A Real Option Approach to the Protection of a Habitat Dependent Endangered Species

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A Real Option Approach to the Protection of a Habitat Dependent Endangered Species

Author Info

Skander Ben Abdallah
Pierre Lasserre ()

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Pierre Lasserre

Abstract

We use a real option approach to determine optimally when a social planner has to stop or resume logging in situations where an endangered species relies on forest habitat for its survival, and that habitat evolves stochastically. The model incorporates economic, ecological and social features, and is calibrated to generate an optimal forest management rule that balances the benefits from commercial forest exploitation with the risks of extinction facing the endangered species. For the reasonable parameters used in our application to the Rangifer tarandus caribou, an endangered species in Central Labrador (Canada), the policy of banning logging temporarily is quite attractive as it does not require long banning periods while it drastically reduces the extinction risk and increases forest value.

Nous utilisons la méthode des options réelles pour déterminer quand un planificateur social doit interrompre ou reprendre l’exploitation d’une forêt, lorsque celle-ci constitue l’habitat stochastique d’une espèce menacée d’extinction. Le modèle présente des aspects économiques, écologiques et sociaux; il établit une règle optimale de gestion forestière qui fait l’arbitrage entre les bénéfices commerciaux de l’exploitation forestière et les risques d’extinction de l’espèce. Pour des paramètres correspondant au cas du Rangifer tarandus caribou, une espèce du centre du Labrador (Canada) menacée d’extinction, la politique optimale d’interruption et reprise de l’exploitation forestière est attractive; elle n’exige pas de longs arrêts dans l’exploitation, alors qu’elle réduit significativement le risque d’extinction et augmente la valeur de la forêt.

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Paper provided by CIRANO in its series CIRANO Working Papers with number 2008s-30.

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Date of creation: 01 Dec 2008
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Handle: RePEc:cir:cirwor:2008s-30

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Find related papers by JEL classification:
C61 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Optimization Techniques; Programming Models; Dynamic Analysis
C63 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computational Techniques
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

This paper has been announced in the following NEP Reports:

NEP-AGR-2009-01-03 (Agricultural Economics)
NEP-ALL-2009-01-03 (All new papers)
NEP-ENV-2009-01-03 (Environmental Economics)

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