Manual for environmental and economic accounts for forestry: a tool for cross-sectoral policy analysis

Table 4.1: Output of forest goods and services

	Commercial forestry	Non-market (household)	Non-forestry economic activities (agriculture, tourism, hydropower, water supply, etc.)	Total
Physical accounts (various units described in Chapter 6)
1.Products of the forestry and logging industry (e.g. m³)
2. Non-timber forest products (e.g. kg, number of livestock grazed, land area)
3. Forest services (e.g. land area providing service, tons of CO₂, etc.)
Employment generated
Monetary accounts (valued in national currency units, described in Chapter 7)
1.Products of the forestry and logging industry
2. Non-timber forest products
3. Forest services
Total value of forest output

Note: This version of accounts for forest goods and services is aggregated for presentation here. The full accounts are based on a detailed set of goods and services.

Table 4.2: Worksheet 1: Major indicators derived from accounts for output of forest goods and services

Purpose	Indicator
Economic contribution of forests relative to other sectors of the economy	Value of total forest goods and services as % of GDP Share of forest goods and services included in GDP, and omitted values as % of GDP Forest employment as % of total (national or regional) employment
Non-forestry sectors: economic contribution of forest services to non‑forestry commercial sectors	% of land area providing forest services % of national energy provided by firewood % of tourists visiting forests % of employment in non-logging industries dependent on forest services Value of forest services as % of GDP Value of forest services as % of output and sectoral GDP of sector that benefits (e.g. agriculture, tourist, etc.)
Rural livelihoods: economic importance of forests to rural communities	% of rural energy needs met by firewood % of household nutritional requirements provided by forests % of animals grazed in forests Forest employment as % of rural employment Value of output by non-market and small-scale producers as % of GDP Value of output by non-market and small-scale producers as % of total forest value
Global benefits: economic importance of forest services to the global community	Carbon storage as % of national-global carbon emissions % of land devoted to biodiversity protection Value of carbon storage as % of total forest value and of GDP

Table 4.3: Forest services to non-forestry sectors

Physical accounts (various units)	Agriculture	Fisheries	Tourism	Hydroelectric power	Municipal water supply	Other sectors	Global beneficiaries
Pollination of crops	X
Livestock grazing (may be treated as NTFP)	X
Tourism services in forests			X
Water and soil protection services	X (water quality)	X (protection of fish habitat)	X (water quality and flow on rivers)	X (water quality and flow)	X (water quality and flow)
Carbon storage							X
Biodiversity protection (in addition to tourism)							X
Other services (e.g. coastal storm protection, noise reduction, protection from avalanches, windbreak, cultural and spiritual values etc.)

Monetary accounts (national currency units)		Agriculture	Fisheries	Tourism	Hydroelectric power	Municipal water supply	Other sectors	Global beneficiaries
Services
	Pollination of crops
	Livestock grazing
	Tourism services in forests
	Water and soil protection services
	Carbon storage
	Biodiversity protection
	Other services
	Total value of services to industry
Indicators
	Value of services as % of industry’s value‑added
	Value of services as % of industry’s output
	Industry employment

Table 4.4: Worksheet 2: Average output of timber and non-timber forest products per household

	HOUSEHOLD 1				HOUSEHOLD 2
	Amount collected	Amount sold	Amount purchased	Total use	Amount collected	Amount sold	Amount purchased	Total use
Physical accounts (various units/household)
1. Timber and tree products
2. Non-timber forest products
Employment generated
Monetary accounts (valued in national currency units/household)
1. Timber and tree products
2. Non-timber forest products
Total value of forest output
Additional information
Forest products as % of average household consumption
Number of households
Average number of people in household

It is also useful to include information about the average household utilization of forest products and to calculate the share of total household consumption that forest products account for (Table 4.4). Here, a distinction is made between the amount collected, sold and purchased by a household. Additional information useful in a socio-economic assessment of forests includes: which family members within a household collect forest products and how much time it takes to collect. This type of account requires very detailed surveys. In many countries, there is little information about use of forest products by different households, so that only a single set of data for the nation (or region) can be derived about household dependence on forest products. There have been case studies that differentiate households within a region, such as Shackleton and Shackleton (2002), but no forest accounts have included this information at this time.

