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Pine forest management today has not already reached its optimal state. The abnormal pine stand structure will cause a decrease in the production of pine resin. This study aimed to determine the optimal rotation of pine plantation forest and formulated the harvest scheduling to ensured optimal resin production. The determination of optimal rotation was conducted by modifying the Faustman formula to be applied on the condition in forest management in Perhutani. Simulation optimization of harvest scheduling was conducted by linear programming. Optimal rotation of pine forest plantation consists of timber rotation and resin rotation. The highest net present value of timber was obtained at 25 year cycles and the highest net present value of the resin was obtained at 35 year cycles. The inclusion of resin benefit was resulting in lengthening the optimal rotation age. The abnormal stand structure was causing the fluctuations of pine resin production. Thus, the efforts to improve it was by applying the harvest scheduling framework. This study concluded that harvest scheduling which conducted over eight periods has made the abnormal stand structure into the normal forest condition. The existence of normal forest condition led to the certainty of pine resin production sustainability.

There are regions where forestry is required for wood production but the profitability is so low that many forest stands cannot be managed without subsidisation. Hence, the policymakers should design an efficient subsidising system involving the selection of subsidised forest stands. In this paper, we present an analytical framework for the proposition through the construction of a normal forest (a forest state such that the age distribution of stands is uniform) that consists of only stands that need to be subsidised for regeneration. The normal forest is constructed so that it supplies the required annual wood yield with minimum governmental expense for the subsidy. The rotation age of the normal forest is set to an optimal rotation age based on the soil expectation value of the stands under the minimum subsidy rates. The normal forest can be derived without numerical integration when the dominant tree height distribution follows a generalised gamma distribution. We present an application of the framework for four tree species in the Nagano Prefecture, Japan. The result of the application shows that the framework enables us to select the subsidised stands for efficient governmental funding, implying the practical conditions of the stands and requirements of wood demands, by using optimisation functions in a commercial spreadsheet program.

This study aimed to estimate the optimal forest rotation age for tropical plantations of a native tree species, Canarium album (Lour.) under the management of high, medium, and low income groups of farm households of Vietnam. The results suggest that: (i) the optimal rotation age for the low income group is longer than that for the high income group; (ii) low income farmers are more sensitive in terms of the land expectation value to changes in discount rate; (iii) low income farmers gain less if the carbon price increases; and (iv) the carbon payment scheme at the start of a rotation is more financially attractive to forest farmers, but the carbon payment scheme at the end of a rotation is more advantageous in terms of forest biodiversity. These findings lead to potential policy implications for forest management for the provision of multiple ecosystem services in the context of a developing country, demonstrating a tradeoff between forest income and biodiversity conservation. While an increase in carbon prices would benefit forest farmers, we also suggest that these farmers could be compensated for their income losses or rewarded to maintain or increase forest biodiversity. However, relatively greater attention could be paid to compensating low income farmers as they potentially lose more with an increase in discount rate and gain less with an increase in carbon price.

The growth of an even-aged stand usually follows a S-shaped pattern, implying that the growth function is convex when stand age is low and concave when stand age is high. Given such a growth functi ...

We extended the Hartman model to examine the optimal rotation, taking into consideration the economic benefits of wood and the dynamics of three carbon pools (aboveground biomass, dead organic matter, and harvested forest products). Chinese fir (Cunninghamia lanceolata) stands in Southern China were taken for a numerical example to analyze the effects of carbon price on the optimal management of short-rotation plantations. The results show that, with the current price of carbon, introducing the effects of harvesting on different carbon pools into the decision model would increase the optimal rotation age on poor (SI = 10) and medium (SI = 17) sites by one year, while it does not have any impact on the optimal rotation for good sites (SI = 21). Irrespective of site condition, the optimal rotation age is not sensitive to carbon price and interest rate. An increase in interest rate by 1% would reduce the optimal rotation age by one year. In conclusion, forest carbon trade could effectively enhance land owners' income from short-rotation forest plantations. However, it does not lead to any significant increase in forest carbon sink.

