Stéphane Couture, and Arnaud Reynaud, “Forest Management under Fire Risk when Forest Carbon Sequestration Has Value”, TSE Working Paper, n. 09-005, January 2009.
In this paper, we develop a multiple forest use model to determine the optimal harvest date for a forest stand producing both timber and carbon benefits under a risk of fire. The preferences of the representative non-industrial private forest (NIPF) owner are modeled though an expected utility specification. We introduce saving as a decision of the forest owner at any time. The problems of forest management and saving decisions are solved simultaneously using a stochastic dynamic programming method. A numerical programming method is used to characterize the optimal forest and saving policies. We apply this framework to model the behavior of a representative NIPF owner located in the Southwest of France. The empirical application indicates that a higher risk of fire will decrease the optimal rotation period, while higher carbon prices will increase the optimal harvesting age. We show that increasing the risk of fire leads to a reduction in rotation duration. On the contrary, a higher carbon price makes carbon sequestration more profitable, thereby leading to increasing the rotation duration. We then show how the carbon price/risk of fire frontier is affected by risk aversion.
Stéphane Couture, and Arnaud Reynaud, “Forest management under fire risk when forest carbon sequestration has value”, Ecological Economics, vol. 70, n. 11, September 2011, pp. 2002–2011.