The indicators could further distinguish by other policy-relevant characteristics. For example, output for each producer could distinguish by the type of forest from which products were extracted. Forests can be defined by a number of attributes, most commonly tree species or ‘degree of naturalness’ (cultivated v natural forest). This can be useful in decisions affecting use of natural forests. It is also helpful for policy‑makers to have a time series, for comparison of the indicators in Table 4.2 over time.

4.2 Distribution of forest benefits

Distribution of forest goods and services is also useful for cross-sectoral policy analysis, helping to identify who benefits from forests by region, scale of operation and other features. As discussed in Chapters 3 and 4, there are several ways in which distribution may be viewed: regional distribution, scale of activity and distance of the beneficiary from the forest. There is some overlap among them and additional dimensions may also be useful. International comparisons of forest values may differentiate countries by their stage of development. For local or regional forest accounts, it may be useful to differentiate the household use of forest goods and services by household income group.

Regional distribution was described in section 3.2.2 and an example shown in Table 3.4 of forest values in Swaziland disaggregated by ecological zone. The indicators listed in Table 4.2 may be constructed for each region or for an individual forest, providing a picture of the importance of forests within a region. When accounts are compiled for multiple regions, it is possible to compare the contribution of forests among regions (Table 4.5).

Regional accounts can also identify the use of forest products by non-forestry sectors, as in Table 4.3, and for different households, as in Table 4.4. This will reveal in which regions non‑forestry industries and rural communities are most dependent on forest products. Although not shown in Tables 4.3 or 4.4, comparison of average regional output of non-market forest products per hectare of forestland may also be a useful indicator.

Table 4.5: Worksheet 3: Major indicators disaggregated by region

	Indicator
Purpose	Region 1	Region 2	Region 3	Total
Economic contribution of forests relative to other sectors of the economy	Indicators from Table 4.2
Non-forestry sectors: economic contribution of forest services to non-forestry commercial sectors
Rural livelihoods: economic importance of forest to rural communities
Global benefits: Economic importance of forest services to the global community

Scale of activity—the distribution of benefits to commercial, artisanal and subsistence users—is another useful dimension to consider. Table 2.6 gave examples for Sweden and South Africa that distinguished three categories of beneficiary: private commercial operators (logging as well as other commercial activities like agriculture), households and multiple beneficiaries (including services that benefit several sectors, like watershed protection and the global community). Other countries may wish to make other distinctions among beneficiaries, depending on the institutions utilizing forest resources.

Finally, distance of the beneficiary from the forest is another characteristic useful for cross‑sectoral policy analysis. It is relatively easy to identify the benefits to local users and to draw them into discussions about forest management. But the further the distance between the forest and the benefits from the forest, the more of a challenge it may be. As Table 3.7 showed, the classification of benefits may differ from one country to another. For Spain, benefits could be allocated to local, regional (recreation services; no regional forest protection services were included in the accounts) and global beneficiaries. For Swaziland, a small country, two types of local beneficiary were identified: subsistence households and large, foreign-owned commercial companies. There were no regional beneficiaries because regional protection services were not estimated and virtually all tourism is foreign. Global beneficiaries included global forest protection services plus tourism. Table 4.6 shows a generalized version of a worksheet that could be used to monitor the distribution of forest goods and services.

4.3 Forestry and sustainable economic growth

Understanding the contribution of forestry to sustainable economic development, viewed from the macroeconomic perspective, is important, although perhaps not central to the analysis of cross‑sectoral policy linkages, so it is dealt with only briefly here. At the macroeconomic level, forest accounts provide indicators of total forest value and the cost of forest depletion such as those listed in Table 4.7. These indicators are discussed in detail in Part II.

