Policies to reconcile forest conservation and rural development: A pathway to bridge the forest transition in Bhutan?

Reconciling economic development with forest conservation is a challenge, particularly for high-forest cover, low-deforestation countries. Using Bhutan as an illustrative case, this study addresses how forest management may be reformed to benefit rural areas with low risk of compromising conservation objectives. Our analytical framework combines an economy-wide model with a spatial forest resource assessment to analyse the effects of three policy scenarios that relax quotas for sustainable fuelwood production. Rural household welfare is found to improve across all three scenarios mainly due to better utilisation of labour in the agricultural off-season, a channel that is considered thanks to a novel model formulation. The share of total forest used increases from 15.4% in the base to 19.9% in the most expansive scenario, still leaving at least 80% of Bhutan’s forest unmanaged. The scenarios also show that incentives for reduced subsistence use of fuelwood and increased consumption of cleaner domestic energy may yield health benefits thanks to reduced indoor air pollution. The findings are of general relevance for countries aiming to bridge the forest transition and reconcile economic and ecological objectives. By incorporating seasonal labour and underemployment into an economy-wide model, the study provides a methodological contribution relevant to analyses of land use policy. It further highlights the need for improved data and further policy research that integrates forest ecosystem services within economy-wide simulation models.