0409-B2
Mustafa F. Türker, Atakan Öztürk and Mehmet Pak 1
As sustainable natural resource, forests produce many positive externalities or external economies. Such as regulation of climate, conservation of biodiversity, carbon storage, erosion control and other non-wood values. Conversely such biotic and abiotic events as faulty management practices, erosion, avalanche, forest fires, are examples of negative externalities to forestry. In this study, some externalities related to forestry were examined. Also, threshold values for these externalities were estimated in conservative manner. For this aim, Turkey country report, prepared by the writers of this paper, of Mediterranean Forest Externalities (MEDFOREX) Project is used for these estimations. As a result, US $ 621 272 995 positive and US $ 173 607 537 negative externalities value were estimated for Turkish forests and forestry. Using these findings some recommendations were produced for Turkish forestry and forest resources management.
Forest resources have a special importance among the natural resources. It is an obvious fact that the demands directed to the forest resources at the regional, global level are increasing and differentiating due to the biological, climatic, economical, ethical and cultural changes occurred in the world and environmental crises. Thus, the strategic importance of forest resources is obviously growing up. Likewise, there has been a market for the non-market goods and services, which was not available market in the past. Today, it is observed that there has been a concrete demand in the world for all benefits provided by the forest resources. The signs of the concrete are seen as new concept and words in the international contracts (Geray 1998)
At this point, all benefits and negativeness occurred as a result of the interaction period between human and environment or human and natural resources (here forests) are the cause of discovering a new concept called as externality which may be classified as positive and negative externality according to the results of benefits or impacts.
Because forests occupy so much space in the World, forestry necessarily involves positive and negative externalities. As sustainable natural resource, forests produce many positive externalities or external economies. Such as regulation of climate, conservation of biodiversity, carbon storage, erosion control and other non-wood values. Conversely such biotic and abiotic events as faulty management practices, erosion, avalanche, forest fires, are examples of negative externalities to forestry.
Both in Turkey and Worldwide, negative and positive externalities of forests and forestry should be determined to promote sustainable forestry and sustainable development. Forest management and administrative activities should involve these externalities. Further more, sustainability and multiple-use principles should be pursued.
In this study, firstly positive and negative externalities related to forest resources and forestry were examined theoretically. Then, the methods and approaches to put monetary value on the possible externalities were reviewed from the forest resources and forest management points of views. Also, threshold values for these externalities in Turkish forests and forestry were estimated in conservative manner. For this aim, Turkey country report, prepared by the writers of this paper, of Mediterranean Forest Externalities (MEDFOREX) Project is used for these estimations (Türker et all. 2002). Using findings some recommendations were produced for Turkish forestry and forest resources management.
The concept of externality goes back to neo-classic economics, and has been developed by Pigou, who made specific reference to negative externalities like pollution, and also to positive ones like those created by forestry and green spaces (Merlo and Brials 2000).
The externality concept is variously defined in the literature, and but, a basic definition may be made as follow: an externality is created when something produced by one economic unit is used by or imposed on another unit without the permission or payment of the recipient. Smoke from factory chimneys has been the usual example, but automobile exhaust emissions, the noise of jet airplanes, pesticide residuals, or blaring radios in campgrounds also serve as illustrations (Gregory 1987).
One of the points in the definition of externality concept is that the goods and services obtained after production period are priced or unpriced (Klemper 1996). In this sense, the externalities are divided into two groups as unpriced positive effects and unpriced negative effects or positive and negative externalities. The unpriced negative effects or negative externalities are defined as the costs that cannot be compensated by the producer and directed to other people or organisations. The pollution linked to air, water, noise and visual can be given as example for the negative externalities. Unpriced positive effects or positive externalities may be defined as the benefits obtained by other people or organizations after the production period of a firm without paying any price. The benefits about the climate and natural beauty provided by afforestation of a firm for the society may be accepted as positive externalities.
On the other hand, the externality concept can also be defined according to the relations between production and consumption. Namely, external effect or externality concept is defined as the effects caused by the decisions related to production or consumption made by a firm on the activities of other firm which has no demand for former firm's goods and services.
The externalities are also defined by environmental economists with more general perspective, as the effects of a firm over the activities of other people or firm (Kışlalıoğlu and Berkes 1997), with specific reference to forests, Price (1989) sees externalities as products, either positive or negative, that do not enter the market (Merlo and Brials 2000).
