The economic impacts of positive feedbacks resulting from deforestation

Forests can affect environmental conditions in ways that enhance their survival. This effect may contribute to a positive feedback whereby deforestation could degrade environmental conditions and inhibit forest re-establishment. Sudden changes in forest functioning can be attributed to the existence of multiple stable states with one high and one low vegetation state. Multiple factors govern whether a transition between states will occur following deforestation. One such factor is strategic behavior and whether communities or stakeholders with an interest in the forest cooperate to maintain the forest in the fully vegetated state by reducing extraction levels or choose their own extraction rates without considering the collective effect of this behavior. We examine how the effect of a positive feedback and strategic behavior affect the optimal quantity of vegetation, V*. A clear hysteresis exists for logged forests exhibiting a positive feedback whereby an increase in extraction rates leads to a shift to the low vegetation state. An increase in the ecological value of the forest increases V* whereas the opposite is true for an increase in the value of timber. V* is also higher under cooperative conditions than non-cooperative conditions. Notably, accounting for the effect of a positive feedback substantially increases V*.