The importance of forests for meeting environmental, developmental and social goals is fully recognised. The fate of the world's forests has become a central topic for international policy dialogue, particularly in the context of the Earth Summit and its follow-up. There is a growing desire to combat deforestation and forest degradation and to promote conservation and sustainable forest management (SFM).
Yet there is a feeling that commitment to SFM could be more effective if the full value of forests could be demonstrated. There is a perception that forests are valued mostly as a land bank rather than as valuable resources in their own right. Thus, forests are too easily cut to make room for other land uses. Where forest worth is appreciated, the financial value of commercial timber sales is the sole or predominant element reported. Value estimates often exclude the worth of forest functions in protecting biological diversity, water and soils; in capturing carbon; or in providing livelihood opportunities outside the formal monetary economy. It has been suggested that due to under-valuation of forests, the sector attracts less investment than it deserves. According to these perceptions, better valuation would, by more clearly demonstrating the full importance of forests, attract more investment into the sector.
In the light of this perspective, FAO awarded a one-year André Mayer Research Fellowship to Dr. Sebastiao Kengen of Brazil and the study was carried out between October 1995 and November 1996 at the College of Forest Resources, University of Minnesota, USA. Dr Kengen was to review methodologies for forest valuation and examine the results of their application in preparing investment projects and programmes where forestry is the sole objective or is one of the options or components. The expectation was that a range of tried and proved techniques were already available from which to select the most promising, to develop them further and to format them for inclusion in mainstream forestry investment project preparation procedures.
The research has shown these expectations to have been premature. The outcome of the programme has accordingly been adapted as reflected in this document:
(a) Firstly, it is confirmed that many potentially good valuation methodologies exist and the document presents these in summary form. It emphasizes that the issue is not lack of methods but of knowledge of biophysical coefficients of the forest and of production and market factors as it relates to goods and services other than timber (which is often better documented). In the absence of such information, value estimation becomes an exercise in guesswork by analysts.
Some questions to which answers remain elusive relate to: How much and for how long can particular goods and services of forests be produced? How seasonal are their yields? What is the probability of finding a beneficial species and what would be sustainable yields of usable essence from it? Taking account of research and development costs, production and distribution losses, and market development costs, what would be the cost of capturing the latent benefit? Would the markets observed at local scale truly remain available if production expanded and what would prices be then for the goods or services in question? The lack of a sound knowledge base is among the greatest challenges facing valuation - until it is resolved, the outcomes of many valuation studies will continue to depend inordinately on individual analyst’s attitudes and the breadth (or otherwise) of their experience. The lack of a reference knowledge base also creates risks of some interest groups using valuation for advocacy purposes to boost support for a particular conservation or development cause.
(b) Secondly, the document highlights important considerations for analysts and decision-makers, among them being: (i) the need to recognise that there are no absolute values and whatever is presented depends on context and necessarily reflects one or several interest group perspectives or a compromise among many; (ii) positive benefits at one level (local, national or global) may not be so important at another level or may even represent a cost - equity issues arise as to who pays and who benefits; and (iii) absolute or proxy values expressed in monetary terms are only one among many elements for decision.
(c) Thirdly, the study has revealed that there is yet to be systematic application of full valuation in forestry, both in investment and other contexts. Of the examples which exist, many have been in academic or environmental interest-group circles. The few practical examples of full valuation have tended to be at a scale which is so large, costly and demanding in terms of skills that they have little chance of entering the mainstream. There is so far not much evidence that full valuation has greatly influenced decisions.
A fundamental factor undermining ability to influence decisions may be the fact that high values are estimated for such benefits as carbon capture, biological diversity conservation etc., for which the possibility of tangible value capture by those most affected by the forest (such as forest dwellers) is often low. Frequent paradoxes arise whereby forests, to which analysts have attributed very high values, are readily cut down by farmers and replaced with land uses which valuation shows to be worth less (but which offer more immediate or tangible gains to the de facto "decision-maker" farmers). Thus, the basic issue is the likelihood that those immediately effected can capture the value in tangible terms rather than in vague terms of importance to the broad international community. In its own way, valuation is therefore highly political. High figures from valuation exercises will, if not accompanied by tangible benefits that can be captured, fail to attract the commitment of decision-makers and those directly affected; as a result, they may loose faith in valuation and ignore its findings.
One important message from this research is to draw attention to the limits of what full forest valuation can achieve and to show that there is a distinction between having a high value and being able to capture it. Valuation alone may be important or even necessary for decision making but is not sufficient to attract greater support for sustainable forest management or increased investment. An indication of capture potential (i.e. ability to yield tangible returns) may be a necessary complement. The research also draws attention to the need to improve understanding of how valuation results can be given more weight in decision-making. To improve the likelihood of valuation being influential, the author advocates a cautious approach; a search for better scientific knowledge so that estimates become less dependent on the analyst; development of more rapid, simpler and less costly techniques for valuation which can be integrated into the mainstream; and promoting ways to capture values, so reducing the gap between estimates and reality.
FAO wishes to thank Dr. Sebastiao Kengen for the research work he undertook, which raises the kinds of questions which we hope will challenge other scientists and practitioners into making further efforts. At the University of Minnesota, FAO wishes to record its appreciation to Dr. Alan Ek, Professor and Head of the Department of Forest Resources, and Dr. Alfred Sullivan, Dean, who extended the offer to host the study; to Professor Hans Gregersen who directly guided the study; and to Professor Alan Lundgren who provided many important professional contributions.
Within FAO, this study was supervised by Mafa Chipeta, Senior Forestry Officer (Forest Economics), supported by Linda Ransom of the Forestry Policy and Planning Division. Administrative and financial support was provided through Jean-Marc Meyour and his team in the Fellowships Group.
M. R. de Montalembert
Director
