Scale of harvesting by non-industrial private forest landowners

We examine the intensity of harvesting decision by non-industrial landowners at the lowest price offer they deem acceptable, using a multiple bounded discrete choice stated preference approach that draws upon and connects two subfields of forestry, one identifying characteristics of landowners important to past harvesting or reforestation decisions, and another proposing how landowners evaluate price offers for forest harvesting decisions. Variables important to harvest intensity choices when the landowners find an acceptable price have only been considered for those landowners who actually have participated in harvesting markets, whereas here we examine the behavior of these individuals as well as those who are on the margin (i.e., have not harvested at prevailing current or past market prices). We show that harvest intensity depends critically on the extent of urbanization, indicated by the presence of structures on a parcel as well as forested tract size, along with landowner characteristics such as absenteeism and length of ownership. The results are useful for understanding the timber management behavior for a majority of landowners who may not harvest at prevailing prices, but may participate should prices reach a level acceptable to them, where this level is determined by individual preferences for standing timber resources.     

Optimal forest harvest age considering carbon sequestration in multiple carbon pools: A comparative statics analysis

We present an analytical model for determination of the economically optimal harvest age of a forest stand considering timber value, and the value of carbon fluxes in living biomass, dead organic matter, and wood products pools. Through comparative statics analysis, we find that consideration of timber value and fluxes in biomass carbon increase harvest age relative to the timber only solution, and that the effect on optimal harvest age of incorporating fluxes in the dead organic matter and wood products pools is indeterminate.We also present a numerical example to examine the magnitudes of these effects. In general, incorporating the dead organic matter and wood products pools have the effect of reducing rotation age. Perhaps more interestingly, when initial stocks of carbon in dead organic matter or wood products pool are relatively high, consideration of these pools can have a highly negative effect on net present value.     

Forest carbon benefits,costs and leakage effects of carbon reserve scenarios in the United States

This study evaluated the potential effectiveness of future carbon reserve scenarios, where U.S. forest landowners would hypothetically be paid to sequester carbon on their timberland and forego timber harvests for 100 years. Scenarios featured direct payments to landowners of $0 (baseline), $5, $10, or $15 per metric ton of additional forest carbon sequestered on the set aside lands, with maximum annual expenditures of $3 billion. Results indicated that from 1513 to 6837 Tg (Teragrams) of additional carbon (as carbon dioxide equivalent, CO₂e) would be sequestered on U.S. timberlands relative to the baseline case over the next 50 years (30–137 Tg CO₂e annually). These projected amounts of sequestered carbon on timberlands take into account projected increases in timber removal and forest carbon losses on other timberlands (carbon leakage effects). Net effectiveness of carbon reserve scenarios in terms of overall net gain in timberland carbon stocks from 2010 to 2060 ranged from 0.29 tCO₂e net carbon increase for a payment of $5/tCO₂e to the landowner (71% leakage), to 0.15 tCO₂e net carbon increase for a payment of $15/tCO₂e to the landowner (85% leakage). A policy or program to buy carbon credits from landowners would need to discount additions to the carbon reserve by the estimated amount of leakage. In the scenarios evaluated, the timber set-asides reduced timberland area available for harvest up to 35% and available timber inventory up to 55%, relative to the baseline scenario over the next 50 years, resulting in projected changes in timber prices, harvest levels, and forest product revenues for the forest products sector.     

Long‐term versus temporary certified emission reductions in forest carbon sequestration programs*

Under the Clean Development Mechanism (CDM) of the Kyoto Protocol, forest projects can receive returns for carbon sequestration via two crediting instruments: temporary or long‐term certified emission reductions (tCERs or lCERs). This study shows the effect of lCERs on the private owner’s forest rotation intervals decision and carbon credit generation in afforestation and reforestation projects. A credit verification mechanism with a harvest penalty implemented under the lCERs policy distorts the timber harvesting decision and the corresponding carbon credit supply. Two opposing incentives are created by the lCERs mechanism which leads to either longer or shorter rotations compared to the Faustmann rotation, depending on which incentive prevails. Our numerical results show that both lCERs and tCERs seem to have similar impacts on harvesting incentives, but the resulting carbon supply differs among the instruments owing to the credit verification mechanism. The tCERs carbon supply curve is monotonically increasing in the carbon price, while a lCERs carbon supply is non‐monotonic and may have a backward bending region over a range of carbon prices.     

