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Managing Forests for Carbon and Timber: A Markov Decision Model of Uneven-aged Forest Management With Risk

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  • Johnston, Craig M.T.
  • Withey, Patrick

Abstract

This paper calculates steady state management decisions that, if followed indefinitely, provide an adaptive strategy that maximizes the value from timber and carbon sequestration when risk is present. By including carbon offsets directly in the objective function of a Markov decision process (MDP) model, we find long-term trade-offs exist between economic and ecological outcomes. An economic supply schedule is provided, which shows an exponential increase in the cost of sequestration. Moderate carbon prices effectively sequester additional CO2 from the atmosphere while having a positive impact on ecological indicators such as size and species diversity. In contrast, high carbon prices promote more of a monoculture in order to maximize expected forest value in the long run from carbon sequestration. This study finds evidence that the optimal adaptive decisions are sensitive to the magnitude of carbon prices, and consequently, so too are ecological outcomes. While some governments acknowledge the influence carbon markets have on the ecological integrity of the forest, fluctuations in carbon prices within a cap-and-trade market likely influence the optimal decision making of the forest manager, and thus, the ecological landscape of the forest itself.

Suggested Citation

  • Johnston, Craig M.T. & Withey, Patrick, 2017. "Managing Forests for Carbon and Timber: A Markov Decision Model of Uneven-aged Forest Management With Risk," Ecological Economics, Elsevier, vol. 138(C), pages 31-39.
    • Handle: RePEc:eee:ecolec:v:138:y:2017:i:c:p:31-39
    DOI: 10.1016/j.ecolecon.2017.03.023
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    References listed on IDEAS

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    1. Zhou, Mo & Buongiorno, Joseph, 2011. "Effects of stochastic interest rates in decision making under risk: A Markov decision process model for forest management," Forest Policy and Economics, Elsevier, vol. 13(5), pages 402-410, June.
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    Cited by:

    1. Ekholm, Tommi, 2020. "Optimal forest rotation under carbon pricing and forest damage risk," Forest Policy and Economics, Elsevier, vol. 115(C).
    2. Roessiger, Joerg & Kulla, Ladislav & Bošeľa, Michal, 2018. "Finding equilibrium in continuous-cover forest management sensitive to interest rates using an advanced matrix transition model," Journal of Forest Economics, Elsevier, vol. 33(C), pages 83-94.
    3. Kovacs, Kent F. & Haight, Robert G. & Moore, Karli & Popp, Michael, 2021. "Afforestation for carbon sequestration in the Lower Mississippi River Basin of Arkansas, USA: Does modeling of land use at fine spatial resolution reveal lower carbon cost?," Forest Policy and Economics, Elsevier, vol. 130(C).
    4. Daigneault, Adam & Johnston, Craig & Korosuo, Anu & Baker, Justin S. & Forsell, Nicklas & Prestemon, Jeffrey P. & Abt, Robert C., 2019. "Developing Detailed Shared Socioeconomic Pathway (SSP) Narratives for the Global Forest Sector," Journal of Forest Economics, now publishers, vol. 34(1-2), pages 7-45, August.
    5. Brèteau-Amores, Sandrine & Brunette, Marielle & Davi, Hendrik, 2019. "An Economic Comparison of Adaptation Strategies Towards a Drought-induced Risk of Forest Decline," Ecological Economics, Elsevier, vol. 164(C), pages 1-1.

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