Forest Management under Fire Risk when Forest Carbon Sequestration Has Value

Stéphane Couture and Arnaud Reynaud

No 09-005, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: In this paper, we develop a multiple forest use model to determine the optimal harvest date for a forest stand producing both timber and carbon benefits under a risk of fire. The preferences of the representative non-industrial private forest (NIPF) owner are modeled though an expected utility specification. We introduce saving as a decision of the forest owner at any time. The problems of forest management and saving decisions are solved simultaneously using a stochastic dynamic programming method. A numerical programming method is used to characterize the optimal forest and saving policies. We apply this framework to model the behavior of a representative NIPF owner located in the Southwest of France. The empirical application indicates that a higher risk of fire will decrease the optimal rotation period, while higher carbon prices will increase the optimal harvesting age. We show that increasing the risk of fire leads to a reduction in rotation duration. On the contrary, a higher carbon price makes carbon sequestration more profitable, thereby leading to increasing the rotation duration. We then show how the carbon price/risk of fire frontier is affected by risk aversion.

JEL-codes: C61 D81 Q23 (search for similar items in EconPapers)
Date: 2009-01
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Related works:
Journal Article: Forest management under fire risk when forest carbon sequestration has value (2011)
Working Paper: Forest Management Under Fire Risk When Forest Carbon Sequestration Has Value (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:22034

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