Monday, 15 April 2013

The Amazonian Rainforest and Nature’s Cash Flows

Economic Threats to the Amazon Rainforest

The Amazonian rainforest is one of the richest ecosystems in biodiversity and provides the world with a wide range of ecosystem services, such as climate regulation, hydrological services, fire protection, pollination, timber and non-timber forest products and recreation. However, Amazonian rainforests are facing some economics driven threats: cattle ranching and increasing plantations of soy and palm. The increased international demand for soybean based products has opened the door of profitability to the Latin American production. The cost: to increase the crop area, they need to reduce the forest size. Not to mention that parts of Amazonian rainforest could be auctioned to international oil companies. (Source: )

Economy vs Environment: The Tough choice of Governments

Governments of countries in the Amazonian region find in agriculture, cattle ranching and mining an opportunity to improve economic development. It is understandable. They face difficult choices: on one side, the preservation of a local natural resource that has a global impact and, on the other, the continuity of economic policies, the generation of employment and the improvement of economic conditions for poorest populations. However, at this point, if we choose development over preservation we could be sacrificing the long term for the short term (Source: 

The Impact on Ecosystems

Amongst the long term costs there are the destruction of tropical ecosystems, the reduction of biodiversity and, due to the reduction of the natural capital in the ecosystem, the flow of ecosystem services (the services we, as humans, enjoy from ecosystems without making any effort) is altered impairing as well, among others, the climate control functions these forests have. The stock of CO2 trapped in these forests is extremely relevant to control the climate change problem and, at this moment, there is no way to completely value such a huge service and the potential damage (Beukering B et al, 2007).
We are facing a situation in which ecosystems (forests, coral reefs...) are competing with other economic activities. However, these economic activities put clear numbers on the table: a soy producing company can tell you clearly how much money it expects to generate as a cash flow. Nevertheless, most of environmental services that we need and enjoy don’t have a value yet. They are not easy to put into dollars or British pounds, and some of the methodologies used to approach a monetary value are still controversial within the scientific community. The mistake some policymakers make is to think because the numbers are not there, these natural resources simply don’t have any value at all and they are not generating any positive impact. 

REDD Projects

There are projects such as REDD (Reducing Emissions from Deforestation and Forest Degradation in Developing Countries). The general objective of this program is to generate financial incentives to preserve the stock of carbon in the forests, reduce emissions from forested lands in developing countries and invest in low carbon paths. Put it simply, this is a way in which richer economies pay to developing economies to preserve natural resources and generate local sustainable projects at the same time. The point is that besides important cuts in carbon emissions from developed countries, developing countries can engage in REDD programs. The outcome could not be very good if these activities were substitutes. If we want to achieve climate change targets, we have to work in both fronts (Source:
However, the challenge is to generate sustainable activities with cash flows positive enough to compete with those that put ecosystems in risk. Additionally, to keep up with the increasing global consumption, if we don’t want to endanger our remaining ecosystems, we must increase productivity: strategies and technologies must be developed to multiply the production per hectare or even reduce the consumption of fossil fuels and some other land intensive products such as beef to reasonable and sustainable levels.
It is a difficult task, but it is one that must be done if we want to generate real and permanent incentives to preserve our remaining natural capital (most of it in developing countries). REDD is just one example, but most of the diverse strategies are inspired, similarly, on the idea that we can have economic growth and sustainability at the same time: that we don’t have to fall in the irony of giving away the planet to eradicate poverty.  

Beukering P et al,(2007) “Keeping the Amazon forests standing: a matter of values” WWF Available from

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