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Implications Of A Market For Carbon On Timber And Non-Timber Values In An Uncertain World

  • McCarney, Geoffrey R.
  • Armstrong, Glen W.
  • Adamowicz, Wiktor L.

Despite considerable interest in the potential for forests to sequester carbon, the impact of carbon management on the provision of timber and non-timber resources has received relatively little attention in the literature. The introduction of value for stored carbon may result in modifications to traditional forest management objectives, generating trade-offs with other forest resources depending on the incentives provided by carbon markets. This paper investigates these issues by examining the impact of a particular form of carbon market on timber and non-timber values in a managed forest. An integrated modeling framework, developed for the incorporation of carbon management into operational timber management modeling tools, is also described. There is still substantial debate over how to properly credit carbon sequestered in forests. To date, there has been little research on how the form of a carbon market will impact the operations and objectives of forestry firms. Alternative market structures could produce very different responses in terms of rotation age, net present value and harvest policy. Here, a specific form of carbon market, the specified level contract, is investigated. Forestry firms are assumed to reach contracts with carbon-seeking agents which “"guarantee"” that a specified level of carbon stock will be maintained over a defined time period. Optimal forest management decisions are examined by implementing an optimization model for a specific land base in Alberta. The Woodstock forest modeling package is used for optimization. Analysis of trade-offs is based on the work of Armstrong et al. (1999, 2003) which assess non-timber resources using the natural disturbance approach to forest management. The analysis is then expanded to include a more rigorous, and realistic, depiction of carbon and carbon stock changes. Using the Carbon Budget Model of the Canadian Forest Sector (CBM-CFS3), carbon yield curves are developed which are integrated directly into the Woodstock forest management ii model. These carbon yields capture dynamics specific to separate biomass and dead organic matter (DOM) carbon pools and are represented for individual forest cover types. Interestingly, the inclusion of DOM carbon generates unexpected relationships between non-timber resources and incentives to sequester carbon. Results show that the presence of co-benefits will depend upon forest cover type, the harvest flow regulation faced by the managing firm and the incentives for timber supply provided by the market. Furthermore, firms that agree to enter contracts for carbon sequestration appear to do so at the expense of a decline in timber supply, with estimates of the opportunity cost of carbon management falling within the range of those found in recent literature.

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Paper provided by Canadian Agricultural Economics Society in its series Annual Meeting, May 25-28, 2006, Montreal, Quebec with number 34175.

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Date of creation: 2006
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Handle: RePEc:ags:caes06:34175
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  1. Brent Sohngen & Robert Mendelsohn, 2003. "An Optimal Control Model of Forest Carbon Sequestration," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(2), pages 448-457.
  2. Emina Krcmar & G. Cornelis van Kooten, 2005. "Boreal Forest Carbon Sequestration Strategies: A Case Study of the Little Red River Cree First Nation Land Tenures," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 53(4), pages 325-341, December.
  3. Matthews, Stephen & O'Connor, Raymond & Plantinga, Andrew J., 2002. "Quantifying the impacts on biodiversity of policies for carbon sequestration in forests," Ecological Economics, Elsevier, vol. 40(1), pages 71-87, January.
  4. Creedy, J. & Wurzbacher, A.D., 2000. "The Economic Value of a Forested Catchment with Timber, Water and Carbon Sequestration Benefits," Department of Economics - Working Papers Series 753, The University of Melbourne.
  5. 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.
  6. Andrew J. Plantinga & JunJie Wu, 2003. "Co-Benefits from Carbon Sequestration in Forests: Evaluating Reductions in Agricultural Externalities from an Afforestation Policy in Wisconsin," Land Economics, University of Wisconsin Press, vol. 79(1), pages 74-85.
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