The multiple effects of carbon values on optimal rotation

Non-consumptive benefits which increase with crop age, like keeping carbon sequestered, lengthen optimal rotation compared with rotation for timber alone. High proposed carbon prices may extend rotation indefinitely. Carbon storage in wood products reduces this tendency. Biomass as an energy source displacing fossil fuels favours rotations near those of maximum biomass productivity. Use of sawn timber to displace structural materials with high embodied carbon favours somewhat longer rotations. Effects of rotation on soil carbon, and fossil carbon volatilised in harvesting operations, are further complications. Including all carbon effects results in optimal rotations somewhat longer than those based only on timber value, but shorter than those based on timber plus forest carbon. To include all factors intuitively is not possible: balanced appraisal needs economic calculations.     

Market and welfare implications of the reservation price strategy for forest harvest decisions

Previous studies have reported significant gains from adopting the adaptive harvest strategy under conditions of timber price uncertainty. For the final harvest decision in even-aged stand management, the adaptive strategy typically means that a stand is harvested when the timber price is sufficiently high, whereas low prices are avoided by postponing the harvest. Such a harvest behavior may have significant impacts on the future price process, which in turn affects the landowner's profits. Moreover, it would certainly affect the timber-based industry and consumers. This paper assesses these impacts in a hypothetical timber market, using the Faustmann rule (FR) as a benchmark. The results show that changing from the FR to the reservation price strategy (RPS) reduces the supply of timber, thereby pushes up the price level. The RPS significantly reduces the short-run random variation of timber price. In the long run, both the mean and the variance of the timber price tend to stabilize. Depending on the anticipated price variation underlying the RPS, the expected timber price may be close to, or much higher than, the benchmark level, and the variance of price can be very large or very small. The welfare effect of the RPS is small if the anticipated variance of timber price used to optimize the RPS is small. If the anticipated variance of price is large, then the RSP leads to significant increase in the landowners’ profits and at the same time reduces the consumer surplus by a much larger amount.     

Determining optimal forest rotation ages and carbon offset credits: Accounting for post-harvest carbon storehouses

Sequestering carbon in forest ecosystems is important for mitigating climate change. A major policy concern is whether forests should be left unharvested to avoid carbon dioxide (CO₂) emissions and store carbon, or harvested to take advantage of potential carbon storage in post-harvest wood product sinks and removal of CO₂ from the atmosphere by new growth. The issue is addressed in this paper by examining carbon rotation ages that consider commercial timber as well as carbon values. A discrete-time optimal rotation age model is developed that employs data on carbon fluxes stored in both living and dead biomass as opposed to carbon as a function of timber growth. Carbon is allocated to several ecosystem and post-harvest product pools that decay over time at different rates. In addition, the timing of carbon fluxes is taken into account by weighting future carbon fluxes as less important than current ones. Using simple formulae for determining optimal rotation ages, we find that: (1) Reducing the price of timber while increasing the price of carbon will increase rotation age, perhaps to infinity (stand remains unharvested). (2) An increase in the rate used to discount physical carbon generally reduces the rotation age, but not in all cases. (3) As a corollary, an increase in the price of carbon increases or reduces rotation age depending on the weight chosen to discount future carbon fluxes. (4) Site characteristics and the mix of species on the site affect conclusions (2) and (3). (5) A large variety of carbon offset credits from forestry activities could be justified, which makes it difficult to accept any.     

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.     

