How much is a tree worth?

30 September 1999

How much is a tree worth? For example, one of the golden teak trees in the Mae Yom National Park. Simple, you might say. What would you get if you cut it down and sold the timber.

But lots of trees together in a forest have other values. They create an environment for lots of other plants and animals – including fungi, shoots, herbs, insects and game which villagers collect, consume and sell. Cut down the trees, and these other things disappear too.

They also create an environment which is pleasant to visit, and which can have value for tourism. As the coverage of forest dwindles, these sites become rarer and more valuable.

They also help the planet. Forests store carbon. Every hectare chopped down releases more carbon into the atmosphere and adds to global warming.

They are also a stock of biodiversity – especially areas like the Mae Yom park, "the best natural teak forest in Thailand". The high-value golden teak is a unique result of the local soil and other environmental conditions. Of course, there are other teak forests elsewhere. But cutting down any of them statistically reduces the potential for maintaining or improving the future quality of teak production. In the case of the exceptional Mae Yom golden teak, this reduction is more than usual.

Finally, many people who will never visit Mae Yom may still want it to exist and be available for their kids and their kids’ kids to enjoy. Doesn’t this desire also have some value?

Cutting down the trees destroys all these other values – the forest produce, the tourism potential, the contribution against global warming, the biodiversity store, the legacy for future generations.

But when the government wants to cut down trees to build a dam, road, or pipeline it calculates only the cubic metres of timber. If the irrigation or electricity provided by the dam is worth more than the timber lost, then cost-benefit accounting says the dam should be built.

This has bothered environmentalists for some time. It means the authorities go on building dams and other projects which would not get built if these other values entered into the accounting. Villagers lose their income from gathering forest products. The future costs of rectifying global warming increase. The potential for tourism and other future uses is destroyed. The gene pool shrinks.

But the problem is that these other values are difficult to calculate. Estimating the cubic metres of timber is relatively simple. Putting a value on the contribution to global warming is a lot more difficult.

But now an attempt has been made. The work is a team effort between Thai and international academics, headed by Dr Khunying Suthawan Sathirathai. It focuses on the Kaeng Sua Ten dam project in the Mae Yom National Park in Phrae. It combines the sweat of field research and the sophistication of econometric modelling. And the results are both shocking and hopeful.

To calculate the value of forest products, the team spent a year interviewing villagers. Some two thousand households are involved in gathering. The main ten products sold in the market in significant quantities - four types of mushroom, three varieties of bamboo shoot, two vegetables, and red ants’ eggs – deliver a total net income of 72 million baht a year. This more than doubles these households’ total income. It is especially important for the poor.

To calculate the potential value of the site for ecotourism, the team designed a series of tourist packages – rafting, elephant treks, hikes, tree study – and surveyed 300 Thai and 200 foreign tourists to find out the potential market value, and in particular the additional value conveyed by the teak forest.

To calculate how much people in general value the forest, the team made a survey of 915 people across 12 provinces. They were asked how much they would give in a one-off "tham boon" donation to preserve the forest for future generations.

On global warming, the team calculated what would be the cost of replanting trees elsewhere to repair the damage done by cutting down the Mae Yom forest To examine the impact on biodiversity, the team constructed a sophisticated model with pages of econometric equations and computer simulations.

In the area which will be flooded by the Kaeng Sua Ten dam, there are around half-a-million golden teak trees. In 1991, the dam project calculated the expected future income from sustainable logging and concluded that this forest had a capital value (NPV, 50 years, 5 percent) of 60 million baht. Just 120 baht per tree. In 1997, TDRI reworked the data using more realistic pricing and upped the capital value to 400 million, or 800 baht a tree. But this calculation still took account only of the timber, not all the other things.

This new study reckons that the forest – apart from the timber value – has a capital value of 3.8 to 6.4 billion baht, between 7,600 and 12,800 baht per tree.

The largest element (2.2 billion) is the value which people place on keeping this forest in existence for future generations. Next comes the capital value of the forest produce at 1.4 billion (the mid-point estimate). The genetic value is small but still important. The team disagreed on the calculation regarding global warming so the estimates range from very little to almost a billion.

The size of these figures, and the difference from the simple timber estimates used by all other project evaluations, is shocking. It indicates how much damage other projects have done simply because these other costs are not evaluated. The capital value of forest products is especially striking. It is higher than the (generous) estimate of the timber value. Other projects have casually deprived villagers of this resource by simply not attributing it any value.

The figures will, of course, be controversial. This research project is experimental on a world scale. Those in favour of the Kaeng Sua Ten dam have dismissed earlier, less sophisticated challenges as mere "academic exercises". This report will run into the same flak. The people supporting such dam projects have a narrow rather than a broad focus. If the Irrigation Department has no such dam projects, it has no reason to exist, and no under-the-table cashflow. Local politicians want the glory of bringing such projects to fruition. Contractors, timber-merchants and land speculators want profits. None of these people are interested in forest gathering, ecotourism, global warming or the gene pool.

But this report is also a beacon of hope. Cutting down forests to build dams might have made sense some decades ago when there were lots of forest. But cutting down a forest like Mae Yom now is an act of vandalism on a global scale. This research challenges the cost-benefit accounting which enables such vandalism to continue. The methodology needs to be simplified and applied to other projects which are pending. At the Pong Khun Petch dam project in Chaiyaphum, for example, forest gathering is far more extensive than in Mae Yom. People come from all over the northeast. Putting a value on this gathering would totally change the cost-benefit result.

Recently, Chuan Leekpai indicated that he wanted the Kaeng Sua Ten project to go ahead. If it meant cutting down a forest, he said, then they would just have to plant another one somewhere else.

But forests are more than the sum of their trees. After this report, it is not that simple.

[‘Khrongkan kan suksa lae phatthana kan pramoen kha thang sethasat khong pa mai’, by Centre for Environmental Economics, Chulalongkorn University]