On the economics of forests and climate change: Deriving optimal policies

First-best optimal forest sector carbon policy is examined. Using a forest and energy sector model with a carbon cycle module we show that the renewability and carbon neutrality arguments do not warrant emission free status of wood use. As a general optimality principle, the release of carbon is penalized by a tax and carbon capture is subsidized. However, under the biomass stock change carbon accounting convention, the land owners pay for the roundwood emissions and, to avoid double counting, the use of roundwood is treated as emission free. Yet, the carbon accounting convention followed does not affect the equilibrium outcome. The bioenergy from harvest residues is not emission free either. Furthermore, we show that an optimal policy subsidizes the production of wood products for their carbon sequestration. Correspondingly, carbon removals by biomass growth are subsidized and the harvest residue generation taxed. Numerical solution of the model shows that, although the use of wood is not emission free, it is optimal to increase the use of wood, possibly also in the energy sector. Before the wood use can be increased, the forest biomass will be increased. This carbon sink decreases the net emissions until the forest resources reach a new equilibrium.     

The Dynamic Competitiveness of U.S. Agricultural and Forest Carbon Sequestration

Society is increasingly turning attention toward greenhouse gas emission control with for example the Kyoto Protocol has entered into force. Since many of the emissions come from energy use, high cost strategies might be required until new technological developments reduce fossil fuel dependency or increase energy utilization efficiency. On the other hand biologically based strategies may be used to offset energy related emissions. Agricultural soil and forestry are among the largest carbon reservoirs on the planet; therefore, agricultural and forest activities may help to reduce the costs of greenhouse gas emission mitigation. However, sequestration exhibits permanence related characteristics that may influence this role. We examine the dynamic role of carbon sequestration in the agricultural and forest sectors can play in mitigation. A 100-year mathematical programming model, depicting U.S. agricultural and forest sectoral activities including land transfers and greenhouse gas consequences is applied to simulate potential mitigation response. The results show that at low cost and in the near term agricultural soil and forest management are dominant sectoral responses. At higher prices and in the longer term biofuels and afforestation take over. Our results reveal that the agricultural and forest sector carbon sequestration may serve as an important bridge to the future helping to hold costs down until energy emissions related technology develops.     

Carbon mitigation potential of the French forest sector under threat of combined physical and market impacts due to climate change

Objectives(1) To quantify the contribution of the French forest-wood product chain in terms of carbon sequestration and substitution when accounting for both the physical impacts (shifts in tree growth and mortality rates) and the market impacts (increased demand of harvested wood products (HWP)) of climate change (cc) and the subsequent forest managers adaptations; (2) To assess the uncertainty of the impacts on the above carbon balance and on forest allocation; and (3) To assess the role of managers’ expectations toward these future, uncertain but highly anticipated, impacts.MethodologyWe used a bio-economic model of the French Forest Sector (FFSM++) that is able to consider and integrate: (a) the effects of climate change over forest dynamics; (b) forest investment decisions (among groups of species) according to expected profitability; and (c) market effects in terms of regionalised supply, consumption and trade of HWP, depending on the forest resource stocks and international prices. By including both forest dynamics and forest products, we can evaluate the carbon balance taking the following elements into consideration: (a) carbon sequestered in live and dead biomass in the forest; (b) carbon sequestered in HWP; (c) carbon substituted when wood is used in place of fossil fuels or more energy-intensive materials; and (d) carbon released by forest operations.ResultsWhen the model is run at constant conditions for the next century, the average carbon potential of French forests is 66.2–125.3 Mt CO₂ y⁻¹, depending on whether we consider only inventoried wood resources, HWP pools and direct energy substitution, or if we also account for the carbon stored in tree branches and roots and if we consider the more indirect, but also largely more subjective, material substitution. These values correspond to 18.3% and 34.7%, respectively, of the French 2010 emissions (361 Mt CO₂). However, when we consider both the probable increment of coniferous mortality and changes in forest growth, plus the rise in HWP demand worldwide, the average sequestration rate of the French forest decreases by 6.6–5.8% to 61.8–118.0 Mt CO₂ y⁻¹. Running partial scenarios, we can assess the relative interplay of these two factors, where the price factor increases the HWP stock while decreasing the forest stocks (where the latter effect prevails), while the physical impact of climate change reduces both, but to a lesser extent. Considering short-sighted forest managers, whose behaviour is based uniquely on the observed conditions at the time decisions are made, we obtain a limited effect of the overall carbon balance but a relatively large impact on the area allocation of broadleaved vs. coniferous species.     

