CASE TEACHING NOTES
for
The Deforestation of the Amazon:
A Case Study in Understanding Ecosystems and Their Value

by Phil Camill
Department of Biology
Carleton College, Northfield, MN

I. INTRODUCTION

Learning Objectives

Upon completion of this case study, students will be able to:

1. understand the political, cultural, and economic history leading to tropical deforestation in Amazonia.
2. understand issues facing the major stakeholders in the Amazon.
3. understand the concern for such a large loss in biodiversity.
4. understand the concepts of market and non-market valuation of ecosystems, benefit-cost analysis, and opportunity cost.
5. perform a benefit-cost analysis of clearing a plot of tropical forest in the Amazon, from the perspective of a peasant farmer, logger, and a conservation organization.
6. critically evaluate economic vs. ethical valuation of ecosystems.
7. appreciate the political, social, economic, and ecological complexity of tropical deforestation.
8. appreciate how difficult decisions must me made in the face of limited or nonexistent data.

Intended Student Audience

This case has been written for my sophomore-level Global Change Biology course at Carleton College. It will be taught for the first time in Spring 2000, although it has been tested with undergraduates in the 1999 SUNY Buffalo Case Studies in Science Workshop. My course fulfills a science distribution requirement for nonbiology majors, but is taken for elective credit by science majors. A typical class may be composed of students from economics, biology, philosophy, sociology/anthropology, environmental studies, English, political science, chemistry, and geology. While I require one prerequisite course from introductory biology, chemistry, or geology, I do not presuppose a strong background in biology or science. To serve this broad audience, I do not focus on scientific methods as much as I take advantage of student diversity to examine the multidisciplinary nature of environmental problems. This and other cases supplement the information students obtain from the following course readings:

1. Cunningham, W.P. and Saigo, B.W. 1999. Environmental Science: A Global Concern, 5th ed. McGraw Hill, Boston.
2. Terborgh, J. 1999. Requiem for Nature. Island Press, Washington, D.C.
3. Brown, L.R., Flavin, C., and French, H. (editors) 1999. State of the World. Worldwatch Institute, W.W. Norton and Co., New York.
4. Additional primary literature placed on reserve.

This case would also be appropriate for the following sophomore-to-senior level courses:

• General ecology: This case could be used as an applied study of the effects of humans on ecosystems, tropical ecology, causes of extinction, and the effects of biodiversity on ecosystem function.

• Environmental science: This case addresses issues related to global biodiversity loss, the effects of population growth, land uses and land rights, and complex multidisciplinary issues.

• Environmental ethics: This case could be used to analyze private vs. public land rights, importance of biodiversity, intrinsic vs. economic valuation of species, international disparity of wealth and natural resources, poverty, and the future of developing nations.

• Environmental policy: This case offers a look at how changing public policies/governments have affected Brazilian national land use, conflicts of different national and private interests, debt-for-nature swaps, the social class structure in Brazil, and the effects of federal subsidies on land use.

• Environmental/ecological economics: This case could help students apply their knowledge of cost-benefit analysis, the effects of federal subsidies on land use, tragedy of the commons, the economics of developing nations, opportunity costs, marginal costs and benefits, ecosystem valuation, and techniques of non-market use valuation. If expanded to analyze a longer time horizon, say 20 years of land use, this case would also be appropriate for discussing discounting and interest rates.

Course Structure

On the first day of class, 48 students are divided into small groups of 4 to 5 students each. Over the 10-week quarter, my course material is divided among three learning styles: (1) lecture (14 class periods), (2) case studies (8 cases requiring 11 class periods), and (3) in-class strategy sessions where groups present in-depth statements on practical methods for mitigating global change (4 class periods). An explicit requirement of the course is that student groups meet out of class to discuss and prepare case study write-ups and position statements. My case study follow-up assignments may therefore be longer and more in-depth than for case studies where all group work is expected to be completed in class.

Five broad sections structure this course:

Theme 1: Introduction to ecology: What is "natural"? Historical changes in species and climate

Theme 2: And then along comes humans...

