Conservation of Tropical Forests: Addressing Market Failure

López Ramón and Michael A. Toman

in Economic Development and Environmental Sustainability

Published in print June 2006 | ISBN: 9780199298006
Published online September 2006 | e-ISBN: 9780191603877 | DOI:

Series: Initiative for Policy Dialogue Series

 Conservation of Tropical Forests: Addressing Market Failure

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Tropical forest conservation and sustainable natural forest management both imply benefits and invoke considerable costs. The spatial and temporal mismatch of such benefits (which might not materialize until far in the future and could be shared by many parties) and costs (which often occur at a local scale and must be borne in the short term) prevents an efficient forest management at the national level. While the international community has developed a variety of instruments to align global and national incentives, the implementation of such policies needs to take into account national property right regimes and the recent trend towards the devolution of rights and responsibilities to communities and private individuals, which has a significant impact on the relative importance of different types of market failures and policy effects. This paper summarizes existing literature on the causes of deforestation and the magnitude of various forest benefit components, discusses the usefulness of forest valuation exercises for guiding policy choices regarding forest management and conservation, and highlights the key role of market failure in tropical forest conservation. It explores the various policy options that exist for the rest of the world to address market failure, and concludes with conditions necessary for improving current systems.

Keywords: deforestation; forest valuation; property right regime; forest management

Chapter.  19077 words.  Illustrated.

Subjects: Economic Development and Growth

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