FOREST BIODIVERSITY AND TIMBER EXTRACTION: AN ANALYSIS OF THE INTERACTION OF MARKET AND NON-MARKET MECHANISMS*
Kanchan Chopra
Pushpam Kumar
July 2003
Institute of Economic Growth,
University of Delhi Enclave, Delhi 110007.
E-mail:
Phone: 91-11-27667424,27667288
Fax: 91-11-27667410
Name and Institutional Affiliation of paper presenter:
Kanchan Chopra, Institute of Economic Growth, University of Delhi Enclave,
Delhi –110 007,
Co-Author: Pushpam Kumar, Institute of Economic Growth,
Key words: Biodiversity Index, Timber Extraction, Market and Non Market Institutions
JEL Codes: Q 23, Q 21,
* This paper was completed during a visit by the first author to the ICTP, Trieste as part of its Ecological Economics Programme in February 2003. The authors are thankful to Charles Perrings and Anastasios Xepapados for helpful discussions and comments. They also wish to thank Avishek Banerjee and Kanupriya Gupta for painstaking and careful assistance with data collection and analysis. The usual disclaimer applies.
FOREST BIODIVERSITY AND TIMBER EXTRACTION: AN ANALYSIS OF THE INTERACTION OF MARKET AND NON-MARKET MECHANISMS
Abstract
Forest ecosystems provide a range of products and services for human use, primarily due to the biodiversity inherent in them. From the ecological viewpoint, this diversity is of different kinds and has the potential to cater to human well-being in multifarious ways. However, the mix of services that is available to any economy from forests depends, in addition to their biological characteristics, on the nature of the economic regime within which they are exploited. Some commodities such as timber are extracted in a regime driven, in the main, by market forces. Others such as non-timber forest products may be extracted under a variety of arrangements, the range varying from open access to common property regimes. Services such as those of water cycle augmentation and micro-climate regulation are typically available to communities as free goods.
It is hypothesized that this difference in institutional regimes has implications for the mix of products and services that are extracted in different ways
· through its effect on the extraction efforts for the marketed product.
· because of policies, such as plantation, which are intended to increase the supply of the marketed product, typically, timber
· through a change in biodiversity of the forest stock which in turn results in a decreased availability of the non-marketed products
The present paper studies conditions under which timber has been extracted from forests of the north Indian state of Uttar Pradesh during the period 1975 to 2000 to examine this proposition. It is postulated that extraction of timber at any point of time depends on the stock, the effort involved in extraction (as represented by the per unit cost of extraction) , the biodiversity index (defined as a product biodiversity index) and a variable depicting ecological characteristics of the forests. Using a modified Gordon-Schaefer production function, and the assumption that forests are managed for “sustainable timber extraction”
the reduced form equations are derived and estimated using data from Uttar Pradesh forests for the period 1975 to 2000.
The results suggest that , in the absence of variables representing the plantation area and bio-diversity corrected stocks, the explanatory power of the model is low, even though extraction is seen to be significantly impacted by effort. If, however, the ratio of plantation area and biodiversity adjusted extraction are introduced as explanatory variables, interesting results with respect to the trend of extraction over time are obtained
As stocks of woody biomass increase, extraction increases. A decrease in bio-diversity of the stock may be accompanied, under a certain set of circumstances, with a rising trend in extraction, and at a rising rate as explained above:. However, an increased biodiversity, may imply a decreasing trend in the extraction in the future provided that present extraction Y does not rise at a rate faster than the rate of increase in the biodiversity. These two results seen together are, we believe, significant. They point to the fact that policies aimed at increasing plantation increase short run timber extractionII Further, if biodiversity increases, the impact on future extraction of timber depends on relative rates of change in biodiversity and extraction per unit effort. It is clear that trade-offs between timber extraction and existence of bio-diverse forests providing a variety of goods and services.
I. Introduction
Forest ecosystems provide a range of products and services for human use, primarily due to the biodiversity inherent in them. From the ecological viewpoint, this diversity is of different types and levels and has the potential to contribute to human well-being in multifarious ways. However, the mix of services that is available to any economy from forests depends both on their biological characteristics and on the nature of the economic regime within which they are exploited. Further, the economic arrangements that govern forest extraction are of different kinds. Some commodities such as timber are extracted in a regime driven, in the main, by market forces. Others such as non-timber forest products may be extracted under a variety of arrangements, the range varying from open access to common property regimes. Services such as those of water cycle augmentation, prevention of soil erosion (through the watershed functions) and micro-climate regulation are typically available to communities as free goods.
It is hypothesized that this difference in institutional regimes has implications for the mix of products and services that are extracted in different ways
· through its effect on the extraction effort for the marketed product
· due to policies such as plantation which are intended to increase the supply of the marketed product, typically, timber.
· through a change in biodiversity of the forest stock , which in turn results in a decreased availability of the non-marketed products
The present paper studies conditions under which timber has been extracted from forests of the north Indian state of Uttar Pradesh during the period 1975 to 2000 to examine this proposition. It is postulated that extraction of timber at any point of time depends on the stock, the effort involved in extraction (as represented by the per unit cost of extraction) , the biodiversity index (defined as a product biodiversity index) and a variable depicting ecological characteristics of the forests. Using a modified Gordon-Schaefer production function, and the assumption that forests are managed for “sustainable timber extraction” the reduced form equations are derived and estimated using data from Uttar Pradesh forests for the period 1975 to 2000.
