Forest management under fire risk when forest carbon sequestration has value

We develop a multiple forest use model to determine the optimal harvest date for a forest stand producing both timber and carbon benefits under a risk of fire. An empirical application is provided for a forest owner producing maritime pine in Southwest of France. Our results indicate that a higher risk of fire will decrease the optimal rotation period. On the contrary, higher carbon prices increase the optimal harvesting age. To investigate the contradictory effects of fire risk and carbon price on forest rotation, we identify the set of carbon prices and fire risks that lead to a given rotation age. We also show that forest owner's willingness to pay for a risk reduction can be substantial (37.33 euros by ha and by year to reduce the annual fire risk from 1.26% to 0.07%).     

Carbon Subsidies,Taxes and Optimal Forest Management

We consider the effect of carbon credit payment schemes on forest owners’ land use and harvest decisions. We study two possible credit allocation regimes: one where credits are allocated according to the actual amount of carbon sequestered by the trees on a piece of land and another where credits are allocated according to the long-run potential to sequester carbon on the land. Using a real options model with uncertain future timber prices, we examine the effect on the timing of harvests and the replanting-abandonment decision. We show that both schemes discourage deforestation. Compensating growers for actual carbon sequestration leads to longer rotation periods between harvests, while basing compensation only on the long-run potential level of sequestration induces shorter rotation periods. The former scheme leads to greater benefits of carbon sequestration at lower cost than the latter scheme. Although inducing moderate levels of sequestration is expensive under both schemes, the cost falls dramatically when the level of payments climbs above some threshold. Indeed, providing the payments are sufficiently generous, carbon credit payment schemes offer an effective means of increasing carbon sequestration. The views expressed in this paper are strictly those of the authors and do not represent the views of the New Zealand Commerce Commission. We thank Lewis Evans and two anonymous referees for many very helpful comments. Kevin Counsell, Steen Videbeck, and participants at an ISCR seminar also provided useful suggestions. Fletcher Forests Ltd and the New Zealand Ministry of Agriculture and Forestry generously provided data.     

Natural carbon capture and storage (NCCS): Forests,land use and carbon accounting

The use of forests as natural carbon capture and storage sinks is considered by introducing carbon sequestration benefits’ accounting in a multi-vintage partial equilibrium land-use model, under different carbon price scenarios. The consequences to timber and land markets and to the profile of the carbon sequestration time path are examined in the short-run, long-run, and transition. Following IPCC, three carbon accounting methods are considered: the carbon flow, the ton-year crediting and the average storage. A full proof of long-run optimality of steady-state forest is provided. Numerical simulations are performed and results discussed illustrating the setup's potential.     

An Integrated System for Management and Policy Analysis

This paper develops an analytical framework to simulate management- and policy-driven environmental changes in Swedish mountain environments. The framework is based on a dynamic model that includes economic connections between timber and reindeer. Economic benefits are obtained in the timber sector and the reindeer sector, by harvesting forest and reindeer stocks and selling the harvests in markets. Unharvested forest and reindeer stocks provide benefits outside of markets. Reindeer stocks provide benefits by supporting the reindeer husbandry lifestyle for members of the indigenous Saami population. The paper analyzes decisions made by a hypothetical planner of a geographical area corresponding to a Swedish sameby (Saami village). Decision outcomes are measured using the present value of net benefits measured in economic terms, and are obtained both inside and outside of economic markets. The final section gives examples of management and policy decisions that might be simulated for Swedish mountain environments, such as market-based policies to increase the economic welfare derived from private timber and reindeer harvests.     

Evaluating Temporary Certified Emission Reductions in Reforestation and Afforestation Programs

This article investigates the efficiency of the temporary certified emission reductions (tCERs) system that attempts to internalize the carbon sequestration function of the forest under the Clean Development Mechanism of the Kyoto Protocol. We find that the regulations creating tCERs partially internalize the carbon sequestration function of the forest. The amount of carbon re-released into the atmosphere, due to timber harvest, and sequestered, after the project period, is not internalized in the private landowner’s decision, which induces shorter rotation intervals than socially optimal. Furthermore, the carbon sequestered during the project is over-credited because credits are counted based on accumulated carbon instead of marginally sequestered carbon, which induces longer rotations intervals. Simulation results for the Philippines and Tanzania show that the difference in social welfare between the tCERs system and a socially optimal policy is only about 2% because of the countervailing effect of the inefficiencies on rotation interval choices.     

