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Faustmann and the Climate

  • Michael Hoel
  • Bjart Holtsmark
  • Katinka Holtsmark

The paper presents an adjusted Faustmann Rule for optimal harvest of a forest when there is a social cost of carbon emissions. The theoretical framework takes account of the dynamics and interactions of forests’ multiple carbon pools and assumes an infinite time horizon. Our paper provides a theoretical foundation for numerical model studies that have found that a social cost of carbon implies longer optimal rotation periods and that if the social cost of carbon exceeds a certain threshold value the forest should not be harvested. At the same time we show that it could be a net social benefit from harvesting even if the commercial profit from harvest is negative. If that is the case, the optimal harvest age is decreasing in the social cost of carbon.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2012/wp-cesifo-2012-10/cesifo1_wp3951.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3951.

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Date of creation: 2012
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Handle: RePEc:ces:ceswps:_3951
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  1. Bjart Holtsmark, 2012. "Harvesting in boreal forests and the biofuel carbon debt," Climatic Change, Springer, vol. 112(2), pages 415-428, May.
  2. Asante, Patrick & Armstrong, Glen W. & Adamowicz, Wiktor L., 2011. "Carbon sequestration and the optimal forest harvest decision: A dynamic programming approach considering biomass and dead organic matter," Journal of Forest Economics, Elsevier, vol. 17(1), pages 3-17, January.
  3. Bjart Holtsmark & Michael Hoel & Katinka Holtsmark, 2012. "Optimal harvest age considering multiple carbon pools – a comment," Discussion Papers 704, Research Department of Statistics Norway.
  4. Asante, Patrick & Armstrong, Glen W., 2012. "Optimal forest harvest age considering carbon sequestration in multiple carbon pools: A comparative statics analysis," Journal of Forest Economics, Elsevier, vol. 18(2), pages 145-156.
  5. Searchinger, Timothy & Heimlich, Ralph & Houghton, R. A. & Dong, Fengxia & Elobeid, Amani & Fabiosa, Jacinto F. & Tokgoz, Simla & Hayes, Dermot J. & Yu, Hun-Hsiang, 2008. "Use of U.S. Croplands for Biofuels Increases Greenhouse Gases Through Emissions from Land-Use Change," Staff General Research Papers 12881, Iowa State University, Department of Economics.
  6. Samuelson, Paul A, 1976. "Economics of Forestry in an Evolving Society," Economic Inquiry, Western Economic Association International, vol. 14(4), pages 466-92, December.
  7. Tahvonen, Olli, 1995. "Net national emissions, CO2 taxation and the role of forestry," Resource and Energy Economics, Elsevier, vol. 17(4), pages 307-315, December.
  8. Farzin, Y H & Tahvonen, O, 1996. "Global Carbon Cycle and the Optimal Time Path of a Carbon Tax," Oxford Economic Papers, Oxford University Press, vol. 48(4), pages 515-36, October.
  9. 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.
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