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Irreversibility and the economics of forest conservation

Author

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  • Adriana Piazza

    (Universidad Adolfo Ibáñez)

  • Santanu Roy

    (Southern Methodist University)

Abstract

Regenerating forest on land used for non-forest economic activities can be difficult; this introduces some irreversibility in the process of deforestation. We analyze the effect of such irreversibility (reforestation cost) on the efficiency of forest conservation in a general model of optimal forest management where trees are classified in age classes and land has alternative economic use. Irreversibility may lead to a continuum of optimal steady states that differ in the area under forest cover; increase in irreversibility can only add steady states with smaller forest cover. High irreversibility discourages expansion of forests but at the same time, makes it optimal to conserve a minimal forested area in the long run; in particular, it is optimal to maintain a forested area above a critical size if the initial forest cover lies above it, while forests that are initially smaller than the critical level are optimally managed at constant size. We characterize the exact condition under which it is optimal to avoid total deforestation; the extent of irreversibility does not matter for this. Weak irreversibility may be associated with cyclical fluctuations in optimal forest cover; we characterize upper and lower bounds on the forest cover along an optimal path.

Suggested Citation

  • Adriana Piazza & Santanu Roy, 2020. "Irreversibility and the economics of forest conservation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 69(3), pages 667-711, April.
    • Handle: RePEc:spr:joecth:v:69:y:2020:i:3:d:10.1007_s00199-019-01175-x
    DOI: 10.1007/s00199-019-01175-x
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    More about this item

    Keywords

    Irreversibility; Deforestation; Conservation; Optimal forest management; Renewable resources;
    All these keywords.

    JEL classification:

    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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