The paper is organized as follows. Section II reviews different approaches to the measurement of biodiversity in order to place the proposed “bio-economic diversity index” in context. Section III presents the theoretical and econometric model underlying the analysis. Section IV looks at forests and forest policy in the Indian state of Uttar Pradesh. Section V estimates the model and the last section concludes the paper with comments and observations
II.1 Characterisation and Measurement of Forest biodiversity
Biological diversity is defined as the variety and the variability of different life forms. The life forms could range from the molecular level (DNA) to the biome level. While, at the conceptual level, a number of well-defined and widely accepted definitions of bio-diversity exist, its characterization and measurement still remain an issue of concern. Characterisation depends on three disciplines[1]:
· Taxonomy which provides the reference system and depicts the pattern of diversity for all organisms
· Genetics which provides knowledge of the gene variations within and between species
· Ecology which provides knowledge of the varied ecological systems in which taxonomic and genetic diversity is located.
Often, analogous to the approach which ecology adopts, biological diversity is characterized and measured with respect to particular eco-systems such as wetland ecosystems, grassland ecosystems, forest eco-systems etc. Our specific interest in this paper is in this aspect of bio-diversity with reference to forest eco-systems, which constitute a major share of global biological resources and their biodiversity. According to one estimate, half of the vertebrates, 60% of the known plant species, and 90% of the total world species are found in tropical forests alone (Flint, 1992)..
It is not possible to set-up an all–embracing scheme of biodiversity measurement which represents all components of biodiversity for different forest ecosystems. Different aspects of biodiversity are captured by different indices. Measurement of forest biodiversity becomes all-important not only due to the existence of species richness in forests but also due to its fragility and the subsequent ecological and economic implications.
To begin with, biodiversity from an eco-system perspective can be viewed as species diversity, within areas or between areas. Ecologists have for long distinguished between ‘alpha’ and ‘beta’ diversity. Further,they have long known that a relationship exists between the number of species and the size of an area. A modified form of this is sometimes referred to as the “island biogeography theory “. An assumed species area relationship is used to estimate the biodiversity in forests as shown by the following equation:
S = cAZ
Where, S is the number of species, A is the area and c is a parameter that depends on the group of species,[2] its population density and the biogeographic region. ‘Z’ determines the shape of the species area curve and has values between 0.15 and 0.8 for most regions of the world. Z factors have inverse relationship with the area under consideration i.e. as the area under consideration increases the Z factors become smaller. Islands have higher Z factors than continental areas. (Mcguiness1984)
However, species richness and species diversity as measures of biodiversity treat all species equally. We know however, that different species may make different contributions both from a biological perspective and from a utilitarian economic perspective. Such perceptions of difference lead to their own measures of biodiversity.
From a biological standpoint, one can distinguish between taxic and functional diversity, both of which refer to relations between species. In a forest eco-system, functional phenomenon can be divided into an array of processes such as photosynthesis, transpiration or the flow of energy and matter through a forest ecosystem, which are mainly driven by the abiotic environment (e.g. sunlight, temperature). In this context silvicultural interventions can be considered as a controlled disturbance to favour certain parts of the population (e.g. individuals, tree species, etc.) or processes (e.g. tree growth) within a forest ecosystem. Functional biodiversity refers in particular to ecological functionality which may have two kinds of consequences
· for a species itself in isolation, referred to as autecological diversity
· for the living together of a set of species referred to as synecological diversity
In a forest eco-system context, both of the above are relevant since we are concerned with “ plants, animals, micro-organisms and physical environment at any given place and the complex relationships linking them into a functional eco-system”[3].
II.2 Functionality and Bio-diversity in relation to human use: Bio-Economic Indices
Humans, governed by their anthropogenic norms and behaviour, define functionality with respect to human use. A variety of bio-diversity measures have been developed with such a focus, albeit from different viewpoints and at different spatial scales. The focus of conventional forest management has, for instance, been on timber production and is defined almost exclusively at the stand level. Regional planners consider some broader issues of the forest sector. In contrast, the measurement of biodiversity from the sustainability perspective requires the inclusion of all spatial scales.
Bioeonomic indices of forest diversity are also aimed at capturing the diversity of forest eco-systems in terms of their use by humans. The two-way division of forest products into non-timber and timber produce constitutes a distinction between diversity based use and single product based use of a product with market- value. Non timber forest products obtained from the forest constitute a range including fuel-wood, leaves with economic value (tendu and sal for instance), roots, canes, herbs, seedlings, honey, gums and resin. Timber may also come from different species but is typically treated as a single product, . It is postulated therefore that, an index capturing the number of products being extracted comprises a good proxy to measurement of biodiversity- in- use. Each product is given a weight which is determined by the value that society places on it.The weighted index of biodiversity is therefore defined as the index in which values are used as weights for the different Yi.. Note however that timber values are measured by market prices and non-timber product values are approximated in a variety of ways reflecting the economic regimes under which they are extracted. Non-timber product values capture the imperfect nature of the markets in which they are evaluated. They may reflect opportunity costs of labour or the relatively lower access of gatherers to markets. This is due to the fact that non-timber forest products are extracted under a number of regimes, varying from open access to collective arrangements or contractual arrangements under governmental control. Timber prices, on the other hand are determined in formal markets.
The bio-economic diversity index is given by
where
In other words, the index is a weighted index, with values defining functionality. These values may be determined in or outside the market and are treated as weights in the bioeconomic index.
A value of the index close to one indicates that fewer products are being extracted. Hence, a loss of biodiversity is reflected in an increase in the value of the index, which ranges between 0 and 1.This means that the higher the value of index, the lower is product biodiversity. It may bear repeating however, that prices for products are determined under different institutional regimes.
III. The Model
This section sets up the simple and the modified Schaeffer models for timber extraction from forests. It is postulated initially that extraction is determined by effort involved in extraction and the stock. In other words: