JICA Ogata Research Institute

Research Activities

Estimation of the Economic Value of Forests in Ethiopia

Past Research Projects

Forests offer people various ecosystem services, which include the supply of resources such as lumber, firewood, and fruits and nuts from trees, as well as the protection of water resources and the absorption of carbon dioxide. However, markets for many of the ecosystem services offered by forests do not function properly (either due to market failure or the absence of a market), and market price cannot be used to assess their value. With regard to assessing the (virtual) value of these sorts of services, there are ways to do so using indirect information—including stated preference methods such as contingent valuation methods, as well as revealed preference methods such as hedonic methods—and such methodological research is still thriving in environmental economics.

This research project, while relying on the existing literature regarding those sorts of (virtual) value estimates, compares them with independently collected and organized geographic and economic data (such as volume of forests, volume of timber trade, and carbon dioxide absorption) to estimate the economic value of forests at the national and regional level. With regard to the method for defining and calculating the estimate indicators, the project utilizes national economic accounting frameworks (chiefly SEEA) that include consideration for environmental factors. Although the majority of these sorts of assessments are still geared toward developed countries at present, the World Bank’s WAVES (Wealth Accounting and the Valuation of Ecosystem Services) initiative is an example of similar research on developing countries other than Ethiopia. Ethiopia was chosen because 1) the country has extensive forests, 2) as specifically noted in the OECD Green Growth Report, there is a recognized need for economic valuation of ecosystems, and 3) although some studies have been previously conducted, they do not reflect the latest data. However, the methodology established by this study in the case of Ethiopia could be applied in the future to similar valuations in neighboring countries or other regions.

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