1. Local Issues: The front lines of environmental degradation: land ownership, rights, responsibilities, and land use changes
   
2. National Issues: Using and saving our natural resources; economic market failures
   
3. International and Global Issues: International wealth disparity--our source of and solution to environmental problems

Theme 3: What can WE do about it?

I use this case within the context of studying environmental science at the local level--a section in the beginning of the course that includes issues related to land use, land rights, and social and economic valuation of the environment. During the first day of the "Local Issues" section, I lecture on conflicts that arise between the private ownership and development of land vs. sustaining the environment. After this class, students are assigned the case and told to read all of its sections: I. Introduction, II. Background, and III. The Problem.

This case, also serves as a springboard for environmental discussions at the national level (creating national parks and protecting endangered species, etc.) and international levels (international trade and debt, global carbon emissions, debt-for-nature swaps, etc.). While I do not explicitly reexamine this case when we cover "National Issues" or "Global Issues," I do make links between the Amazon case and national and global issues. In this way, students get a chance to "scale up" an issue across multiple cultural scales. It would be appropriate to teach this case at national and global levels in this or other courses.

Case Synopsis

Tropical deforestation in the Brazilian Amazon threatens to wipe out the most biologically diverse ecosystems on earth, replacing them with degraded pastureland. There are a number of complicated, interacting factors leading to rapid destruction of tropical forests--most of which are underscored by the economic value of different land use options. Over the last few decades, farming and cattle have resulted in the greatest monetary return from using tropical land. The sustainable use of primary tropical forests is simply not as lucrative as these other options. In this case, students examine the issue from the perspective of three dominant stakeholders in the region: a peasant farmer, a logger, and an environmentalist. Using data and techniques for valuing ecosystems, students determine how each of these stakeholders values a hypothetical five-hectare plot of tropical rainforest in the Amazon.

II. FACILITATING THE CASE

This case will require a full 50- to 75-minute lecture period. In my course, I will use a full 70-minute period.

Step 1: Before students come to class: Assign students all three sections, I. Introduction, II. Background, and III. The Problem, to read before coming to class. Students should be familiar with the issue and understand generally the role-playing responsibilities. They will be most prepared if they are given questions to work on either individually or in groups before coming to class to help them think of how they would value ecosystems from each of the three perspectives: a peasant farmer, a logger, and an environmentalist.

Here are some good questions to assign students before coming to class:

1. Who are the stakeholders involved in Amazonian deforestation, and what are the issues facing them?
2. What does opportunity cost mean and how does it apply to the valuation of land uses in this case?
3. How does the new view of ecological economics differ from traditional economic views?
4. How is "willingness to pay" being used to value ecosystems? What would you be willing to pay to ensure the protection of at least 10% of remaining tropical forests? A random 5-hectare plot in the middle of the Amazon forest?
5. Using data presented in the case study, fill in the data tables showing how a farmer, a logger, and an environmentalist values tropical forests.

   Step 2: In-class activities: Begin the class with a very brief introduction of the issue. A slide show of tropical ecosystems and deforestation and personal anecdotes about jobs vs. the environment would be effective. It is useful to outline the problem and goals of the class period, but do not lecture on material from Section II of the case. Assign to each student group the position of one of the three stakeholders. Ask them to (1) develop a strategy of using/not using the land to best represent their values and (2) use data from the case, summarized in the appendix, to associate a pricetag with the stakeholder's values. Due to time constraints, it is probably unreasonable to expect each group to role-play all three stakeholders. Urge students to represent their interest as best they can.

   The in-class activity begins with Section III of the case, The Problem. The majority of the in-class discussion (25 to 30 minutes) should focus on comparing notes and putting together a common set of data tables using the data presented in the case (and any other information they may already know). It is crucial that students realize they are valuing a single, 5-hectare forest and not the whole Amazon or tropical forests in general. Also limit the time span to one or two years, otherwise the exercise runs into the messy problem of having to discount present values.