This article examines alternative forest harvesting regimes when ecosystem services in terms of water quality, biodiversity conservation and climate change mitigation are included in the analysis. The harvesting regimes are whole-tree harvesting with stump removal and conventional stem-only harvesting. The harvesting regimes are evaluated under two alternative climate policy contexts. The first alternative is a carbon neutral bioenergy policy, which assumes the carbon dioxide (CO2) neutrality of bioenergy and produces substitution benefits, as bioenergy replaces fossil fuels. The second alternative climate policy, a carbon non-neutral bioenergy policy, takes into account the fact that bioenergy causes carbon dioxide emissions, producing substitution costs, and that harvested woody biomass affects the ability of a forest to act as a carbon sink. We extend the traditional Faustmann (1849) rotation model to include nutrient load damage, biodiversity benefits, and climate impacts. The empirical analysis is based on Finnish data from a catchment experiment carried out on drained peatland forests. The empirical results show that under a carbon neutral bioenergy policy, whole-tree harvesting with stump removal produces the highest net social benefits. However, if a carbon non-neutral bioenergy policy is assumed, the net social benefits are greater under stem-only harvesting.

We extend the classic Mitra and Wan forestry model by assuming that prices follow a geometric Brownian motion. We move one step further in the model with stochastic prices and include risk aversion in the objective function. We prove that, as in the deterministic case, the optimal program is periodic both in the risk neutral and risk averse frameworks, when the benefit function is linear. We find the optimal rotation ages in both stochastic cases and show that they may differ significantly from the deterministic rotation age. In addition, we show how the drift of the price process affects the optimal rotation age and how the degree of risk aversion shortens it. We illustrate our findings for an example of a biomass function and for different values of the model’s parameters.

This paper presents a method for determining the subsidy required to motivate farmers to participate in timber afforestation programs designed to maximize social well-being. The method incorporates a carbon sequestration benefit function into the land expected value model in order to quantify the social benefit arising from carbon sequestration by the planted trees. This is used to calculate the optimal rotation age for newly planted forests that maximizes social utility. The minimum subsidy required to motivate farmers to participate in the afforestation program was calculated using a modified decision model that accounts for the subsidy's impact. The maximum subsidy offered by the government was taken to be the NPV of the carbon sequestration achieved by afforestation. Data on Robinia pseudoacacia L. trees planted on the Loess Plateau were used in an empirical test of the model, which in this case predicts an optimal subsidy of 254.38 yuan/ha over 40 years. This would guarantee the maintenance of forest on land designated for afforestation until they reached the socially optimal rotation age. The method presented herein offers a new framework for designing afforestation subsidy programs that account for the environmental service (specially, the carbon sequestration) provided by forests.

Biodiversity loss is a major problem in terms of loss of genetic and ecosystem services and more specifically via impacts on the livelihoods, food security and health of the poor. This study modeled forest management strategies that balance economic gains and biodiversity conservation benefits in planted tropical forests. A forest-level model was developed that maximized the net present value (NPV) from selling timber and carbon sequestration while maintaining a given level of biodiversity (as per the population density of birds). The model was applied to Eucalyptus urophylla planted forests in Yen Bai Province, Vietnam. It was found that the inclusion of biodiversity conservation in the model induces a longer optimal rotation age compared to the period that maximizes the joint value from timber and carbon sequestration (from 8 to 10.9 years). The average NPV when considering timber values plus carbon sequestration was 13 million Vietnamese Dong (VND) ha− 1 (765 USD ha− 1), and timber, carbon sequestration and biodiversity values were 11 million VND (676 USD) ha− 1. Given this differential, governments in such tropical countries may need to consider additional incentives to forest owners if they are to encourage maximizing biodiversity and its associated benefits. The results also have some implications for implementing the climate control measure of “Reducing Emissions from Deforestation and Forest Degradation-plus (REDD +)” in developing countries, i.e., payment for carbon sequestration and biodiversity benefits in planted forests.

This study modelled the potential biodiversity benefits and the opportunity costs of a patch-clear-cutting strategy over a clear-cutting strategy for Pinus radiata in New Zealand. Patch-clear cutting is a special case of clear cutting involving the removal of all the trees from strips or patches within a stand, leaving the remainder uncut or clear cutting a series of strips or patches. A forest-level optimisation model was extended to include uncertainty in timber growth, plant diversity, and cutting costs. Using a species-area relationship and economies of cutting scale, the net present value and optimal rotation age under alternative management strategies were calculated. Results suggested that the optimal rotation ages were similar (24 and 25 years) for the two cutting strategies. Patch-clear cutting provided higher biodiversity benefits (i.e., 59 vs. 11 understorey plant species) with an opportunity cost of 27 NZD (18 USD) per extra plant species or 1250 NZD (820 USD) ha−1. However, the true benefits of patch-clear cutting would be even greater if other benefits of stand retention are included. Our research can potentially inform local decision making and inform international systems of payment for environmental services, such as the REDD+ (Reducing Emissions from Deforestation and Forest Degradation) program, to conserve biodiversity in developing countries with plantation forests.

