Scientists suggest placing planetary boundaries on human-induced threats to key Earth system sinks and resources. Such boundaries define a “safe operating space” on depletion and pollution. Treating any remaining “space” as a depletable economic asset allows derivation of optimal and actual rules for depletion. We apply this analysis to natural forests, and find that the critical asset is tropical forests. The size of the safe operating space and assumptions about the annual rate of tropical deforestation matter significantly. In the most critical scenario, actual depletion could occur in 11–21 years, whereas optimal depletion is 65 years. The optimal unit rental tax equates the actual price with the optimal price path. The tax rate and its amount vary with the depletion scenario and increases over time. However, if the environmental benefits of tropical forests are sufficiently large, the remaining safe operating space should be preserved indefinitely.
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In earlier literature (e.g., see El Serafy 1989; Hartwick and Hageman 1993), this accounting price was often referred to as the unit or marginal user cost. Because all other assets in the economy are assumed to be exogenously determined, the safe operating space \(S\left( t \right)\) only affects its own capitalized value \(V\left( t \right)\). See Wei (2015) and Barbier and Burgess (2017) for further discussion.
This scenario also conforms to the business-as-usual projection of tropical deforestation over 2013-2050 by Busch and Engelmann (2018), who project a fairly constant rate of average annual tropical forest loss, especially over the initial decades.
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We are grateful to research assistance provided by Hwayoung Jeon.
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Barbier, E.B., Burgess, J.C. Scarcity and Safe Operating Spaces: The Example of Natural Forests. Environ Resource Econ 74, 1077–1099 (2019). https://doi.org/10.1007/s10640-019-00360-9
- Economic depreciation
- Optimal depletion
- Planetary boundaries
- Safe operating space
- Tropical forest
- User cost