NON-WOOD FOREST PRODUCTS (NWFP) AS A COMPONENT OF THE TOTAL ECONOMIC VALUE (TEV) OF MEDITERRANEAN FORESTS

First results of ongoing research

Ms. Lelia CROITORU, Ms. Paola GATTO and Mr. Maurizio MERLO¹
PADOVA University Centre for Accounting and Management in Agriculture & Forestry
Italy

Summary

(No translation in French & Russian available)

This paper introduces MEDFOREX Project launched by European Forest Institute and Solsona Forest Technology Centre in January 2000 and highlights the first results of its preliminary task: an inventory of MEDiterranean FORest public goods and EXternalities, here referred to as MEDFOREXs.

MEDFOREXs, as well as the other forest outputs, are related to the Total Economic Value (TEV) of forests. It is a concept where direct and indirect use-values, option and bequest-existence values are considered. Another way to see the TEV is given by market, potential market and non-market values. The distinction between private, local, club and public goods can also be mentioned.

Non-Wood Forest Products (NWFP) are generally intended as private goods remunerated in the market and represent tangible outputs such as berries, resin, and mushrooms. Thus, NWFP exclude the more traditional wood based products such as timber or fuel wood. However, non-market public goods and externalities can also be transformed into NWFP, remunerated in the market once appropriate institutional (laws, regulations, property rights, etc) and management/marketing means are adopted. There are also non-market public goods and externalities, by definition not remunerated in the market, which can also be included amongst NWFP. Some of these are potentially marketable and can be valued by various economic methods derived from traditional land appraisal to the most recent environmental valuation.

In order to highlight the dynamic evolution of NWFP in the context of the overall forest outputs, a specific questionnaire based on the TEV concept was developed for surveying the value of Mediterranean forests as far as possible at country level. The questionnaire aims firstly at collecting basic forest information related to area, types of forests, degradation, income and employment. It then focuses on developing a list of the main wood and NWFP that should be quantified according to national official statistics for each Mediterranean country.

The questionnaire has been completed for Italian forests. The initial results demonstrate the growing importance of NWFP in terms of market values as well as the potential for new NWFP to be transformed into real market products. Similar questionnaires are presently being completed in France, Greece, Portugal, Spain and Tunisia. The work should be accomplished in all the other Mediterranean countries during the next two years.

Key words: MEDFOREXs, non-wood forest products, externalities, total economic value.

¹ The responsibility of the paper must be equally distributed amongst the three authors. Section 4 should be attributed to Croitoru, sections 3 and 5 to Gatto and sections 1 and 2 to Merlo. Information about the questionnaire and the ongoing research can be provided under request to this E mail: [email protected]

1. Introduction: scope and contents

Among the various outputs provided by MEDiterranean FORests, there is a wide range of public goods and EXternalities, positive and sometimes negative, here referred to as MEDFOREXs. Information and quantification of MEDFOREXs is however scarce within and between Mediterranean countries. There is a need for data collection, processing and exchange, together with dissemination of existing knowledge. For these reasons, in January 2000 the European Forest Institute (EFI) and Solsona Forest Technology Centre launched a three-year Regional Project Centre called MEDFOREX.

The project aims to survey and inventory MEDFOREXs. The outcome should help forest management and policy formation/implementation (EFI, 1999). The survey (or inventory) of all MEDFOREXs is the preliminary task of the whole project. Its main objectives are the identification and, whenever possible, quantification/valuation of MEDFOREXs at the national level in each Mediterranean country. The scope of the task is:

• inform forest policy makers and stakeholders;
• inform forest management and participation;
• complete forest information systems;
• improve accountability and accounting of forestry.

Participants from Italy, France, Greece, Portugal, Spain and Tunisia are presently cooperating on the survey - inventory. Up to now 10 forest research units, members of EFI, have agreed to co-operate. Other countries and units are expected to join soon.