   Once the students have assembled in their groups, they should take advantage of their advanced preparation to help them fill in the table. If they attempted seriously the above pre-class questions, there should be little doubt what they need to do. The role of the instructor during this period is to make sure that students understand their tasks and to help clarify points concerning data/techniques used to value ecosystems. After this 25- to 30-minute period is over, students should have come up with a written strategy of land use and an associated data table of ecosystem values.

   Here's an example of what the data tables might look like for the three interests. In parentheses, I explain how I have calculated each of these values using data from the case study. It is important to remember that this is only one of many potential outcomes of this exercise. I do not claim it to be "correct" because there are no right or wrong answers. I hope this open-endedness makes the case thought-provoking and interesting. I want to foster as much creativity and open-ended thinking as possible.

    

   Perspective 1: Peasant Farmer Strategy: Clear land, sell timber, farm for two years, and sell land
   How you value the 5-hectare forest plot	Value per hectare per year ($ or other)	Value for entire 5-ha plot per year	Value for the entire 5-ha plot for 2 years
   1) Merchantilable wood from clearing first year (Assumes $35/m3 timber* 5m3 of merchantilable timber/ha; only one year of income)	$175	$875	$875
   2) Two years of agriculture ($460/ha/yr from data table)	$920	$2,300	$4,600
   3) Net increase in value of cleared land ($300 for cleared land-free forest; Note this calculation assumes that the forest was free for the farmer. If he had bought the land ($150), net profit of clearing is $150/ha)	$300	$1,500	$1,500
   Total	$1395	$4,675	$6,975

    

   Perspective 2: Logger Strategy: Selectively log valuable timber species and non-timber resources, then establish a forest plantation for pulp and collect carbon sequestration royalties for growing a secondary forest
   How you value the 5-hectare forest plot	Value per hectare per year ($ or other)	Value for the entire 5-ha plot per year	Value for the entire 5-ha plot for 2 years
   1) Selective logging (Assumes $35/m3 * 5m3/ha; only one year of income)	$175	$875	$875
   2) One year of non-timber resources (An extremely high estimation based on the work of Peter et al. 1989)	$422	$2,110	$2,110
   3) Agroforestry (Assumes a productive teak plantation supporting 150m3 timber over 10 years, or 15m3/year selling at $35/m3)	$525 (average/yr)	$2,625	$2,625
   4) Carbon sequestration (Assumes high end of the global benefits of sequestering carbon; also assumes this benefit is one time only as long as forest cover is maintained)	$2,000	$10,000	$10,000
   Total	$3,122	$15,610	$15,610

    

    

   Perspective 3: Environmentalist Strategy: preserve primary forest, sell rights for limited bioprospecting, establish ecotourism, secure external (international funding from donors) for preservation of species and for carbon sequestration
   How you value the 5-hectare forest plot	Value per hectare per year ($ or other)	Value for the entire 5-ha plot per year	Value for the entire 5-ha plot for 2 years
   1) Non-timber resources (Assumes Peters et al. 1989 unrealistically high estimate)	$422	$2,110	$4,220
   2) Genetic resources (Assumes the low value ($21/ha) of Southgate 1998; one-time payment)	$21	$105	$105
   3) Willingness to pay (This value is an upper limit based on the one-time payment survey of Kramer and Mercer 1997)	$110	$550	$550
   4) Ecotourism (Assumes that this plot is not unique and is therefore not in high demand from tourists: ticket price of $15/person and 100 visitors annually)	NA	$1,500	$3,000
   5) Carbon sequestration (Assumes high end of the global benefits of sequestering carbon; also assumes this benefit is one time only as long as forest cover is maintained)	$2,000	$10,000	$10,000
   6) Ecosystem services provided by hydrological cycling in rainforest (Assumes that this can be quantified using a method to calculate the cost it would take to irregate cropland)	?	?	?
   Total	$2,553	$14,265	$17,875

   
   

   
   

Once the tables are filled out, have a representative of each group come to the board and write down his/her group's results. This will take about 5 to 10 minutes. For the remaining 30 to 35 minutes, the instructor should foster an in-class discussion that works through the "Questions for Further Thought" described below. A good question to ask first is "Which land use option is most valuable, and how might this affect land use in the Amazon?" After soliciting responses from each group, it is important to reveal that the students have just completed a simplified version of cost-benefit analysis. Have each group write down what other students suggested for the other two stakeholder perspectives so that they have all the information for comparing the perspectives in their case write-up. Continue through the "Questions for Further Thought." This will allow time for in-class discussion of most of these questions before students have to turn in a report (see below).

