ABSTRACT
Managing forests solely for their commercial timber values leads to market failure because too much forestland is harvested relative to what society desires, or it is harvested in ways that are considered detrimental to other forest values. Market failure occurs because markets do not adequately capture the benefits associated with the environmental amenities that forests provide, so that the level of provision of those amenities is below what is economically optimal - these associated environmental amenities are a public good. As the forestland owner, the government of British Columbia must balance commercial or financial aspects of the forest against the environmental amenities of forests, particularly forest ecosystem functions
. such as carbon sink and uptake (to mitigate global warming), watershed protection, and wildlife habitat and biodiversity protection. Also important to the people of the Province are the outdoor recreational opportunities provided by forests, their role in attracting tourism income and scenic amenities. Again, these amenities are not traded in markets and are suboptimally provided if focus is only on commercial timber values.