Woody biomass potential for energy feedstock in United States

The production reliability and relatively low costs of sustainably harvested woody biomass such as logging residue and low value roundwood could make it a significant component of the Renewable Fuel Standards portfolio. This research explored a set of woody biomass harvesting combinations of different sources and wood types using a cost minimizing linear programming model populated with disaggregated regional inventory, yield, and cost data, and projected future conventional wood demand of the United States. The model pre-satisfied conventional wood demand before harvesting roundwood as woody biomass. Findings suggest that collecting forest residue and non-merchantable (small sized) timber may provide the largest initial contribution in woody biomass supply. Regional estimations imply that not all regions have the capacity to develop bioenergy plants without using merchantable (medium sized) wood. Within a reasonable range of harvesting costs, demand for roundwood is expected to increase with higher energy production targets. Harvesting merchantable natural softwood as woody biomass has a relatively small impact on marginal supply costs. This will result in little or no disturbance to merchantable natural softwood timber management and operations if demand for woody biomass increased.     

The financial benefits of forest certification: Case studies of acacia growers and a furniture company in Central Vietnam

The demand for forest products is growing and plantation forests are supplying an increasing proportion of wood to industry. There are also increasing market requirements to demonstrate the sustainability of timber supply. Vietnam has some 3.9 M ha of plantation forests, 44% of which is on short-rotations managed by smallholders. More than 80 percent of the harvested volume from the plantation forests is used for woodchip production to serve domestic and international markets. The Vietnam Government has goals to increase the domestic supply of suitable wood for furniture production to international markets by increasing the supply of larger logs grown in plantations and the supply of certified wood to industry. However, it is not clear that these objectives will necessarily benefit growers and processors. This study compared financial returns from certified and non-certified forest products for: (1) growers with 10-year rotation acacia plantations; and (2) a furniture processing business (battens for chair and table) in Quang Tri Province, Central Vietnam. The data were collected from smallholder tree growers and a sawmilling company, triangulated with and supplemented by formal and informal interviews with other stakeholders. Currently, much of the cost of certification is met by external aid donors. Results showed that net returns from both certified and non-certified timber products are positive for both actors and are higher from certified timber production than non-certified timber production. When the full costs of certification are included, the benefits to growers of certification are much reduced and potentially negative unless the fixed costs can be spread over a large group of growers. A minimum of group with 3000 ha may be required to make certification cost effective. In recent years, the price difference between the certified and non-certified logs is narrowing and this may discourage farmers from attaining certification. For the sawmiller, the benefit of certified timber production is greater. It would be in their interests to increase prices paid to growers for certified logs. Government policy measures to support certification should include consideration of who bears the cost, support for aggregation of smallholder growers and improved communication in timber supply chains.     

Economic evaluation of ecosystem goods and services under different landscape management scenarios

Human-induced changes in the natural environment are affecting the provision of ecosystem goods and services (EGS). Land use plans rarely include the value of public ecosystem services such as climate regulation and biodiversity due to difficulties in valuing these services. In this study, we assessed total economic value for five important ecosystem goods and services under five future land-use scenarios using varying levels of costs, prices and discount rates. Results indicated that at higher discount rates normally applied to commercial activities, and assuming the current prices for goods and services, net present value (NPV) was highest for landscape management scenarios aimed at maximising agricultural production. Potential income from services such as carbon and biodiversity does not offset projected income lost from agriculture due to land-use changes. At higher discount rates, NPV was negative for the two scenarios aimed at enhancing the longer term ecological sustainability of the landscape. These results indicate that income from carbon sequestration and biodiversity conservation would need to be considerably higher than current levels in order to justify focusing management of this landscape on ecological outcomes. At lower discount rates (at levels normally associated with public investments), the more ecologically appropriate ‘mosaic farming system’ had the highest NPV, indicating that this type of system might be attractive for investors interested in longer term return horizons or wider public benefits. Higher income from carbon or biodiversity, or increased return from timber by using high value tree species, could potentially make more ecologically appropriate systems profitable at higher discount rates.     

