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Impact of storm risk on Faustmann rotation

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  • Loisel, Patrice

Abstract

Global warming may induce in Western Europe an increase in storms. Hence the forest managers will have to take into account the risk increase. We study the impact of storm risk at the stand level. From the analytical expressions of the Faustmann criterion and the Expected Long-Run Average Yield, we deduce in presence of storm risk the influence of criteria and of discount rate in terms of optimal thinnings and cutting age. We discuss the validity of using a risk adjusted discount rate (a rate of storm risk added to the discount rate) without risk to mimic the storm risk case in terms of optimal thinnings.

Suggested Citation

  • Loisel, Patrice, 2014. "Impact of storm risk on Faustmann rotation," Forest Policy and Economics, Elsevier, vol. 38(C), pages 191-198.
    • Handle: RePEc:eee:forpol:v:38:y:2014:i:c:p:191-198
    DOI: 10.1016/j.forpol.2013.08.002
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    1. Marc Hanewinkel & Dominik A. Cullmann & Mart-Jan Schelhaas & Gert-Jan Nabuurs & Niklaus E. Zimmermann, 2013. "Climate change may cause severe loss in the economic value of European forest land," Nature Climate Change, Nature, vol. 3(3), pages 203-207, March.
    2. Patrice, Loisel, 2011. "Faustmann rotation and population dynamics in the presence of a risk of destructive events," Journal of Forest Economics, Elsevier, vol. 17(3), pages 235-247, August.
    3. Staupendahl, Kai & Möhring, Bernhard, 2011. "Integrating natural risks into silvicultural decision models: A survival function approach," Forest Policy and Economics, Elsevier, vol. 13(6), pages 496-502, July.
    4. Price, Colin, 2011. "When and to what extent do risk premia work? Cases of threat and optimal rotation," Journal of Forest Economics, Elsevier, vol. 17(1), pages 53-66, January.
    5. Reed, William J., 1984. "The effects of the risk of fire on the optimal rotation of a forest," Journal of Environmental Economics and Management, Elsevier, vol. 11(2), pages 180-190, June.
    6. Holecy, Jan & Hanewinkel, Marc, 2006. "A forest management risk insurance model and its application to coniferous stands in southwest Germany," Forest Policy and Economics, Elsevier, vol. 8(2), pages 161-174, March.
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    Cited by:

    1. Patrice Loisel & Marielle Brunette & Stéphane Couture, 2020. "Insurance and Forest Rotation Decisions Under Storm Risk," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 76(2), pages 347-367, July.
    2. Sauter, Philipp & Mußhoff, Oliver, 2015. "Forestry harvesting decisions in contrast to theory? Evidence from an economic experiment," 2015 Conference (59th), February 10-13, 2015, Rotorua, New Zealand 202579, Australian Agricultural and Resource Economics Society.
    3. Patrice Loisel & Marielle Brunette & Stéphane Couture, 2022. "Ambiguity, value of information and forest rotation decision under storm risk," Working Papers of BETA 2022-26, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    4. Deegen, Peter & Matolepszy, Kai, 2015. "Economic balancing of forest management under storm risk, the case of the Ore Mountains (Germany)," Journal of Forest Economics, Elsevier, vol. 21(1), pages 1-13.
    5. Loisel, Patrice, 2020. "Under the risk of destructive event, are there differences between timber income based and carbon sequestration based silviculture?," Forest Policy and Economics, Elsevier, vol. 120(C).
    6. Patrice Loisel & Guillerme Duvilli'e & Denis Barbeau & Brigitte Charnomordic, 2019. "EvaSylv: A user-friendly software to evaluate forestry scenarii including natural risk," Papers 1909.07288, arXiv.org.
    7. Rakotoarison, Hanitra & Loisel, Patrice, 2016. "The Faustmann model under storm risk and price uncertainty: A case study of European beech in Northwestern France," MPRA Paper 85114, University Library of Munich, Germany.
    8. Couture, Stéphane & Cros, Marie-Josée & Sabbadin, Régis, 2016. "Risk aversion and optimal management of an uneven-aged forest under risk of windthrow: A Markov decision process approach," Journal of Forest Economics, Elsevier, vol. 25(C), pages 94-114.
    9. Stanturf, John A. & Young, Timothy M. & Perdue, James H. & Dougherty, Derek & Pigott, Michael & Guo, Zhimei & Huang, Xia, 2018. "Productivity and profitability potential for non-native Eucalyptus plantings in the southern USA," Forest Policy and Economics, Elsevier, vol. 97(C), pages 210-222.
    10. Petucco, Claudio & Andrés-Domenech, Pablo, 2018. "Land expectation value and optimal rotation age of maritime pine plantations under multiple risks," Journal of Forest Economics, Elsevier, vol. 30(C), pages 58-70.
    11. Susaeta, Andres & Gutiérrez, Ester & Lozano, Sebastián, 2023. "Profit-efficiency analysis of forest ecosystem services in the southeastern US," Ecosystem Services, Elsevier, vol. 64(C).
    12. Susaeta, Andres, 2018. "On Pressler’s indicator rate formula under the generalized Reed model," Journal of Forest Economics, Elsevier, vol. 30(C), pages 32-37.
    13. Müller, Fabian & Hanewinkel, Marc, 2018. "Challenging the assumptions of a standard model: How historical triggers in terms of technical innovations, labor costs and timber price change the land expectation value," Forest Policy and Economics, Elsevier, vol. 95(C), pages 46-56.

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