The free-market argument would be to privatize all forests so that individuals could make the best decisions about how to manage their land. Through this people would preserve the optimal amount of forest.
Deforestation is the product of a lack of alternatives to wood products. If we legalized industrial hemp, which has no THC (THC is the active ingredient in marijuana) in it, then we could make wood products for a fraction of the environmental cost and reduce deforestation.
Efficiency, or lack thereof, is another contributor is deforestation. If we became more efficient in our production and use of wood products then less would need to be used. Recycling is a part of this, the more we recycle the less virgin resources we use. Recycling, if done inefficiently, can actual use more resources than just using virgin resources.
Deforestation in industrializing countries occurs due to a lack of alternatives for poor farmers. Slash and burn is popular in the Amazon because the soil is low in nutrient content so by cutting down the plants and burning them nutrients are fused into the ground providing good soil for a couple of years of farming. If these farmers were provided with access to resources for sustainable agriculture they would not cut down forests at the rates that they do.
Another solution is increasing our reliance on computers to store information.
Another solution is to fund non-profit organizations that work on reforesting parts of the world or keeping forests from being cut down in the first place.
The United Nations created the Clean Development Mechanisms which allows countries that are trying to reduce their emissions of green house gases in accordance with the Kyoto Protocol to fund activities in the third world that reduce green house gas emission, like reforestation. This would count as a decrease in emissions for the country funding the project even though the project happened in another country.
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