Step 3: Post-class activities:
Following the in-group discussion of the positions of each stakeholder, students meet out of class to discuss and summarize a written, 2- to 3-page response to the "Questions for Further Thought." These are discussed below. I generally have one person, the group leader, be responsible for summarizing the case writing. The responsibility of being the group leader changes with each case.

Follow-up Assignment

After completing the case, groups should discuss the following "Questions for Further Thought" and critique the use of benefit-cost analysis for environmental decisionmaking. Three short papers for students to read include Costanza et al. 1997b, Sargoff 1997, and Pearce 1998. These provide spirited debate to the controversy of ecosystem valuation.

Answers to Questions for Further Thought

1. Based on this simplified form of benefit-cost analysis, which land use option wins and why?

   Depending on how aggressive/creative each group is, usually the logger makes the best case, followed by the farmer, and lastly, the environmentalist. In a trial run of the case, this was the outcome because the environmental group had a difficult time valuing the ecosystem in noneconomic terms. If the data are analyzed thoroughly by the environmental group, as in the example tables above, it may be most profitable to leave forests intact.

2. Evaluate the ways that peasant farmers, loggers, and conservation organizations approach land use. Which do you agree with? Is there room for peaceful coexistence in the Amazon, especially with the prospect of population growth?

   Use results from each group to foster this discussion. The latter half of the question gets into normative issues.

3. Support or criticize the use of benefit-cost analysis as a means of economic planning and as a means of preventing environmental degradation. Do you agree more with Costanza (1997b), Pearce (1998), or Sagoff (1997)? Do you feel that species have intrinsic rights to exist? Can such existence values be incorporated into environmental policy?

   The difficulties and fallacies of using cost-benefit analysis will hopefully become apparent to students as they progress through the exercise. Take advantage of the issues students raise to discuss the issue of economic valuation vs. the intrinsic value of species existence.

4. Do you believe that citizens of tropical countries have the right to deforest the most biologically diverse communities on earth? Compare and contrast the economic and environmental issues of tropical deforestation with deforestation that occurred in the US and Europe over the last several hundreds of years.

   Again, a normative issue. These discussions can be fun, especially when students realize that this kind of deforestation has already happened in the US and Europe hundreds of years ago.

5. John Terborgh, tropical ecologist at Duke University, asserts that in order to save tropical forests, citizens of industrial nations are going to have to pay developing countries. Do you agree? What are some ways that this might be done?

   This is an opportunity I use to portend things to come when dealing with issues at the global scale.

Common Pitfalls Encountered by Students and Instructors

After a trial run of this case with undergraduates at the 1999 Case Studies in Science Summer Workshop, there are a few areas that gave students and instructors trouble.

• Students struggle with filling out the tables, especially the environmental group. There are several reasons. First, the data are not clean and simple. There is extraneous material that they must wade through to find the salient data that represent their interest. Second, they are not used to "putting a pricetag" on an ecosystem, either for economic or ecological reasons. During the trial run of this case, the environmental group listed numerous ecological services that tropical forests provide, but they put "priceless" next to each because of the difficulty ascribing monetary value to these services. One way to help them may be to provide an example of what each of the three stakeholders might value (see tables above). Assigning the readings and questions to work through before coming to class will also alleviate some of this problem. However, you can take advantage of this difficulty by making the point that this is why economic development usually trumps concern for the environment. It is very difficult to determine nonmarket uses of ecosystems, but it is relatively easy to envision a profit from logging a forest full of trees.

• Students have difficulty making decisions when data are lacking. This is often the case in environmental issues. Nonetheless, the students will feel like you are tricking them or making them do something impossible. Have no fear! This is real life, and it serves a good purpose for them to be uncomfortable during this process. Reassure them at the end of the in-class discussion, that this is the way scientists, economists, and policymakers are forced to think about these issues in the real world.
  

