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The Faustmann model under storm risk and price uncertainty: A case study of European beech in Northwestern France

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  • Rakotoarison, Hanitra
  • Loisel, Patrice

Abstract

International, economic and environmental contexts in this century are strongly affected by risks and uncertainties. Due to the long-term nature of forest investment, forest managers must integrate risks and uncertainties into their decisions. Our objective is to build a decision support tool to optimize forest management under multiple risks: extreme events and price variations. Our method integrates, into an economic model, different types of models on forest growth, price functions, predicted storm intensity and intervals, and damage functions. A numerical simulation applied to European beech (Fagus sylvatica) in Northwestern France shows that price variation as between 1974 and 2016 produces higher economic loss than does storm damage. We conclude on the need to concentrate forest policy on the development of new technologies and wood industry practices to increase the value of this natural resource. However, future climate change may well influence storm frequency and intensity, and this places limits on our conclusions.

Suggested Citation

  • 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.
    • Handle: RePEc:pra:mprapa:85114
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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.

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    More about this item

    Keywords

    Price uncertainty; Storm damage; Risks; Wood industry; Forest policy;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices
    • 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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