Philippine Institute
for Development Studies
Policy Notes
Surian sa mga Pag-aaral
Pangkaunlaran ng Pilipinas ISSN 1656-5266
Economic and poverty impacts
of the National Greening Program
Caesar B. Cororaton, Arlene B. Inocencio,
Marites M. Tiongco, and Anna Bella S.
Manalang
This Policy Note draws from the paper of
Cororaton et al. (2016) that assessed the
economy-wide impacts of the National
Greening Program (NGP) of the Department
of Environment and Natural Resources. The
study was part of the economic component of
a bigger impact assessment of the NGP that
also included three other areas of concern:
environmental, social, and institutional.
The Cororaton et al. study carried out
policy simulations to establish impacts
complementing the economic component’s
assessment. The key findings are presented in
this Note.
Introduction director of Research and Advanced Studies at the School of Economics, De La Salle
Between 1990 and 2013, the Philippines lost
3.8 million hectares of forest, which represent
36 percent of its 1990 forest cover. If no
intervention is implemented, the country’s
No. 2016-12 (June 2016)
forest cover will continue to deteriorate to
4.5 million hectares by 2050. This continued
deforestation has negative effects on the
environment, health, and agricultural
productivity. The NGP, implemented in 2011
through Executive Order 26, was designed
to increase reforestation and, consequently,
address other related problems on poverty,
food security, environmental stability and
biodiversity conservation, and climate change.
The NGP can potentially result in large-scale
environmental changes that have economy-
wide effects. However, most valuation methods
thus far that are used to analyze these
PIDS Policy Notes are observations/analyses written by PIDS researchers on certain
policy issues. The treatise is holistic in approach and aims to provide useful inputs
for decisionmaking.
The authors are consultants of PIDS. Caesar Cororaton is research fellow at Virginia
Polytechnic Institute and State University; Arlene Inocencio is associate professor and
University (DLSU)-Manila; Marites Tiongco is associate professor and dean of the
School of Economics, DLSU-Manila; and Anna Bella Manalang is associate professor
at the Industrial Engineering Department of the Gokongwei College of Engineering.
The views expressed are those of the authors and do not necessarily reflect those of
the PIDS or any of the study’s sponsors.
2
changes employ partial equilibrium models,
which are limited in their consideration of
economic and ecological spillover effects.
Thus, for Phase I of the NGP impact
evaluation, a computable general equilibrium
(CGE) model was used to quantitatively assess
the potential economic and poverty effects
of the NGP (Cororaton and Corong 2009). In
particular, the assessment was conducted
using the framework in Figure 1.
The CGE model was calibrated to a social
accounting matrix (SAM) of the Philippine
economy in 2012.1 The CGE model
incorporates a land-use module that is
critical in the assessment. The model also
______________
1
The SAM was constructed using the official 2006 Input-
Output Table updated to 2012 values using the official
national income accounts data. The other information used
in the SAM include: (i) savings of households, firm, and the
government from the 2012 Flow of Funds account of the
Bangko Sentral ng Pilipinas (BSP); (ii) government accounts
from the Bureau of Treasury; (iii) the balance-of-payments
accounts of the BSP; (iv) the consumption of households
from 2012 Family Income and Expenditure Survey; and
(v) unskilled and skilled labor from the 2012 Labor Force
Survey, where unskilled labor is defined as labor without
high school diploma.
Figure 1. Framework of analysis
Source: Authors’ rendition
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Policy Notes
incorporates factor-efficiency parameters in
production to accommodate the health effects
of changes in the environment on labor, and
the climate change effects on the productivity
of agricultural land.
In the assessment, a CGE model was specified,
calibrated, and used to simulate three
scenarios:
(i) baseline scenario that incorporates:
– the current forest deterioration from 6.4
million hectares to 4.5 million hectares in
2050;
– a 14-percent decline in agricultural land
productivity in 2050 as a result of climate
change (Cline 2007); and
– a 3-percent decline in labor supply in
2050 as a result of negative human health
effects of deforestation (Pattanayak et al.
2009).
(ii) full NGP scenario which:
– increases the forest cover by 1.5 million
hectares by 2050 (from 4.5 to 6.0 million
hectares);
 3

