CHALLENGE
At the heart of whether growth in a country is green and sustainable is the issue of accumulation of wealth. It is wealth — broadly defined to include manufactured capital, natural capital (including forests), human and social capital— that underlies the generation of national income. Gross domestic product (GDP) has conventionally been used to assess economic performance, measuring economic growth from one year to the next. But GDP does not take into account depreciation and depletion of wealth, and therefore does not provide an indication of whether growth is sustainable: an economy could appear to be growing in the near term by running down its assets such as its forests. Assessments of economic performance should therefore be based on both measures of annual growth (such as GDP) and measures of the comprehensive wealth of a country, which indicate whether that growth is sustainable in the long term.

For the past 15 years, the World Bank has provided indicators to measure the sustainability of a country’s growth path, such as Adjusted Net Saving (ANS), adjusted Net National Income (aNNI), and comprehensive wealth estimates.  Underpinning these indicators are data on natural resource rents (from forests, minerals, and energy) which provide policy makers with information on potential revenues from natural capital.

The comprehensive wealth accounts, which have been published for 1995, 2000, and 2005, include estimates for forest wealth which is calculated as the sum of the net present value of rents from timber extraction and annual benefits from non-timber resources, including minor forest products, hunting, recreation, and watershed protection. ANS, which is published annually and covers the period 1970-present, is defined as net national saving adjusted for investments in human capital, depletion of natural resources (including forests), and damages to human health caused by pollution, and provides an estimate of the annual change in wealth.

Recent findings suggest that while wealth data and ANS data are used by researchers and policy analysts, the greatest demand is for data on natural resource rents.  However, while minerals and energy rent data have gained a lot of traction, rent data for forests are not used as frequently. Interviews have revealed concerns with the credibility of the underlying data, such as the FAO data on forest area and growing stock. The authors of the indicators have also concluded that a number of methodological changes could improve estimates for forest wealth, potential forest rents, and net forest depletion.  

APPROACH
This activity hopes to increase the use of improved World Bank forest data (forest rents, net forest depletion, and forest wealth), so that countries and data users are better equipped with credible and more accurate information on the physical area and value of forest resources. Countries should consider not just the flow of revenues from forest resources, but also the sustainable management of the asset (stock of forest resources).

• Data on the value of forest wealth, its share in total wealth, and how the value is changing over time can help governments assess the contribution of forests to current development outcomes and whether forests are being managed sustainably.
• Data on potential forest rents when combined with information on actual rent recovery and use of these revenues will allow governments to assess whether contribution of forest resources to sustainable development is being realized and who is benefitting from the revenue.  Such data and assessments can equip policymakers to better manage forest resources, improve forest governance, increase transparency in the rent captured, and ultimately lead to increased reinvestment of forest rents in other forms of capital to grow the total wealth of the country.
• These policy changes could, in turn, promote the sustainable management of forest resources for poverty reduction and economic growth.

RESULTS

The activity has been successfully completed.

A report is being finalized and will be released soon. The report reviews the latest literature, explores improved data sources, evaluates key parameters and assumptions in the methodology, and outlines the steps and resources required to improve the data and methods.

An implementation plan for updating the forest database that includes a plan for country surveys if the report finds insufficient global data will be finalized in the coming months.

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