Table 4.6: Worksheet 4: Distribution of forest goods and services among local, regional and global beneficiaries (as percent of total value of forest goods and services)

	Local beneficiaries			Regional beneficiaries	Global beneficiaries
	Commercial-domestic	Commercial-foreign owned	Households	Regional beneficiaries	Global beneficiaries
1. Products of the forestry and logging industry	X	X	X
2. Non-timber forest products			X
3. Forest services	X¹	X¹		X²	X³

¹ Agriculture, tourism and recreation, commercial fisheries, etc.

² Recreation of regional tourists and forest environmental protection services to hydroelectric power, agriculture, municipal water supply, fisheries, etc.

³ Forest environmental protection services: carbon storage and biodiversity protection

Table 4.7: Macroeconomic indicators including forest values

Conventional indicator from national accounts	Proposed adjustment from forest accounts	Revised indicator
GDP	Omitted non-market forest values	GDP including full value of forests
Depreciation capital stocks	Depletion of natural forests¹	Total depreciation including depletion of natural forests
NDP	Depletion or degradation of natural forests¹	NDP including loss of natural forests
National wealth	Capitalized value of natural forests	Total national wealth including natural forest assets

¹Depletion of cultivated forests is included in national accounts. This issue is discussed further in Part II.

The indicators tell policy-makers, for example, how dependent the national economy is on forests, whether this dependence is increasing or the economy is becoming more diverse, and the extent to which economic growth is sustainable or has been obtained by liquidating natural capital like forests. The indicators identified earlier in this chapter are based on forest flow accounts, but these indicators also make use of forest asset accounts.

4.4 Trade-offs among competing users

Cost-benefit analysis is the main economic tool used for assessing trade-offs among competing uses; it is often used for project or policy evaluation at the local or regional level. The example from Malaysia in Chapter 2 showed how land use conversion and deforestation could result from a lack of information about all the goods and services provided by forests to other sectors of the economy, as well as a lack of institutions or regulations to monetize these services, so that forest owners are compensated for the services that forests provide.

Analysis of trade-offs requires assumptions about what will happen if forest management objectives change. The starting point, an assessment of the value of present uses of a forest, may be provided by forest accounts. Analysis of alternative uses usually requires some information about the impact of a change in forest use on the ability of a forest to deliver goods and services. A change in logging, for example, could affect tourism, water quality (affecting many users) or the availability of NTFP to rural communities in ways that cannot be determined from forest accounts. Some of this information, at least in a preliminary version, is likely to be collected for forest accounts in order to assess the sustainability of present uses.

Forest accounts for conservation forest reserves (CFR) of Tanzania (Ministry of Natural Resources and Tourism, 2003), introduced in Chapter 3, were used for a simple CBA to assess alternative options for CFR management. Tanzania’s CFRs are currently set aside exclusively for watershed catchment protection, but are subject to illegal consumptive exploitation by local communities surrounding the forests, which in some instances is unsustainable and threatens the catchment protection function. Under Tanzania’s new national forest policy, joint forest management is being introduced which is mandated to consider all stakeholders in the management of forests. The report assessed the net benefits of CFRs generated under the present management option with the potential net benefits that could be generated under alternative management that combined catchment protection and consumptive utilization of the forests.

For CBA, one must compare the present value of net benefits of alternative uses of forests over the lifetime of the forest, not just current annual net benefits. However, the surveys provided information about annual net benefits for most goods and services. The stream of future net benefits was calculated from annual values by making assumptions about the sustainability of the supply of forest goods and services over time. Where forest use is sustainable, the value can be provided indefinitely; in such cases, the present discounted value over time is obtained by simply dividing the current value by the discount rate (10 percent was used).

Their analysis had several parts:

Identify the value of forest goods and services under present management. Forest accounts quantified the total economic value as well as the net value (gross value minus extraction costs) of CFRs for hydroelectric power, irrigated agriculture, municipal water supply, tourism, carbon storage and harvesting of forest goods by local communities.

Identify the value of forests under alternative management that combines catchment protection and restricted consumptive use of forests. The value of forest benefits under alternative management was determined by assessing the sustainability of present forest benefits. The study concluded that non-consumptive forest services, such as tourism and protection, are sustainable, so the value of these services continues at the current level under both present and alternative management. The study then determined the level of consumptive forest activities that could be undertaken without damaging the ability of CFRs to provide catchment protection:

Extraction of sawn timber could be substantially increased over present levels without reducing the ability of the forests to provide catchment protection.