This article analyzes the optimal rotation age and the size of the buffer zone when society values harvest revenue, water quality and biodiversity. In a theoretical model we extend the traditional Faustmann rotation model to include the possibility of leaving an unharvested riparian buffer zone between the cut area and the watercourse in order to reduce nutrient load damages to the watercourse and increase biodiversity benefits in the buffer zone. We then analyze how the optimal rotation age and optimal size of the buffer zone are chosen simultaneously. In an empirical analysis, we use Finnish data including simulation results of nitrogen loads to find the social optimal solution with a numerical model. Biodiversity is valuated as a willingness to pay for retention trees left in the buffer zone. According to the empirical results in the social optimum it is not optimal to allocate any land to an unharvested buffer zone when we consider the reduction of the nitrogen load as the only benefit provided by the buffer zone. However, when we add the biodiversity benefits into the empirical analysis, the optimal size of the buffer zone is 4% of the area in the social optimum. Under the current damage valuation, the empirical results do not give any support to the hypothesis that prolonged rotation ages could be used to reduce the damage from the nutrient load.

In the 1990s, an expansion of small-scale (farm) forestry in medium to low rainfall areas was considered to be an important part of increasing the national forest estate but it remains a very minor source of timber, largely confined to the higher rainfall areas. In most areas, returns from timber are much less than for alternative land uses, even with low discount rates. If however, there are additional returns from plantation grazing and carbon sequestration and there are other potential management gains, multiple use plantations may be more attractive. The goal of this study is to estimate the net present values of multiple use spotted gum plantations in a medium rainfall area of southeast Queensland. For the case study, production, carbon sequestration and emissions data were supplemented by formal and informal interviews with landholders, sawmill staff and government extension personnel. Forest inventory, biomass and soil sampling, and stakeholder interviews were used as sources of primary data. The costs and benefits data were converted into monetary terms and discounted to produce net present values. Evaluations in this study identify the optimal rotation age of plantations to be 33–34 years. This is the case if including carbon and stock values, and using either farm- or factory-gate timber prices. The net present value increases significantly however if farmers harvest the trees themselves. In addition, at harvesting age, it was found that carbon and stock had the potential to account for 19.2 and 11.4 % respectively of the total returns from spotted gum plantations. Policy initiatives to support the farm forestry sub-sector should include pricing greenhouse gas emissions and developing and strengthening farmers co-operatives and marketing institutions to enhance farmers’ bargaining power.

A classical problem in forest economics is the determination of the optimal rotation age. It is commonly acknowledged that Martin Faustmann and Max Robert Pressler contributed the most to the solution of this problem. Faustmann formulated the renowned land expectation value formula, which laid the foundation for economic analyses of the optimal rotation problem. He also provided several hints on how to correctly solve the problem. Pressler's work focused on the growth of the capital in a forest stand. He invented the concept of Indicator Per Cent, and argued that the Indicator Per Cent should be used to guide forestry decision-making. Pressler correctly stated how to use the Indicator Per Cent to determine when a stand should be harvested. However, his suggestions about the choice among silviculture options indicate that he did not fully understand the economic implication of the Indicator Per Cent.

This paper proposes a discrete-time type timber harvesting model for simultaneously determining (i) the optimal quantity of seedlings to be planted, (ii) the optimal quantities of timber harvested by thinnings, and (iii) the optimal rotation age. With the help of Microsoft Excel Solver, a generalized reduced gradient algorithm, numerical examples are developed to evaluate the impact of the variations in the quality level of a forest site on the optimal harvest strategy. It is shown that the level of optimal rotation age and optimal quantity of seedlings to be planted can individually exhibit non-monotonicity to the increase in site quality.

Healthy forests and enhanced habitat for wildlife is a growing concern among public and policy makers. These concerns have led to substantial interest in promoting various regulatory and voluntary compliance policies to further biodiversity on private forests. These policies, however, might result in additional cost to forestland owners. In this paper, we estimate the opportunity cost of adopting various biodiversity-friendly forest practices. We do this in the context of slash pine, a dominant commercial tree plantation species in Florida. Results suggest that prescribed burning, invasive species control, maintaining streamside buffer zones, and extending timber harvest beyond the optimal rotation age would significantly decrease the profitability of slash pine forestry. If the major objective of landowners is to maximize profits, results indicate that they are less likely to adopt these practices at socially desirable levels without a policy support. More specifically, results suggest that an annual payment of $38–83 per hectare is required for landowners to adopt these practices. The paper further argues that application of mere command-and-control approaches to implement these practices may result in conversion of private forests to other competitive land uses.