Implicit Valuation of Non-Market Benefits in Even-Aged Forest Management

Choosing the optimal harvesting time in multiple-use, even-aged forest management is an important but difficult problem. The usual formulation of the problem requires explicit knowledge of the value of the timber, plus the value of the other, non-timber and mainly non-market values. The latter are notoriously difficult to measure. This paper develops a harvesting rule that depends only implicitly on the flow of non-market values. The rule, dubbed the implicit value formula, gives the minimum stream of non-market values that would induce a landowner to adopt a given rotation length. Since harvesting decisions must be made with or without information on non-market values, the implicit value formula can provide guidance to forest managers by putting a lower bound on the non-market values for every rotation length. As a demonstration, implicit non-market values are calculated for Douglas fir. The implicit value formula indicates that preserving a forest of Douglas fir beyond the optimal rotation is much more expensive than harvesting it an equivalent length of time before the optimal rotation.     

Optimal Design of Forest Taxation with Multiple-Use Characteristics of Forest Stands

The paper studies optimal forest taxation under uncertainty about future timber price when private forest owners value amenity services of forest stands and forest stands have public goods characteristics. It is assumed that preferences of forest owners can be described by a quasi-linear, intertemporal utility function which reflects risk aversion in terms of consumption and constant marginal utility in terms of amenity services. The comparative statics of current and future harvesting in terms of timber price risk, site productivity tax and yield tax are first developed. It is shown that, given the optimal site productivity tax, which is independent of the timber harvested and thus non-distortionary, it is desirable to introduce the yield tax at the margin; it both corrects externality due to the public goods characteristic of forest stands and serves as a social insurance device. The optimal yield tax is less than 100% and depends on the social value of forest stands, timber price risk and properties of compensated timber supply. In the general case the 'inverse elasticity rule – according to which the optimal yield tax is negatively related to the size of the substitution effects – may not hold. Under certainty, the desirability of the yield tax, given the optimal site productivity tax, depends only on the existence of public goods characteristic and is thus a pure Pigouvian tax.     

Economies of scale and the optimality of rotational dynamics in forestry

Forest harvesting is traditionally analyzed in terms of the Faustmann rotation model. This paper considers the identification of optimal forest harvest regimes using jump controls. This approach enables the structural assumptions of clear-cut technology and identical cycles in perpetuity which are imposed in a Faustmann model to be relaxed. Jump control models permit investigation of the biological and economic conditions which favour continuous growth management regimes as opposed to clear-cut harvest regimes. A numerical solution approach to the jump control model is presented. The link between the harvest cost function and the optimal biomass path is analyzed. Economies of scale are shown to generate rotational harvest as optimal policies.      

Timber harvesting versus forest reserves—producer prices for open-use areas in German beech forests (Fagus sylvatica L.)