2. Approach: Total Economic Value

MEDFOREXs as well as the other forest outputs are related to the Total Economic/Environmental Value (TEEV) of forests. The TEV (Total Economic Value) has been introduced in economic theory following development of environmental economics (Campos, 1998). Some authors tend to make a distinction between the proper Total Economic Value (rather anthropocentric value) and the so-called non-anthropocentric Primary Value (Turner, Pearce and Bateman, 1994). The Total Economic Value comprises direct and indirect-use values, option values and non-use bequest and existence values. While there is a widespread consensus on the TEV concept, the boundaries between its various components remain somewhat less clear (Randall, 1991; Bateman 1994). Overlaps, if not double counting, as well as missing certain components, are rather common. This paper has tried to adopt Turner, Pearce and Bateman (1994) classification. Therefore use values are those that ‘derive from the actual use of the environment’. Option values are considered as a component of use or non-use values, depending on whether the present generations choose to use the environment. Bequest values have been included within the non-use category and refer to future generations' options. Existence values are ‘unassociated with actual use, or even the option to use the thing’ (Turner, Pearce, and Bateman, 1994), therefore non-use values.

Figure 1. Possible pragmatic approaches to the Total Economic Value - TEV

Within the rather theoretical concept of the TEV, the entire range of forest outputs can be more practically seen as market, potential market and non-market values. In addition the classic distinction made by public economics between private and public goods with all the intermediate categories of local and club goods can be recalled. Adopting a somewhat pragmatic approach, Figure 1 puts together the various possible perspectives. The result though debatable is thought to be rather useful for classifying forest outputs particularly in Mediterranean forests where public and non market items are the most important.

Figure 1 can also be seen as the starting point for classifying Non-Wood Forest Products (NWFP) as a component of TEV. NWFP are basically intended as private goods remunerated in the market. They comprise berries, truffles, medicine plants, etc. that are part of direct use values and generally have a market price. However, in addition, non-market public goods and externalities, typically the MEDFOREXs, can be transformed into NWFP and remunerated in the market once appropriate institutional means (laws, property rights, regulations, etc.), as well as management or marketing means are adopted. Evidence of this market transformation and development is given by recent research undertaken in four European countries including Mediterranean regions². A ‘marketability arrow’ has been singled out and drawn in Figure 2 based on the real world case studies evidence.

² EU financed research on ‘Niche Markets for Recreational and Environmental Services - RES’ (FAIR - CT95-0743) undertaken in collaboration with the University of Hamburg (co-ordinator Prof. Udo Mantau), the University of Vienna (Prof. Walter Sekot), University of Padova (Prof Maurizio Merlo) and IBN - DLO- Wageningen (Dr. Kees Van Vliet). The task of Padova University was to identify the transformation/development paths. The outcome of the research has recently appeared as Merlo, M., Milocco, E., Panting, R. and Virgilietti, P. (2000). As shown by recent research covering 100 case studies in various European countries including the Mediterranean region.

Figure 2. Transformation/Development of Public Goods and Externalities into Recreational-Environmental (RE)-Products

Transformation/Development of Public Goods and Externalities into Recreational-Environmental (RE)-Products

Figure 2, essentially derived from Samuelson's (1954 and 1955) description of public and private goods as ‘polar’ cases, shows in the left hand corner the range of public goods/externalities that are characterised by non-rivalry and non-excludability in consumption. The public good connotations can be linked to their intrinsic nature (e.g. indivisibility like a landscape enjoyable by everybody) as well as to ill- defined, assigned or enforced property rights (e.g. access for berry picking) leading to collective consumption. The upper right hand corner of Figure 2 shows the private goods that are characterised by full excludability and rivalry in consumption, typically timber and other market products.

Most of the forest outputs however, are not pure public or private goods. They can be regarded as ‘mixed impure public goods’ with various degrees of rivalry and potential excludability. An example of the dynamic view of public goods and externalities when excludability is increased or decreased according to property rights, is demonstrated by Buchanan (1965) in his ‘theory of clubs’ where, incidentally, he gives an example rather linked to forestry: hunting rights. Previously also Tiebout (1956) has introduced ‘local public goods’ restricted to those living or getting access to a certain area as is often the case for various forest outputs. The ‘marketability arrow’ of Figure 2 illustrates the dynamic evolution of public goods to remunerated private products, or at least local/club products.

