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The Infinitely Worried Forest Owner: Key Biotopes and Forest Certification in a Faustmann Model

Author

Listed:
  • Kriström , Bengt Per-Olov

    (Skogsekonomi, SLU)

  • Johansson, Per-Olov

    (Stockholm School of Economics)

Abstract

In this note, we consider a case when a forestry property may lose its market value through “political risk”, illustrated here by it being classified as containing a key biotope. If a key biotope is found on a forest property in Sweden, the wood is almost impossible to sell. We show how the Faustmann formula is modified in this case and identify a “balance sheet” effect and document the incentive properties (the “kill an owl, save a logger” effect observed in the Spotted Owl controversy). The theory seems to have some empirical support, given observed changes in bank lending contracts and alleged changes in forester's behavior to reduce the ”political risk.”

Suggested Citation

  • Kriström , Bengt Per-Olov & Johansson, Per-Olov, 2018. "The Infinitely Worried Forest Owner: Key Biotopes and Forest Certification in a Faustmann Model," CERE Working Papers 2018:11, CERE - the Center for Environmental and Resource Economics.
    • Handle: RePEc:hhs:slucer:2018_011
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    More about this item

    Keywords

    Faustmann model; Forest certification; Forest owner;
    All these keywords.

    JEL classification:

    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry

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