Confusing liquidation with income in BC’s forests: economic analysis and the BC forest industry

Forest exploitation in British Columbia is currently unsustainable. Economic analysis is frequently used to justify the high rate of cut by documenting the revenue, job and wage benefits of current industrial forestry. However, Hicks’ definition of income implies that it is poor accounting practice to count the consumption of natural capital as income. Yet in BC, economic analysis fails to make adjustments for the consumption of forest capital. Such analysis provides society with misleading signals of future economic prospects. By reference to landscape ecology, conservation biology, forest ecology, and ecosystem-based management, this paper sets out requirements for a forest management regime that maintains forest capital intact and for determining a rate of cut that would likely maintain ecosystem structure and function. This ecologically sustainable rate of cut can be seen as an ‘extraction ceiling’. Extraction beyond this ceiling is considered to involve natural capital consumption. This extraction ceiling is used to divide the proceeds from timber extraction into ‘interest’ and ‘depletion’ streams. The interest stream is consistent with maintaining capital intact, and can be considered true income. The depletion stream involves capital consumption. Basing economic analysis of the forest industry on an extraction ceiling encourages debate about defining sustainable extraction levels and about how to make the transition to sustainable forestry. It also shows that the timber industry overstates its contribution to government revenues and to the province’s economic well-being. Critics of industrial forestry in BC have yet to take full advantage of how proper accounting for natural capital depletion can show the advantages to moving towards an ecoforestry approach. By insisting that economists make adjustments where natural capital depletion is projected to occur, advocates of ecoforestry can ensure a more level playing field for the comparison of industrial forestry and ecoforestry. © 2000 Elsevier Science B.V. All rights reserved.