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Climate Change and Optimal Rotation in a Flammable Forest

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  • Ken Stollery

    (Department of Economics, University of Waterloo)

Abstract

This paper builds a Faustmann-based model to investigate the effects of increased climate-induced fire risk on the optimal rotation period in a commercial forest. Simulations using species of trees prevalent in North American forests indicate that both the commercial and socially optimal rotation ages decline as the risk increases. This occurs despite the fact that the inclusion of carbon sequestration benefits in society's maximand means that the socially optimal rotation length exceeds the length that is commercially profitable. The increased fire risk as the climate warms also has important implications for the ability of forests to act as absorbers of carbon. The arguments of the 'Umbrella Group' of countries who desire to use their forests' carbon-absorbing ability to offset their need for fossil fuel emission reductions will have increasingly less force as the climate warms. Because the heightened fire risk dramatically reduces the ability of living forests to act as carbon sinks, alternative proposals for storing carbon by 'pickling' wood in cold lakes look increasingly attractive.

Suggested Citation

  • Ken Stollery, 2001. "Climate Change and Optimal Rotation in a Flammable Forest," Working Papers 01001, University of Waterloo, Department of Economics, revised Jan 2001.
  • Handle: RePEc:wat:wpaper:01001
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    References listed on IDEAS

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    1. Lind, Robert C., 1990. "Reassessing the government's discount rate policy in light of new theory and data in a world economy with a high degree of capital mobility," Journal of Environmental Economics and Management, Elsevier, vol. 18(2), pages 8-28, March.
    2. 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.
    3. K. E. McConnell & J. N. Daberkow & I. W. Hardie, 1983. "Planning Timber Production with Evolving Prices and Costs," Land Economics, University of Wisconsin Press, vol. 59(3), pages 292-299.
    4. Reed, William J., 1984. "The effects of the risk of fire on the optimal rotation of a forest," Journal of Environmental Economics and Management, Elsevier, vol. 11(2), pages 180-190, June.
    5. G. Cornelis van Kooten & Louise M. Arthur & W. R. Wilson, 1992. "Potential to Sequester Carbon in Canadian Forests: Some Economic Considerations," Canadian Public Policy, University of Toronto Press, vol. 18(2), pages 127-138, June.
    6. William D. Nordhaus, 1993. "Reflections on the Economics of Climate Change," Journal of Economic Perspectives, American Economic Association, vol. 7(4), pages 11-25, Fall.
    7. Englin, Jeffrey E. & Boxall, Peter C. & Hauer, Grant, 2000. "An Empirical Examination Of Optimal Rotations In A Multiple-Use Forest In The Presence Of Fire Risk," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(01), July.
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