How Do We Value Forests?

By Charlie Collins

Forest products are used in our everyday lives, from the chairs we sit on to the books we read, to the medicines we take and even the timber used in the buildings all around us. Without them our lives would be vastly poorer. Additionally, forests provide jobs for thirteen-million people globally (WWF) and are home to three-hundredmillion people Forests are also important environmentally, providing a habitat for 80% of the world’s terrestrial biodiversity (WWF) and housing for over half of the world’s land-based species. Second only to oceans, they are also the largest storer of carbon. How, then, can we begin to place a value on something so vital? The Boston Consulting Group (BCG), have attempted to do just that, coming up with four dimensions to consider: the climate regulatory function forests play, their commercial output, their environmental benefits, and their social impact.

The climate regulatory role forests play is significant, to say the least. Forests are the second biggest storer of carbon dioxide, and store around one billion tonnes of CO2. Since one tonne of CO2 is roughly valued at $27 to $135, the value of forests in climate regulation ranges from $27 to $135 billion. The latter CO2 price of $135 may be necessary to use in order to prevent global warming exceeding 1.5 degrees, whilst the lower price of $27 represents the current 30-day rolling average of EU CO2 prices. This climate regulatory role accounts for the majority, 65% to 90%, of the total value of forests.

Next, the commercial value of forests is perhaps the easiest to value. It can be quantified by both the value of wood products, such as timber and paper, and the value of other non-wood products, such as honey, fruit and the raw materials used to make medicines. Non-wood products are very important for certain production processes, but only account for about 1% of the commercial value of forests. In total, the commercial value of forests represents about 5% to 20% of a forest's total value.

Thirdly, the benefits of forests to the environment beyond regulating the climate are are numerous, from their importance for biodiversity to the way trees filter clean water (purifying 60% of clean water in Asia, for example, and thus proving essential for many people). Essentially, the environmental value of forests is based on avoided costs, such as the cost of water filtration or the increased healthcare costs that would occur from higher pollution levels This accounts for around 2% to 7% of the total value of forests

Finally, the social value of forests is extremely important and should not be overlooked. Many people directly depend on forests for their homes and livelihoods. Accordingly, the value of people living in forests is calculated based on what those individuals would need to pay for things like housing and food, if they had to live in a non-forested rural community instead. Moreover, forests have recreational benefits, which can be quantified based on the amounts people will pay to travel to visit them.

The total value of forests is calculated at about $50-$150 trillion, which at the upper end is twice the value of the global stock market. However, valuing forests can prove extremely tricky. Therefore, whilst this estimate is informative, further work is still needed, for example in more accurate measurements, especially if we wish to end deforestation. This is because we must be able to value forests in order to compensate developing countries with large forests so that they might preserve rather than destroy them. Systems like BCG’s for valuing forests are a step in the right direction. Yet there is as yet no clear cut, unified methodology globally for valuing one of the world’s most essential resources.

References:

Kappen, G et al (2020) The Staggering Value of Forests and How to Save Them The Staggering Value of Forests and How to Save Them | BCG

WWF (2022). [online] Available at: <https://wwf panda org/discover/our focus/forests practice/importance forests/#: :text=The%20importance%20of%20forests%20cann ot%20be%20underestimated.%20We,prevent%20soil%20erosion%20and%20mitigate%20climate%20change.%20> [Accessed 18 March 2022]