EconPapers    
Economics at your fingertips  
 

Optimal forest rotation under carbon pricing and forest damage risk

Tommi Ekholm

Papers from arXiv.org

Abstract: Forests will have two notable economic roles in the future: providing renewable raw material and storing carbon to mitigate climate change. The pricing of forest carbon leads to longer rotation times and consequently larger carbon stocks, but also exposes landowners to a greater risk of forest damage. This paper investigates optimal forest rotation under carbon pricing and forest damage risk. I provide the optimality conditions for this problem and illustrate the setting with numerical calculations representing boreal forests under a range of carbon prices and damage probabilities. The relation between damage probability and carbon price towards the optimal rotation length is nearly linear, with carbon pricing having far greater impact. As such, increasing forest carbon stocks by lengthening rotations is an economically attractive method for climate change mitigation, despite the forest damage risk. Carbon pricing also increases land expectation value and reduces the economic risks of the landowner. The production possibility frontier under optimal rotation suggests that significantly larger forests carbon stocks are achievable, but imply lower harvests. However, forests' societally optimal role between these two activities is not yet clear-cut; but rests on the future development of relative prices between timber, carbon and other commodities dependent on land-use.

New Economics Papers: this item is included in nep-agr and nep-env
Date: 2019-11
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://arxiv.org/pdf/1912.00269 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1912.00269

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().

 
Page updated 2020-01-03
Handle: RePEc:arx:papers:1912.00269