Not seeing the carbon for the trees? Why area-based targets for establishing new woodlands can limit or underplay their climate change mitigation benefits

Area-based targets for afforestation are a frequent and prominent component of policy discourses on forestry, land use and climate change emissions abatement. Such targets imply an expected contribution of afforestation to the net reduction of greenhouse gas emissions, yet the nature of afforestation undertaken and its geographical distribution means that there is considerable uncertainty over the eventual emission reductions outcomes. This uncertainty is reduced if the net carbon balance is calculated for all potential afforestation sites, considering climate, soil characteristics and the possible types of afforestation (species and management regimes). To quantify the range of possible emissions outcomes for area-based afforestation targets, a new spatial analysis method was implemented. This improved the integration of spatial data on antecedent land use with mapped outputs from forest models defining the suitability and productivity of eleven forestry management alternatives. This above ground carbon data was then integrated with outputs from the ECOSSE (Estimation of Carbon in Organic Soils – Sequestration and Emissions) model which simulates the soil carbon dynamics. The maps and other model output visualisations combining above and below ground carbon highlight where net carbon surpluses and deficits are likely to occur, how long they persist after afforestation and their relationships with antecedent land use, soils, weather conditions and afforestation management strategies. Using more productive land classes delivers more net sequestration per hectare and could mean greater carbon storage than anticipated by emissions reduction plans. Extensive establishment of lower yielding trees on low-quality ground, with organo-mineral soils could, though, result in net emissions that persist for decades. From the spatial analysis, the range of possible outcomes for any target area of planting is substantial, meaning that outcomes are highly sensitive to policy and implementation decisions on the mix of forestry systems preferred and to spatial targeting or exclusions (both at regional and local scales). The paper highlights the importance of retaining the existing presumption against planting of deep peat areas, but also that additional incentives or constraints may be needed to achieve the aggregate rates of emission mitigation implied by policy commitments. Supplementary carbon storage tonnage targets for new forestry would introduce a floor for carbon sequestration outcomes, but would still allow for flexibility in achieving an appropriate balance in the trade-offs between carbon sequestration and the many other objectives that new woodlands are expected to deliver.     

The potential and cost of increasing forest carbon sequestration in Sweden

This paper examines the potential and the cost of promoting forest carbon sequestration through a tax/subsidy to land owners for reducing/increasing carbon storage in their forests. We use a partial equilibrium model based on intertemporal optimization to estimate the impacts of carbon price (the tax/subsidy rate) on timber harvest volume and price in different time periods and on the change of forest carbon stock over time. The results show that a higher carbon price would lead to higher forest carbon stocks. The tax/subsidy induced annual net carbon sequestration is declining over time. The net carbon sequestration during 2015–2050 would increase by 30.2 to 218.3 million tonnes of CO₂, when carbon price increases from 170 SEK to 1428 SEK per tonne of CO₂. The associated cost, in terms of reduced total benefits of timber and other non-timber goods, ranges from 80 SEK to 105.8 SEK per tonne of CO₂. The change in carbon sequestration (as compared with the baseline case) beyond 2050 is small when carbon price is 680 SEK per tonne of CO₂ or lower. With a carbon price of 1428 SEK per tonne of CO₂, carbon sequestration will increase by 70 million tonnes of CO₂ from the baseline level during 2050-2070, and by 64 million tonnes during 2070–2170.     

