Can I pay you not to harvest that timber?

From BBC News, Norway is going to pay Liberia to cease all harvesting of trees from its rainforest by 2020:

Liberia is to become the first nation in Africa to completely stop cutting down its trees in return for development aid.

Norway will pay the impoverished West African country $150m (£91.4m) to stop deforestation by 2020.

Why would Norway want to do that? Apparently…

Liberia’s forests are not as big as other countries but the country is home to a significant part of West Africa’s remaining rainforest, with about 43% of the Upper Guinean forest.

It is also a global diversity hotspot, home to the last remaining viable populations of species including western chimpanzees, forest elephants and leopards.

“We hope Liberia will be able to cut emissions and reduce poverty at the same time,” said Jens Frolich Holte, a political adviser to the Norwegian government, speaking to the BBC on the sidelines of the UN climate summit in New York.

So apparently (assuming “Norway” is acting on behalf of its citizens) Norwegians value the forest because it provides habitat for endangered species and because it acts as a carbon sink. Well, that’s not really that surprising – plenty of studies have shown that residents of one nation value ecosystem services provided by forests and other kinds of habitat in other nations.

But what is surprising is that the two nations were able to strike a deal. Here’s why: typically, the benefit to the nation owning the forest (here, Liberia, whose harvesters can sell the timber) of harvesting from it is greater than the cost of harvesting, which includes not only costs of equipment and labor, but also costs of giving up carbon storage and the costs of harming wildlife habitat. Let’s call the benefits of harvesting to Liberia Bl, and the Costs of harvesting to Liberia Cl. However, forests provide services like carbon storage and wildlife habitat that benefit not only the nation which controls the forest, but residents of other nations as well. So let’s say we have some nations whose names start with a, b, and c. The typical problem is that, even though Bl > Cl, Bl is yet less than Cl + Ca + Cb + Cc. So, from the perspective of the entire world, it’s economically inefficient to harvest from the forest, but from the perspective of the owning nation, it’s economically efficient to harvest from the forest.

This problem comes up repeatedly with the Amazon rainforest which is primarily controlled by Brazil. As far as I know, Brazil has never entered any similar deal with another nation or group of nations to receive payments to not harvest from its rainforest.

In the case of Liberia and Norway though, a deal was struck because the benefits to Norway of not harvesting the forest are greater than the $150m payment it gives to Liberia, and the $150m that Liberia receives is greater than its costs of not harvesting from the forest (i.e. forgone profits from selling timber). And, again, this assumes that each nation has made a decision that is actually best for its own nation.

As the article mentions, success of the deal will depend on being able to enforce the ban on logging, and Norway is prepared to help with that.

By the way, this is also the same exact problem that makes coordinating a global effort to curb greenhouse gas (ghg) emissions difficult (e.g. the Kyoto protocol). For each individual nation, the costs of cutting down on ghg are greater than the benefits of doing so. But from a global perspective, the costs are less than the benefits of doing so because curbing ghg emissions in one nation benefits all other nations.

You don’t see this kind of deal that Liberia and Norway struck very often, if ever. And one of the nice things about it is that residents of other nations besides Norway benefit as well, for example, the U.S. Many U.S. citizens would be happier protecting the habitat of the chimps, elephants, and leopards than allowing the habitat to be cut down. That increase in happiness? Economists would consider that to be a benefit that should be accounted for in any economic analysis of the decision – but most non-economists aren’t used to thinking about these kinds of benefits.

That’s why I describe economics in my principles class as the study of how to make the best decisions by comparing all the costs and all the benefits of an action.

Lemurs: fierce, friendly, ninjas?

My favorite part of this article is the three lemur photos. You do not want to mess with that first lemur! But the second lemur looks like someone you might feel comfortable taking home to meet your mother. The third looks like a ninja jumping off a rooftop.

Madagascar’s lemurs – the world’s most threatened primate – could be saved from extinction by eco-tourism, conservationists say.

The big-eyed fluffy creatures are unique to the island but their numbers have declined dramatically in recent years.

Now researchers have unveiled a survival plan that combines tourism with increased conservation efforts.

Political turmoil has enveloped Madagascar following a coup in 2009. As a result of the instability, illegal logging has increased on the island, a source of valuable rosewood and ebony trees.

Due to a lack of environmental policing, the habitat of the lemurs has been under constant threat and the primates are now one of the most endangered groups of vertebrates on the planet.

The team propose that cashing in on Madagascar’s unique lemur “brand” would help the animals and poor rural communities.

Dr Christoph Schwitzer from the Bristol Zoological Society has been working in Madagascar for more than a decade. He said that tourists had still been flocking to the island, despite the political instability.

“There’s always a trade-off between the destruction caused by too many tourists and the money they bring to the country that can be used for wildlife conservation,” he told theBBC’s Science in Action programme.

“This balance for Madagascar is still very positive for conservation and it’s a long way until it may tip over.”

I don’t like that last quote. It sounds like it means something, but, when you think about it, its meaning is totally unclear. What does it mean for a balance to tip over? Anyway…

Conservationists point to eco-tourism in Rwanda and Uganda where visitors are willing to pay a premium to observe endangered mountain gorillas in their natural habitat.

Other aspects of a new three-year emergency action plan include increasing the number of long-term research field stations and building up conservation programmes.

These could help reduce another threat to lemurs, the illegal hunting of the primates for bushmeat.

Managing forests for multiple uses is an interesting problem studied by many environmental economists. This article mentions 3 benefits of Madagascar forests: it’s valuable (1) for its trees (rosewood and ebony), (2) for its habitat for lemurs for tourism, and (3) for its habitat for lemurs so they can be hunted for bushmeat. In general forests are often also valuable for things like nature tourism (people like to go for walks in forests, for example, even if there aren’t lemurs), their help in maintaining the health of aquifers, and for acting as a carbon sink.

In this case, the lemur is highly threatened. In economics we learn that people’s preferences tend to exhibit diminishing marginal utility. For example, that first slice of pizza you eat is really delicious, the third slice is good, but you don’t get as much enjoyment out of it as the first, and the sixth slice might even make you feel sick if you eat it. One implication of diminishing marginal utility is that we tend to value something more when we have less of it. Since lemurs are  highly threatened, we’d tend to assume that we are willing to incur a greater cost, for example in forgone profits from harvesting and selling timber, than if lemurs were more abundant.

I just recently saw a preview for a Disney movie (documentary narrated by Morgan Freeman) coming out later this year in IMAX theaters about lemurs. They look hilariously entertaining.