After all definitions, the important main characteristics related to externalities or external economies can be summarised as follow; firstly, it is necessary to be a production or consumption occurrence or period for arising the externalities. In this process, there should be two sides as affecting and affected side in the position of active and passive. However, affected side has no any demand on the process or do not pay a price to opposite side. Lastly, positive results of this influence or process are occurred as positive externalities and negative results of it are negative externalities.
After mankind passed to settled life, they constitute pressure on the forests in order to expand their living area, to gain arable land and to graze their animals. Previously they see the forests as wood raw material source and easily obtainable land by cutting forests. But, today, they recognized many ecological benefits supplied by forests (SPO 2001).
Due to rapid increase in population and necessity, forest resources have been destroyed and the forest areas decreased more and more. Therefore, people are more sensitive about the benefits obtained by them from forests and possible negativeness in case the forest resources were destroyed. Some of these benefits and negativeness, especially unpriced with the market price, are identified as the externalities of forestry activities.
Today, due to increasing importance of forest resources, the determination of externalities in the forestry practices become important for the society. For this purpose, various attempts at regional, national and international levels have been realised by individuals and institutions. One of these researches is an international project called as MEDFOREX, whose findings were used for evaluations in this paper, and carried out by European Forest Institution Regional Project Centre. In the coverage of this project, it is aimed that the negative and positive externalities linked to forests and forestry in the Mediterranean Countries were evaluated from the different aspects of issue (EFI 2000).
In the coverage of watershed management, the benefits such as erosion prevention or soil conservation, preventing floods and avalanche may be expressed among the positive externalities of forests (EFI 2000). Consequently, most of these benefits are obtained from the losses prevented by forests.
Furthermore, there are many positive externalities provided by forests such as increasing landscape quality, carbon storage, regulating climate, increasing water quality and purification, biodiversity and providing sustainability of local ecosystems (EFI 2000). Similarly, these benefits, which are also called as environmental services of forests, are quite important especially for the sustainability of natural ecosystem balances and for preserving continuously physical and psychological health of individuals in the society.
On the other hand, the negative externalities occurred by the interferences to forests can be summarised as follow: erosion, floods and avalanche events due to poor or no forest management and the losses in the landscape quality due to increasing the intensive use of forest lands may be accepted as negative externalities.
Forest fires arisen from many different reasons, the losses such as biodiversity and landscape value occurred due to plantation forestry, the losses of recreational value arisen from poor management and intensive plantation forestry may also be accepted as negative externalities of forests (EFI 2000).
In the valuation for the natural resources, Hedonic Pricing and Travel Cost Methods have been used with the help of data observed in the market. In cases this is impossible, contingent valuation method has been applied to put value on the goods and services provided by natural resources (Akgüngör 1997). These approaches used in the valuation of natural resources and environmental services are also suitable for the positive and negative externalities of forests. It is essential to give some brief descriptions about the valuation methods.
The travel cost method (TCM) is based on the assumption that consumers value the experience of a particular forest site at no less than the cost of getting there, including all direct transport costs as well as the opportunity cost of time spent traveling to the site (i.e. foregone earnings). This survey-based method has been used extensively, especially in richer countries, to estimate environmental benefits at recreational sites (including wildlife reserves, special trekking areas and beaches). TCM has recently been applied in several developing countries, particularly where higher incomes and rapidly developing markets have been associated with growing demand for amenities such as scenic views and recreational areas (Bishop 1999)
Three basic steps are involved in travel cost models. First, it is necessary to undertake a survey of a sample of individuals visiting the site to determine their costs incurred in visiting the site. These costs include travel time, any financial expenditure involved in getting to and from the site, along with entrance (or parking) fees. In addition, information on the place of origin for the journey, and basic socio-economic factors such as income and education of the individual is required (Bishop 1999).
Another valuation technique is the hedonic pricing method, which attempts to impute a price for an environmental good by examining the effect which its presence has on a relevant market-priced good. The notion of land characteristics being reflected in land values can be traced back to Ricardo. However, it was Ridker who conducted the first recognisable Hedonic Pricing study, noting that `if the land market were to work perfectly, the price of a plot of land would equal the sum of the present discounted stream of benefits and costs derivable from it' (i.e. environmental values are reflected in associated market prices); and, equally importantly, that `since air pollution is specific to locations and the supply of locations is fixed, there is less likelihood that the negative effects of pollution can be significantly shifted onto other markets' (i.e. single markets can be identified as capturing these environmental values (Bateman 1993).
