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Economics of Species Change under Risk of Climate Change and Increasing Information: A (Quasi-)Option Value Analysis

Author

Listed:
  • Marielle Brunette

    (Laboratoire d'Economie Forestière, INRA - AgroParisTech)

  • Sandrine Costa

    (INRA, UMR 1110 MOISA)

  • Franck Lecocq

    (CIRED)

Abstract

This paper provides an economic analysis of timber species change as a tool for adapting forests to climate change. We use the framework of cost-benefit analysis, taking uncertainty into account both exogenously, via sensitivity analysis, and endogenously, via (quasi-)option value calculations. We apply the method to assess the economic rationale for converting Norway spruce stands to Douglas-fir in the French Black Mountain. We find that Douglas fir conversion is Land Expected Value (LEV) maximizing under a wide range of a priori (subjective) probability attached to high mortality of Norway spruce under climate change (precisely, for probabilities higher than 0.25-0.31). If information about the impacts of climate change is expected to increase over time, and given the important sunk costs attached to conversion, a delay strategy can be preferable to transition and to status quo when the impacts of climate change on Norway spruce mortality are sufficiently ambiguous. In such cases, getting information earlier increases the LEV by 5-60€/ha. Beyond the specifics of the case study, this paper suggests that quasi-option value is a relevant tool to provide insights to forest owners faced with adaptation decisions in the context of climate change.

Suggested Citation

  • Marielle Brunette & Sandrine Costa & Franck Lecocq, 2012. "Economics of Species Change under Risk of Climate Change and Increasing Information: A (Quasi-)Option Value Analysis," Working Papers - Cahiers du LEF 2012-05, Laboratoire d'Economie Forestiere, AgroParisTech-INRA, revised Sep 2012.
    • Handle: RePEc:lef:wpaper:2012-05
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    File URL: http://www6.nancy.inra.fr/lef/Cahiers-du-LEF/2012/2012-05
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    Citations

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    Cited by:

    1. M. Brunette & M. Hanewinkel & R. Yousefpour, 2020. "Risk aversion hinders forestry professionals to adapt to climate change," Climatic Change, Springer, vol. 162(4), pages 2157-2180, October.
    2. Julie Thomas & Marielle Brunette & Antoine Leblois, 2021. "Adapting forest management practices to climate change : Lessons from a survey of French private forest owners," Working Papers hal-03142772, HAL.
    3. Montagné-Huck, Claire & Brunette, Marielle, 2018. "Economic analysis of natural forest disturbances: A century of research," Journal of Forest Economics, Elsevier, vol. 32(C), pages 42-71.
    4. Dymond, Caren Christine & Giles-Hansen, Krysta & Asante, Patrick, 2020. "The forest mitigation-adaptation nexus: Economic benefits of novel planting regimes," Forest Policy and Economics, Elsevier, vol. 113(C).
    5. Brèteau-Amores, Sandrine & Brunette, Marielle & Davi, Hendrik, 2019. "An Economic Comparison of Adaptation Strategies Towards a Drought-induced Risk of Forest Decline," Ecological Economics, Elsevier, vol. 164(C), pages 1-1.

    More about this item

    Keywords

    Adaptation to Climate Change; Cost-Benefit Analysis; (Quasi-)Option Value; Forest Conversion.;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • 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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