– prevents the decline in agriculture land Table 1. Effects on sectoral output (% change from baseline)
productivity; and   Full NGP Scenario Partial NGP Scenario

– improves human health and thus   2020 2030 2050 2020 2030 2050

prevents the decline of labor supply. Palay 0.490 1.310 3.126 0.131 0.338 0.798

(iii) partial NGP scenario which: Coconut 0.369 1.057 2.844 0.095 0.262 0.778
Sugar 0.483 1.289 3.221 0.128 0.330 0.889
– increases the forest cover by 750,000
Other agriculture 0.405 1.066 2.838 0.097 0.249 0.802
hectares by 2050 (from 4.5 to 5.25 million
Forestry 0.750 1.978 9.533 0.286 0.730 5.650
hectares);
Rice processing 0.501 1.335 3.167 0.133 0.343 0.801
– declines agricultural land productivity
Coconut processing 0.393 1.178 3.020 0.099 0.283 0.747
by 10 percent in 2050, instead of 14 Sugar processing 0.485 1.293 3.231 0.128 0.330 0.893
percent in the baseline; and Other food 0.449 1.219 2.980 0.121 0.319 0.794
– declines labor supply by 2 percent by All other manufacturing 0.414 1.183 2.883 0.121 0.341 0.820
2050, instead of 3 percent in the baseline. Other industry 0.398 1.122 2.692 0.116 0.323 0.772
Dwellings 0.264 0.767 2.030 0.065 0.181 0.555
The results of the CGE simulation were Other service 0.046 0.293 1.029 0.010 0.073 0.278
utilized in a poverty microsimulation model Public administration 1.064 2.237 4.441 0.326 0.689 1.347
to quantify the economy-wide effects on Overall output 0.329 0.933 2.343 0.092 0.256 0.656
poverty and income distribution of the NGP Source: Authors’ calculation

(Cororaton and Corong 2009). The poverty

microsimulation was calibrated to the 2012
Family Income and Expenditure Survey.
Simulation results
Table 1 shows that relative to the baseline,
overall output of the economy under the full
NGP scenario improves by 0.3 percent in 2020,
0.9 percent in 2030, and 2.3 percent in 2050.
Agricultural crop production of palay, coconut,
sugar, and other agricultural crops improves,
as well as the processing of these crops into
food. Nonmanufacturing production improves
also. The higher agricultural output growth is
due to the improvement in agricultural land
productivity and the improvement in labor
efficiency under the NGP scenario relative to
the baseline. Output of dwellings and other
services increases, but the improvement
is relatively lower than the overall output
growth of the economy. The forestry sector
benefits the most under the NGP scenario.
Public administration, which includes
public health, education, and other general
government services, increases as the overall
economy improves with higher government
revenue and spending.2
The sectoral effects are lower under the
partial NGP scenario. Overall output of the
economy improves by only 0.7 percent
relative to the baseline in 2050. Agriculture
______________
2
Government budget balance is held fixed in the
simulation.