Forecasting the German forest products trade: A vector error correction model

In the forest sector often very complex models are used that take into account a variety of factors. In addition to variables that describe the natural production of wood, into these models flow among others also such variables that depict nature conservation legislation, market contexts, etc. The limited availability of large amounts of data and more particularly of precise data to all these subject areas considerably weakens the validity of the models. Our study therefore takes up the challenge to develop a model, as simple as possible, that can help to estimate export and import volumes as well as export and import prices of raw timber in Germany. To this end, we apply the technique of time series analysis and develop a simple model that allows for short-term and medium-term forecasting in the German forest sector. We show that using a vector error correction model (VECM) can succeed in a relatively simple modelling of future quantities and prices of raw timber for Germany.     

Optimal forest management with sequential disturbances

Previous work in forest management under uncertainty has been based on the assumption that landowners face a risk of only one damaging event during any forest rotation, with the main result being that landowners choose shorter rotation ages. These models are universal in an assumption that, should the disturbance arise in a given rotation, the landowner salvages what is possible through a harvest and replants to begin a new rotation. However, a real possibility exists that multiple disturbances may occur in one rotation, with the landowner retaining the damaged stand thereby waiting through the first or even a subsequent disturbance to harvest and begin a new rotation. We develop a new approach for rotations models and choices that allows more than one event and flexibility in the timing of harvest, where tree recovery and damage may make continuance of the rotation, rather than starting over, a rent maximizing strategy. We thereby generalize the highly-cited body of literature based on Paul Samuelson's and William Reed's seminal contributions. Results demonstrate that failure to consider these new features leads to suboptimal harvest decisions and highly suboptimal land rent values. Important parameters are found to be arrival rates of future disturbances and survival proportions and growth rates after each disturbance.     

中国原木进口量价齐增的原因及对策

中国原木产品的国际贸易依存度一直较高,特别是自2010年以来,中国原木进口出现了高价位上进口量激增的现象,以进口原木为主要原材料的中国家具出口也创下历史新高。这一现象不得不引起我们的注意,原木进口来源国集中限制了进口原木的定价话语权,旺盛的国内需求成为高进口价的重要拉动力量,分析原木进口量价齐增的原因,并找到相应的对策已经成为当务之急。     

Supply potential and annual availability of timber and forest biomass resources for energy considering inter-prefectural trade in Japan

This study estimates the supply potential and annual availability of timber and forest biomass resources under profitable forest management in Japan. It focuses on four prefectures, namely, Fukushima, Ibaraki, Tochigi, and Gunma, and considers the trade between these prefectures. Production forests were extracted as subcompartments where the expected revenues surpassed all costs, from planting to final harvest. To estimate harvesting costs, appropriate harvesting systems were determined according to each prefecture’s topographical features. The log markets and woody biomass power generation plants were assumed to be the destinations for timber and forest biomass resources. Annual availability from the Cut-To-Length (CTL) system, consisting of the use of harvesters and forwarders, accounted for 58 % of the total availability, even though the supply potential from CTL was only 15 %; this is because CTL is the most productive and least expensive harvesting system. Then, the effects of subsidies on availability are examined. Availability under an additional regeneration subsidy meets almost the entire current demand in this region. Furthermore, availability with a thinning subsidy can meet the forecasted future demand in this region, while availability with both thinning and additional regeneration subsidies can meet future demand in all prefectures analyzed in the present study. Thus, subsidies play an important role in the profitability of forestry operations as well as the supply of timber and forest biomass resources in Japan.     

Estimating the long-run impact of forest fires on the eucalyptus timber supply in Galicia,Spain

Using annual data, we have estimated the timber harvest of eucalyptus in the region of Galicia (Spain). The explanatory variables considered were price, pulp exports, and salvage timber. The latter variable was used as a proxy for forest fires. The problems related to spurious regression were addressed by applying the bounds testing approach to cointegration, and confidence intervals were constructed using the bootstrap technique. The results indicate that pulp exports have a positive effect on the harvested timber volume. Moreover, we find that salvage timber positively affects the timber supply. This result indicates that there is no substitution between salvage timber and non-damaged timber. It also suggests that the natural expansion of the eucalyptus in Galicia compensates for the destruction caused by forest fires, avoiding supply shortages. On the other hand, and according to the economic law of supply, the timber price shows a positive effect.     

