This article presents a cost-benefit analysis of three different use systems for the remaining cloud forests in Ethiopia, which at present are being depleted at the rate of 8% per year. These use systems are traditional conversion to crop land, sustainable management of the forest (e.g., by growing high-quality, semi-forest coffee) and strict conservation. Business-as-usual conversion to cropland yields the highest net present income value for the local population. Taking into account watershed services, sustainable forest use is in the best interests of the country for discount rates of 10% or lower. Taking into account the global benefits of biodiversity conservation and carbon storage, sustainable forest management also yields the highest total economic value while strict conservation does not pass a cost-benefit test even at a discount rate of 3%.
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