Forests Sourcebook - HCV Resource Network

NOTE 6.3
Identifying the Need for Analysis on Forests in
Development Policy Reforms
The combined impacts on forests of economic
activities that originate outside the forest sector
are, in most cases, significantly greater than those
produced by economic activity within the sector itself.
Macroeconomic change will almost always be a major
component of these external forces. Therefore, if forests
are a significant part of the economic and social resource
base of a country, it will be necessary to consider such
impacts when DPL, broadly based poverty alleviation programs,
and related programmatic activities are being
designed.
Assessing causality is complicated. The impacts on
forests and other natural resources of large-scale economic
policy changes and reforms will manifest themselves
through a complex web of second- and third-round activities
and responses that will be triggered as illustrated in figure
6.1 (World Bank 2005). Identifying the nature of their
eventual impacts on forests—or even whether there will be
significant impacts—will not be straightforward: Prior economic,
environmental, and social conditions will have a
major role in outcomes, and no general relationships or
models to predict impact outcomes are, or are likely to
become, available. 1
Where forests are sufficiently important economically, or
directly support the livelihoods of a large number of poor
people, the impacts of broadly based growth could significantly
compromise the broad goals of economic growth,
poverty alleviation, and environmental sustainability of
macro policy loans. Due diligence requires identification of
cases where this is a potential risk to the overall implementation
of the policy loan and making the necessary adjustments
to program design.
A dearth of data. There are currently relatively few comprehensive
data sets on cross-sectoral impacts or impacts of
macroeconomic reform; this imposes a significant operational
constraint on development of good practice for managing
the World Bank’s engagement in this area. Good practice
will, therefore, initially largely be a matter of developing
guidelines and approximation methodologies for identifying
cases where there is significant potential for important
impacts to occur, and then applying economic and sector
work in a timely and focused manner to those situations.
Linked to the latter, there is a need to develop acceptable
approaches and for the World Bank to adequately invest in
assessing the potential impacts of particular economic
changes in which it is involved in specific countries.
Figure 6.1
Indirect Impact of Fiscal Reform on Forests
Economic reform
Anticipated response Institutional linkages Environmental impact
Fiscal reform
Reduction in
resources for
environmental goods
and services
Reduction in
• Coverage of
environmental
issues
• Enforcement
capacity
• Monitoring ability
Deforestation
Soil contamination
Biodiversity loss
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