How Much Is A Forest Worth?

Forests around the world are being cut down. One of the reasons is that they are incorrectly "priced." When valued in a traditional way, the price of a forest will usually depend on the value of the timber and the value of the land where the timber grows. The broader services that a forest provides to society are usually not taken into account. However, these broader services are not only ecologically valuable, they are financially valuable as well.

These factors are the ecosystem services that a forest provides.

Merely by existing a forest provides ecosystem services. A standing forest can prevent flooding, generate rainfall, provide biodiversity, regulate the soil, and store carbon.

Although no one pays for these ecosystem services they are available to everyone. Often called "externalities", these environmental services aren't included in the price of the forest.

The reality is that when any forest vanishes people will suffer. This is the reason that many people believe that forests must be included in the global financial balance sheet immediately.

In 2008 an economist at Deutsche Bank, Pavan Sukhdev, said that the world was losing between $2 trillion and $5 trillion of its natural capital worth every year solely because of deforestation. Sukhdev believes that if selling the aforementioned ecosystem services would result in a profit then the financial equation that determines a forest's value would change.

The Iwokarama Rainforest

Iwokrama is a part of the largest area of undisturbed rainforests on Earth. Iwokrama overlies the Guiana Shield. This rainforest is administered by an international board of trustees. They are working on exploiting the forest's sustainability without having to rely on donor funding.

Initially the center identified the forest's assets. Today they make money in areas as diverse as ecotourism, bio-prospecting, forest products such as oils and honey, timber extraction, and forestry research. In 2008 it made a profit of $800,000 from its $2.4 million in revenues.

Future profits may also be derived from ecosystem services. Several years ago the trustees sold a license to London based Canopy Capital to create a financial deal for the Iwokrama forest's services.

At this point in time detailed information about what an eventual proposal for the Iwokrama ecosystem services is unavailable because it is still being negotiated. However, if you take a look at the carbon sequestration alone you can see the potential profit.

Hylton Murray-Philipson of Canaopy Capital has said, "why pay BP $100 a tonne to take carbon dioxide out of the atmosphere and bury it when you can do the same with a rainforest for a fraction of a dollar?"

If the rights to the sequestration of carbon dioxide from the 1 billion hectares of forest in the world are sold for only $10 per ton it would generate $10 billion per year.

Iwokrama's financial success has shown that with ecosystem services and sustainable forestry there is money in the world's rainforests. And that the money is literally growing on its trees.