Optimal forest rotation age under efficient climate change mitigation

Tommi Ekholm

Research output: Contribution to journalArticleScientificpeer-review

12 Citations (Scopus)

Abstract

This paper considers the optimal rotation of forests when the carbon flows from forest growth and harvest are priced with an increasing price. Such evolution of carbon price is generally associated with economically efficient climate change mitigation, and would provide incentives for the land-owner for enhanced carbon sequestration. For an infinitely long sequence of even-aged forest rotations, the optimal harvest age changes with subsequent rotations due to the changing carbon price. The first-order optimality conditions therefore also involve an infinite chain of lengths for consecutive forest rotations, and allow the approximation of the infinite-time problem with a truncated series of forest rotations.Illustrative numerical calculations show that when starting from bare land, the initial carbon price and its growth rate both primarily increase the length of the first rotation. With some combinations of the carbon pricing parameters, the optimal harvest age can be several hundred years if the forest carbon is released to the atmosphere upon harvest. In the near term, however, a higher growth rate of carbon price can lead to shorter rotations for forests that are already near their optimal rotation age, indicating that the effect of carbon price dynamics on optimal rotation is not entirely monotonous. The introduction of carbon pricing can also have a significant impact on bare land value, and in some considered parametrizations the land value was based solely on its potential to capture and store atmospheric carbon.
Original languageEnglish
Pages (from-to)62-68
JournalForest Policy and Economics
Volume62
DOIs
Publication statusPublished - 2016
MoE publication typeA1 Journal article-refereed

Fingerprint

carbon markets
pollution control
climate change
carbon
land values
land value
pricing
forest growth
price dynamics
climate change mitigation
Climate change mitigation
carbon sequestration
Carbon
Carbon price
incentive
Harvest
price
Optimal rotation

Keywords

  • optimal forest rotation
  • carbon pricing
  • climate change mitigation

Cite this

@article{15cf6a1ff76541baab6c4e4ae34e5ead,
title = "Optimal forest rotation age under efficient climate change mitigation",
abstract = "This paper considers the optimal rotation of forests when the carbon flows from forest growth and harvest are priced with an increasing price. Such evolution of carbon price is generally associated with economically efficient climate change mitigation, and would provide incentives for the land-owner for enhanced carbon sequestration. For an infinitely long sequence of even-aged forest rotations, the optimal harvest age changes with subsequent rotations due to the changing carbon price. The first-order optimality conditions therefore also involve an infinite chain of lengths for consecutive forest rotations, and allow the approximation of the infinite-time problem with a truncated series of forest rotations.Illustrative numerical calculations show that when starting from bare land, the initial carbon price and its growth rate both primarily increase the length of the first rotation. With some combinations of the carbon pricing parameters, the optimal harvest age can be several hundred years if the forest carbon is released to the atmosphere upon harvest. In the near term, however, a higher growth rate of carbon price can lead to shorter rotations for forests that are already near their optimal rotation age, indicating that the effect of carbon price dynamics on optimal rotation is not entirely monotonous. The introduction of carbon pricing can also have a significant impact on bare land value, and in some considered parametrizations the land value was based solely on its potential to capture and store atmospheric carbon.",
keywords = "optimal forest rotation, carbon pricing, climate change mitigation",
author = "Tommi Ekholm",
year = "2016",
doi = "10.1016/j.forpol.2015.10.007",
language = "English",
volume = "62",
pages = "62--68",
journal = "Forest Policy and Economics",
issn = "1389-9341",
publisher = "Elsevier",

}

Optimal forest rotation age under efficient climate change mitigation. / Ekholm, Tommi.

In: Forest Policy and Economics, Vol. 62, 2016, p. 62-68.

Research output: Contribution to journalArticleScientificpeer-review

TY - JOUR

T1 - Optimal forest rotation age under efficient climate change mitigation

AU - Ekholm, Tommi

PY - 2016

Y1 - 2016

N2 - This paper considers the optimal rotation of forests when the carbon flows from forest growth and harvest are priced with an increasing price. Such evolution of carbon price is generally associated with economically efficient climate change mitigation, and would provide incentives for the land-owner for enhanced carbon sequestration. For an infinitely long sequence of even-aged forest rotations, the optimal harvest age changes with subsequent rotations due to the changing carbon price. The first-order optimality conditions therefore also involve an infinite chain of lengths for consecutive forest rotations, and allow the approximation of the infinite-time problem with a truncated series of forest rotations.Illustrative numerical calculations show that when starting from bare land, the initial carbon price and its growth rate both primarily increase the length of the first rotation. With some combinations of the carbon pricing parameters, the optimal harvest age can be several hundred years if the forest carbon is released to the atmosphere upon harvest. In the near term, however, a higher growth rate of carbon price can lead to shorter rotations for forests that are already near their optimal rotation age, indicating that the effect of carbon price dynamics on optimal rotation is not entirely monotonous. The introduction of carbon pricing can also have a significant impact on bare land value, and in some considered parametrizations the land value was based solely on its potential to capture and store atmospheric carbon.

AB - This paper considers the optimal rotation of forests when the carbon flows from forest growth and harvest are priced with an increasing price. Such evolution of carbon price is generally associated with economically efficient climate change mitigation, and would provide incentives for the land-owner for enhanced carbon sequestration. For an infinitely long sequence of even-aged forest rotations, the optimal harvest age changes with subsequent rotations due to the changing carbon price. The first-order optimality conditions therefore also involve an infinite chain of lengths for consecutive forest rotations, and allow the approximation of the infinite-time problem with a truncated series of forest rotations.Illustrative numerical calculations show that when starting from bare land, the initial carbon price and its growth rate both primarily increase the length of the first rotation. With some combinations of the carbon pricing parameters, the optimal harvest age can be several hundred years if the forest carbon is released to the atmosphere upon harvest. In the near term, however, a higher growth rate of carbon price can lead to shorter rotations for forests that are already near their optimal rotation age, indicating that the effect of carbon price dynamics on optimal rotation is not entirely monotonous. The introduction of carbon pricing can also have a significant impact on bare land value, and in some considered parametrizations the land value was based solely on its potential to capture and store atmospheric carbon.

KW - optimal forest rotation

KW - carbon pricing

KW - climate change mitigation

U2 - 10.1016/j.forpol.2015.10.007

DO - 10.1016/j.forpol.2015.10.007

M3 - Article

VL - 62

SP - 62

EP - 68

JO - Forest Policy and Economics

JF - Forest Policy and Economics

SN - 1389-9341

ER -