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The Economic Value of a Forested Catchment with Timber, Water and Carbon Sequestration Benefits

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  • Creedy, J.
  • Wurzbacher, A.D.

Abstract

This paper examines the optimal management strategy for a forested catchment that yields timber, water and carbon sequestration benefits. The Faustmann multiple rotation model is extended to allow for the maximisation of the net present value of these timber and non-timber benefits. The model is applied to the Thomson Catchment in Central Gippsland, Victoria. Carbon sequestration benefits are modelled via total stand biomass accumulation. The cost of carbon release back into the atmosphere upon logging is estimated as a function of rotation age using an adjusted pulpwood/sawlog ratio. The allowance for both non-timber benefits is found to lengthen the optimal rotation, in a large range of cases to infinity.

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Bibliographic Info

Paper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 753.

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Length: 27 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:mlb:wpaper:753

Note: This paper has now been published in: Creedy, J. and Wurzbacher, A.D. (2001), The Economic Value of a Forested Catchment with Timber, Water and Carbon Sequestration Benefits, Ecological Economics, 38, pp. 71-83.
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Keywords: NATURAL RESOURCES ; ECONOMIC MODELS ; ECONOMICS;

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References

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  1. D Demeritt & D Rothman, 1999. "Figuring the costs of climate change: an assessment and critique," Environment and Planning A, Pion Ltd, London, vol. 31(3), pages 389-408, March.
  2. Roger Sedjo & Joe Wisniewski & Alaric Sample & John Kinsman, 1995. "The economics of managing carbon via forestry: Assessment of existing studies," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 6(2), pages 139-165, September.
  3. S. Rama Chandra Reddy & Colin Price, 1999. "Carbon Sequestration and Conservation of Tropical Forests Under Uncertainty," Journal of Agricultural Economics, Wiley Blackwell, vol. 50(1), pages 17-35.
  4. S Fankhauser & R S J Tol, 1999. "Figuring the costs of climate change: a reply," Environment and Planning A, Pion Ltd, London, vol. 31(3), pages 409-411, March.
  5. Kadekodi, Gopal K. & Ravindranath, N. H., 1997. "Macro-economic analysis of forestry options on carbon sequestration in India," Ecological Economics, Elsevier, vol. 23(3), pages 201-223, December.
  6. Hartman, Richard, 1976. "The Harvesting Decision When a Standing Forest Has Value," Economic Inquiry, Western Economic Association International, vol. 14(1), pages 52-58, March.
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Citations

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Cited by:
  1. Juutinen, Artti, 2008. "Old-growth boreal forests: Worth protecting for biodiversity?," Journal of Forest Economics, Elsevier, vol. 14(4), pages 242-267, November.
  2. Renan Ulrich Goetz & Natali Hritonenko & Ruben Mur & Àngels Xabadia & Yuri Yatsenko, 2008. "Climate Change and the Cost of Carbon Sequestration: The Case of Forest Management," Working Papers 329, Barcelona Graduate School of Economics.
  3. McCarney, Geoffrey R. & Armstrong, Glen W. & Adamowicz, Wiktor L., 2006. "Implications Of A Market For Carbon On Timber And Non-Timber Values In An Uncertain World," Annual Meeting, May 25-28, 2006, Montreal, Quebec 34175, Canadian Agricultural Economics Society.
  4. Daniel Spring & John Kennedy & Ralph Mac Nally, 2005. "Optimal management of a flammable forest providing timber and carbon sequestration benefits: an Australian case study ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 49(3), pages 303-320, 09.
  5. Pajot, Guillaume, 2011. "Rewarding carbon sequestration in South-Western French forests: A costly operation?," Journal of Forest Economics, Elsevier, vol. 17(4), pages 363-377.
  6. Guitart, A. Bussoni & Rodriguez, L.C. Estraviz, 2010. "Private valuation of carbon sequestration in forest plantations," Ecological Economics, Elsevier, vol. 69(3), pages 451-458, January.
  7. Venn, Tyron J., 2005. "Financial and economic performance of long-rotation hardwood plantation investments in Queensland, Australia," Forest Policy and Economics, Elsevier, vol. 7(3), pages 437-454, March.
  8. Benitez, Pablo C. & Obersteiner, Michael, 2006. "Site identification for carbon sequestration in Latin America: A grid-based economic approach," Forest Policy and Economics, Elsevier, vol. 8(6), pages 636-651, August.
  9. Spring, Daniel & Kennedy, John O.S. & Mac Nally, Ralph, 2005. "Optimal management of a flammable forest providing timber and carbon sequestration benefits: an Australian case study," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 49(3), September.
  10. Chisholm, Ryan A., 2010. "Trade-offs between ecosystem services: Water and carbon in a biodiversity hotspot," Ecological Economics, Elsevier, vol. 69(10), pages 1973-1987, August.
  11. Susaeta, Andres & Chang, Sun Joseph & Carter, Douglas R. & Lal, Pankaj, 2014. "Economics of carbon sequestration under fluctuating economic environment, forest management and technological changes: An application to forest stands in the southern United States," Journal of Forest Economics, Elsevier, vol. 20(1), pages 47-64.
  12. Price, Colin & Willis, Rob, 2011. "The multiple effects of carbon values on optimal rotation," Journal of Forest Economics, Elsevier, vol. 17(3), pages 298-306, August.
  13. McKenney, Daniel W. & Yemshanov, Denys & Fox, Glenn & Ramlal, Elizabeth, 2004. "Cost estimates for carbon sequestration from fast growing poplar plantations in Canada," Forest Policy and Economics, Elsevier, vol. 6(3-4), pages 345-358, June.

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