Valuing a Logging Externality: Loss of the Water Purification Service of Temperate Coastal Rainforests

In many biodiversity rich watersheds, there is a lack of understanding concerning the trade-offs between timber harvesting and maintaining the watershed’s other ecosystem services, where losses of these services can occur as an externality from timber harvesting. As a result, the potential benefit from an appropriate mix of activities in multiple-use watersheds frequently remains unrealized. Our study provides insight into such trade-offs by estimating the value of a loss in a forest’s water purification/filtration service due to sedimentation caused by logging (the externality). More specifically, we develop a model to quantify the economic impact of increased sedimentation from forest roads on the quality of raw water withdrawn by a municipal water utility. Our approach is novel in several ways. First, we recognize the complex response of the water treatment plant to elevated sedimentation (turbidity) by considering a stochastic environmental influence on water system performance; to accommodate this complexity, we estimate the number of times turbidity exceeds an acceptable threshold by using a count data estimation procedure. Second, we generate alternative time series for turbidity that vary according to assumptions about forest management (logging versus no logging), traffic volume (road use intensity) and aggregate road length. We find that reductions in the economic value of the water purification/filtration service is more sensitive to traffic volume than other considerations but only when the road use is High, as the welfare effect in other cases is modest. Our analysis will be helpful to forest planners who must consider the trade-offs in forest management when timber harvesting can have harmful impacts on important ecosystem services, such as water purification/filtration.