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Faustmann and the Climate

Author

Listed:
  • Hoel, Michael

    () (Dept. of Economics, University of Oslo)

  • Holtsmark, Bjart

    () (Statistics Norway)

  • Holtsmark, Katinka

    () (Dept. of Economics, University of Oslo)

Abstract

This paper presents an adjusted Faustmann Rule for optimal harvest of a forest in the presence of a social cost of carbon emissions. A contribution of the paper is to do this within theoretical and numerical frameworks that take account of the dynamics and interactions of the forest’s multiple carbon pools within an in…nite time horizon model. With our less restrictive assumptions we …nd that a social cost of carbon has a signi…cantly stronger e¤ect on the optimal harvest age than found in earlier studies. Considered is also how increased use of harvest residues for energy purposes and storage of carbon in building materials and furniture should in‡uence the length of the rotation period. The theoretical results are quanti…ed within a numerical framework.

Suggested Citation

  • Hoel, Michael & Holtsmark, Bjart & Holtsmark, Katinka, 2012. "Faustmann and the Climate," Memorandum 26/2012, Oslo University, Department of Economics.
  • Handle: RePEc:hhs:osloec:2012_026
    as

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    File URL: https://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2012/memo-26-2012.pdf
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    References listed on IDEAS

    as
    1. Bjart Holtsmark, 2012. "Harvesting in boreal forests and the biofuel carbon debt," Climatic Change, Springer, vol. 112(2), pages 415-428, May.
    2. 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 515-536, October.
    3. Holtsmark, Bjart & Hoel, Michael & Holtsmark, Katinka, 2013. "Optimal harvest age considering multiple carbon pools – A comment," Journal of Forest Economics, Elsevier, vol. 19(1), pages 87-95.
    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. 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.
    6. 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.
    7. Michael Scorgie & John Kennedy, 1996. "Who Discovered the Faustmann Condition?," History of Political Economy, Duke University Press, vol. 28(1), pages 77-80, Spring.
    8. Samuelson, Paul A, 1976. "Economics of Forestry in an Evolving Society," Economic Inquiry, Western Economic Association International, vol. 14(4), pages 466-492, December.
    9. 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 Archive 12881, Iowa State University, Department of Economics.
    10. 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.
    11. Pukkala, Timo, 2011. "Optimizing forest management in Finland with carbon subsidies and taxes," Forest Policy and Economics, Elsevier, vol. 13(6), pages 425-434, July.
    12. Hartman, Richard, 1976. "The Harvesting Decision When a Standing Forest Has Value," Economic Inquiry, Western Economic Association International, vol. 14(1), pages 52-58, March.
    13. 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.
    14. Gutrich, John & Howarth, Richard B., 2007. "Carbon sequestration and the optimal management of New Hampshire timber stands," Ecological Economics, Elsevier, vol. 62(3-4), pages 441-450, May.
    15. Price, Colin & Willis, Rob, 2011. "The multiple effects of carbon values on optimal rotation," Journal of Forest Economics, Elsevier, vol. 17(3), pages 298-306, August.
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    Citations

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    Cited by:

    1. Holtsmark, Bjart & Hoel, Michael & Holtsmark, Katinka, 2013. "Optimal harvest age considering multiple carbon pools – A comment," Journal of Forest Economics, Elsevier, vol. 19(1), pages 87-95.
    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, vol. 20(1), pages 47-64.
    3. repec:eee:ecomod:v:248:y:2013:i:c:p:130-134 is not listed on IDEAS
    4. Lintunen, Jussi & Uusivuori, Jussi, 2016. "On the economics of forests and climate change: Deriving optimal policies," Journal of Forest Economics, Elsevier, vol. 24(C), pages 130-156.
    5. Ekholm, Tommi, 2016. "Optimal forest rotation age under efficient climate change mitigation," Forest Policy and Economics, Elsevier, vol. 62(C), pages 62-68.
    6. Matthies, Brent D. & Valsta, Lauri T., 2016. "Optimal forest species mixture with carbon storage and albedo effect for climate change mitigation," Ecological Economics, Elsevier, vol. 123(C), pages 95-105.

    More about this item

    Keywords

    climate; forestry; biofuels; Faustmann; carbon;

    JEL classification:

    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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