Sustainable forest management, pecuniary externalities and invisible stakeholders

Agreement of all stakeholders is crucial to sustainable forest management. But timber production may be an externality in participatory decision making. Reduced supply under local environmental constraints influences price and hence timber supply elsewhere. Such pecuniary externalities are generally ignored in cost-benefit analysis, but for questionable reasons. Modelling shows that they induce significant net distributional and technological effects: thus stakeholders exist outside the local participatory context. Quasi-markets for environmental and social effects, as in sale of certified timber, appear to internalise such effects, rendering spillovers from local decisions welfare-neutral. However, the nebulousness of certified markets makes this improbable: demand is for a symbolic warm glow, little related to either consequences for sustainability or costs of achieving them. Pecuniary externalities remain an unresolved problem in evaluating local decisions. (C) 2006 Elsevier B.V. All rights reserved.