0.13 Natural capital: forestry  (Page 5/14)

How was the Borneo 1983 fire an example of market failure? Understand that large-scale selective logging on Borneo began only in 1969. Logging involved an unforeseen externality. Destruction from the 1983 fire was particularly severe in the logged-over areas. Indeed, in East Borneo the unlogged forest escaped major damage. But in logged-over areas there was a great amount of dead wood and other combustible ground litter. As we noted the source of ground litter: in areas logged up to 50% of the residual stock left after logging was destroyed or damaged. With all that fuel on the ground the fires thus were able to burn at very high temperatures. Airplanes flying over Borneo at 35,000 feet were enveloped in smoke from the fires.

The huge Dipterocarp trees that had been left standing after logging exploded like roman candles in the fire, shooting flames straight up 500 feet. Dozens of species of Hornbills were exterminated (localized population). Ever hear a Hornbill in flight?

Damage was very slight in undisturbed unlogged forest areas because of the relatively low volume of dead wood and other ground litter prevented fires from generating enough heat to ignite the large Dipterocarp (Meranti) trees.

The base cause of this catastrophe was that Government sold the resource too cheaply. So logging after 1970 predisposed the forest to catastrophe fire. Vulnerability to fire was a very large external cost not reflected in either the prices paid by loggers for logging rights, or the prices paid by consumers in the U.S. and Europe for tropical wood products. Even if the government as owner of the forests had recognized the risks of greater forest vulnerability from logging, and even if they had sought to charge a price for wood high enough to cover these costs, there was no way for the market to value them. Market failure thus contributed to ecological calamity, a giant external Diseconomy- a cost – imposed on others by economic actions of a few.

Another very large externality of deforestation has been an increase in CO ² emissions.

Deforestation accounts for 20% of annual worldwide emissions (includes carbon emissions from burning fossil fuels and deforestation). In 2010 Brazil and Indonesia were #3 and #4 in total emissions, right behind #1 China and #2 U.S.A. How can this be? About one half of the weight of a tree is made of stored carbon most of which is released when trees rot, or are burned.

Faulty institutions also played a role in the catastrophic Borneo fires of 1983. How?

Satellite pictures taken in January 1983 showed no fire.

Satellite pictures taken in February - March showed the fire raging.

Satellite pictures in April showed only burnt out forests.

But by May of 1983, the President and Cabinet in the capital of Jakarta knew nothing of the extent of the fire. They found out only in May when shown the satellite pictures. The reason they were unaware of the catastrophe was due to a common worldwide cultural trait that is especially important in Indonesia.

The President was not told about the fire while it raged across Borneo. Why? There is an old Indonesian saying: