Chapter 2: Cross-sectoral policy applications of forest accounts

This chapter shows how forest accounts have been implemented and used for policy analysis. Country experience at the national level is discussed in relation to how it addresses each of the main policy applications of forest accounts identified in Chapter 1:

A.  Establish the true socio-economic value of forests in relation to the rest of the economy

What is the total economic contribution of forests and what are the benefits from sustainable forest management?

What is the distribution of forest benefits among different groups in society?

Is economic growth sustainable or is it based on the depletion of forests?

B.  Evaluate the impact of non-forestry policies

What are the trade-offs among competing users and how can forest utilization be optimized?

What are the impacts of non-forestry policies on forest use?

National forest accounts assess the total economic value of forests and link forestry values to the use of other resources and to the broader economy, integrating forestry policy with national development and monitoring interactions and feedback across different industries. Thus, forest accounts can be useful for two sets of resource managers and stakeholders: forestry managers and stakeholders responsible for sustainable management of the forest sector, and managers and stakeholders concerned with the macroeconomy.

Forestry managers may already have information about the total economic value of forest resources, including the inputs provided to sectors not part of the traditional forestry sector. What they gain from forest accounts is the ability to put that information within the context of the national economy. This helps them to identify and address threats to forest resources that originate outside the forestry sector, which can improve their ability to protect this resource.

Policy-makers and other stakeholders outside the forestry sector benefit from forest accounts in several ways: more accurate GDP that reflects all the contributions of forests, better indicators of sustainable economic development that include forestry and forestland resources, a tool for comparing policies across different natural resources including the extent to which the ‘user pays’ principle is applied, but perhaps most importantly, a method to integrate forestry into macroeconomic policy and planning tools. By identifying the extent of other sectors’ dependence on forests, it is possible to build strategic alliances with stakeholders in other sectors, such as agriculture, tourism, electric power and water.

Sustainable economic development requires anticipating the interaction and feedback from one part of the economy to another, weighing alternative development strategies in a manner that anticipates the full (direct + indirect) costs and benefits incurred throughout the economy. In the past, sectoral policies may have been designed with relatively little emphasis on economy‑wide impacts. Agricultural policy, for example, may have been formulated with little concern for impact on forestry, even though it may have had a major indirect impact through changes in land use. Forest accounts provide a tool for coordinating policies across the economy, anticipating cross-sectoral policy impacts and designing more effective national development policies.

This chapter begins by listing the countries with formal forest accounting programmes and the components of forest accounts and related environmental accounts that they have constructed. Examples of the policy applications of forest accounts are drawn from a range of countries—beginning with Sweden, South Africa and Romania—to illustrate how forest accounts are implemented and applied under widely varying circumstances. Additional examples will be provided by accounts for other countries, such as Swaziland and Spain, as well as forest valuation case studies.

2.1 Countries implementing forest accounts

Table 2.1 shows countries that have constructed forest accounts and the type of forest goods and services included in the accounts. This table is limited to those countries with formal accounting programmes sponsored by government agencies or by non-governmental agencies in cooperation with governments. Forestry accounts are more common in developed than in developing countries. Eurostat has had an ongoing programme to develop forest resource accounts since 1995 and many of the participating countries have developed extensive accounts. There are also many additional academic studies and one-off studies by governments or international agencies that are not shown here; some of these will be discussed later in the section on policy analysis. For an exhaustive review of all forest accounting efforts through 1997, see Vincent and Hartwick, 1997.

Forest accounts for all countries include timber asset accounts in physical and monetary terms. Forests are disaggregated in different ways depending on the policy issues and characteristics of forests in each country. Virtually all forest accounts distinguish cultivated and natural forests, and disaggregate forests by major tree species. Many developing countries limit timber accounts to commercial timber production, but are beginning to add non-commercial timber production and use of non-wood products as data become available. Among the developing countries, only Swaziland has constructed supply and use tables (SUT). SUTs are only constructed for timber and wood products at this time.

The non-timber benefit most commonly included in forest resource accounts is carbon storage. Virtually all developed countries include carbon accounts. This practice is less widespread in developing countries but is likely to increase with growing potential for markets in forest carbon mitigation. There is limited treatment of environmental services such as water and soil protection at the national level. This omission is due partly to the great uncertainty about these services (discussed further in Part II) compounded by the highly site-specific nature of the quantity of services provided and their economic value. For these reasons, forest environmental services are more commonly found in regional accounts or accounts for individual forests. This issue will be discussed in more detail in Chapter 3.

2.2   Total economic contribution of forests and the benefits from sustainable forest management

NA:  not applicable

NAV:  not available

Source: (Hassan, 2002)

Table 2.5:        Value of forest goods and services in Romania, 1994 to 1997

(millions of US$ in constant 1997 prices)

Source: Adapted from Fortech Dames and Moore, 1999.

The Romanian forest valuation study reports timber and non-timber products, recreational services and forest environmental services. Figures are not reported for different categories of forest. The underlying physical data and valuation methodologies are reported only for timber and non-timber products. Insufficient data were available for valuing recreational services. A single value is reported for environmental services that combine carbon storage, soil and water protection and social values, but no information about the value of each service and how this figure was obtained. The estimated value of environmental services is more than an order of magnitude greater than the total for timber and non-timber products. Without further documentation it is difficult to assess this value; in any case, it is likely that forest environmental services are substantial. An example of forest accounts that addresses the value of environmental protection services for water and soil will be discussed in Chapter 3.

2.2.3    How do forest accounts improve national economic accounts?

With respect to the main objective of this policy application, providing a better understanding of the total economic value of forests than conventional national accounts provide, the benefit of accounts may be summarized in Table 2.6. In all countries, the values directly attributed to forests in national accounts greatly underestimate the true value of forests. The share attributed to forestry ranges from a high of 45 percent in Sweden to a low of 4 percent in Romania. A large part of forest services benefits other sectors and is attributed to these sectors, mainly recreation and agriculture, which account for 41 percent of forest output in Sweden and 24 percent in South Africa. Given the omission of many forest environmental services from forest accounts, these values should be considered a lower bound. It is not possible to determine the share of Romanian forest values wrongly attributed to other sectors and the share not counted at all.

Table 2.6:        Forest values included in national accounts of Sweden, South Africa and Romania

2.3 Who benefits from the goods and services provided by forests?

The question of who benefits from forests is increasingly important for development policy. This issue has two dimensions, inter-generational and intra-generational. Inter‑generational equity concerns the forest wealth left to future generations - whether society is liquidating its natural capital to pay for current consumption or using it sustainably. This is discussed in section 2.4.

Intra-generational equity concerns the distribution of benefits among different social groups in the present generation. Forest accounts have not been used to address systematically the issues of equity and poverty, but this use of the accounts is likely to become important in future work (e.g. Lange and Hassan, 2002). Identifying the different social groups that benefit from forest goods and services is an essential first step in forestland use planning, infrastructure development and assessing trade-offs among competing forest uses.

There are several ways in which the distribution of forest benefits may be evaluated, each of which is useful for policy purposes. Some of the characteristics to consider include:

In identifying forest beneficiaries, it may be useful to combine two or more of these dimensions and to further disaggregate households by income class or other relevant characteristics. This section will address the first two approaches to evaluating the distribution of forest benefits, scale of forest use and distance from forest. Distribution by geographic distribution within a country will be discussed in Chapter 5, where the construction of accounts for regions or individual forests is addressed.