Financial and Economic Analysis of Reduced Impact Logging

Concern regarding extensive damage to tropical forests resulting from logging increased dramatically after World War II when mechanized logging systems developed in industrialized countries were deployed in the tropics. As a consequence, tropical foresters began developing logging procedures that were more environmentally benign, and by the 1990s, these practices began to be described as “reducedimpact logging” (RIL) systems. As scientific evidence accumulated demonstrating that RIL techniques could substantially reduce logging impacts on the residual forest relative to conventional logging (CL), attention turned to understanding the financial conditions under which logging firms would choose to implement RIL. While most studies conducted in Latin America show that RIL is financially competitive or superior to CL, research in Southeast Asia and Africa suggests that economic incentives will likely be required to induce logging firms to adopt RIL. One approach that appears promising to promote better logging practices in the tropics is to offer payments for the incremental carbon retained by RIL systems.