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.     

The impact of forest management plans on trees and carbon: Modeling a decade of harvesting data in Cameroon

By 2010, about 25% (180 million ha) of The International Tropical Timber Organization (ITTO) producer countries’ permanent forest estate was being managed using an approved forest management plan (FMP). While the existence of a FMP is often used as evidence of sustainable forest management (SFM), State officials mandated to monitor and verify FMPs’ implementation often lack the technical knowledge and political incentives to assess the changes that have been introduced, notably in terms of harvested volumes and species. Among tropical timber producers, Cameroon is considered to be exemplary for its progressive forest regulatory framework. Here we aim to estimate for the first time in sub-Saharan Africa the causal impact of the implementation of FMPs on harvested volumes, species and carbon stocks. We do so by using a 12-year (1998–2009) unbalanced longitudinal data set of a detailed, official harvesting inventory of 81 concessions in Cameroon. Results provide evidence to the theoretical expectations that for many years many practitioners have had on the implementation of SFM, i.e. that FMPs show a substantial opportunity to reduce carbon emissions from forest while presenting logging companies with acceptable financial trade-offs. We explore the technical and political reasons for our findings and conclude that these analyses are important for countries that are underwriting carbon-related schemes in which they propose to reduce their emissions through the effective implementation of SFM. We also demonstrate that producer countries do record useful information that, when effectively used, can help them to inform their policies and improve their sustainable development strategies.     

Designing afforestation subsidies that account for the benefits of carbon sequestration: A case study using data from China's Loess Plateau

This paper presents a method for determining the subsidy required to motivate farmers to participate in timber afforestation programs designed to maximize social well-being. The method incorporates a carbon sequestration benefit function into the land expected value model in order to quantify the social benefit arising from carbon sequestration by the planted trees. This is used to calculate the optimal rotation age for newly planted forests that maximizes social utility. The minimum subsidy required to motivate farmers to participate in the afforestation program was calculated using a modified decision model that accounts for the subsidy's impact. The maximum subsidy offered by the government was taken to be the NPV of the carbon sequestration achieved by afforestation. Data on Robinia pseudoacacia L. trees planted on the Loess Plateau were used in an empirical test of the model, which in this case predicts an optimal subsidy of 254.38 yuan/ha over 40 years. This would guarantee the maintenance of forest on land designated for afforestation until they reached the socially optimal rotation age. The method presented herein offers a new framework for designing afforestation subsidy programs that account for the environmental service (specially, the carbon sequestration) provided by forests.     

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.     

Choice experiment adaptive design benefits: a case study*

Efficient experimental designs offer the potential to reduce required sample sizes, or to reduce confidence intervals for parameters of interest, in choice experiments. Choice experiment designs have typically addressed efficiency of utility function parameter estimates. The recently developed concept of C‐efficiency recognises the salience of willingness to pay estimates rather than utility function parameters in studies that seek to put money values on attributes. C‐efficiency design benefits have been illustrated in a theoretical context, but have not been tested in applied settings. This study reports a choice experiment field application that used initial responses to update statistical designs to maximise C‐efficiency. Consistent with theoretical predictions, the revised design delivered significant reductions in the variance of willingness to pay estimates, illustrating that C‐efficient designs can indeed decrease costs of choice experiments by reducing required sample sizes.     

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.     

Urban water management: optimal price and investment policy under climate variability*

Australian urban water utilities face a significant challenge in designing appropriate demand management and supply augmentation policies in the presence of significant water scarcity and climate variability. This article considers the design of optimal demand management and supply augmentation policies for urban water. In particular, scarcity pricing is considered as a potential alternative to the predominant demand management policy of water restrictions. A stochastic dynamic programming model of an urban water market is developed based on data from the ACT region. Given a specification of the demand and supply for urban water state dependent optimal price and investment policies are estimated. The results illustrate how the optimal urban water price varies inversely with the prevailing storage level and how the optimal timing of investment differs significantly between rain dependent and rain independent augmentation options.     