A strong demand for nature conservation can be ascertained in Germany. Several nature conservation groups argue that in order to provide nature conservation in considerable parts of the forest area forestry should sacrifice timber harvesting. For example, the abandoning of harvesting altogether is supposed to enhance and protect the species richness. This fact and the very low profitability of forestry in Germany motivated the writing of this paper. The paper explains a methodology for deriving producer prices involved in forest reserves, where harvest benefits are sacrificed totally. Such methodology can be useful to form a basis for private contracts between forest owners and nature conservationists, who demand forest reserves. The results of this methodology can also be integrated in financial programs for species and habitat conservation.In a basic theoretical consideration, it is demonstrated that a stand-by-stand evaluation approach may only serve as an initial step in deriving compensation prices for forest reserves. Due to the stochastic character of forest management, a nonlinear programming approach (NLP) was adopted to find an optimal operational plan for a hypothetical beech (Fagus sylvatica L.) forest. In both the constraints and the objective function, the nonlinearity is considered by integrating stochastic components. Additionally, only virtual homogenous forest reserves are considered. Firstly, a basic NLP solution for the hypothetical forest with the objective “maximise the net present value (NPV) of timber harvests adjusted to risk” was obtained when considering several constraints subject to stochastic variation of net revenues and timber harvests without considering forest reserves. Secondly, other solutions allowing for forest reserves were computed. The decrease of the objective function when forest reserves were increased in periodic increments seemed well suited to mirror the opportunity costs of forest reserves.The results showed that a stand-by-stand approach gave much greater compensation prices than the NLP approach. The reason for this lay in the consideration of a nonlinear objective function as well as the nonlinear constraints in the case of NLP. The first 42-ha forest reserve was priced at 11,494 Euro/ha or, 483 Euro/ha/year expressed in infinite yearly compensation. The yearly compensation price for the last forest reserve had an increase up to 607 Euro/ha/year. A stand-by-stand approach, however, resulted with compensation prices from minimally 609 up to maximally 709 Euro/ha/year.Various interest rates (3.2% and 5.2%) caused different compensation price curves. The slope of the curves increased when the interest rate decreased.The limits of the approach, the problem of deriving a demand for forest reserves and the opportunities for applying the presented approach to state forests are discussed.     

Estimating price compensation requirements for eco-certified forestry

Eco-certified forestry (ECF) is defined as forest management that incorporates ecological concerns into commercial timber production. In this paper, we link the adoption of ECF practices to shifts in the timber supply function. We use a spatially disaggregated model of southeastern US timber supply to simulate the empirical relationship between variations in the price premium offered for timber produced under ECF regimes and producer surplus-maximizing rates of ECF. The simulation results suggest that a large share of nonindustrial private timber suppliers in the region may have relatively small compensation requirements, but complete adoption by the sector would require a large premium.     

Radiative forcing and the optimal rotation age

Forests help mitigate climate change by sequestering atmospheric carbon. However, boreal and high-latitude temperate forests may also contribute to global warming due to the albedo effect. The relative effects of carbon sequestration and albedo can be quantified in terms of radiative forcing. We present a stylized, stand-level analysis to determine the optimal rotation age when considering a tax/subsidy scheme based on radiative forcing and the notion of equivalent carbon emissions. Additional management decision variables considered include species choice and regeneration effort, since these can impact the albedo effect. We demonstrate analytically that the optimal rotation length is likely shortened when albedo-related equivalent emissions are incorporated, relative to a policy based only on carbon. Empirical results indicate that rotation ages do decrease relative to a “carbon only” policy, and approach the traditional (timber only) Faustmann rotation age as equivalent emission rates increase. Our results suggest that forestation does not necessarily provide climatic benefits in all circumstances, and that, at the margin, other opportunities for carbon reduction (e.g. abatement), or pursuing forestation in other locations, become more attractive.     

Harvest Decisions and Spatial Landscape Attributes: The Case of Galician Communal Forests

In recent years, forest management has moved towards a landscape approach reflecting a mix of social, environmental and economic values. In this paper, we evaluate the effect on harvesting decisions of the spatial attributes of communal forests in Galicia. We first model the forest landscape management problem within a bioeconomic framework, which allows the identification of optimal clear-cutting strategies. This framework makes it possible to model a Faustmann-type rotation at the landscape level. The empirical analysis uses data from communal forests in Galicia, Spain. Under communal ownership, members of a rural community have rights to forest resources, but not rights to the forest itself. The management of communal forests integrates multiple forest uses within the decision making process. Given the communal nature of forest rights, and given these multiple uses, we show that landscape patterns—fragmentation, diversity and clumpiness—determine rotation periods.     

