A black-box approach on assessing the opportunity cost of deforestation

a b s t r a c t The paper presents a new concept on assessing the opportunity cost of land use changes based on differentiating the ratio between the economic loss produced downstream by floods and the catchment area where different land uses eventually have different runoffs. Having the shares of different land uses and their corresponding runoff coefficients, the average loss per hectare within the watershed is further broken down according to the same land uses types and an average loss per hectare, for each type of land use, is finally appraised. Ceteris paribus, any further changes between different land uses, under the same rainfall regime, are assumed to produce different ‘virtual’ total losses, according to the degree to which high runoff land utilizations would have been changed in low runoff land utilizations or vice versa. The economic reasoning of the method is also presented in the broader context of the opportunity cost theory and a case study demonstrates the readiness of the method. © 2013 Elsevier Ltd. All rights reserved.