Emergence and influence of a new policy regime: The case of forest carbon offsets in British Columbia

The most significant carbon mitigation policy currently targeting BC’s forests is the Forest Carbon Offsets Protocol (FCOP) that outlines the rules regulating forest carbon offsets. By applying the Policy Regime Framework to the FCOP, this paper addresses the following specific questions: what is the extent of the policy change brought by FCOP, and what are the main factors that influenced and shaped this policy change? The paper concludes that policy did change: an offset regime was established and FCOP was adopted to steer the development of forest carbon offsets. It is the executive branch of government, and especially Premier Gordon Campbell, that was most influential during problem definition and the decision making around forest carbon offset policy. In addition, environmentalists and First Nations, by advocating for a conservation economy, and the private sector, by lobbying the government to prioritize their economic interests, also influenced the policy making process. However, the actual magnitude of policy change that occurred with the emergence of the forest carbon policy regime is quite limited. Apart from a few conservation and improved forest management projects that mostly benefited First Nations, very few projects have been successfully implemented to date. This limited policy change was caused by various economic, social and political limitations. In particular, the shift in government in 2011 that led to the decision not to implement a cap and trade program significantly reduced marketing opportunities for BC-based forest offsets. In addition, the negative public opinion towards the credibility and effectiveness of forest carbon offsets, the low international price of carbon, the high transaction costs and the lack of financing options strongly restrained their development.     

Sequester or substitute—Consequences of increased production of wood based energy on the carbon balance in Finland

Forests play an important role in mitigating climate change. Forests can sequester carbon from the atmosphere and provide biomass, which can be used to substitute for fossil fuels or energy-intensive materials. International climate policies favor the use of wood to substitute for fossil fuels rather than using forests as carbon sink. We examine the trade off between sequestering carbon in forests and substituting wood for fossil fuels in Finland. For Finland to meet its EU targets for the use of renewable energy by 2020, a considerable increase in the use of wood for energy is necessary. We compare scenarios in which the wood energy targets are fully or partially met to a reference case where policies favoring wood based energy production are removed. Three models are used to project fossil fuel substitution and changes in forest carbon sinks in the scenarios through 2035.Finnish forests are a growing carbon sink in all scenarios. However, net greenhouse gas (GHG) emissions will be higher in the medium term if Finland achieves its current wood energy targets than if the use of energy wood stagnates or decreases. The volume of GHG emissions avoided by replacing coal, peat and fossil diesel with wood is outweighed by the loss in carbon sequestered in forests due to increased biomass removals. Therefore, the current wood energy targets seem excessive and harmful to the climate. In particular, biodiesel production has a significant, negative impact on net emissions in the period considered. However, we did not consider risks such as forest fires, wind damage and diseases, which might weaken the sequestration policy. The potential albedo impacts of harvesting the forests were not considered either.     

龙江森工林区森林固碳量核算及碳汇潜力评价

基于森林蓄积量换算因子法与灰色预测GM(1,1)模型,对龙江森工林区森林固碳量和碳汇潜力进行核算与预测。结果表明:天保工程的实施和重点国有林区全面停止商业性采伐对森工林区的碳汇效果产生重大影响。截至2015年天保工程累计增汇2.85 Tg(1 Tg=1012g);到2020年,停伐政策支持下新增碳汇1.27 Tg。龙江森工林区现有森林碳储量为986 Tg,2030年碳储量将达到1 158 Tg,碳汇潜力巨大。     

A modified production possibility frontier for efficient forestry management under the New Zealand Emissions Trading Scheme

Carbon sequestered through increased forest biomass provides a low cost means to curb emissions and has become a major focus of New Zealand's Emissions Trading Scheme. We present a forest planning optimisation model where land use is governed by forest owners maximising the returns to both timber harvest and carbon sequestration. By varying carbon prices, we model efficient trade‐offs between the two forest activities along a modified production possibility frontier for four distinct wood supply regions in New Zealand. Results show that while more productive regions such as the Central North Island (CNI) and Northland have a greater capacity as a carbon sink, it is the less productive regions that have a comparative advantage in carbon sequestration in terms of a lower cost of wood production revenue foregone. However, moderate increases in carbon uptake can be achieved in the CNI at low opportunity cost by subtle changes in forestry management. The implication for policy‐makers is that initial increases in carbon sequestration will be achieved at the lowest cost to society by favouring high volume timber production in some productive woodland areas and/or by more carbon farming in less productive areas.     

