Forests Sourcebook - HCV Resource Network

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evaluate indirect use of forests: watershed and soil protection,
wind breaks, climate control, and nutrient
cycling
evaluate options values, including future direct and indirect
uses
evaluate off-site and on-site economic effects; also evaluate
private costs and benefits versus social costs and benefits,
with attention to market failures, policy-induced
distortions, and externalities
evaluate nontimber values like health, carbon sequestration,
and alternative livelihood strategies
assess the incremental or additional costs associated with
transforming a project with national benefits into one
with global environmental benefits, for Global Environment
Facility projects
Financial analysis
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evaluate the financial viability of investments like reforestation,
microenterprises, and so forth; also evaluate
risk and market access
■ conduct a financial analysis from the perspectives of various
stakeholders
■ undertake a cost-benefit analysis (see box 9.6)
■ base decisions, to the extent possible, on a total economic
valuation of forest resources, that is, an estimate of the
value of all economic benefits that a society derives from
its forests (see box 9.7)
Potential methodology
■ review of primary and secondary data sources
■ rapid Rural Appraisal
■ interviews, including stakeholder interviews, questionnaires,
village-based surveys for livelihood analysis
(including wealth ranking, group interviews, process
analysis)
■ Cost-benefit analysis
■ Market analysis (see box 9.8)
■ Contingent valuation
■ Quantitative measures, including TEV, internal rate of
return, net present value
Box 9.6
Cost-Benefit Analysis
Box 9.7
Total Economic Valuation
A detailed cost-benefit analysis will be undertaken
during project preparation, taking into account
the issues of economic importance and financial
analysis and using quantitative models. Incremental
costs and benefits of project investments will be
examined in detail, and economic and financial
rates of return calculated. Cost-effectiveness analysis
will be conducted on alternative plantation and
protection techniques. The analysis will also
include the preparation of indicative economic
and financial models for participatory management
of forests by locals, including analysis of
alternative land uses. The economists will also
undertake sensitivity analysis on key risks and discuss
implications for project design.
The quantified cost-benefit analysis will be supplemented
by an analysis of other environmental
benefits not as readily conducive to financial quantification
(for example, biodiversity, climatic
changes), which, where appropriate, will take into
account physical measurements and least-cost
analysis of any associated marginal costs of interventions
specific to those benefits.
Source: World Bank 2003a.
Total economic valuation (TEV) is a method
used to identify and estimate the value of all economic
benefits that a society derives from its
forests. As such, TEV extends well beyond the
scope of financial analyses of forest values that
concentrate almost exclusively on timber, to
account for the great variety of other products and
services provided by a forest system. The TEV of a
forest is the sum its use and nonuse values. Use
values are, in turn, divided into direct, indirect,
and option values; while nonuse values include
bequest and existence values. Examples of the various
use values include
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Direct uses—timber, fruits, nuts, mushrooms,
medicinal plants, forage, hunting and fishing,
tourism and recreation, genetic resources, and
educational uses
Indirect uses—watershed and soil protection,
wind breaks, climate control, and nutrient
cycling
Option—future direct and indirect uses
Source: World Bank 2003a.
CHAPTER 9:APPLYING FORESTS POLICY OP 4.36 305