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The Millennium Ecosystem Assessment (MEA 2005) has classified a number of ecosystems good and services (EGS) provided by tropical forests, namely cultural, provisioning, regulatory and support services. The primary focus of this paper is to carry out an economic assessment by comparing the financial costs and returns of selected EGS, namely carbon and timber in the tropical forests of Central America. Timber is unlike the other EGS provided by forests in that it competes with the other services, i.e. biodiversity, recreation and water services. Carbon storage is the non-timber value most often included in forest accounts and can be equated directly with timber available in terms of biomass content.

The study provides a quantitative appraisal of the carbon and timber stocks and flows of tropical (primary) forests and the associated trade-offs by evaluating them simultaneously using data and market values from a number of sources. The provision of reliable and accurate estimates of the economic value of these services is crucial to plan adequate conservation policies that encourage the protection and sustainable management of tropical forests such as those under REDD/REDD+. Results indicate that the economic return for managing natural forests is influenced by timber and carbon prices as well as the discount rate applied. Timber on face value is the better land use option; however, there are many issues that need to be considered when valuing timber, especially regarding the management regimes. Revenues under REDD/ REDD+ option would be higher if co-benefits, which include monies from the sustainable extraction of timber under Sustainable Forestry Management (SFM) are considered.