Tree-conomics

Many trees are private goods. If you own some, you can probably do whatever you want with them. As a rational economic actor, you can respond effectively to incentives. If the price of wood goes up, you can decide to chop your trees down and sell them.

But trees are also public goods — they generate benefits for other people, creating what economists call positive externalities. Most trees are beautiful. Most create habitat for an immense variety of creatures that don’t know the meaning of property rights.

All trees sequester carbon until they die, helping buffer the effect of carbon dioxide emissions from automobiles, power plants and other sources (our most worrisome public bad).

The difference between private and public benefits explains why some local communities regulate tree management. But more profoundly, it drives a hardwood wedge between individual and social outcomes, with disturbing implications. Deforestation is contributing to global warming.

Why are rational economic actors having such a hard time responding to this problem? Partly because it can’t be reduced to individual choices. It requires coordinated actions that involve collective conflict, coalition-building and strategic maneuver.

The urge to sidestep such difficulties helps explain efforts to find market-based solutions. Many nonprofit groups (including Carbonify and Greater Good) offer individuals and companies the opportunity to pay for planting a tree (almost anywhere in the world) to help offset their carbon consumption.

If I pay to plant a tree, you benefit as much as I do, without forking over a dime. And if I’m the only one who plants a tree, it won’t make much difference. This free-rider problem weakens individual incentives.

And the transactions costs are high: How can I be sure that the tree I pay for will actually get planted and cared for enough to suck up the promised amount of carbon dioxide? Oversight and certification are required – and are not always reliable.

Furthermore, there’s some controversy over specific issues, such as the effect of the latitude at which trees are planted on their climatic impact.

International agreements like the Kyoto Protocol (which the United States refused to sign) created strong incentives for organizations in participating countries to purchase carbon offsets, like tree plantings. According to the World Bank, this policy has generated modest benefits but needs to be scaled up.

Efforts to design and implement international agreements could be enriched by more attention to community forest management in developing countries. As the Nobel-Prize winner Elinor Ostrom emphasizes in “Governing the Commons,” equitable rules of access often prove successful.

More than a quarter of all forests in developing countries are managed by local communities. A recent report by the Rights and Resources Initiative offers a detailed analysis of forest management in Mexican communities as a strategy to combat global climate change.

The economist Bina Agarwal recently published an impressive study of women and community forestry in India and Nepal, entitled “Gender and Green Governance.” In most developing countries, rural women take more responsibility for collecting fuel wood on a regular basis, while men are more likely to harvest wood episodically, for home repairs and tools.

Professor Agarwal finds that effective representation of women in community forestry decision-making significantly improves conservation outcomes, as well as the likelihood of meeting women’s needs.

The most striking contribution of her book lies in its thoughtful discussion of strategic alliances and public engagement – continuing efforts to develop the “habits of cooperation, forms of deliberation, and social networks” on which “canopies of green development” could be built.

If rational economic actors can’t improve their efforts in this direction, we will all feel the heat.