Fodder extraction and grazing, currently an important forest value, are unsustainable; would have to be stopped in order to maintain the soil protection services of CFRs.

The extraction of other NTFP is considered sustainable at current levels and could continue under alternative management.

Value the present value of the stream of net benefits for alternative forest management options over the lifetime of the forest. CBA requires comparison of the present value of net benefits of alternative uses of forests over the lifetime of the forest, not just current annual net benefits. The researchers made a simple assumption: sustainable activities would continue at the present level indefinitely, without increasing or decreasing. Unsustainable activities (livestock grazing) would be discontinued under the alternative management option. A discount rate of 10 percent was used to calculate the present value of future net benefits (Table 4.8).

The total value of CFRs is greater under mixed-use management, US$614.6 million, than under the present management for catchment protection only, US$ 490.3. The value of forest services remains the same under both forest management options. However, the value of wood is much higher under alternative management and the value of NTFPs is much lower. Under present management, very little timber is harvested, US$67.6 million; the alternative management would allow timber harvesting at the sustainable rate, yielding a net current value of US$ 445 million. Regarding NTFPs, fodder and livestock grazing would not be allowed under the alternative, mixed‑use management system, so the contribution of NTFPs to forest values is much lower than under present management.

Evaluate the distribution of forest benefits and identify policies to support sustainable management of CFRs. The distribution of benefits is a key element in designing policies to ensure sustainable management of forests. The total value of CFRs under mixed-use management is higher than under present management, but there is a clear loss to local communities from cessation of grazing. Local communities will not benefit from alternative management unless their share of benefits from harvesting of timber is sufficient to compensate for their loss of grazing. Timber harvesting requires a combination of local participants as well as those in other areas where sawmills are located, with access to export markets, etc.

Local communities: The report noted that local communities depend on CFRs and are using them in an open access manner, mainly because forest use is illegal so there is no local management of consumptive use of forests. By allowing selective consumptive use of CFRs, local management committees can be established to oversee forest use and ensure that local use does not compromise catchment protection services.

Downstream beneficiaries: although downstream users received much of the benefits, they are unaware of this and contribute nothing to forest management. The report recommends that all stakeholders be educated and that conservation fees be introduced for water and electricity that would be used to finance forest management or possibly compensate local communities for loss of livestock grazing.

Table 4.8: Total net economic values generated by catchment forest reserves under present management and alternative management in Tanzania

(present discounted net value in million US$, 2001)

	Management objective
	Present management (catchment protection only, with illegal consumptive use)	Alternative (combined catchment protection + consumptive use)
Forest goods
Timber and timber-related products	67.6	445.0
NTFPs	287.1	33.9
Forest services
Water protection	54.1	54.1
Soil protection	18.7	18.7
Tourism	11.9	11.9
Carbon storage	50.9	50.9
Total	490.3	614.6

Source: Based on author’s calculations from Ministry of Natural Resources and Tourism, 2003.

The Tanzanian case study is a highly simplified assessment of trade-offs between two alternative forest management options, but it demonstrates that forest accounts can provide a useful first step in these assessments. A more extensive analysis of the socio-economic benefits of forests would include measurement of the upstream and downstream linkages from each user, in terms of changes in employment and national income under each option. This is a standard analytical technique developed for input-output and SAM analysis. This analysis shows more fully the dependence of the regional and national economy on forestry as well as the impact of land use change.

4.5 The impacts of non-forestry policies on forest use

Cross-sectoral policy impacts on forestry result from a range of macroeconomic, sector‑specific and institutional policies that have far-reaching effects throughout the economy on unemployment, wages and income, relative prices and other factors that ultimately affect decisions about the use of forests. Simulation analysis is an ambitious tool for understanding this process, which seeks to represent the full chain of effects from indirect causes at the macroeconomic level, through the activities and policies of different economic sectors, to the direct causes and, ultimately, to decisions by individual agents about the use of forests.

