Climate change in the Faustmann forest economics model: a qualitative review

Sofia Mpekiri and Konstantinos G. Papaspyropoulos

Forestry Economics Review, 2026, vol. 8, issue 2, 194-215

Abstract: PurposeThis paper examines how climate change is addressed within the Faustmann forest economics framework, to uncover main takeaways for optimal rotation, land expectation value (LEV) and policy.Design/methodology/approachWe organize climate change treatments in the Faustmann model and its extensions into three recurring themes: (1) modeling techniques, (2) implications for optimal rotation and (3) implications for policy. A PRISMA-screened Scopus search was performed, followed by targeted selection of the most influential and recent papers incorporating climate change into the Faustmann framework.FindingsModeling techniques for climate change in the Faustmann forest economics model are represented mainly through (1) carbon accounting (rules and methods for quantifying carbon stocks and net emissions/removals across multiple carbon pools and stages of the carbon life-cycle), (2) climate-related disturbance risk (fire, storms, insects) and (3) productivity changes and species shifts valued via LEV. For an optimal rotation period, economic evaluation does not yield a generally applicable rule: it may be shortened or lengthened depending on the modeling technique, parameter change and underlying assumptions, with corresponding implications for policy. Stand-age-dependent hazards typically shorten rotations, while carbon-sequestration objectives can imply extremes of very short or very long rotations. Recent studies suggest common carbon accounting may ignore variables such as albedo. Biome shifts significantly affect LEV. Policy implications are complex, reflecting trade-offs and specification dependence embedded in instrument design.Originality/valueThis qualitative review shows how modeling choices translate into implications for rotation, forest value and policy, clarifying why rotation results diverge when climate change is incorporated, and outlining practical implications for policy design that link carbon incentives with multi-hazard risk, including newer monitoring and risk-management tools under evolving climate commitments and uncertain disturbances.

Keywords: Faustmann model; Climate change; Optimal rotation; Land expectation value (LEV); Carbon accounting; Forest economics (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ferpps:fer-02-2026-0010

DOI: 10.1108/FER-02-2026-0010

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