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Table 2. Output-land ratio in agriculture (% change in 2050 (Table 3). There is higher employment
from baseline)
of both skilled and unskilled labor with NGP,
  Full NGP Scenario Partial NGP Scenario
resulting therefore in higher labor income. The
  2020 2030 2050 2020 2030 2050
higher land efficiency and the improvement
Palay 3.3 7.9 15.8 1.1 2.7 4.5
in land utilization in land-using sectors with
Coconut 3.3 7.8 15.7 1.1 2.6 4.5
Sugar 3.3 7.8 15.8 1.1 2.6 4.6 NGP increase land income as indicated in the
Other agriculture 3.3 7.8 15.4 1.1 2.6 4.3 results. Capital income also improves, but it
Source: Authors’ calculation is lower than the increase in labor and land
income. Higher labor and land efficiency
and food processing sectors are also favorably because of NGP decreases the cost of
affected. production, especially in agriculture and food
sectors. As prices of these food items have
Deforestation decreases the supply of significant weights in the consumer basket,
forest land. This is reversed under the tree- the consumer price index declines as the
replanting activities in NGP. Reforestation simulation results show.
increases forest land as well as the overall
supply of productive land. The improvement The differences in the sources of income and
in land productivity increases the output-land the variations in the consumption shares
ratio in agriculture as shown in Table 2. The translate into differences in income and
ratio is higher under the full NGP scenario. consumer price effects across household
groups (Table 4). Nominal household income
The improvement in the health effects with improves while consumer prices decline. The
reforestation increases the effective supply increase in income and the decline in prices
of labor. The increase in labor supply causes tend to accelerate over time. Also, the effects
downward effects on wages of skilled and of the NGP scenario are progressive in the
unskilled labor in 2030, but recovers slightly sense that lower-income household groups

Table 3. Factor incomes and consumer prices (% change from baseline)

  Full NGP Scenario Partial NGP Scenario
  2020 2030 2050 2020 2030 2050
Skilled labor 0.088 0.607 1.948 0.245 0.662 1.574
Unskilled labor 0.214 1.048 3.180 0.500 1.276 2.966
Capital 0.354 0.809 1.826 0.097 0.220 0.549
Land 3.369 8.618 13.233 3.090 7.420 11.341
Change in consumer prices* -0.109 -0.219 -0.590 -0.022 -0.039 -0.174
Source: Authors’ calculation
*The change in factor income is the change in factor price multiplied by the change in factor demand, while the change in
consumer price is the change in sectoral Armington composite price weighted by household expenditure shares.

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Table 4. Effects on household income and consumer prices (% change from the baseline)
Household Full NGP Scenario Partial NGP Scenario
Groups 2020 2030 2050 2020 2030 2050
(Decile) Income1 Prices2 Income Prices Income Prices Income Prices Income Prices Income Prices
H1 0.419 -0.133 1.100 -0.262 2.430 -0.664 0.133 -0.027 0.338 -0.045 0.683 -0.182
H2 0.409 -0.126 1.092 -0.252 2.440 -0.653 0.129 -0.024 0.334 -0.040 0.683 -0.178
H3 0.404 -0.121 1.090 -0.244 2.453 -0.641 0.127 -0.023 0.332 -0.039 0.685 -0.176
H4 0.395 -0.118 1.079 -0.240 2.452 -0.632 0.124 -0.022 0.327 -0.039 0.682 -0.175
H5 0.381 -0.113 1.069 -0.231 2.472 -0.618 0.118 -0.021 0.320 -0.037 0.683 -0.173
H6 0.373 -0.109 1.065 -0.224 2.489 -0.604 0.115 -0.021 0.317 -0.036 0.685 -0.171
H7 0.361 -0.106 1.048 -0.218 2.477 -0.593 0.111 -0.020 0.310 -0.036 0.679 -0.170
H8 0.355 -0.106 1.046 -0.215 2.496 -0.585 0.108 -0.021 0.307 -0.037 0.683 -0.171
H9 0.349 -0.109 1.031 -0.217 2.465 -0.582 0.106 -0.023 0.302 -0.041 0.674 -0.174
H10 0.364 -0.105 1.007 -0.206 2.305 -0.556 0.113 -0.023 0.303 -0.041 0.642 -0.172
Source: Authors’ calculations
1
Nominal
2
Computed using the change in the Armington composite price, weighted by household expenditure shares in each decile group