Some of the most accepted and important forest outputs like those linked to indirect use values such as watershed management, carbon storage, etc, the so called ‘off site’ but ‘near market’ effects, can be rather easily included amongst NWFP, as it is currently done by investment analysis based on Cost Benefit (Gregersen and Contreras, 1979 and 1992). Amongst NWFP, other non-market public goods and externalities could also be included that are not remunerated in the market as option, bequest and existence values. This view is, however, far from current conception of NWFP, rather linked to technological and material aspects.

3. Method: the questionnaire to survey MEDFOREXs and all other Mediterranean forest outputs (blank questionnaire available by request to the authors)

In order to achieve the objectives of the survey-inventory task a specific questionnaire has been developed to be completed in all the various Mediterranean countries. It concerns the following areas:

• basic forest data: area, types of forests, degradation, main forest functions, ownership, average size of properties or management units;

• macroeconomic forest indicators: contribution to Gross Domestic Product (GDP), employment and income in forestry and timber-based industries, distribution between national/imported wood, processing timber industries;

• availability of statistics on market and non-market forest outputs;

• a list of forest outputs as tentatively developed by Table 1 in order to guide those filling the questionnaire and ensure consistent responses for every Mediterranean country with the possibility to include new items or delete others;

• distinction among various direct use values according to the valuation/quantification methods;

• distinction among various indirect use values according to official statistics and available research reports;

• availability of estimates regarding option, existence and bequest values;

• evaluation of other externalities that negatively affect TEV, if previously not considered³;

• list of sources of official/unofficial information on forest outputs available for each Mediterranean country.

³ It could be argued that theoretically, negative externalities should be valued as loss of positive outputs within TEV. In reality, as confirmed by the first country questionnaire, negative externalities can't be considered within use and non-use values estimation. Moreover, some of them must be estimated by using other valuation methods.

Table 1: Outputs of Mediterranean forests according to the TEV (tentative approach)

Source: adapted from M.Merlo and E. Rojas Briales (2000)

A key issue in filling the questionnaire is the use of the most recent data expressed in annual flows. In case data at national level are not available, any information provided at local level can be taken into account. Another point is the type of forest related to the questionnaire. In principle it should be real Mediterranean forest located in Mediterranean countries. In reality, statistics do not always allow a clearcut and satisfactory distinction between Mediterranean and other forest typologies often part of Mediterranean countries. For this reason the questionnaire suggests considering all forests of Mediterranean countries.

4. First results of the Italian survey (filled questionnaire available under request to the authors)

4.1 Valuing Wood Forest Products

Timber, firewood and cork were identified as Wood Forest Products (WFPs) and valued according to their market price as reported by Italian official statistics (ISTAT, 1997). Of course these values are part of direct use values (Table 2).

Table 2. Estimated WFPs of Italian forests, 1994

Source: ISTAT, 1997

4.2 Valuing Non Wood Forest Products (NWFP) and other forest outputs

NWFP as usually defined are reported and valued in Table 3. A more comprehensive view of NWFP including other forest outputs is reported in Table 4, which in addition to direct and indirect use values, includes option, bequest, existence values. In order to complete the picture negative externalities are also included.

Table 3. Value of traditional NWFP of Italian forests, 1994

Source: ISTAT, 1997 except for ^* items which represent our estimations or results of other surveys

Traditional NWFP as reported in Table 3 are part of direct use values and include mushrooms, truffles, chestnuts, pine kernels, hazelnuts, bilberries, strawberries, raspberries, acorns, grazing, honey and hunting. The above items have been valued, whenever possible, according to market prices as reported by official statistics (ISTAT, 1997). A first exception is grazing and honey where imputed prices have been used. A second one is represented by mushrooms and hunting valued by means of users' benefits (consumers' surplus), though some prices are available but only partially.

