It is essential to understand and recognize the role that environmental resources such as forest goods and services play in the provision of income to peoples’ livelihoods (especially the poor and marginalized communities). The purpose of this paper is to give a concise account and scientific basis of the importance of the phenomenon of valuation of environmental goods and services which is manifested in two ways. Firstly, it helps policymakers in designing and implementing effective sustainable livelihoods and poverty reduction strategies. Secondly, the size and nature of environmental values have implications for issues of conservation and sustainable resource use. This paper outlines the contemporary models and approaches of valuing the direct use benefits, indirect use benefits and intermediate use services of the forest as an ecosystem and not a mechanical body to produce goods and services for income generation, overlooking the fundamental principles of sustainable forest management and sustainable development. Shortcomings and remedial measures of valuation methods are also summarized. Through appreciating the total value of the forest resources, national governments and local communities would be able to promote sustainable forest resource use across all strata of society and incorporate the value of natural forests and woodlands in their System
of National Accounts to avoid unnecessary conversion of forests into other development projects.