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Tropical Forests, Tipping Points, and the Social Cost of Deforestation

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  • Sergio L. Franklin, Jr.
  • Robert S. Pindyck

Abstract

Recent work has suggested that tropical forest and savanna represent alternative stable states, which are subject to drastic switches at tipping points, in response to changes in rainfall patterns and other drivers. Deforestation cost studies have ignored the likelihood and possible economic impact of a forest-savanna critical transition, therefore underestimating the true social cost of deforestation. We explore the implications of a forest-savanna critical transition and propose an alternative framework for calculating the economic value of a standing tropical forest. Our framework is based on an average incremental cost method, as opposed to currently used marginal cost methods, for the design of optimal land-use policy or payments for ecosystem services. We apply this framework to the calculation of the social cost of deforestation of the Amazon rainforest.

Suggested Citation

  • Sergio L. Franklin, Jr. & Robert S. Pindyck, 2017. "Tropical Forests, Tipping Points, and the Social Cost of Deforestation," NBER Working Papers 23272, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:23272
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    References listed on IDEAS

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    2. Sonno, Tommaso & Zufacchi, Davide, 2022. "Epidemics and rapacity of multinational companies," LSE Research Online Documents on Economics 117802, London School of Economics and Political Science, LSE Library.
    3. Giudice, Renzo & Börner, Jan, 2021. "Benefits and costs of incentive-based forest conservation in the Peruvian Amazon," Forest Policy and Economics, Elsevier, vol. 131(C).
    4. Thomas Knoke & Carola Paul & Elizabeth Gosling & Isabelle Jarisch & Johannes Mohr & Rupert Seidl, 2023. "Assessing the Economic Resilience of Different Management Systems to Severe Forest Disturbance," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 84(2), pages 343-381, February.
    5. Alarcón-Aguirre, Jaime S. & Aguirre-Mejía, Patricia M. & Palacios-Hinestroza, Hasbleidy & Sulbarán-Rangel, Belkis, 2020. "Evaluation of the forestry administrative system that regulates the activity of extracting wood from the Northern Ecuadorian amazon," Land Use Policy, Elsevier, vol. 99(C).
    6. Bård Harstad, 2022. "Trade, Trees, and Contingent Trade Agreements," CESifo Working Paper Series 9596, CESifo.
    7. Bård Harstad, 2020. "Trade and Trees: How Trade Agreements Can Motivate Conservation Instead of Depletion," CESifo Working Paper Series 8569, CESifo.
    8. Pavanelli, David Domingues & Voulvoulis, Nikolaos, 2019. "Habitat Equivalency Analysis, a framework for forensic cost evaluation of environmental damage," Ecosystem Services, Elsevier, vol. 38(C), pages 1-1.
    9. Bård Harstad, 2020. "The Conservation Multiplier," CESifo Working Paper Series 8283, CESifo.
    10. Golub, Alexander & Herrera, Diego & Leslie, Gabriela & Pietracci, Breno & Lubowski, Ruben, 2021. "A real options framework for reducing emissions from deforestation: Reconciling short-term incentives with long-term benefits from conservation and agricultural intensification," Ecosystem Services, Elsevier, vol. 49(C).
    11. Thomas Knoke & Nick Hanley & Rosa Maria Roman-Cuesta & Ben Groom & Frank Venmans & Carola Paul, 2023. "Trends in tropical forest loss and the social value of emission reductions," Nature Sustainability, Nature, vol. 6(11), pages 1373-1384, November.

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    More about this item

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics

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