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Optimal Forest Management with Carbon Sequestration Credits and Endogenous Fire Risk

Author

Listed:
  • Adam J. Daigneault
  • Mario J. Miranda
  • Brent Sohngen

Abstract

We use a stochastic dynamic profit maximization model to investigate the effects of forest carbon sequestration credits on optimal forest management practices for stands facing wildfire risk. Landowners that periodically thin a stand can increase growth rates and mitigate loss of timber and carbon stocks from wildfire. Results indicate that thinning and shortening rotations are cost-effective strategies to mitigate wildfire risk. Carbon prices cause landowners to delay both their thinning treatments and the final rotation age. Thinning and extending timber rotations are thus a viable climate-change mitigation option even when stands are susceptible to risks of fire.

Suggested Citation

  • Adam J. Daigneault & Mario J. Miranda & Brent Sohngen, 2010. "Optimal Forest Management with Carbon Sequestration Credits and Endogenous Fire Risk," Land Economics, University of Wisconsin Press, vol. 86(1), pages 155-172.
  • Handle: RePEc:uwp:landec:v:86:y:2010:i:1:p:155-172
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    References listed on IDEAS

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    1. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, January.
    2. Chladna, Zuzana, 2007. "Determination of optimal rotation period under stochastic wood and carbon prices," Forest Policy and Economics, Elsevier, vol. 9(8), pages 1031-1045, May.
    3. G. Cornelis van Kooten & Clark S. Binkley & Gregg Delcourt, 1995. "Effect of Carbon Taxes and Subsidies on Optimal Forest Rotation Age and Supply of Carbon Services," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(2), pages 365-374.
    4. Jonathan Yoder, 2004. "Playing with Fire: Endogenous Risk in Resource Management," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(4), pages 933-948.
    5. Englin, Jeffrey E. & Boxall, Peter C. & Hauer, Grant, 2000. "An Empirical Examination Of Optimal Rotations In A Multiple-Use Forest In The Presence Of Fire Risk," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(01), July.
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    Citations

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    Cited by:

    1. Charles Sims & David Aadland & David Finnoff & James Powell, 2013. "How Ecosystem Service Provision Can Increase Forest Mortality from Insect Outbreaks," Land Economics, University of Wisconsin Press, vol. 89(1), pages 154-176.
    2. 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, pages 47-64.
    3. Acosta, Montserrat & Sohngen, Brent, 2009. "How big is leakage from forestry carbon credits? Estimates from a Global Model," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49468, Agricultural and Applied Economics Association.
    4. Kim, Taeyoung & Langpap, Christian, 2012. "Private Landowners’ Response to Incentives for Carbon Sequestration in Forest Management," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 130709, Agricultural and Applied Economics Association.
    5. Hoel, Michael & Holtsmark, Bjart & Holtsmark, Katinka, 2014. "Faustmann and the climate," Journal of Forest Economics, Elsevier, pages 192-210.
    6. Jevgenijs Steinbuks & Thomas Hertel, 2016. "Confronting the Food–Energy–Environment Trilemma: Global Land Use in the Long Run," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, pages 545-570.
    7. Hoel, Michael & Holtsmark, Bjart & Holtsmark, Katinka, 2014. "Faustmann and the climate," Journal of Forest Economics, Elsevier, pages 192-210.
    8. Luis Diaz-Balteiro & David Martell & Carlos Romero & Andrés Weintraub, 2014. "The optimal rotation of a flammable forest stand when both carbon sequestration and timber are valued: a multi-criteria approach," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 72(2), pages 375-387, June.
    9. Sohngen, Brent & Tian, Xiaohui, 2016. "Global climate change impacts on forests and markets," Forest Policy and Economics, Elsevier, vol. 72(C), pages 18-26.
    10. Jussi Lintunen & Jussi Uusivuori, 2014. "On The Economics of Forest Carbon: Renewable and Carbon Neutral But Not Emission Free," Working Papers 2014.13, Fondazione Eni Enrico Mattei.
    11. Köthke, Margret & Dieter, Matthias, 2010. "Effects of carbon sequestration rewards on forest management--An empirical application of adjusted Faustmann Formulae," Forest Policy and Economics, Elsevier, vol. 12(8), pages 589-597, October.
    12. Gren, Ing-Marie & Zeleke, Abenezer Aklilu, 2016. "Policy design for forest carbon sequestration: A review of the literature," Forest Policy and Economics, Elsevier, vol. 70(C), pages 128-136.
    13. Creamer, Selmin F. & Genz, Alan & Blatner, Keith A., 2012. "The Effect of Fire Risk on the Critical Harvesting Times for Pacific Northwest Douglas-Fir When Carbon Price Is Stochastic," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 41(3), December.
    14. Jevgenijs Steinbuks & Thomas W. Hertel, 2016. "Confronting the Food–Energy–Environment Trilemma: Global Land Use in the Long Run," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, pages 545-570.
    15. repec:eee:forpol:v:83:y:2017:i:c:p:107-120 is not listed on IDEAS
    16. Couture, Stéphane & Reynaud, Arnaud, 2011. "Forest management under fire risk when forest carbon sequestration has value," Ecological Economics, Elsevier, vol. 70(11), pages 2002-2011, September.
    17. Zhou, Mo, 2015. "Adapting sustainable forest management to climate policy uncertainty: A conceptual framework," Forest Policy and Economics, Elsevier, vol. 59(C), pages 66-74.

    More about this item

    JEL classification:

    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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