The data requirements for simulation models are quite extensive and not all countries will be able to implement this application of forest accounts. The examples for the Philippines and Indonesia discussed in section 2.6.2 used environmental-economic models based on combined database of an IO/SAM, and environmental accounts can trace the interdependencies of the economy and the environment as well as the chain of effects of economic policies on the natural resource base.

As with CBA, forest accounts provide a starting point or base year for a model: forestland use, timber harvest, NTFP harvest and provision of forest services. The model itself typically generates a change in pressure on forestland due to a combination of economic, demographic or other factors (such as climate change). The model includes equations that generate feedback effects on forests in terms of economic behaviour, population movements and forest ecology. The data requirements for this kind of analysis are shown in Table 4.9. They include an IO table or, preferably, a SAM to represent the economy and its inter-dependencies and forest accounts.

Accounts used to build simulation models also include resources that are closely related to forest use such as land, pollution, water and energy. For forestry issues, land could be classified by ecological characteristics such as type of land cover, agricultural potential and slope and soil erosion potential. Land accounts may also be classified by economic or institutional characteristics such as degree of forest protection, accessibility to settlers and economic users of the land (with detailed accounts for users like agriculture and infrastructure, which put the most pressure on forestland).

Simulation models used to assess impacts of non-forestry policies on forests require a great deal of data. Even the relatively simple forestry multiplier models require input-output tables of the economy, which are not constructed by all developing countries and the data are not always up‑to‑date or very reliable. CGE models are designed to assess the response of households and firms to changes in market signals, such as the relative prices of products, labour or exports, so they are particularly well suited to address the cross-sectoral policy linkages affecting forestry. CGE models are based on SAMs, which represent the most detailed implementation of national accounts. The drawback of simulation modelling is the amount of data required. For countries that do not compile SAMs, IO tables may be available, which may be used for more limited simulation modelling.

Table 4.9: Data requirements for simulation models of cross-sectoral policy impacts

1. ECONOMIC ACCOUNTS

IO table or SAM for the national or regional economy

2. FOREST ACCOUNTS

2. A Forest asset accounts

Timber

Non-timber values (by major type of value)

Forestland (by type of tree-cover, availability for use, ecological characteristics, including agricultural
potential, slope, etc.)

Carbon storage

Forest balance accounts

2. B Forest resource flow accounts

Detailed supply and use tables for wood products, market + non-market

Detailed supply and use of non-timber goods and services

Environmental degradation from different forest-based activities

3. LAND AND ECOSYSTEM ACCOUNTS

Land use and land cover by economic sector and ecological characteristics appropriate to policy:
agricultural potential, tourism potential, soil erosion potential, etc.

Land use change accounts

4. OTHER RESOURCE ASSETS AND FLOW ACCOUNTS

Pollution, energy, water as relevant to deforestation in a given country

4.6 Concluding comments

Forest accounts provide a comprehensive framework for representing all goods and services provided by forests to all other sectors, with extensive policy applications described in Chapters 2 and 3. Examples of the policy uses of forest accounts and the actions that could be taken on the basis of the policy analysis are shown in Table 4.10. Prominent among the policies are the institution of fees for environmental services, which may be used to fund forest management—often woefully underfunded in many developing countries—and to compensate other users, often local communities who may have to sacrifice some forest uses in order to maintain the flow of forest protection services. Forest accounts help identify potential conflicts, at the level of Ministry development objectives as well as between local users of forest resources. By quantifying the relative values, trade-offs among users can be assessed and an optimal forest strategy designed that takes into account all stakeholders. Forest accounts also assist in the building of multidisciplinary alliances across ministries and among different stakeholders in the private sector, as they realize the extent of their dependence on forests.