Accounting for harvested wood products in a forest offset program: Lessons from California

Carbon offset programs, such as that overseen by the California Air Resources Board (CA ARB), have emerged as a strategy for climate change mitigation. Offset projects sequestering carbon earn credits that can be traded on the Cap-and-Trade market to compensate for carbon emissions. The carbon stock embodied in harvested wood products can make up a substantial portion of the sequestered carbon in forest offset projects. In this paper we investigate the sensitivity of the calculations for the number of credits allocated to a forest offset project in the California system. We also examine how alternative models for the decay of harvested wood products might better reflect the dynamics of both the lifetime and cascade chain progression of the products and how this might change the amount of credits earned. The results suggest improved data collection and refinement in methodology would help to improve accuracy and reduce uncertainty in a large and important carbon stock. We conclude with offering suggestions on how an understanding of the dependence of harvested wood product stocks on life cycle parameters might affect the economics of offset programs and assist targeted mitigation efforts.     

森林碳汇储备中政府监管与林农行为博弈分析

基于碳汇发展过程中政府与林农之间的博弈关系,结合嵌入式社会结构理论、农户经济理论和正式制度与非正式制度理论,构建政府监管和林农行为选择博弈模型,分析双方的博弈收益。结果表明:政府采取监管、加大扶持力度、建立健全碳汇发展体制机制、完善碳汇市场体系等措施,林农会选择执行监管政策;反之,若政府不实施相关政策,加之林农对森林碳汇认识不够,参与森林碳汇储备意愿不强等,林农会选择不执行监管政策。因此,急需建立健全碳汇交易市场体制机制、完善碳汇林补贴政策、加大政策宣传力度、创新政府监管模式,以期有效推动森林碳汇储备,从而加快森林碳汇项目发展。     

A grassland strategy for farming systems in Europe to mitigate GHG emissions—An integrated spatially differentiated modelling approach

This paper assesses the impact of an EU-wide policy to expand grassland areas and promote carbon sequestration in soils. We use the economic Common Agricultural Policy Regionalized Impact (CAPRI) model, which represents EU agriculture using 2450 mathematical programming farm-type models in combination with the biogeochemistry CENTURY model, which provides carbon sequestration rates at a high resolution level. Both models are linked at the NUTS3 level using location information from the Farm Accounting Data Network. We simulated a flexible grassland premium such that farmers voluntary and cost efficiently increase grassland area by 5%. We find that the GHG mitigation potential and the costs depend on carbon sequestration rates, land markets and induced land use changes, and regional agricultural production structures. In Europe, the calculated net effect of converting 2.9 Mha into grassland is a reduction of 4.3 Mt CO2e (equivalents). The premium amounts to an average of EUR 238/ha, with a total cost of EUR 417 million for the whole EU. The net abatement costs are based on the premium payments, and account on average EUR 97/t CO2e. However, substantial carbon sequestration (28% of total sequestration) can be achieved at a rate of EUR 50/t CO2e. Carbon sequestration would be most effective in regions of France and Italy and in Spain, the Netherlands and Germany. Larger farms and farm-types specialized in ‘cereals and protein crops’, ‘mixed field cropping’ and ‘mixed crop-livestock’ farming systems have the highest mitigation potential at relatively low costs.     

Is the agricultural industry spared from the influence of the Australian carbon tax?

The Australian agricultural sector provides food security for the nation and affects the livelihood of farmers and the development of rural communities. This sector has been uneasy about the Australian carbon tax scheme introduced in July 2012 although the government has exempted the agricultural sector from the scheme. By employing a computable general equilibrium model and an environmentally extended Social Accounting Matrix, this article simulates the effects of different carbon tax policy scenarios. The modeling results show that all agricultural sectors will be affected negatively but to differing degrees. The household compensation policy will improve the performance of the poultry and fishing sectors, while having opposite effects in the other agricultural sectors. The inclusion of the agricultural industry into the carbon tax scheme will lead to a considerable further decrease in output, employment and profitability in the agricultural sector, and a significant further reduction in real GDP, but a much larger emission reduction.     