Consequences of carbon offset payments for the global forest sector

Long-term effects of policies to induce carbon storage in forests were projected with the Global Forest Products Model. Offset payments for carbon sequestered in forest biomass of $15–$50/t CO₂e applied in all countries increased CO₂ sequestration in world forests by 5–14 billion tons from 2009 to 2030. Limiting implementation to developed countries exported environmental damage from North to South, as developing countries harvested more, decreasing their stored CO₂e. Substantially more CO₂e was sequestered by allocating a given budget to all countries rather than to developed countries only. As offset payments increased wood prices relatively more than they decreased production, timber revenues generally increased. In the few countries with timber revenues losses they were more than compensated by the offset payments.     

Review - Roger A. Sedjo (2003): Economics of Forestry

Ashgate Publishing Limited, Gower House, Croft Road, Aldershot, Hants GU11 3HR, England (www.ashgate.com). 498 p. £ 100.00. ISBN 0-7546-2237-1 (hardback).Being one volume in the series of the International Library of Environmental Economics and Policy (T. Tietenberg and W. Morrison, gen. eds.), this book is a collection of some of the most significant journal essays in forest economics and forest policy. In compiling this volume, Roger Sedjo did a great service to the forest economics profession.This volume includes twenty-five essays originally published between 1849 and 1996 in a dozen journals, and one chapter from the Third Assessment Report of the International Panel on Climate Change (IPCC, 2001) which addresses the biological sequestration of carbon in terrestrial ecosystems. These are organized into four parts: the harvest rotation issue, timber supply, multiple-use and non-timber outputs, and global issues. An introduction essay to this volume, written by the editor, provides an overview of the major issues in forest resource management and discusses some the most important contributions to the forest economics literature.The eleven essays in the first part of the book provide a rather complete coverage of the most important contributions to the literature on optimal rotation age, which is a fundamental issue in forest management and forestry investment. Four of the essays (Faustmann 1849, Ohlin 1921, Bentley and Teeguarden 1965, and Samuelson 1976) address the basic formulation and interpretation of the optimal rotation model. Four essays (Löfgren 1985, Newman, Gilbert and Hyde 1985, Reed 1984, and Brazee and Mendelsohn 1988) extend the basic rotation model to examine the rotation age decision in the presence of deterministic trends and uncertainty in timber yield and price, respectively. Based on the Faustamnn rotation model, Klemperer (1976) and Chang (1982) examine the impacts of taxation on forest value and on the optimal rotation age. Koskela (1989) provides a detailed analysis of the impacts of taxation on timber harvest decisions under price uncertainty. What I feel missing in this part is a comparative statics analysis examining the impacts of changing economic parameters on the optimal rotation age.Part II includes five essays on economic analysis of long-run timber supply. Clawson (1979) reviews the historical development of forest resource and forest utilization in the United States. Vaux (1973) examines the long-run potential supply of timber from forest plantations in California. Berck (1979) investigates the difference in harvesting behavior between private forest owners and public managers. Lyon (1981) and Lyon and Sedjo (1983) examine the optimal exploitation of old-growth natural forests and the transition to steady state. While these essays all focus on the long-run timber supply in the United States, the methods developed and used in these papers could be applied for any other region. The exploitation of old-growth natural forests and the long-term availability of timber have been without doubt two major concerns in the United States. In many parts of the world, however, concerns about timber supply in the short-run have also had great influences on the development of forest policy. It would have been appreciated if a couple of essays addressing the short-run supply of timber had been included.Part III contains three essays dealing with the problem of multiple-use forest management. Gregory (1955) develops an economic framework for multiple-use management based joint production theory. Hartman (1976) examines the multiple-use rotation age decision. Swallow, Parks and Wear (1990) investigate the problem of non-convexities involved in multiple-use rotation age decisions. The merits of these essays lie in that they use rather simple models to demonstrate the importance of incorporating non-timber benefits in forestry decisions and the complexities of the multiple-use problem. In his 1976 essay, Hartman points out that in many situations management practices applied to one stand affect the value of non-timber outputs derived from the adjacent stands; such interdependence needs to be incorporated into multiple-use decision analysis. I certainly would like to find in this volume one or two essays examining the impacts of stand interdependence on the optimal decision. Another important issue in multiple-use management, which is not covered in this volume either, is the valuation of non-market priced outputs and services. Yet I believe that this omission is well motivated, for there are two separate volumes in this series devoted to non-market valuation methods (R. T. Carson, ed. Direct Environmental Valuation Methods, Volumes I and II).The seven essays in Part IV deal with a set of forest economic and policy issues related to global warming and biodiversity conservation. Parks and Hardie (1995) examine the cost-effective subsidies to convert marginal agricultural land to forests for the purpose of carbon sequestration. Hoen and Solberg (1993) analyze the potential and cost-effectiveness of increasing carbon sequestration in existing forests by changing forestry practices. van Kooten, Binkley and Delcourt (1995) examine the effect of carbon taxes and subsidies on the optimal rotation age. The chapter from the Third Assessment Report of IPCC (2001) provides a comprehensive review of the literature on the ecological, environmental, social and economic aspects of carbon sequestration in terrestrial ecosystems. While forests and forest management could play an important role in mitigating climate change, increasing level of atmospheric dioxide and climate change would inevitably affect the productivity of forest ecosystems, thereby could have significant impacts on future timber growth, harvest and inventory as well as carbon storage in forest ecosystems. Joyce et al. (1995) present a framework for analyzing the potential effects of climate change on the forest sector. The remaining two essays in this part examine the costs and benefits of biodiversity preservation, respectively. Montgomery, Brown and Adams (1994) estimate the marginal cost of preserving the northern spotted owl. Simpson, Sedjo and Reid (1996) examine the expected value of the marginal species as an input to pharmaceuticals.The editor points out in the introduction chapter that there are many other important contributions that are not included in this volume, some of these are mentioned, others not. In addition to the few omissions noted earlier, several important economic and policy issues such as uneven-aged stand management, deforestation, international trade, sustainable forestry, forest recreation, wildlife management and so on are not discussed. Moreover, none of the journal essays published since 1997 is selected. That there are many other important contributions does not mean the essays included in this volume are less important, however. While each forest economist may present a different list of the most important papers, most (if not all) of the essays in this volume would appear on anyone's list. I strongly recommend this book for research scientists and graduate students of forest economics as an essential addition to their reference library.     

