Despite all the value our forests hold, the economic contribution they provide are not being reflected as they should be
Known as a crucial natural capital, forests provide a wide range of ecosystem services, benefitting both the environment and the society at large. Natural capital is the most central form of capital as it provides basic conditions for human survival such as delivering food, clean water and air and other essential resources. The concept of Natural Capital shows that environmental systems play a significant role in determining the social being and economic output of a country.
Natural Capital is basically a stock of natural ecosystems existing at a point of time that contributes to human wellbeing. Together, Natural Capital and Ecosystem Services form the ecological foundation of the society. Following the Millennium Ecosystem Assessment (MEA) in 2005 and The Economics of Ecosystem and Biodiversity (TEEB) in 2010, ecosystem services have been broadly classified as provisioning, regulating, cultural, and habitat or supporting services. Various studies have shown that forests provide all kinds of ecosystem services, benefitting the environment at large. In addition to providing provisions such as food, fiber, fuelwood, timber, water, medicines, raw materials, and genetic resources, regulating services offered by forests limit the effect of stresses and shocks to the system, erosion control or soil stabilization, water purification and waste treatment, regulation of air quality, climate regulation, regulation of hydrological flows, control of pests and diseases and natural hazards among others. Likewise, cultural services consist of recreational, aesthetic, spiritual and cognitive benefits. Not to forget other supporting services including soil formation, photosynthesis, primary production, and nutrient cycling.
The total economic contribution of forests is equivalent to the value of the ecosystem services derived from these forests and are categorized as use and non-use value. Use values are associated with goods and services for which market price exists and are dealt with as direct use value and indirect use value. Direct use values comprise of benefits received from the actual use of ecosystem services (consumptive use) such as timber or indirect (non-consumptive use) such as recreation. Furthermore, indirect use values refer to the benefits derived from an ecosystem’s function without direct interaction with it and are associated with regulating services such as carbon sequestration. Whereas, non-use values are associated with goods and services that do not have a market price and are dealt with option, existence, altruist and bequest value.
Despite its size and an under-developed status, with 6.61 million hectares of forests (44.7 percent of the total area of the country) and 118 types of natural ecosystems, Nepal is rich in the case of natural capital. Moreover, Nepal’s protected areas cover about 23 percent of the total range of the country. With 35 different types, Nepal’s forest is diverse and falls under ten major groups-tropical forests, subtropical broadleaf forests, subtropical conifer forests, lower-temperate broadleaf forests, lower-temperate mixed broadleaf forests, upper-temperate broadleaf forests, upper-temperate mixed broadleaf forests, temperate conifer forests, subalpine forests, and alpine scrubs. And higher forest diversity means more ecosystem services.
Nepal has developed a national account framework to create macroeconomic data to analyze and evaluate the performance of the country’s economy. These accounts play an important role when it comes to forming economic policies and making investment decisions. Nepal’s accounting system is largely based on the system of the United Nations that combines and evaluates the agricultural and forestry sector to estimate the gross value and the gross domestic products of the country. Data analysis of the last five years shows the contribution of agriculture and forestry towards gross domestic products to be between 27 percent to 32 percent. However, forestry sector’s sole contribution to the national economy is seen between two to three percent.
Despite all the value our forests hold, in the absence of a national accounting system that recognizes all its value, the economic contribution these forests provide are not being reflected as they should be. Our national accounting system recognizes only a segment of use values of the forest ecosystem such as timber, fuelwood, grass, fodder, bedding materials, medicinal herbs and resin. Non-consumptive, indirect and non-use values are completely overlooked by the system making its economic contribution seem undervalued and not well reflected in the decision-making process. A recent case study conducted in one of the forests in the mid-hills of Nepal shows that consumptive use value, the only value recognized by the current accounting system, contributes to just about one-third of the total economic value of the ecosystem services provided by the forests. In the light of the above, the need is that all the input made by the forest ecosystem be well recognized in a manner that justifies its value, thereby facilitating decisions and economic policies in the context of the country’s investment in a resourceful manner.