The challenges of reducing deforestation and how scientific simulations can help

By Ben Groom

To try to begin to save what’s left of the world’s forests it is important to first ask: Who deforests and why? While this varies considerably in different contexts, some broad patterns exist. Loggers and farmers or cattle ranchers are the ‘actors’ that typically clear forests, but what they do to their land is determined by the political and economic systems that they find themselves in: the prevailing institutions, markets and policies. Chief among the institutional determinants are property rights: that is who owns the rights to the land and timber and how this ownership is regulated and enforced. Of the many economic determinants, the nature of land markets, local labor markets, and migration in and out of the locale are key. Where institutions are weak and markets fail to reflect the full economic value of standing forest cause for concern is warranted.

From the perspective of climate change and biodiversity, forests also have a global value. They matter because life would be difficult and much more expensive without them and the services they provide to the world, such as clear air, clean water, carbon storage and so on (see 5 Rainforest Ecosystem Services that Nourish People and Planet). However, a market for this global value does not yet exist and many people who have benefited from using the timber of clearing the land for agriculture have done so for free. In other words, the full economic value of forests has not and is not considered by the actors. This is the motivation for global payments for environmental services (PES)—a system that rewards landowners and farmers for the ecosystem services that their forests provide.

The success of such strategies will depend on the local institutional and economic environment. At the local level, insecure or poorly defined property rights to land are perhaps the most important precursors to inefficient land use. Examples abound. Where forest land is under an open access regime, where specific rights are not assigned to anyone and no-one can be excluded, forests will be cleared sooner than is desirable since actors fear that others will do the same. In such cases, for instance in Brazil during the 80s and 90s, and presently in Bolivia, ownership of land and timber is conditioned on clearing the land, what Lee Alston, professor of economics at the University of Colorado, and colleagues have described as ‘use it or lose it’ property rights regime. Such uncertainties provide additional reasons for land clearing than would exist if private tenure were secure, or where forest land is held under a functioning common property regime.

Market failures are also important. For instance, imperfect or non-existent markets for off-farm labor can act as a centripetal force on agricultural labor. Evidence from China and Africa shows that, in order to cope with a lack of alternative jobs, households and farms put all their human resources into farming causing its expansion into formerly forested land. The flip side of this dynamic is that relaxing constraints on migration can sometimes release the pressure on the forest frontier. According to mine and my colleagues’ research, this appears to be how China’s Sloping Lands Conversion Programme (SLCP)—which pays people to reforest cultivated land in upper reaches of major river basins—was successful in reducing poverty, and how deforestation was reduced in Mexico, the Philippines, and Nepal.

As if the story were not complicated enough already, market imperfections often occur together in developing countries. Not having much cash or savings and being unable to get a loan can limit people’s ability to either migrate to try and improve their lot or invest in intensifying or changing the nature of agricultural production. While improving credit is likely to reduce poverty, the impact on the forest frontier is not entirely predictable. If it leads to out-migration this may reduce the pressure. If it leads to more extensive agriculture or cattle ranching, pressure on the forest frontier will most likely increase. The overall effect will depend on the balance of these different impacts. Often there will be a trade-off between poverty alleviation/income generation and environmental goals.

Cattle ranching is a key driver of deforestation in Latin America in three ways. Firstly, farmers switching from growing crops to herding cattle, because the latter is more profitable and requires less labor, is one determinant; growing existing cattle operations is the second; and intensification of cattle production (e.g. stall feeding) is the third. The causes of these processes are often different and depend on the ability to accumulate capital funds and invest. Once again market failures can influence the amount of cattle owned. For instance, the absence of functioning banks can lead ranchers to overstock cattle as a means of accumulating wealth or saving as a precaution for an uncertain future.

In developing countries then, the important actors determining land use decisions organize their activities around local, and sometimes global, institutional and market constraints. Sometimes otherwise well-meaning policies such as subsidies on fuels or crops can actually encourage deforestation. In such environments it is difficult to predict how these actors will respond to other policies and incentives to reduce deforestation.

Most prominent among the global initiatives is the United Nations Reduced Emissions from Deforestation and Degradation (REDD) scheme, whose motivation is to correct a global market failure in carbon by paying for reduced deforestation below some baseline. However, where off-farm labor markets and migration are constrained, for instance, payments to reduce deforestation may simply increase the local supply of labor, reduce local wages, and increase the profitability of other deforesting activities, such as cattle ranching. In other cases such payments may encourage out migration of labor and reduce the pressure at the forest frontier, a phenomenon witnessed in China in the aforementioned SLCP scheme. However, outmigration may provide remittances which overcome local credit constraints on agricultural production or cattle ranching, and hence ultimately be counter-productive with regard to forests. So even if enforcement and monitoring of forest property rights is perfect, which it generally is not, simple labor market responses could potentially weaken or undo the effect of REDD payments.

Exactly how a policy will affect what people do with their forested land is hard to fully imagine and predict, but simulation tools can prove useful. By modeling the features of deforestation, using scientific economic and agent based approaches, and calibrating the models to local conditions, it is possible to obtain a richer picture of the possible consequences of policies on welfare and land-use. Typically such exercises expose new mechanisms through which policy can operate, as well as unintended consequences of interventions.

SimPachamama, a scientific game released this month by an inter-disciplinary team from the Institute for Advanced development Studies (INESAD), the London School of Economics and Political Sciences (LSE) and various others, combines both agent based and economic features and is calibrated to data on farmers in the Amazon basin in Bolivia. The game embodies all of the institutional and economic determinants of land use described above: the decision to expand arable production, the switch to cattle ranching, the extensification/intensification decisions, and migration.

Through a 20-year term, the player – the mayor of an Amazonian community – has to try to balance the inherent policy priorities in order to increase the wellbeing of his citizens, while reducing deforestation. Payments (such as envisaged in REDD), taxes and public investment are among the tools available to meet these goals. The simulation is based on extensive research and data from a real life Bolivian forest town, so the outcomes of the game are an attempt to map outcomes from an real-life, observed starting point. SimPachamama aims to inform the researcher, but also to educate potential participants and practitioners in deforestation policies to the opportunities and potential pitfalls of implementation.

Ben Groom is a Lecturer in Environment and Development Economics at the London School of Economics and Political Sciences (LSE).

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For your reference:

Alston L. J., Libecap G. D. & Mueller B. (2000). Land Reform Policies, the Sources of Violent Conflict, and Implications for Deforestation in the Brazilian Amazon. Journal of Environmental Economics and Management, 39(2), 162-188, doi: 10.1006/jeem.1999.1103

Groom B., Grosjean P., Kontoleon A., Swanson T. & Zhang S. (2010) Relaxing rural constraints: a ‘win-win’ policy for poverty and environment in China? Oxford Economic Papers, 62 (1), 132-156, doi: 10.1093/oep/gpp021