Correcting measures of national income for environmental values: The case of water abstraction and carbon sink externalities of industrial plantations in South Africa

Abstract

Conventional measures of national income and capital formation underestimate the contribution of industrial plantations to gross domestic product and do not account for the social costs or benefits of their environmental impacts. The present study adopted an environmental accounting approach to establish an improved measure of the sector's contribution to value added and to correct for the omitted social values of water abstraction and carbon sink externalities of plantations. The net economic benefit from carbon storage functions was found to be about half the economic costs of water reduction by plantations. However, the study indicated that plantation forestry contributes marginally to the carbon cycle and hence holds low potential as an instrument for balancing carbon budgets in the country. Measures for reducing CO2 emissions at source sectors may prove more effective alternatives in managing carbon budgets in South Africa.