causes not only domestic externalities, but also cross border ones, the actual optimal is where marginal cost, including global costs is equal to the marginal social benefit.

Graph 4

The point formerly made is illustrated in graph 3. The true socially optimal level of deforestation occurs when the Marginal Social Benefit (MSB) = Marginal Cost (including global costs)

Trade is an integral cog in the machine of deforestation. Going back to our previous point, by not identifying the true value of a forest, loggers may not be taxed at a high enough rate, thus not internalising the negative externalities inflicted through their actions and also encouraging inefficient domestic wood processing industries. Plantation forestry with well-defined property rights can help combat excessive logging with inefficient production methods; by establishing well defined property rights, the government can help to incentivise sustainable timber production in the long run. Furthermore all aspects of a country can affect deforestation, not only government policies solely targeted at forests. If a country were doing well economically and their currency was strong in

1185243 comparison to others, then importing timber may be a more feasible option than growing domestically, thus decreasing land conversion due to timber logging.

In addition, perhaps a global compliance system such as REDD+ (which stands for countries' efforts
to reduce emissions from deforestation and forest degradation, and foster conservation, sustainable management of forests, and enhancement of forest carbon stocks) will necessitate

clearly defined and allocated forest carbon property rights, in the form of carbon credits or certified emissions reductions, with liability assigned for possible future carbon release into the atmosphere.4 Limiting the amount of carbon being produced by a country can inhibit deforestation by taking into account the carbon emissions released when deforestation occurs.

Deforestation due to urbanization and infrastructure building attract people from the rural areas into the urbanized ones. With an increase in population more roads need to build in order to capacitate the increase in traffic; the increase in roads allows companies to penetrate deeper areas of forests and extract more resources. Road building increases the ease of transport and decreases the distance to markets for producers making their activities more profitable. The simple correlation between roads and deforestation, however, overstates the causal link from the first to the second, because roads are partly endogenous. Some roads are built precisely because an area has been cleared and settled, rather than vice versa.5

If the government were to implement some sort of road pricing to ease traffic and congestion, this would decrease demand for roads and can lead to less penetration of forest area in the long run. Increase in road building can also be beneficial to deforestation, if a country were to implement a system of carbon credits; increased carbon emissions from cars would mean less carbon is able to be emitted the release of carbon when trees are cut down, therefore less deforestation.

1185243 The government can initiate marketing campaigns to boost the eco-tourism sector, giving a previously non-marketed or poorly marketed function of the rainforest a new stream of revenue. If the eco-tourism sector was doing well, then owners of the forest would be less obliged to sell forest land for agricultural use or any other uses.

The growing population is a worrying matter; if the population continues to grow at the rate which it is currently growing, more and more forest cover will need to be converted for agriculture, eventually we may even experience the Malthusian catastrophe where population growth outpaces agricultural production. However I digress, I believe that the key determinant of deforestation is for the need of more agricultural land. Because of the non-marketed values of the forest, forest owners whose moral compasses do not point north, have little reason to not sell their forest land in the face the demand and unless an international treaty is established that protects the forests then the percentage of forest cover will continue dwindling until reaching a critical value.

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REFERENCES

Graph 1 http://www.coolgeography.co.uk/Alevel/AQA/Year%2012/Population/Population%20change/Global_Population_Change.htm Graph 2 http://tutor2u.net/economics/content/topics/marketsinaction/producer_subsidies.htm

Figure from http://www.earth-policy.org/indicators/C56/forests_2012

Economic Models of Tropical Deforestation A Review David Kaimowitz and Arild Angelsen 1998 by Center for International Forestry Research All rights reserved. Published 1998. Printed in Indonesia Page 90 http://www.cifor.org/publications/pdf_files/Books/Model.pdf
3

Trade and Deforestation: A literature review Juan Robalino and Luis Diego Herrera December 2010 Page 3 http://www.wto.org/english/res_e/reser_e/ersd201004_e.pdf
4

Property rights and liability for deforestation under REDD : Implications for permanence in policy design Ecological economics [0921-8009] Palmer, Charles yr:2011 vol:70 iss:4 pg:571 -576
5

Economic Models of Tropical Deforestation A Review David Kaimowitz and Arild Angelsen 1998 by Center for International Forestry Research All rights reserved. Published 1998. Printed in Indonesia Page 93 http://www.cifor.org/publications/pdf_files/Books/Model.pdf