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Optimal Forest Management with Carbon Sequestration Credits and Endogenous Fire Risk

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  • Adam J. Daigneault
  • Mario J. Miranda
  • Brent Sohngen

Abstract

We use a stochastic dynamic profit maximization model to investigate the effects of forest carbon sequestration credits on optimal forest management practices for stands facing wildfire risk. Landowners that periodically thin a stand can increase growth rates and mitigate loss of timber and carbon stocks from wildfire. Results indicate that thinning and shortening rotations are cost-effective strategies to mitigate wildfire risk. Carbon prices cause landowners to delay both their thinning treatments and the final rotation age. Thinning and extending timber rotations are thus a viable climate-change mitigation option even when stands are susceptible to risks of fire.

Suggested Citation

  • Adam J. Daigneault & Mario J. Miranda & Brent Sohngen, 2010. "Optimal Forest Management with Carbon Sequestration Credits and Endogenous Fire Risk," Land Economics, University of Wisconsin Press, vol. 86(1), pages 155-172.
    • Handle: RePEc:uwp:landec:v:86:y:2010:i:1:p:155-172
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Charles Sims & David Aadland & David Finnoff & James Powell, 2013. "How Ecosystem Service Provision Can Increase Forest Mortality from Insect Outbreaks," Land Economics, University of Wisconsin Press, vol. 89(1), pages 154-176.
    2. Susaeta, Andres & Chang, Sun Joseph & Carter, Douglas R. & Lal, Pankaj, 2014. "Economics of carbon sequestration under fluctuating economic environment, forest management and technological changes: An application to forest stands in the southern United States," Journal of Forest Economics, Elsevier, vol. 20(1), pages 47-64.
    3. Acosta, Montserrat & Sohngen, Brent, 2009. "How big is leakage from forestry carbon credits? Estimates from a Global Model," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49468, Agricultural and Applied Economics Association.
    4. Jussi Lintunen & Jussi Uusivuori, 2014. "On The Economics of Forest Carbon: Renewable and Carbon Neutral But Not Emission Free," Working Papers 2014.13, Fondazione Eni Enrico Mattei.
    5. Kim, Taeyoung & Langpap, Christian, 2012. "Private Landowners’ Response to Incentives for Carbon Sequestration in Forest Management," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 130709, Agricultural and Applied Economics Association.
    6. Tommi Ekholm, 2019. "Optimal forest rotation under carbon pricing and forest damage risk," Papers 1912.00269, arXiv.org.
    7. Hoel, Michael & Holtsmark, Bjart & Holtsmark, Katinka, 2014. "Faustmann and the climate," Journal of Forest Economics, Elsevier, vol. 20(2), pages 192-210.
    8. Al Abri, Ibtisam H. & Grogan, Kelly A. & Daigneault, Adam, 2017. "Optimal Forest Fire Management with Applications to Florida," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258568, Agricultural and Applied Economics Association.
    9. Ekholm, Tommi, 2020. "Optimal forest rotation under carbon pricing and forest damage risk," Forest Policy and Economics, Elsevier, vol. 115(C).
    10. Patto, João V. & Rosa, Renato, 2022. "Adapting to frequent fires: Optimal forest management revisited," Journal of Environmental Economics and Management, Elsevier, vol. 111(C).
    11. Luis Diaz-Balteiro & David Martell & Carlos Romero & Andrés Weintraub, 2014. "The optimal rotation of a flammable forest stand when both carbon sequestration and timber are valued: a multi-criteria approach," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 72(2), pages 375-387, June.
    12. Aino Assmuth & Janne Rämö & Olli Tahvonen, 2021. "Optimal Carbon Storage in Mixed-Species Size-Structured Forests," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 79(2), pages 249-275, June.
    13. Sohngen, Brent & Tian, Xiaohui, 2016. "Global climate change impacts on forests and markets," Forest Policy and Economics, Elsevier, vol. 72(C), pages 18-26.
    14. Köthke, Margret & Dieter, Matthias, 2010. "Effects of carbon sequestration rewards on forest management--An empirical application of adjusted Faustmann Formulae," Forest Policy and Economics, Elsevier, vol. 12(8), pages 589-597, October.
    15. Gren, Ing-Marie & Zeleke, Abenezer Aklilu, 2016. "Policy design for forest carbon sequestration: A review of the literature," Forest Policy and Economics, Elsevier, vol. 70(C), pages 128-136.
    16. Kuusela, Olli-Pekka & Lintunen, Jussi, 2020. "Modeling market-level effects of disturbance risks in age structured forests," Forest Policy and Economics, Elsevier, vol. 118(C).
    17. Gintautas Mozgeris & Vaiva Kazanavičiūtė & Daiva Juknelienė, 2021. "Does Aiming for Long-Term Non-Decreasing Flow of Timber Secure Carbon Accumulation: A Lithuanian Forestry Case," Sustainability, MDPI, vol. 13(5), pages 1-24, March.
    18. Creamer, Selmin F. & Genz, Alan & Blatner, Keith A., 2012. "The Effect of Fire Risk on the Critical Harvesting Times for Pacific Northwest Douglas-Fir When Carbon Price Is Stochastic," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 41(3), pages 1-14, December.
    19. Labbé, Rodrigo & Niklitschek, Mario & Contreras, Marco, 2023. "Effect of climate change on the land rent of radiata pine plantations in Chile: Site productivity and forest fires," Forest Policy and Economics, Elsevier, vol. 156(C).
    20. Lauer, Christopher J. & Montgomery, Claire A. & Dietterich, Thomas G., 2017. "Spatial interactions and optimal forest management on a fire-threatened landscape," Forest Policy and Economics, Elsevier, vol. 83(C), pages 107-120.
    21. Luo, Li & Gao, Yuan & Regan, Courtney M. & Summers, David M. & Connor, Jeffery D. & O'Hehir, Jim & Meng, Li & Chow, Christopher W.K., 2024. "Emissions offset incentives, carbon storage and profit optimization for Australian timber plantations," Forest Policy and Economics, Elsevier, vol. 159(C).
    22. Couture, Stéphane & Reynaud, Arnaud, 2011. "Forest management under fire risk when forest carbon sequestration has value," Ecological Economics, Elsevier, vol. 70(11), pages 2002-2011, September.
    23. Rossi, David & Kuusela, Olli-Pekka, 2023. "Carbon and Timber Management in Western Oregon under Tax-Financed Investments in Wildfire Risk Mitigation," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 48(2), May.
    24. Zhou, Mo, 2015. "Adapting sustainable forest management to climate policy uncertainty: A conceptual framework," Forest Policy and Economics, Elsevier, vol. 59(C), pages 66-74.

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    More about this item

    JEL classification:

    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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