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Are Ecosystem Services Complementary or Competitive? An Econometric Analysis of Cost Functions of Private Forests in Vietnam

February 07, 2018 |

This paper was originally published in: Ecological Economics


  • The paper contributes to the ecosystem services (ES) literature by assessing the production cost structure.
  • A dual cost function approach is used to analyse the trade-off between forestry costs and ecological performance.
  • There is complementarity in the provision of timber and carbon sequestration.

“Forest ecosystem service (FES) provisioning and management in Vietnam is a priority in the Vietnamese environmental agenda. The main rationale of private forest management is to maximise profits from timber and non-timber forest product (NTFP) production. From a social point of view an under-supply of positive forest externalities (or non-marketed ecosystem services) exists.

This paper therefore contributes to the ecosystem service (ES) literature by assessing the production cost structure, in other words, the cost of marketed production and provision of carbon and biodiversity, based on a survey of private forest owners in Hoa Binh Province in Vietnam. The econometric analysis was carried out using a dual cost function approach to analyse the trade-off between forestry costs and ecological performance.

This is, to our knowledge, the first time such an approach has been used to estimate the production relationship between marketed outputs and non-marketed ES in the forest sector. This approach appears to be appropriate for handling the multiple joint outputs of forest production and allows us to estimate marginal costs and other cost measures such as cost complementarities in the production of multiple ES. Our results indicate that there is complementarity in the provision of timber and carbon sequestration and, consequently, policies that enhance carbon sequestration in private forests in Vietnam can be implemented without additional costs for the forest owner.

We also found that keeping deadwood (to favour biodiversity) had no significant cost and was complementary with NTFP (also an indicator of biodiversity in our study), but could increase the marginal cost of producing timber. This means that biodiversity can be enhanced at no additional cost, provided that the quantity of deadwood does not significantly increase…”

Read on and access the full paper at Ecological Economics.

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