An assessment of the policies and practices of selective logging and timber utilisation: A case study from natural forests of Tarai Nepal and Queensland Australia

Selective logging (SL) contributes nearly 15 percent of the global timber needs. Considering its role in sustainable timber production, biodiversity conservation and forest carbon enhancement, assessment of SL policies and practices is crucial. This paper assesses the policies and practices of SL in natural production forests of the Tarai region of Nepal and Queensland Australia to explore the key differences in such policies and practices and their possible implications in achieving sustainable forest management objectives. The primary methods applied in the study were review and synthesis of key policy documents and qualitative analysis of the information gathered from key informant interviews and stakeholders’ workshop. Altogether, 53 respondents from a wide range of stakeholder groups (government organizations-15, non-government organizations/networks-15, private sector including the individual landowners-13, local political leaders-3 and independent forest experts/scientists-7) were consulted. Findings suggest that: (1) frequent and inconsistent changes in policy provisions, lengthy administrative procedures and heavy engagement of state forest agencies in forest product harvesting and sales processes play key roles in sub-optimal forest production in Nepal, whereas lower dependency on forest-products, higher labour costs, lack of species-wise royalty rate and flexibility in selecting optional logs are the key factors for increased wastages of forest products in Queensland; (2) recovery and utilisation of the harvested forest product is better in Nepal but policy and practical considerations on biodiversity and environment are better in Queensland; and (3) Forest harvesting specific codes of practice, occupational health and safety standards, and their compliance mechanism of Queensland could be beneficial for Nepal to minimise operational harvesting risks and to attract professional harvesters that support promoting sustainable use and management of natural forests, as we found this aspect almost neglected in Nepal.     

森林碳汇价值实现对林地效益影响的路径及机理分析

森林在应对气候变化中具有特殊的地位和重要作用,国际社会努力为实现森林碳汇价值提供途径,探讨森林碳汇价值实现对林地效益可能产生的影响具有重要的理论和现实意义。本文在阐述森林碳汇价值实现对林地效益影响路径的基础上,分析了在森林碳汇价值实现的情境下,森林最佳轮伐期的变化情况,以及木材收益和碳汇收益的变化,最后得出林地效益的变化情况。     

Investment planning under uncertainty and flexibility: the case of a purchasable sales contract*

Investment decisions are not only characterised by irreversibility and uncertainty but also by flexibility with regard to the timing of the investment. This paper describes how stochastic simulation can be successfully integrated into a backward recursive programming approach in the context of flexible investment planning. We apply this hybrid approach to a marketing question from primary production which can be viewed as an investment problem: should grain farmers purchase sales contracts which guarantee fixed product prices over the next 10 years? The model results support the conclusion from dynamic investment theory that it is essential to take simultaneously account of uncertainty and flexibility.     

Precaution: principles and practice in Australian environmental and natural resource management*

Since the late 1980s, the concept of precaution has been incorporated into numerous international agreements and laws, as well as in domestic statutes and policies in many countries. This paper examines the international emergence of the concept and its application in Australia. Despite rapid growth in adoption of the so‐called ‘precautionary principle’, the concept remains highly controversial, and its success in terms of improving environmental and natural resource management has been questioned. A common misconception is that the principle prescribes action. In fact, internationally accepted definitions are about decision‐making processes. This paper argues that implementation guidelines are essential to ensure that precautionary decision‐making is consistent with good decision‐making principles, and to avoid unnecessary costs and perverse outcomes.     

Public support effect on natural disaster management: A case study of ice storms in forests in Slovenia

In the last decade Slovenia has experienced more frequent natural disasters in forests. The most severe and widespread one that affected Slovenian forests, which cover more than a half of Slovenian territory, was a large-scale ice storm in early February 2014. This study aims to investigate the effect of the public support on the recovery of forest farms affected by the 2014 ice storm. Analyses focus particularly on the ability of Slovenian forest farms’ income recovery in a short-time period. The economic resilience of forest farms in the absence of forest disaster payments due to the absence of legal certainty for disaster aid in 2014 and 2015 provides an interesting framework for identifying the income effect of Common Agricultural Policy (CAP) payments. The Farm Accountancy Data Network has been used with applied statistical and regression methods to estimate the public support effect on selected woodland area size samples. Results suggest a positive effect of CAP payments on farm income recovery. The magnitude of the effect is high and significant for the less favoured area and disaster payments that were given for farm production loss in the 2013 drought. Although the magnitude of the effect is weak, investment payments show a significant positive effect on farm income recovery for all studied forest farm samples.     