• If students are mostly from a single socioeconomic background (i.e., the children of loggers, farmers, or environmentalists), it may be difficult challenging their default viewpoints and inspiring a thoughtful discussion. The instructor may need to take the viewpoint of the "devil's advocate" and use Socratic methods to push the discussion.

• Students are unfamiliar with the new ideas of ecological economics. Although Section II of the case defines several concepts, make sure they understand the difference between market and non-market valuation and why some people use techniques like "willingness to pay." Encourage them, especially the environmental group, to be as creative as possible in coming up with values for the ecosystem. Allow them to invent their own methods if they so choose.
  

III. A PRIMER ON SOME OF THE CONCEPTS IN THE CASE

Material in this complex case is drawn from a number of disciplines, in particular biology, economics, and political science. For understanding material in this case, it may be beneficial to highlight the following concepts to students.

(1) Opportunity Costs
Opportunity cost is a basic economic tenet stating that the choice of making an economic decision must be weighed against the value of making other decisions. More precisely, the cost of doing something is the value of whatever opportunity one must give up in order to do it. If, for instance, a Brazilian could make a net profit of $500 for clearing and farming, $300 for logging, or $100 for sustainable harvesting fruit from a tropical forest, the opportunity cost of fruit harvesting is a net loss of $400 had he chosen to farm.

(2) Ecological Economics
A relatively new field of economics that attempts to internalize the costs of doing business and to determine an economic value for goods and services provided by natural ecosystems. For example, if an industry makes a net profit of $1,000,000 while dumping toxic waste in a river, we say that the company is "externalizing" the cost of waste disposal. If the company were forced to clean up the waste, or "internalize" the costs, its net profit might only be $700,000 if the cost of proper waste disposal is $300,000. As a method of coercing business to internalize their costs and develop more accurate estimates of costs and benefits, ecological economists attempt to put a price tag on the values of natural capital and services (see Table 1 in the case study for a description of these services). Ecological economists reason that if the value of these natural services were taken into account in ordinary day-to-day decisionmaking, we would opt much less often to degrade the environment because of the enormous value nature provides to humanity for free. If humanity were to drive all species of insects extinct, for instance, what would it then cost us to pollinate all the flowers of the world? This field of economic is gaining popularity, especially among ecologists (Dailey 1997), although it is unpopular among traditional economists and some philosophers (Sagoff 1997).

(3) Terms Related to Tropical Forest Ecosystems
For the sake of simplicity, the picture of tropical forests presented here is overly general. A typical tropical forest in the Amazon may be composed of many different plant community types, including wet tropical forest, dry tropical forest, swamp forest, floodplain forests, and montaine forests. Old forests that have not been previously altered by humans are termed "primary (virgin) forests" and are distinguished from "secondary forests" that are recovering from human or other natural disturbances. Forests with the highest species diversity are primary forests.

Tropical forests are the most species-diverse in the world. Several evolutionary and ecological processes have been offered to explain this high level of diversity; the actual cause is most likely a mix of several factors: (1) the lack of major disturbance like glaciations for long periods of time, (2) relatively mild and constant environmental conditions, (3) diverse gradients in habitat.

As a result of the lack of glaciation or inundation by seas for millions of years, Amazonian soils are considered "old" and highly weathered. That is, tropical warmth and high precipitation has weathered rock minerals to a state where they are fine-textured, acidic clay materials that are deficient in many nutrient elements required by plants, such as nitrogen and phosphorus. It is this general characteristic of tropical soils that makes agriculture and cattle ranching unsustainable unless crops and pastures are subsidized with large amounts of fertilizer and pesticides.

IV. REFERENCES

• Buschbacher, R.J. 1986. Tropical deforestation and pasture development. Bioscience. 36(1):22-28.
  

• Buschbacher, R.J. 1987. Cattle productivity and nutrient fluxes on an Amazon pasture. Biotropica 19(3): 200-207.
  

• Clark, C.W. 1973. The economics of overexploitation. Science 181:630-634.
  

