The social welfare effect of forest certification under environmental spillovers

Abstract

Forest certification has positive environmental spillovers. Considering environmental spillovers, this study analyzed the social welfare effects of forest certification using partial and general equilibrium methods. The results of the partial equilibrium analysis showed that social welfare in producing countries tended to increase under the market expansion of certified forest products. The general equilibrium analysis results indicated that, in autarky, or economic independence, the production amount of certified forest products could increase. If conventional forest products are imported and certified forest products are exported, then the level of utility in free trade condition is greater than that in autarky. If conventional forest products are exported and certified forest products are imported, then the price of imported products must be compared with the price of the autarky domestic market to determine the utility level of free trade and autarky. If the price of certified products is less than the price at the time of autarky, then the total utility level increases; otherwise, it decreases. The social welfare effect of forest certification can be increased through expanding the market demand of certified products and giving these products subsidies in production and price incentives in importing.

Keywords

• Environmental spillover Forest certification Partial equilibrium General equilibrium Social welfare