In General, the loss of trees and other vegetation can cause climate change, desertification, soil erosion, fewer crops, flooding, increased greenhouse gases in the atmosphere, and a host of problems for indigenous people.

Environmental protection and economic growth do not always go hand in hand. When it comes to forests, immediate economic gains are often the priority. However, the negative economic effect of deforestation is also great and often ignored, especially in the long run.

• The Economic Effect of Deforestation:

The loss of forests affects millions of the poor in rural areas. About 250 million people in poor rural areas live in forests. Furthermore, over a billion people rely on forests for food, medicine, or fuel.8 For these people, therefore, deforestation means lost income, lost subsistence, and even a lost home. Sometimes commodity production and land conversion from forests to agriculture provide the poor with opportunities for work, yet they can also be associated with poor working conditions and labor exploitation.

In some cases, due to logging or short-term agricultural shifts, forests are not wiped out completely but suffer from degradation. In these scenarios, economic gains suffer as well. For example, Ghana suffers from one of the highest deforestation rates worldwide. According to one study9, every year it loses over a hundred million dollars of revenue when comparing gains from degrading forests to preserving natural forests.

The Big Picture:

Forests are crucial for biodiversity, water supply, and the global climate. Thus, we need to adopt a global long-term outlook in order to fully appreciate the detrimental economic effect of deforestation.

Forests are home to 80% of the world’s known land-based animal species. Consequently, deforestation wipes out natural habitats causing numerous animal communities and, in some cases, entire species to go extinct. It is difficult to put a price tag on the loss of flora and fauna ethically. However, estimates suggest that the loss of biodiversity and genetic resources for scientific, medical, and drug research could cost billions.

Deforestation also has the potential to disrupt local and possibly global water cycles and increase soil erosion, with costly consequences. Firstly, disruptions in the provision of clean water in the tropics are costly to local governments. Furthermore, changes in water cycles can negatively affect specific industries. For example, more frequent and longer droughts have been associated with decreases in the variety of coffee species. In terms of soil erosion, unlike agricultural plants, forests prevent the soil and its nutrients from being washed into rivers. Therefore, over time deforestation can render some areas unusable even for agriculture.

Finally, forest cover loss is a major contributor to global warming and climate change. We cannot yet predict the full effect of these changes but there is no question that they will incur huge costs in the future.