Effects of Wood Products Markets and Forest Policies on Land Use Change

Wood products markets influence returns to forest land uses, and policies targeting these markets could influence land use outcomes, with important implications for timber scarcity, as well as conservation outcomes from watershed protection to carbon sequestration. In this paper, I model interactions between wood product demands, timber prices, and land use switching in the US South between 1982 and 2012 and show that the amount and volatility of financial returns to forests and agriculture influenced both afforestation and deforestation decisions. I then simulate the effects of demand expansion and forest policies on afforestation, deforestation, and net change in forest land area using counterfactual scenarios applied to 2007–12. One scenario estimates the effects of economic growth using the Great Recession as a natural experiment. Other scenarios examine policy approaches that (1) encourage additional wood use in construction, (2) subsidize tree planting, and (3) change agricultural returns. The economic growth (recession counterfactual) scenario results in little net change in forest area—increased afforestation driven by higher timber prices is offset by deforestation from increased demand for urban land uses. In contrast, policies that increase timber demands without increasing demands for urban land (e.g., using more wood in the built environment) are twice as effective as tree-planting subsidies at encouraging afforestation and expanding forest land uses. Agricultural returns more strongly affect deforestation decisions (forest-to-agriculture switching) than afforestation decisions (agriculture-to-forest switching) and have a very small impact on forest area. Results highlight how any policy that increases returns to forest uses, such as through carbon offset markets, could increase forest area in this region and others.