Dual Discounting in Renewable Resource Planning under Risk

Renewable resource planning and management projects entail evaluating economic and ecological criteria in the long term. During the past decade or so, dual discounting––ecological criteria discounted at a smaller rate than that for economic criteria––has been proposed for such projects as an alternative to the prevailing single-discounting scheme, out of theoretical and empirical considerations. We focus on how to apply this principle in planning problems that involve a multitude of risk in the attendant biological-economic system. A stochastic dynamic programming framework is introduced which allows dual discounting rates and finds the optimal decisions (passively) adapting to changes in the system. Furthermore, we show how to evaluate the variances of the criteria in this framework. With a case study of managing public forestlands in the US Pacific Northwestern region for both timber return and habitat preservation for the northern spotted owl (Strix occidentalis caurina), we illustrate the impacts that the dual-discounting scheme has on the trade-off between conflicting management objectives, the optimal planning strategy, the temporal development of the portion of the forestlands suitable for owl habitats, as well as its steady-state expected value and standard deviation.