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.     

The potential impact of markets for irrigation water in Italy and Spain: a comparison of two study areas*

The viability of irrigated systems in Southern Europe is closely linked to efficient institutional settings and water‐allocation mechanisms. A significant, although not widely used, mechanism for water allocation is an intra‐sectorial water market. The objective of this paper is to evaluate to what extent water markets may contribute to the improvement of the efficiency of water allocation and to the profitability of irrigated agriculture. The related issues of water allocation among farm types and farm specialisation are also addressed. The analysis is based on a basin‐level linear programming model, comparing the situation with and without a market. It includes both fixed and variable transaction costs and estimates their combined effects on market performances. The model is applied in two areas in Southern Italy and Spain, and simulates the behaviour of different farm types, derived from cluster analysis on a sample of farms in each area. The paper confirms that water markets could potentially improve the economic efficiency of water use, in terms of higher profit per hectare, given limited water availability. The potential improvements are associated with a more intense specialisation of farms and are strongly differentiated among farmers, particularly where significant restrictions to water availability occur. This corroborates the expectations of institutional difficulties in implementing water markets. However, the exchanges, and consequently the potential effects of water markets, are heavily affected by the actual level of water availability, as well as the size and the structure (fixed vs. proportional) of transaction costs. The paper calls for a more in‐depth analysis of the connections between market performances and institutional settings, as related to the issue of water‐agriculture policy design and coordination.     

Modelling a mixed system of air pollution fee and tradable permits for controlling nitrogen oxide: a case study of Taiwan*

A mixed-integer non-linear programming model that minimises the total regulatory costs of controlling nitrogen oxide is used to investigate how a newly proposed permit trading scheme in Taiwan, which incorporates the features of banking and a non-one-to-one trading ratio, may affect firms’ emission reduction strategies and permit trading decisions. Compared to the previous regulation where only an air pollution fee is used, the new regulation that requires a reduction in emissions by 10 per cent from the emission level in the year 2000 for a 5 year period will increase the costs by 77 per cent, which is equivalent to US$9.87 million. The design of banking and the increasing returns to scale characteristic of pollution control among firms might lead to an uneven reduction in emissions in each year. Setting a lower reservation rate for banking would, however, help maintain a more stable environmental quality without a significant loss to the government in terms of air pollution fee revenue.     

Modeling producer responses with dynamic programming: a case for adaptive crop management

Past research found agricultural producers’ conditional responses during the growing season are important adaptations to weather and other stochastic events. Failing to recognize these responses overstates the risks confronting producers and understates their ability to respond to adverse circumstances. Dynamic programming (DP) provides a means for determining optimal long‐term crop management plans. However, most applications in the literature base their analysis on annual time steps with fixed strategies within the year, effectively ignoring conditional responses during the year. We suggest an alternative approach that captures the strategic responses within a cropping season to random weather variables as they unfold, reflecting farmers’ ability to adapt to weather realizations. We illustrate our approach by applying it to a typical cereal farm in Karak, Jordan. The results show that including conditional within‐year responses to weather reduces the frequency of fallowing by 23% and increases expected income by 9%.     

Factors affecting NIPF landowner participation in management programs: a Massachusetts case study

Conjoint analysis is used to examine landowner attitudes toward specific management program attributes and requirements. Our results suggest that the majority of respondents are very reluctant to convey landowner rights, such as timber rights or public access, without unrealistic levels of compensation ($ 53 to $ 185 per hectare per year). This implies the need to develop alternatives to the conventional economic incentive based approach to forest management. It is envisioned that the conjoint methodology used here could readily be applied to study landowner decision making in other countries.