Table 4.10: Selected policy applications of forest accounts

Indicator/measure	Use for policy analysis	Examples of policies and actions taken from policy analysis
1. What is the total economic contribution of forests and what are the benefits from sustainable management
Total value of forests including non-market forest goods and services.	More comprehensive, accurate value of forests’ contribution to GDP.	Showing a higher value for forest contribution to GDP may increase the forestry sector’s ability to request a larger share of national budget for forest management and investment.
Value of forest services to non‑forestry sectors.	Measure of the economic importance of forest services to agriculture, electricity, fisheries, tourism, municipal water supply, etc.	Design economic instruments to promote sustainable forest use, for example: - institute conservation fee on water and hydroelectricity tariffs for downstream beneficiaries that can be used for forest management or to compensate local communities - institute tourism fees for biodiversity conservation for forest management/compensation of local communities - negotiate international payments for carbon storage services of forests. Build multi-sectoral stakeholder alliances on the basis of mutual benefits. Identify institutional weaknesses in forest management, e.g. where one sector benefits but does not pay, or does not have a say in forest management.
Value of forest goods and services used by local communities.	Share of forest goods in rural livelihoods provides measure of dependence on forests of local communities.	Useful for design and implementation of PRSPs.
2. What is the distribution of forest benefits among different groups in society
Share of forest benefits accruing to commercial, artisanal and subsistence users of forests, or, Share accruing to local, downstream and global beneficiaries.	Identify social benefits from preservation of local communities and increased equity.	Identify potential conflicts, e.g. benefits to subsistence users/local communities are low because commercial/downstream users obtain benefits. Design economic instruments so that beneficiaries pay for the benefits, compensating those who may sacrifice benefits. For example, property rights – some say over how a forest is managed – and fees for environmental services received. Optimize investment in forests and forest infrastructure that balances social objectives for equity and regional development as well as economic objectives of maximizing national income.
3. Is economic growth sustainable or is it based on the depletion of forests?
Value of forest assets and the cost of deforestation and forest degradation.	Macroeconomic indicators of sustainability (such as NDP, national wealth, asset depletion).	Reassess forest management if deforestation is occurring.
4. What are the trade-offs among competing users of forests?
Value of forest goods and services under alternative forest management options.	Measure economic linkages between forestry and other sectors of the economy, upstream and downstream. Identify the economic trade-offs among competing sectors.	Optimize forest use and investment in forests and forest infrastructure by taking into account total economic value of forests, market and non‑market, including linkages to non-forestry sectors and impacts on all stakeholders, economy-wide. Identify winners and losers. Design appropriate economic instruments to achieve that strategy (fees, compensating payments, property rights, etc.).
5. What are the impacts of non-forestry policies on forest use?
Analyze economic development scenarios that trace the full chain of causation from macroeconomic policy and/or non-forestry sector policies to their impact on forestry and land use.	Measures the winners and losers, pressures on forests and forest users from alternative development strategies. Identifies potential conflicts between development objectives of forestry and those of other sectors, e.g. commercial logging vs catchment protection (Ministry of Agriculture, Ministry of Energy, etc.). Identify conflicts among divisions of the same ministry (Ministry of Agriculture), e.g. pastoralists’ use of forest vs downstream crop farmers.	Identify winners and losers. Identify optimal forest management strategy, based on addressing conflicts among ministries and within a single ministry. Design appropriate economic instruments to achieve that strategy (fees, compensating payments, property rights, etc.).

Implementation of forest accounts raises a number of challenges, technical as well as institutional. Regarding the institutional aspects, the manual cautions that good inter‑disciplinary and inter‑ministerial coordination is necessary to utilize forest accounts. Forest accounts provide some motivation, by quantifying the value of forests to non-forestry sectors, but this may not be sufficient. Other components of FAO’s cross-sectoral linkages programme will address institutional issues in more detail.

The major data sources for forest accounts that are common to many countries are listed in Table 4.11. The coverage of these data sources will vary by country. For example, the national accounts of some countries may include most NTFP, while those of others may not. Most of the common data sources focus heavily on commercial products. The strongest data are those for commercial logging; physical and monetary data are relatively easy to collect and are available in most countries. Carbon storage accounts may be reasonably estimated from forest stock accounts. NTFP and other forest services pose additional challenges that are described below.

