Imagine the sheer magnitude if entire countries like France, Germany, and Spain were fully covered in forests, and then, almost suddenly, all those trees disappeared. This is the scale of global deforestation from 2001 to 2020, with implications that are hard to fathom.
The detrimental effects of deforestation are staggering. First, deforestation significantly drives climate change, contributing anywhere from six to 17 percent of the worldwide greenhouse gas emissions.
Moreover, since trees act as carbon sinks, they draw CO2 out of the atmosphere, which has a cooling effect on the planet. Finally, forests are also sanctuaries of biodiversity.
“Climate change and biodiversity make this a global problem, not a local problem,” said Massachusetts Institute of Technology (MIT) economist Ben Olken and senior author of a recent study describing way of tackling global biodiversity. “Deciding to cut down trees or not has huge implications for the world.”
However, the economic allure of deforestation is undeniable, leading to its unabated continuation. With technological advancements in the past 25 years, we can now monitor this issue more closely.
Devices like the Landsat satellites have revolutionized our ability to track changes in forests since 2000 with incredible detail.
“Part of this revolution in measurement is accuracy, and the other part is coverage,” explained lead author Clare Balboni, an assistant professor of Economics at the London School of Economics (LSE).
“On-site observation is very expensive and logistically challenging, and you’re talking about case studies. These satellite-based data sets just open up opportunities to see deforestation at scale, systematically, across the globe.”
But how could global deforestation be curbed effectively? According to the experts, a first step in this direction is understanding the problem.
Several intellectual heavyweights from the past, including renowned MIT economist Paul Samuelson in the 1970s, devised models that viewed forests as sustainable resources.
The primary purpose behind these models was to optimize the balance between deforestation and reforestation. However, the current wave of deforestation, especially in tropical regions, exhibits a different trend. Regrowing forests is not the norm anymore.
As Balboni and Olken stress, the economic reasons behind deforestation have evolved. The immediate profits now stem not just from lumber but from clearing woods to make way for agriculture.
For instance, in Brazil there is a positive correlation between rising agricultural prices and deforestation rates, while in Indonesia, surging global palm oil prices have pushed companies to convert forests into palm orchards.
This rampant deforestation poses an economic dilemma: The global consequences of climate change due to deforestation are external costs imposed on the masses by a few.
“The relevance of global externalities is very important, and the conceptualization of alternate land uses is very important,” Olken said.
Various solutions to effectively curb deforestation have been proposed, ranging from levying taxes on those responsible to compensating landowners to preserve forests. The UN’s REDD+ program, for example, involves Payments for Environmental Services (PES). Yet, its efficacy varies across regions and situations.
“There’s mixed evidence from many of these [studies],” says Balboni, emphasizing the need to evaluate each policy’s real-world impacts.
While paying individuals might seem a straightforward solution, this method faces significant challenges in some parts of the world.
For instance, while cash subsidies in Indonesia led to a 30 percent reduction in deforestation in certain areas, a similar scheme in Mexico had unintended consequences, inadvertently promoting further deforestation.
The seemingly straightforward method of outrightly banning deforestation also has its complexities. Even with designated protected regions, illegal deforestation often simply shifts to other unprotected areas.
However, some unconventional approaches have been more successful. For instance, in Brazil, the Amazon Soy Moratorium, where grain traders pledged not to source soy from deforested areas, significantly curtailed deforestation without merely shifting it elsewhere.
Similarly, a 2008 policy in Brazil tightened the criteria for availing agricultural loans, demanding adherence to environmental norms. This led to a dramatic 60 percent reduction in deforestation over almost ten years.
When dissecting the root causes of deforestation, Balboni and Olken pinpoint two predominant challenges. Firstly, the ambiguity in forest land ownership often exacerbates deforestation. Secondly, political dynamics play a significant role in forest conservation (or the lack thereof).
Politics and policy intertwine deeply when it comes to deforestation. Analyzing the Amazon between 2001 and 2005, the experts found that conservation policies significantly curbed deforestation in Brazil compared to neighboring regions.
However, a change in political leadership in 2014 saw a resurgence in deforestation. Another example is Brazil’s satellite-based DETER system. A study showcased that municipalities that increased its usage saw a 25 percent reduction in deforestation from 2006 to 2016.
“The research there is aiming to understand what the political economy drivers are, with the idea that if you understand those things, reform in those countries is more likely,” Olken explained.
As the world grapples with the deforestation crisis, Balboni and Olken believe that evolving research could be of great help for finding ways to stop massive forest losses. However, the onus now lies on merging accumulated knowledge with actionable policy measures.
“To the extent that there’s ambiguity across different contexts with different findings, part of the point of our review piece is to draw out common themes – the important considerations in determining which policy levers can [work] in different circumstances. That’s a fast-evolving area,” said Balboni.
“We don’t have all the answers, but part of the process is bringing together growing evidence about [everything] that affects how successful those choices can be.”
The study is published in the journal Annual Review of Economics.
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