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A marginal cost analysis of trade-offs in old-growth preservation in Ontario

Listed author(s):
  • Khajuria, Rajendra Prasad
  • Laaksonen-Craig, Susanna
  • Kant, Shashi
Registered author(s):

    The paper examines the economic impacts of sustainable forest management (SFM) policies in Canada. Specifically, the marginal costs (MC) of old-growth preservation in an even-aged boreal forest in northeastern Ontario are examined under the condition that forest managers need to achieve multiple objectives for SFM. Furthermore, the trade-offs of old-growth preservation are estimated, allowing the levels of three specific SFM objectives to vary, namely, providing a consistent supply of timber in each period, meeting terminal volume targets at the end of the planning horizon, and maintaining a desired age structure of the forest. MCs are higher for harvesting regimes constrained by SFM objectives compared with that in which only profit maximization is considered. We observed that MCs for these three scenarios varied more when the area allotted for old-growth preservation is small. When the area of protected old-growth forest reaches about 66% of the maximum possible, the MCs are almost the same. All MCs are iso-elastic. The even-flow volume per period has the highest marginal cost among the three cases. If managers choose to provide terminal volume that is greater than or equal to the initial volume, instead of a lesser terminal volume, then old-growth forest can be preserved at no extra cost. The study emphasizes the need for integrated and simultaneous achievement of complementary goals of SFM for better economic return and minimization of the negative economic impact of SFM on the forestry sector.

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    Article provided by Elsevier in its journal Forest Policy and Economics.

    Volume (Year): 10 (2008)
    Issue (Month): 5 (April)
    Pages: 326-335

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    Handle: RePEc:eee:forpol:v:10:y:2008:i:5:p:326-335
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    1. Montgomery, Claire A. & Pollak, Robert A. & Freemark, Kathryn & White, Denis, 1999. "Pricing Biodiversity," Journal of Environmental Economics and Management, Elsevier, vol. 38(1), pages 1-19, July.
    2. Reed, William J., 1993. "The decision to conserve or harvest old-growth forest," Ecological Economics, Elsevier, vol. 8(1), pages 45-69, August.
    3. N. D. Hanley & R. J. Ruffell, 1993. "The Contingent Valuation Of Forest Characteristics: Two Experiments," Journal of Agricultural Economics, Wiley Blackwell, vol. 44(2), pages 218-229.
    4. Loomis, John B. & Gonzalez-Caban, Armando, 1998. "A willingness-to-pay function for protecting acres of spotted owl habitat from fire," Ecological Economics, Elsevier, vol. 25(3), pages 315-322, June.
    5. Eid, Tron & Fredrik Hoen, Hans & Okseter, Petter, 2002. "Timber production possibilities of the Norwegian forest area and measures for a sustainable forestry," Forest Policy and Economics, Elsevier, vol. 4(3), pages 187-200, July.
    6. Montgomery Claire A. & Brown Jr. , Gardner M. & Adams Darius M., 1994. "The Marginal Cost of Species Preservation: The Northern Spotted Owl," Journal of Environmental Economics and Management, Elsevier, vol. 26(2), pages 111-128, March.
    7. Englin, Jeffrey & Mendelsohn, Robert, 1991. "A hedonic travel cost analysis for valuation of multiple components of site quality: The recreation value of forest management," Journal of Environmental Economics and Management, Elsevier, vol. 21(3), pages 275-290, November.
    8. Daniel A. Haqen & James W. Vincent & Patrick G. Welle, 1992. "Benefits Of Preserving Old-Growth Forests And The Spotted Owl," Contemporary Economic Policy, Western Economic Association International, vol. 10(2), pages 13-26, 04.
    9. Claire A. Montgomery & Greg S. Latta & Darius M. Adams, 2006. "The Cost of Achieving Old-Growth Forest Structure," Land Economics, University of Wisconsin Press, vol. 82(2), pages 240-256.
    10. Zhou, Wenchao & Gong, Peichen, 2004. "Economic effects of environmental concerns in forest management: an analysis of the cost of achieving environmental goals," Journal of Forest Economics, Elsevier, vol. 10(2), pages 97-113, September.
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