Non-timber forest products

The new guidelines for national forest resource assessments include non-timber and non‑market forest goods and services. As assessments are implemented, coverage of this important aspect of forest resources will improve: more products will be covered and in a more consistent manner across countries. As such, forest resource assessments could become an important tool for building forest accounts. However, at this time there has not been any harmonization of the definitions of NTFP and services across countries. It is also possible to obtain information about household use of NTFP from household income and expenditure surveys that are undertaken periodically at the national level in many developing countries. Special surveys and valuation studies are required to provide the missing data in forest accounts.

Forest services

The value of tourism is not usually measured in most countries (see Chapter 7 for further discussion of this topic), even when tourism is an important industry. Surveys collect figures for numbers of tourists, but national surveys of the economic value of tourism are still not common. Tourism surveys (tourist expenditure and tourism industry surveys) may be used to estimate this forest service and there is extensive literature on this subject. Care must be taken to isolate the contribution of forests from other attractions that occur simultaneously, such as mountains or wildlife.

Forest protection services that benefit other sectors, such as agriculture, hydroelectric power and fisheries, are the most difficult forest benefit to quantify; this component of the accounts remains a challenge for forest accounting and for any approach to cross-sectoral policy analysis. Clearly this is an area where much more research is needed.

National and regional valuation: scaling and aggregation of forest values

The value of forests is determined by local and regional site-specific characteristics and options for use. As discussed in the section on benefits transfer, the availability of NTFPs and their local economic value, for example, will often vary a great deal by region. The same applies to forest services: a forest catchment may provide significant water protection services, but unless there are downstream users who require these services they have little economic value. The site-specific nature of forest values means that values estimated for one area of a country cannot be assumed to hold in other areas. This poses a problem for constructing accounts for forests at the national level, because the method commonly employed for national accounts—scaling up to the national level from sample data—cannot be as readily applied.

Proceeding incrementally with forest accounts

It is recommended that countries proceed incrementally and not try to construct comprehensive forest accounts at one time. At the national level, there are often sufficient data to begin compiling accounts for commercial timber and forest activities. However, in addressing NTFPs and forest services, it is more accurate and useful to policy‑makers to construct forest accounts at the regional level. When enough regional accounts are compiled, national accounts may be constructed by aggregating regional accounts. Regional accounts will be more useful for policy‑makers because many forest management decisions are taken at the regional or local level, and even policy at the national level must take into account regional variations in forest resources and value.

Table 4.11: Major data sources for constructing forest accounts

Component of forest accounts	Data source	Data provided
1. Asset accounts for wooded land and standing timber	Forest resource assessment	Physical data for area of wooded land and volume of standing timber accounts, including changes over time. Only undertaken at large time intervals
	National forest inventories	Physical data for area of wooded land and volume of standing timber. Only undertaken at large time intervals
	Forestry statistics	Sometimes provide annual figures for forestland and stocks of standing timber updated from forest inventories May provide data on forest health, e.g. defoliation
	National accounts, national balance sheets	Monetary accounts for cultivated forests: wooded land and standing timber. Do not include natural forests unless SEEA has been implemented
2. Flow accounts for forest goods and services	Forestry statistics	Physical data on forestry and forest industry products
	National forest resource assessment	Data on commercial forestry products plus non-timber forest products in physical units. May collect information about NTFP
	National accounts	Monetary data for output of forestry and logging, and non-timber forest products in some countries. Data include: output, intermediate consumption, value‑added, consumption of fixed capital, compensation of employees, net operating surplus, changes in inventories Supply and use tables IO and SAMs
3. Forest environmental services
Carbon storage	Forest resource assessment, country climate change programmes	Carbon storage, change in carbon storage in cultivated and natural forests in physical units
Other environmental services	No regular source of data at this time.
4.Forest resource management expenditures	National accounts	Expenditures are included but require supplementary surveys to identify these expenditures as part of total government or industry expenditures.

Chapter 4: Guidelines for policy analysis using forest accounts

4.1 Economic value of forests, including market and non-market goods and services