Table 4. Value of NWFP and other outputs of Italian forests, 1994

Source: ISTAT, 1997 except for * items which represent our estimations or results of other surveys

The reference to users' benefits is clearly linked to the legal status of these items under Italian property rights system. The amount of mushrooms sold in the market, and collected by professional pickers, was valued according to their market price at 25 471 000 EURO (ISTAT, 1997). Mushrooms were also collected by non-local hobby pickers paying for a permit or a ticket to the local authorities. Other mushrooms were picked without paid picking permits because either they were not requested by local authorities or people did not comply with the rules. Therefore with reference to various survey pickers' benefits, the value is estimated at 60 000 000 EURO⁴.

⁴ Generally, picking of mushrooms and small fruits growing spontaneously in woodlands was once considered as part of the access right, everybody is entitled by natural rights, and as such, was free. However, high pressure on natural resources and land owners reactions, have pushed to regulation. Legislation has been recently issued. Maximum quantities of small fruits and mushrooms to be picked per day and per person were established. Mushroom picking is now also regulated by National Legislation (National Law 352/1993), which has assigned mushroom property rights to the Local Authorities. Provinces, Mountain Communities and Municipalities can, and do, sell mushroom picking permits on their territory, often with different prices for residents and non-residents.

Hunting, even if corresponding to permit prices paid to national and local authorities has been valued on users' benefits according to various surveys employing contingent valuation method (Battisti et al, 2000). It is important to mention that game is traditionally public property in Italy as well as shooting/hunting rights. The State sells shooting/hunting permits and generally identifies the hunting areas at regional/local levels. Enforcement and control is delegated to Regions and Provinces. Hunters have free access to private properties except when these are fenced or enclosed ‘fondi chiusi’. Recent legislation (LN 157/92) has created a market for shooting/hunting; landowners can now sell access and shooting rights from private estates and game-farms: Aziende Faunistico-Venatorie and Aziende Agri-Turistico Venatorie. These areas still represent the exception rather than the rule as it is the case with neighbouring countries like Austria and others adopting Anglo-Saxon property rights.

The extended view of NWFP as reported in Table 4 includes recreation amongst use-values. Though in several cases it is paid by consumers, the overall value has been calculated according to the estimated number of day-visits/year and consumer benefit/visit (2.5 EURO) as resulting from several surveys and case studies where consumers are obliged to pay a price to get access to the forests or, generally speaking, to services that help the recreation in the forests (footpaths, guides, car parks, etc) as shown by the already mentioned survey on possible marketing of public goods and externalities linked to forestry (Merlo et al, 2000). A minimum 120 000 000 EURO⁵ and a maximum 420 000 000 EURO⁶ values are reported to give an idea of the recreation value of Italian forests.

Among the indirect use values, potentially part of NWFP, only watershed management and carbon storage could be estimated. Watershed management, broadly including soil conservation and land protection against landslides, floods, erosion, water conservation and purification⁷ within catchment areas, etc, was valued by employing Public Expenses (Ministero dell' Ambiente, 1997) for ‘watershed management’ as reported by national accounts, amounting in 1997 to 1 321 000 000 EURO. The criterion of avoided costs due to good forest management has been adopted according to the following arguments: the magnitude of watershed management carried out by forests can be deduced by comparing data on actual and potential erosion as published by the Ministry of the Environment (1997); it can be estimated that about 5 millions hectares of land would be at risk if present forest land use was changed; given the size of the country (30 millions hectares) and forest land use (around 9 millions hectares of which only some 30% are object of forest planning, and some 50% reasonably well managed), it can be deduced that the National Expenditures must be principally imputed to areas poorly managed, therefore the area well managed allows society to save the amount of money spent in areas not so well managed. It is a very rough, and certainly debatable estimation. Nevertheless it must be recalled that the water-related functions of forests have been estimated by distinguished foresters like Patrone (1971) - updated by Codemo (1986) - some 40% higher at around 2 000 000 000 EURO.

Estimation of carbon storage was done at 60 000 000 on the basis of the opportunity cost per additional ton of carbon fixed in the forest biomass and in the soil (Cesaro et al, 1994). Of course it is another questionable method that, however, is internationally accepted as the basis for negotiation amongst interested parties as an outcome of Kyoto protocol.