• Costanza, R., Cumberland, J., Daly, H., Goodland, R., and Norgaard, R. 1997a. An Introduction to Ecological Economics. St. Lucie Press, Boca Raton, Fla.
  

• Costanza, R. d'Arge, R., deGroot, R., Farber, S., Grasso, M., Hannon, B., Limburg, K., Naeem, S., O'Neill, R.V., Paruelo, J., Raskin, R.G., Sutton, P., and van den Belt, M. 1997b. The value of the world's ecosystem services and natural capital. Nature 387:253-260.

• Dailey, G.C. (ed.) 1997. Nature's Services: Societal Dependence on Natural Ecosystems. Island Press, Washington, D.C.

• Durning, A.T. 1993. Saving the forests: What will it take? Worldwatch Publication 117. Worldwatch Institute, Washington, D.C.

• Grainger, A. 1993. Controlling Tropical Deforestation. Earthscan, London.

• Hall, A.L. 1989. Developing Amazonia. Manchester University Press, Manchester.

• Kramer, R.A., and D.E. Mercer. 1997. Valuing a global environmental good: U.S. residents' willingness to pay to protect tropical rain forests. Land Economics 73(2): 196-210.

• Lawrence, W.F. 1997. A crisis in the making: Responses of Amazonian forests to land use and climate change. Trends in Ecology and Evolution 13(10): 411-415.

• Mann M.E., Bradley R.S., and Hughes M.K. 1998. Global-scale temperature patterns and climate forcing over the past six centuries. Nature 392: 779-787.

• Nepstad, D.C., Verissimo, A., Alencar, A., Nobre, C., Lima, E., Lefebvre, P., Schlesinger, P., Potter, C., Moutinho, P., Mendoza, E., Cochrane, M., and Brooks, V. 1999. Large-scale impoverishment of Amazonian forests by logging and fire. Nature 398: 505-508.

• Pearce, D. 1998. Auditing the Earth. Environment 40(2):23-28.

• Peters, C., Gentry, A., Mendelsohn, R. 1989. Valuation of an Amazon rainforest. Nature 339:655-656.

• Richter, D.D., and Markewitz, D. 1995. How deep is soil? Soil, the zone of the earth's crust that is biologically active is much deeper than has been thought by many ecologists. Bioscience 45(9): 600-609.

• Ruitenbeek, H.J. 1989. Social Cost-Benefit Analysis of the Korup Project, Cameroon. WWF, London.

• Sagoff, M. 1997. Can we put a price on nature's services? Report from the Institute for Philosophy and Public Policy 17(3)

• Schlesinger, W.H. 1997. Biogeochemistry: An Analysis of Global Change, 2nd ed. Academic Press, San Diego.

• Simpson, D., Sedjo, R., and Reid, J. 1996. Valuing biodiversity: An application to genetic prospecting. Journal of Political Economy 104(1): 163-185.

• Serrão, E.A.S., and Homma, A.K.O. 1993. Brazil. in Sustainable Agriculture and the Environment in the Humid Tropics. National Research Council. National Academy Press, Washington, D.C.

• Southgate, D. 1998. Tropical Forest Conservation: An Economic Assessment of the Alternatives in Latin America. Oxford University Press, New York.

• Terborgh, J. 1999. Requiem for Nature. Island Press, Washington, D.C.

• Vitousek, P.M., and Sanford, R.L. 1986. Nutrient cycling in moist tropical forest. Annual Review of Ecology and Systematics 17:137-167.

• Weitzman, M.L. 1998. Why the far-distant future should be discounted at its lowest possible rate. Journal of Environmental Economics and Management 36(3): 201-208.

• Wilson, E.O. 1989 (September). Threats to biodiversity. Scientific American 261: 108-116.

• Wilson, E.O. 1992. The Diversity of Life. W.W. Norton and Company, Inc. New York.

Acknowledgements: This case was developed as part of a National Science Foundation-sponsored Case Studies in Science Workshop (NSF Award #9752799) held at the State University of New York at Buffalo on June 7-11, 1999.