Economics of carbon sequestration under fluctuating economic environment,forest management and technological changes: An application to forest stands in the southern United States

This study presents a model that determines the effect of current and future payments for carbon sequestration, proportion of wood that sequesters carbon in long-lived product and landfills, and amount of carbon in the wood, on the optimal current forest harvest age. Increased current and future prices of carbon would lead to a longer and shorter harvest age, respectively. Higher current prices of carbon could increase the supply of carbon at a decreasing rate due to longer harvest ages. Moderate prices of carbon would encourage landowners to maintain standing timber. Policies focused then on stimulating landowners to hold timber on forestlands may not necessarily imply higher amounts of sequestered carbon. Increased future values of carbon could imply a reduction of the current supply of carbon.     

Urbanization,the energy ladder and forest transitions in India's emerging economy

Urbanization is currently a major force in tropical land use transitions as economic activities aggregate in urban centers, particularly in Asia. This paper examines relationships among urbanization, household energy source, and forest cover at the state level in India using available census, survey, and remote sensing analysis from the 1990s and 2000s. Central questions include (1) how rapidly are urban and rural households switching from traditional to modern fuel sources; and (2) what are the consequences of changing household energy sources for fuelwood demand and forest cover. Country-wide, 30 and 78% of urban and rural households respectively used fuelwood for cooking in 1993. In urban households, the percentage decreased to 22% by 2005 with a shift towards liquefied petroleum gas (LPG). The shift occurred across almost all income classes. In rural areas, the use of LPG increased fourfold but 75% of households still rely on fuelwood. Despite the decline in percentage households using traditional fuels, fuelwood demand continued to increase from 1993 to 2005 at a national scale due to an increasing total number of households. However, 25% of states and union territories experienced declines in rural fuelwood demand and over 70% declines in urban fuelwood demand. Forest cover has remained steady or increased slightly over the time period, reaffirming the conclusion that fuelwood demand may lead to local degradation but not large-scale deforestation. At the state level, increases in percent forest cover between 2000 and 2004 are positively associated with percent of total households that are urban (corresponding to fewer percentage households using wood) but not related to changes in fuelwood demand. Plantations are a primary cause of increases in forest area, where benefits to ecosystem services such as biodiversity and hydrologic function are controversial. Results suggest that households will continue to climb the energy ladder with future urbanization, resulting in substantial development benefits and reduced exposure to indoor air pollution. Implications of reduced fuelwood demand for forest cover are less certain but the limited data suggest that urbanization will promote a transition to increasing forest cover in the Indian context.     

Economics of carbon sequestration in community forests: Evidence from REDD+ piloting in Nepal

Reducing Emissions from Deforestation and Forest Degradation (REDD+) has been piloted in developing countries as a climate change mitigation strategy, providing financial incentives for carbon sequestration in forests. This paper examines the economic feasibility of REDD+ in community forests within two watersheds in central Nepal, Ludikhola and Kayarkhola, using data on forest product demand, carbon sequestration, carbon price and REDD+ related costs. The benefits of REDD+ are about $7994, $152, and $64 per community forest, per hectare of forest area, and per household in Ludikhola watershed compared to $4815, $29, and $56 in Kayarkhola watershed, respectively, under the business-as-usual scenario. Compared to the EU ETS carbon price ($10.3/tCO₂e), the average break-even carbon price in community forests is much higher in Kayarkhola watershed ($41.8/tCO₂e) and much lower in Ludikhola watershed ($2.4/tCO₂e) when empirical estimates of annual expenditure in community forests are included in the analysis. The incorporation of annual expenditure estimates and opportunity cost of sequestered carbon (in the form of firewood prices in local markets) in the analysis suggests that community forests are economically infeasible for REDD+ at the prevailing carbon prices. The implication of our findings is that economic feasibility of REDD+ in community forests depends on the local contexts, carbon prices and the opportunity costs, which should be carefully considered in designing REDD+ projects.     