Effect of conserving habitat for biodiversity on optimal management of non-industrial private forests in Florida

Healthy forests and enhanced habitat for wildlife is a growing concern among public and policy makers. These concerns have led to substantial interest in promoting various regulatory and voluntary compliance policies to further biodiversity on private forests. These policies, however, might result in additional cost to forestland owners. In this paper, we estimate the opportunity cost of adopting various biodiversity-friendly forest practices. We do this in the context of slash pine, a dominant commercial tree plantation species in Florida. Results suggest that prescribed burning, invasive species control, maintaining streamside buffer zones, and extending timber harvest beyond the optimal rotation age would significantly decrease the profitability of slash pine forestry. If the major objective of landowners is to maximize profits, results indicate that they are less likely to adopt these practices at socially desirable levels without a policy support. More specifically, results suggest that an annual payment of $38–83 per hectare is required for landowners to adopt these practices. The paper further argues that application of mere command-and-control approaches to implement these practices may result in conversion of private forests to other competitive land uses.     

A review of recent developments and applications of partial equilibrium models of the forest sector

Recent history has seen an increase in the utilization of partial equilibrium based forest sector models to identify potential impacts of various policies or timber market shocks. These models are particularly useful in that they employ economic theory to capture the interaction of supply and demand in a framework where commodity prices are endogenous to the policy or shock simulated. We present recent developments and linkages between models and review applications of these models to forest policy questions over the previous decade. We conclude with a discussion of potential future directions for such research.