Chapter 6: CONCLUSIONS AND FUTURE DIRECTIONS

Effective economic valuation of the different goods and services that can be provided by a forest is a complicated and complex task. A sophisticated economic valuation exercise requires expertise from economics and other disciplines to provide /adequate assurance that valid conclusions can be drawn. The major problem of forestry valuation is not a lack of methodologies, many of which have been described here. Such methods have been widely applied in both developed and developing country contexts and their application does not seem to be a major constraint. However, these studies have tended to be academic exercises with no major practical application. There is little evidence to indicate that government planning offices or development agencies have successfully integrated study results into their decision-making processes except in cases where valuation has been applied to confirm decisions already taken.

One of the greatest challenges is therefore to produce valuation studies that will actually be used in the process of decision-making and that will contribute to better management of the forest resources. Otherwise, valuation will not help to overcome the great barrier posed by lack of political will in support of sustainable forest management. However, remember that economic values are just one, often small, input into the decision-making context. A forest valuation per se cannot assure that a forest will be better managed.

To summarize what has been discussed in this paper, several suggestions are presented below to help guide the preparation of forest valuations. These are not intended to be "rules" to be followed in all cases, but represent some aspects that should be considered during the process of valuation.

6.1.1 Define the decision to be made

- First ask why the valuation should be undertaken or if there is an adequate alternative basis for decision;

- Be sure that those who will make decisions are interested in valuation information and, if not, convince them of its importance before undertaking the exercise;

- Find out what questions valuation will help to answer, i.e. have a very clear statement of purpose; for example, which are the particular forest benefits that people demand?;

- Remember that valuation should not be used as a tool for advocating preconceived preferences;

- Remember that economic values are just one, often small, input into the decision-making context. Valuation is not the sole (or even necessarily the most critical) basis for decision-making. Many decisions are made on the basis of value judgements which are generally made by politicians and they do not necessarily rely on economic grounds.

6.1.2 Clarify the purpose of the valuation, its context and outputs

- Create an awareness of the need to look at more than financial flows, e.g. consider economic efficiency factors;

- Pay attention to benefits, but also consider costs, feasibility considerations and the claims of the most affected populations (usually local);

- Always consider who pays and who benefits from the proposed changes because there are always social implications; valuation should be done with the perspective from which it is carried out identified;

- Pay attention to the role that non-wood forest products (NWFPs) play in the life of the rural poor, since this may be important to a successful forestry project;

- In weighing various values or benefits, avoid the tendency to be influenced by the "flavour of the month" in popular opinion;

- Reduce the probability of analyst bias in the assumptions made by having a consultative mechanism among analysts and clients, including local people, before analysis goes too far.

6.1.3 Identify and determine the input and output information needs and constraints to meeting those needs

- Look at the size of project or programme being considered and scale the costs of valuation accordingly⁴⁹;

- Focus on getting data and information that is relevant to the valuation being done. Remember that there is a great difference between producing data and having it used. Data production is time-consuming and costly. An overload of data and information does not make decisions easier. On the contrary, it can contribute to making decisions more difficult;

- Remember that there are values that cannot be presented in monetary form but that are as important, or even more important, than those that can be put in monetary terms; thus, when a weight is assigned it should be a function of the importance of the good or service in the context of the valuation rather than only of its ability to be expressed in monetary form.

6.1.4 Choose and apply the valuation methods and techniques to meet the information needs

- Assess the capacity of local institutions and adapt techniques to them in terms of skills, data availability, etc.;

- Remember that the total economic value (TEV) of a forest is an ideal which cannot be reached. There is a question of compatibility among the different uses of the forest;

- Remember that people do not necessarily act according to their expressed opinions as to willingness to pay or willingness to accept.

6.1.5 Consider potential uncertainties in values

- Even if it is assumed that every remaining plant species has potential medicinal or other importance for mankind, remember that there is only a low probability of finding such "hits" and that there may be a long wait before the next such discovery whereas people have immediate survival needs;

- Remember that estimating economic values does not ensure their being captured in practice;

- Recognize that markets for hitherto subsistence-based products may not exist beyond the purely local setting or, if they exist, that (i) they may be limited in scope, (ii) their production may be unstable and cyclical, (iii) costs of research and development before full market acceptance may be high or even prohibitive, and (iv) there may be losses in the processing and storage or trading chain. Do not underestimate the costs of commercializing such products which may result in very low or even negative gains;

- Consider what damages to the forest may result from increasing the production of, for example, non-wood forest products from a subsistence to a commercial level.

From what has been discussed so far, it becomes clear that the subject of forestry valuation has received a lot of attention. However, there is little evidence to suggest that results of these studies have been widely used by government planning offices or by decision-makers. This suggests some points that need to be addressed in order to transform forestry valuation into an effective tool in formulating forestry development policy.

a. Forest valuation studies have been carried out in the context of both developed and developing countries. This suggests that there are no major problems in applying the theory or techniques available. However, most of these studies appear to be quite academic and it is not clear in the literature how they are being used, or even if they have been used in an actual decision-making context. The great challenge, then, is not so much how to carry out new studies, but:

i. to know why these studies have not been used in the decision-making context;

ii. once this has been understood, to effect the changes necessary to make them useful to the decision-making context;

iii. to apply them to concrete problems in order to contribute to forestry development policy or to practical action;

iv. to find ways to capture these values.

b. During its second meeting in Geneva in March 1996, the UN Commission on Sustainable Development’s Intergovernmental Panel on Forests pointed out that the complexity and costs involved in forestry valuation techniques and methodologies might limit their widespread application: it suggested that innovative and simple scientific valuation methods were needed. Experience also shows that exercises attempted to date demand too much in terms of skills, time and money; they are still too complex. Their results are not necessarily better than if more simplified ways were found. Within this context, another set of challenges deserves attention, namely:

i. to develop simpler and less costly approaches that will better meet the needs of decision-makers, managers and administrators as well as provide them with information that is relevant, timely, accurate and usable;

ii. to develop methods that are less time-consuming because time constraints demand immediate decisions. This is in recognition of the fact that orders of magnitude rather than fine-tuned numbers are often what is needed. To be imprecise but have the correct objective can be better than to be precise about the wrong objective;

iii. major attention should be given to determining the biophysical production functions, such as how much of any specified products or services could be yielded over what time and in return for what inputs. From the professional/technical viewpoint, it is essential to develop a knowledge base of how much and which non-market goods and services are produced by forests. At present, productivity coefficients are available only for timber. There is little or nothing on wild fruits, carbon capture efficiency and carbon release indices of ecosystems, wildlife, latexes/gums, medicinal plants (or the seasonality and periodicity of their useful products), carrying capacity of ecotourism sites, probability levels of discovering "miracle cure" species and so on. Until this information exists, valuation will remain dependent on guesswork and can easily be manipulated for advocacy.

c. One reason valuation results may have failed to influence decisions is their lack of credibility when, for example, estimated values are unrealistically high or vary according to analyst or when many prove impossible to capture. To interest policy-makers in valuation, ways must be found to capture the benefits identified; practical instruments are needed to convert potential benefits into real ones. A priority is to find ways for carbon sequestration and biological diversity (which have the two highest values among forest goods and services) to yield practical benefits for those who conserve forests. At present, the benefits of outputs such as carbon sequestration and biological diversity are ascribed mainly to a vague "international community" without a clear indication of its willingness to pay.