政策综合在森林转型中的作用——以福建长汀为例

森林转型的概念于1992年被首次提出,现已成为国际生态经济和自然资源管理领域讨论的前沿与热点问题。中国在20世纪80年代实现了森林转型,为全球固碳和气候变化减缓作出了重要贡献。政策因素被认为在中国森林转型进程中发挥了重要的作用。以中国森林转型的典型地区福建长汀为例,构建植被恢复政策综合分析框架,从植被恢复政策的纵向综合与横向综合两方面对促进长汀森林转型的政策综合进行分析,对长汀植被恢复政策取得成功的原因进行探索,以丰富森林转型的政策路径理论的讨论。研究认为,植被恢复横向政策综合是长汀森林转型相关政策取得成功的关键,长汀的植被恢复政策体系对其他地区具有重要的借鉴意义。     

Analysing foregone costs of communities and carbon benefits in small scale community based forestry practice in Nepal

Reducing emissions from deforestation and forest degradation, conservation and sustainable management of forests and enhancement of forest carbon (REDD+) are considered to be important cost effective approaches for global climate change mitigation; therefore, such practices are evolving as the REDD+ payment mechanism in developing countries. Using six years (2006–2012) data, this paper analyses trade-offs between carbon stock gains and the costs incurred by communities in generating additional carbon in 105 REDD+ pilot community forests in Nepal. It estimates foregone benefits for communities engaged in increasing carbon stocks in various dominant vegetation types. At recent carbon and commodity prices, communities receive on average US$ 0.47/ha/year of carbon benefits with the additional cost of US$ 67.30/ha/year. One dollar’s worth of community cost resulted 0.23 Mg of carbon sequestration. Therefore, carbon payment alone may not be an attractive incentive within small-scale community forestry and should link with payments for ecosystem services. Moreover, the study found highest community sacrificed benefits in Shorea mixed broadleaf forests and lowest in Schima-Castanopsis forests, while carbon benefits were highest in Pine forests followed by Schima-Castanopsis forests and lowest in Rhododendron-Quercus forests. This indicates that costs and benefits may vary by vegetation type. A policy should consider payment for other environmental services, carbon gains, co-benefits and trade off while designing the REDD+ mechanism in community based forest land use practice with equitable community outcomes. The learning from this study will help in the formulation of an appropriate REDD+ policy for community forestry.     

Dual discounting in climate change mitigation in the forest sector

The efficiency of potential climate change mitigation is predicated on future costs and benefits and thus heavily influenced by the discount scheme. Dual discounting involves discounting carbon and monetary values differently; stand level modeling efforts show that it improves the profitability of afforestation projects. However, these stand level results may not hold across other age classes and stocking levels. Using a partial, spatial equilibrium model of the Norwegian forest sector, we analyze the impacts of a dual discounting scheme on climate change mitigation efforts. Dual discounting results in less mitigation efforts in the first decades but substantially higher long-term mitigation efforts.     

The Need for Comprehensive Climate Change Mitigation Policies in European Agriculture

During the last decade the European Union has shown a firm determination to move to a low carbon economy. Since 2008 the agricultural sector has been part of this strategy and is included in the EU effort sharing decision. Introducing specific GHG mitigation obligations for agriculture could be one option to achieve an overall GHG emission reduction target. One argument for this strategy would be that the agricultural sector is the main contributor of non‐CO₂ greenhouse gases. Nevertheless, a comprehensive EU mitigation policy would most likely have to take into account the particularities of its diverse agricultural sector, reflected by different trends in historical GHG emission reductions, and a varied mitigation cost structure between farming systems. Consequently, using targeted but flexible policy instruments may more equitably distribute the mitigation efforts across Member States and reduce cost inefficiencies. The increased uptake of technological and management emission mitigation measures would be crucial to keep mitigation costs for EU farmers at a minimum. However, while unilateral action would initially signal the EU's commitment to serious GHG mitigation effort in the sector, ultimately a multilateral agreement is needed to minimise emission leakage and to reduce global GHG emissions effectively.