COST-BENEFIT ANALYSIS OF ESTABLISHMENT OF SCOTS PINE, AUSTRIAN PINE AND SPRUCE FOREST PLANTATIONS

Mihailo Ratknić and Sonja Braunović

Economics of Agriculture, 2013, vol. 60, issue 3, 14

Abstract: The cost-benefit analysis, which contributes to finding best solutions and helps in making decision on acceptability of treatment, has been used as an instrument in the assessment of afforestation impact on the environment. It has been established that a cost-effective investment into Scots pine, Austrian pine and Spruce afforestation is viable solely on the basis of wood production. Wood production, depending on tree species and soil quality, can bear even slightly higher interest rates in the areas of good soil quality in comparison to previous estimates, which mostly ranged around 3%. In the areas of poor soil quality, the interest rates can drop even below the 3% rate. At lower discount rates, the breakeven point is extended in time, whereas at higher discount rates, it is shortened. The length of production cycle performs an important role in determining the costeffectiveness of an investment, particularly from the aspect of the relation between the length of production cycle and production purposes (type and quality of wood assortments that are produced). Based on the analysis of non-quantifiable benefits and costs, it has been established that the benefits surpass the costs, therefore, afforestation projects can be acceptable.

Keywords: Crop Production/Industries; Production Economics (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:ags:iepeoa:158259

DOI: 10.22004/ag.econ.158259

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