Contingent Valuation Method (CVM) which was firstly used by Davis in 1963 seeks to place a figure on the benefits people derive from consuming a public good by directly questioning a sample of consumers in order to obtain their maximum willingness to pay (WTP) to have the good, or minimum compensation sum to go without it; their willingness to accept (WTA). WTP and WTA may also be estimated for any welfare decreasing action (Hanley 1989). The CVM requires that individuals express their preferences for some environmental resources, or change in resource status, by answering questions about hypothetical choices (Bateman and Turner 1993).
Besides these methods, there are a number of approaches for valuing the externalities of forests. For example, the positive externalities mostly including environmental services mentioned previously are also called as non-use values. In this sense, it is stated that the values of benefits obtained from forests in the context of watershed management may be estimated by using Replacement Cost Method (Croitoru et al. 2000). The expenses made from the national economy for the activities linked to the soil erosion and floods in the context of watershed management and forest fires are taken into consideration in this calculation. However, it is not forgot that this value calculated will indicate the minimum value of positive externalities provided from the watershed management side of forests. But, its real value will be higher and the calculation of real value is quite difficult.
On the other hand, the replacement cost method is also used for calculation of the value of negative externalities such as erosion arisen from the faulty forest management activities. In this sense, the calculation is based on the expenses made for transportation of soil annually eroded to transform the area to previous original position (Croitoru et al. 2000).
The most important positive externalities of Turkish forests are carbon storage, climate regulation, enhancing water quality and purification, preventing erosion, floods and avalanches, decreasing the air pollution and noise, preserving the biodiversity.
The other important issue for the Turkish forest resources is negative externalities. Especially in Turkey, wrong behaviour of people directed to forest resources and illegal utilizations, wrong applications in the forest management, and forest fires are the most important negative externalities.
Table 1: Some positive and negative externalities of Turkish forests and their values
Type of Externality |
Goods and Services |
Value (US$) |
Positive Externalities |
Non-wood forest products |
86 044 495 |
Grazing |
225 000 000 | |
Hunting |
35 948 500 | |
Recreation |
2 000 000 | |
Carbon storage |
158 400 000 | |
Pharmaceuticals |
112 500 000 | |
Existence value (to conserve biodiversity) |
1 380 000 | |
Total |
621 272 995 | |
Negative Externalities |
Erosion |
-125 000 000 |
Risk of damage by forest fires |
- 8 607 537 | |
Illicit fuelwood |
- 40 000 000 | |
Total |
-173 607 537 | |
Table 1 shows the minimum value of some possible positive and negative externalities linked to Turkish forests and forestry extracted from Turkish country report of MEDFOREX Project prepared by the research group, who are authors of this paper (Türker et al. 2002). In addition to these externalities, in the coverage of the project, the values of other externalities such as watershed protection, soil conservation, avalanche prevention, increasing water quality and purification, landscape and therapy were calculated at the local level. Thus, these externalities are not included in Table 1.
According to Table 1, US $ 621 272 995 positive and US $ 173 607 537 negative externalities value were estimated conservatively for Turkish forests and forestry. On the other hand, about 58 % of positive total economic value calculated for the Turkish forests is obtained from the positive externalities stated in Table 1, and they are out of wood based products. Considering the values of externalities calculated at the minimum bounds, it is expected that the real value of positive externalities would be higher. On the other hand, it is necessary to minimise the values of negative externalities arisen from erosion, forest fires and illicit fuelwood consumption.
In Turkey, the value of forest goods and services cannot be properly reflected to the balance sheets of forest enterprise directorate at the micro level and sector balance sheets at the macro level. Thus, the share of forestry sector is only 0.05 % and it is quite low for the sector. Therefore, the forestry sector cannot get financial support for its investments (Türker et al. 2002).
The number of studies is increasing about assessing effects of the forest externalities at national, regional and international level. However, these studies have been underestimated mainly because of the timber oriented management mentality.
Necessity for the considering these non-market or difficult to be priced benefits or externalities has emerged in Turkish forestry to pursue sustainable and multiple-use management of the forest resources. In this context, firstly comprehensive management plans should be prepared instead of existing plans. New plans should include such non-wood values and local, economic, social and cultural characteristics as comprehensive enterprise plan.
Thus, it can be possible to make people aware about positive externalities they benefited such as carbon storage, climate regulation, enhancing water quality and purification, preventing erosion, floods and avalanches, and about negative externalities they cause such as forest fires, erosion, decreasing of biodiversity and aesthetics etc.
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1 Professor, Karadeniz Technical University, Faculty of Forestry, Department of Forest Engineering, Division of Forest Economics, 61080 - Trabzon, Turkey. [email protected]