Regarding option, bequest and existence values, Italian official statistics provide little information. In fact, only one local example regarding existence value, reports a benefit of 10 EURO/person (Signorello, 1990). The estimate was not extrapolated at national level, taking into account that the peculiarities of the surveyed region are not similar to those characterising the main national forest area.

⁵ Calculated using a number of 48 000 000 day-visits/year in mountainous and hilly areas (ISTAT, 1998).

⁶ Obtained when employing an estimate of 168 000 000 day-visits/year (G. Scrinzi et al 1996).

⁷ Concerning the water functions the fact can be remembered that some water authorities have started to sign collective agreements with forest owners at least in countries like Austria.

Concerning the negative externalities, erosion due to poor forest management has been valued by employing the estimated average soil loss/year - calculated on the basis of Benini (1990) valuation, and the costs for soil transportation for returning to the original situation. The replacement cost method was applied for estimating the damage by forest fires whereas the losses of natural quality and landscape value due to illegal actions were quantified on the basis of the fines paid.

In conclusion, the estimates of the WFPs (440 839 000 EURO) and NWFP (1 646 484 000 EURO) lead to an overall TEV of 2 087 323 000 EURO, of course excluding as already underlined, option and non-use values. Taking into account the various shortcomings of official statistics, the poor knowledge and quantification of forest functions and the lack of reliable information about option, existence and bequest values, the overall figure can certainly be regarded as a minimum estimate of the annual TEV of Italian forests.

The application of the questionnaire to Italian forests suggests the following classification of WFPss and NWFP according to valuation methods used:

• WFPs
  • valued by means of market price: timber, firewood, cork.
• NWFP
  • valued by means of market price or imputed market price: mushrooms, truffles, chestnuts, pine kernels, hazelnuts, bilberries, strawberries, raspberries, acorns, honey, grazing;
  • valued by means other than market price (consumers' benefit): hunting and other items where consumer surplus measures are corroborated by strong and credible market evidence where a market is possible and developed.
• Extended NWFP or other outputs
  • valued by means other than market price (consumers' benefit or loss, opportunity costs, etc.): recreation, watershed management, carbon storage, erosion, damage by forest fires;
  • valued by means other than market price (consumers' benefit or loss): natural quality, landscape, biodiversity for the present generation where, however, it is difficult to make market references and even to simulate a market;
  • not valued: option, bequest and existence values.

5. Some conclusions

It is clear that NWFP, when broadly interpreted including near market value, represent a substantial part of the TEV of the Italian forests, and this appears to be true even if important issues like option, bequest and existence values are not accounted for. As shown by Figure 3 some 67% of the TEV is represented by NWFP or potentially marketable NWFP. The survey-inventory has also shown that the potential for market remuneration, after the transformation/development, is not a remote option as is certainly the case with hunting and, to a large extent, with recreation. Other important functions like those concerned with water (watershed management, moisture conservation, purification, etc) present important potential for transformation and developement, this looks particularly true in the Mediterranean context where water is a key economic and social issue. The valuations in Figure 4 underscore this fact, showing that watershed management alone could represent some 4/5th of the total value of the NWFP and potential NWFP.

Figure 3. An attempt to estimate the TEV of Italian forests

Figure 4. Components of WFPs and NWFP

The option, bequest and existence values, even though not valued, should also be taken into account as paramount components of the TEV of Mediterranean forests. Of course any attempt to value them raises serious objections and question marks, given the state of the art of social and economic sciences.

Notwithstanding the above various shortcomings, the ongoing research aims to make an accurate review of existing information on the overall Mediterranean forest outputs including public goods and externalities that is the MEDFOREXs. Dissemination of the acquired information among Mediterranean countries is needed. It is clear, and well demonstrated by the survey, that valuation of MEDFOREXs and all the other outputs, including the various NWFP broadly intended, represents an essential step in improving forest accounting, therefore local planning and forest policy formation and implementation at regional/national/global levels.

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