tend to benefit slightly more than higher- Summary and conclusion

income groups.
The CGE model simulation results were
utilized in the poverty microsimulation
to assess the impact of NGP on poverty.
The microsimulation computes the poverty
indexes over time and compares them with
indexes in 2012. The positive income and the
negative price effects of NGP lower poverty
in the Philippines (Table 5). The results show
that the NGP scenarios lower poverty in the
Philippines. Households who are in extreme
poverty are favorably affected, as indicated
by the higher decline in P2. The decline in all
poverty indices are slightly higher in urban
areas than in rural areas. The Gini coefficient
declines slightly under the full NGP scenario,
which indicates favorable distributional
effects of the NGP scenario.
This paper provides a quantitative assessment
of the economic, poverty, and income
distribution effects of NGP. The simulation
results indicate that a full implementation of
the NGP generates notable poverty reduction
effects in the long run as factor payments
improve and consumer prices decline. Also,
agricultural output (food production) is higher
as land moisture and productivity improve with
increased forest cover. The effects are much
lesser under a partial NGP implementation
scenario. However, a full implementation of
a reforestation program may be difficult to
achieve as the previous reforestation efforts
in the country would indicate. This implies
that the results under a partial NGP are
more realistic and are likely to be achieved,
unless the government exerts extra effort to

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Table 5. Poverty and income distribution effects, NGP scenarios

  Full NGP Scenario Partial NGP Scenario
Poverty Indices Percent Change* Poverty Indices Percent Change
  2012 2030 2050 2030 2050 2012 2030 2050 2030 2050
Philippines  
P0 24.85 24.22 23.38 -2.55 -5.93 24.85 24.69 24.44 -0.64 -1.63
P1 6.84 6.60 6.30 -3.46 -7.87 6.84 6.77 6.68 -0.97 -2.24
P2 2.68 2.57 2.43 -4.07 -9.18 2.68 2.65 2.61 -1.15 -2.64
Urban  
P0 11.57 11.25 10.80 -2.75 -6.70 11.57 11.50 11.37 -0.58 -1.70
P1 2.79 2.68 2.53 -4.11 -9.36 2.79 2.76 2.72 -1.15 -2.68
P2 0.99 0.94 0.88 -4.75 -10.69 0.99 0.98 0.96 -1.34 -3.09
Rural  
P0 35.58 34.70 33.55 -2.49 -5.72 35.58 35.35 35.01 -0.66 -1.61
P1 10.10 9.77 9.34 -3.31 -7.53 10.10 10.01 9.89 -0.93 -2.15
P2 4.04 3.89 3.69 -3.94 -8.88 4.04 4.00 3.94 -1.11 -2.55
Gini coefficient 0.4713 0.4711 0.4709     0.4713 0.4712 0.4712    
Source: Authors’ calculation
*Relative to 2012 indices from the Family Income and Expenditure Survey
P0 - poverty incidence; P1 - poverty gap; P2 - poverty severity

significantly push for a full implementation of
the reforestation program. 4
References
Cline, W.R. 2007. Global warming and agriculture:
Impact estimates by country. Washington, D.C.:
Center for Global Development and Peterson
Institute for International Economics.
For further information, please contact
The Research Information Staff
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The Policy Notes series is available online at http://www.pids.gov.ph. Entered
as third class mail at the Quezon City Central Post Office under Business Mail
Permit No. 3C-15-12-494. Valid until December 31, 2016.
Cororaton, C. and E. Corong. 2009. Philippine
agricultural and food policies: Implications
on poverty and income distribution. IFPRI
Research Report No. 161. Washington, D.C.:
International Food Policy Research Institute.
Cororaton, C., A. Inocencio, M. Tiongco, and A.
Manalang. 2016. Quantifying the potential
economic and poverty effects of the
National Greening Program. Part II of Impact
assessment of the National Greening Program
of the DENR: Scoping and process evaluation
phase (economic component) led by A. Vista.
Final report submitted to the Philippine
Institute for Development Studies, Quezon
City, Philippines.
Pattanayak, S.K., M.T. Ross, B.M. Depro, S.C.
Bauch, C. Timmins, K.J. Wendland, and K.
Alger. 2009. Climate change and conversation
in Brazil: CGE evaluation of health and wealth
impacts. The B.E. Journal of Economic Analysis
and Policy 9, 2(6):1–42.

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