Deforestation pressure in a tropical catchment
A tropical country's catchment of 1.2 million hectares contains 780,000 ha of primary forest. Between 2015 and 2023, forest cover fell by 6% per year, driven mainly by cattle pasture and soy expansion. The catchment's main river supplies water to 2.4 million people and a hydropower scheme generating 40% of national electricity. Sediment loads in the river have doubled since 2010, and dry-season flow has fallen. The government is considering (A) a full logging and land-clearing ban in the upper catchment, or (B) a payment for ecosystem services scheme paying landowners $180 per hectare per year to retain forest, funded by a levy on hydropower revenue. Smallholders argue they need cleared land to survive; large operators hold 70% of the cleared area.
1. Calculate the remaining forest after eight years at the observed rate, and assess whether either policy is likely to succeed.
Read the worked answer
A 6% annual loss compounds: remaining after 8 years = 780,000 × 0.94^8. 0.94^8 ≈ 0.61, so about 476,000 ha remain-a loss of roughly 304,000 ha. The observed rate is therefore severe. Policy A (ban) could halt clearing quickly but faces enforcement problems: large operators hold 70% of cleared land and have strong incentives to evade, and smallholders may lose livelihoods, creating political resistance. Policy B (PES) at $180/ha/year aligns incentives with retention, but its cost must be compared with returns from cattle or soy, which may exceed $180/ha. If returns are higher, the payment will not compete. A judgement answer should note that PES works best where it targets large operators who control most clearing and where monitoring is credible, and that combining a ban on primary forest conversion with PES on already-cleared land may be more effective than either alone. Downstream costs-sediment, reduced dry-season flow, hydropower risk-justify the investment.
2. Explain how the catchment illustrates the concept of ecosystem services and the 'tragedy of the commons' problem.
Read the worked answer
The forest provides regulating services (reduced erosion and sediment, water yield and dry-season flow regulation) and supporting services (soil formation, habitat). These benefits flow to 2.4 million water users and the hydropower scheme, but the land-use decision is made by individual landowners who capture the returns from clearing. That mismatch between private benefit and public cost is the commons problem: each operator clears for private gain while sediment and flow costs are shared downstream. The doubled sediment load and falling dry-season flow are the measurable symptoms. A strong answer explains that the externality is not priced, so over-clearing occurs relative to the social optimum, and that PES or a levy internalises the cost by making forest retention pay. It should also note that common-pool resources can be governed by regulation, property rights or payments-not only by privatisation.