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

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

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 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

  • Franklin, Sergio L. & Pindyck, Robert S., 2018. "Tropical Forests, Tipping Points, and the Social Cost of Deforestation," Ecological Economics, Elsevier, vol. 153(C), pages 161-171.
  • Handle: RePEc:eee:ecolec:v:153:y:2018:i:c:p:161-171
    DOI: 10.1016/j.ecolecon.2018.06.003
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    References listed on IDEAS

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    1. repec:eee:ecoser:v:1:y:2012:i:1:p:50-61 is not listed on IDEAS
    2. Strand, Jon, 2017. "Modeling the marginal value of rainforest losses: A dynamic value function approach," Ecological Economics, Elsevier, vol. 131(C), pages 322-329.
    3. Robert S. Pindyck, 2013. "Climate Change Policy: What Do the Models Tell Us?," Journal of Economic Literature, American Economic Association, vol. 51(3), pages 860-872, September.
    4. Robert S. Pindyck, 2013. "The Climate Policy Dilemma," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 7(2), pages 219-237, July.
    5. Pindyck, Robert S., 2019. "The social cost of carbon revisited," Journal of Environmental Economics and Management, Elsevier, vol. 94(C), pages 140-160.
    6. Sergio Margulis, 2004. "Causes of Deforestation of the Brazilian Amazon," World Bank Publications, The World Bank, number 15060.
    7. Andersen,Lykke E. & Granger,Clive W. J. & Reis,Eustaquio J. & Weinhold,Diana & Wunder,Sven, 2002. "The Dynamics of Deforestation and Economic Growth in the Brazilian Amazon," Cambridge Books, Cambridge University Press, number 9780521811972, July - De.
    8. Lykke E. Andersen, 2015. "A Cost-benefit Analysis of Deforestation in the Brazilian Amazon," Discussion Papers 0065, Instituto de Pesquisa Econômica Aplicada - IPEA.
    9. Torras, Mariano, 2000. "The total economic value of Amazonian deforestation, 1978-1993," Ecological Economics, Elsevier, vol. 33(2), pages 283-297, May.
    10. Fearnside, Philip M., 1997. "Environmental services as a strategy for sustainable development in rural Amazonia," Ecological Economics, Elsevier, vol. 20(1), pages 53-70, January.
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    More about this item

    Keywords

    Deforestation; Critical transition; Tipping point; Social cost; Forest dieback; Payments for ecosystem services; Amazon;

    JEL classification:

    • 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
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling

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