Unsustainable timber harvesting, deforestation and the role of certification

Deforestation is a major environmental issue, while demand for timber products increases rapidly in the developing world. One can thus wonder whether forest harvesting is sustainable worldwide, or if demand for timber products is fulfilled with the products from deforestation. Our panel data analysis shows that countries where timber harvesting is more important tend to experience larger deforestation rates than others, giving the intuition that forest harvesting is generally not sustainable. We also show that timber certification is negatively related to deforestation and thus seems to be a good indicator of harvesting sustainability.     

信息不对称、分成契约与超限额采伐--中国国有森林资源变化的理论分析和实证考察

本文回顾了改革开放以来国有林业企业管理体制的演变 ,通过多任务委托代理模型探讨了这一演变过程中利润分成和采伐限额两个不相容的政府政策激励对国有林业企业经营者激励的影响 ,特别是信息不对称条件下其对木材采伐的影响 ,从而解释了国有林业企业普遍存在的超限额采伐的经济原因。通过全国 2 8个省 5次全国森林资源普查的面板数据 ,通过使用国有林业企业的平均面积作为政府与国有林业企业委托—代理关系中信息不对称的代理变量 ,从实证上验证了信息不对称将会导致超限额采伐和国有林资源增长率下降的假说     

Natural resource accounting for Indian states — Illustrating the case of forest resources

Our main objective is to set out and apply a SEEA-based methodology to reflect the true value of forest resources in India's national and state accounts. We establish that a “top-down” approach using available national databases is both feasible and desirable from a policy perspective. In this paper, we address four components of value creation in forests: timber production, carbon storage, fuelwood usage, and the harvesting of non-timber forest products. The results of our analysis suggest that prevailing measures of national income in India underestimate the contribution of forests to income. The income accounts of the Northeastern states in particular are significantly understated by these traditional (GDP/GSDP) measures. We are also able to identify some states which performed poorly in the context of our sustainability framework, reflecting natural capital losses due to degradation and deforestation. Our results highlight the need to integrate natural resource accounting into the national accounting framework in order to generate appropriate signals for sustainable forest management and for the conservation of forest resources which are widely used by the poor in India, as well as being significant stores of national wealth.     

Taking timber browsing damage into account: A density dependant matrix model for the optimal harvest of moose in Scandinavia

At present there is a growing optimism in commercializing the moose hunting in Scandinavia. We developed a deterministic, dynamic bio-economic model to examine the optimal management of land with both moose and timber as potential sources of income. We show that most forest owners should target their moose commerce towards increased quality of the hunt rather than quantity. Due to the inherent complexity of moose: forest interactions we ran the model for a wide array of parameter values to check its sensitivity. Although it was the combined production of timber and moose that gave the highest net value in all run scenarios, timber was the major source of income (69% or more). The main single-factors favouring moose over timber was: low timber productivity of the soil and high moose prices in the market. Also factor synergies can strongly increase the relative value of moose. Our model may serve as a decision tool for choosing the economically optimal moose levels in populations with no across-border migration. It highlights the following need for further studies: I. Quantifying the relationship between browse availability (forest state, moose density) and moose condition (weights, fecundity). II. Quantifying the relationship between browse availability and timber browsing damage.     

Biological capital theory: a question and a conjecture

A community possesses an empty tract of land, good only for growing trees of a particular type. What is the optimal pattern of planting and harvesting? If utility is convex in consumption it is optimal to plant and harvest periodically. If the utility function is strictly concave our numerical analyses suggest that the forest approaches a balanced state in which the rate of timber production is uniform.     

Timber harvest adjacency economies,hunting, species protection,and old growth value: seeking the dynamic optimum

Forests have the potential to provide ecosystem services, timber, mature growth aesthetics, and wildlife and endangered species protection. Forest managers are faced with complex ecosystem management decisions due to competing and complementary social values, and differential interactions of these social values with timber production. As a result, management strategies can have dramatic aggregate and intertemporal welfare implications. This paper portrays the trade-offs and externalities in choosing or changing the forest management objective, and the resulting rankings of management policies. In addition, the paper analyzes the role of economies of scale in harvest area, where larger harvest areas generate average cost savings in harvesting and reseeding, thereby promoting more intensive harvesting at the expense of environmental benefits.