Populations of northern bobwhite (Colinus virginianus) have declined significantly over the past 50 years, and the primary factor contributing to this decline has been the loss of habitat. Forest landowners who are concerned with providing bobwhite habitat as well as generating revenue from timber should balance the silvicultural requirements of timber production with the biological needs of the bobwhite. The goal of this study was to determine the economic tradeoffs between bobwhite and timber management and how to minimize loss or maximize profit when managing for bobwhite and timber simultaneously. I performed discounted cash flow analyses, calculated land expectation value, and determined the financially optimal rotation age and optimal timing and intensity of thinnings for loblolly pine (Pinus taeda) plantations under specific management objectives. My results show that the annual per-hectare economic gains of managing for both bobwhite and timber ranged from US$19.27 to $41.37 on site index 50 land, and ranged from $32.63 to $50.02 on site index 90 land. My analysis indicates that bobwhite management provides an investment opportunity to landowners whose low-productivity sites would be unprofitable if timber is the only product. My study provides an example of integrating multiple uses of goods and services in a way that maximizes economic returns and aids land managers in producing better habitat for bobwhite.

Forests help mitigate climate change by sequestering atmospheric carbon. However, boreal and high-latitude temperate forests may also contribute to global warming due to the albedo effect. The relative effects of carbon sequestration and albedo can be quantified in terms of radiative forcing. We present a stylized, stand-level analysis to determine the optimal rotation age when considering a tax/subsidy scheme based on radiative forcing and the notion of equivalent carbon emissions. Additional management decision variables considered include species choice and regeneration effort, since these can impact the albedo effect. We demonstrate analytically that the optimal rotation length is likely shortened when albedo-related equivalent emissions are incorporated, relative to a policy based only on carbon. Empirical results indicate that rotation ages do decrease relative to a “carbon only” policy, and approach the traditional (timber only) Faustmann rotation age as equivalent emission rates increase. Our results suggest that forestation does not necessarily provide climatic benefits in all circumstances, and that, at the margin, other opportunities for carbon reduction (e.g. abatement), or pursuing forestation in other locations, become more attractive.

The economic decision model serving as an objective function in forest economics was conceived originally by Faustmann at the stand level. Nevertheless, the tree level seems to be an appropriate scale for analysis, especially for harvesting decisions and certain estimations both at tree and stand levels. However, the Faustmann formula cannot be directly applied to the tree level. The present research has provided certain tree-level formulations of the Faustmann formula, including, in particular, tree expectation value (TEV) and land expectation value (LEV). TEV and tree-level LEV formulas were developed by analyzing the Faustmann formula under deterministic conditions. Unlike previous tree-level decision models presented in the forest economics literature, TEV and tree-level LEV formulas incorporate the expectation value of the land occupied by trees and its variability over time as well as the interaction between trees and their trajectories (cutting age). The proposed formulas were then compared with the Faustmann formula using the first-order condition of optimal harvest age. The TEV and tree-level LEV formulas appeared to be absolutely compatible with the Faustmann formula. The utility of the proposed formulas was then illustrated with application examples, including target diameter, stand expectation value, TEV, LEV, and the value of damage to beech trees or stands in northeastern France.

In this paper, the effects of stumpage prices and forest and landowner characteristics on nonindustrial private forest owners’ long-run timber supply are examined using cross-sectional variation in a data set of 1860 landowners in Finland during 1994–1998. We estimate an inverse hyperbolic sine Tobit model allowing for heteroscedasticity and non-normality of errors. The hypotheses of the rotation model can be examined by decomposing the effects of the exogenous variables into the effects on the conditional mean of nonzero harvests and the effects on the probability of nonzero harvest. The results of the study are consistent with the Faustmann rotation model when the forest owner simultaneously decides both the optimal rotation age of an even-aged stand and the optimal life-cycle consumption of goods and services with in situ valuation of standing timber.

This paper analyses timber harvesting in the Finnish economic and wood production environment. Empirical evidence including stumpage prices, silvicultural costs, etc., since 1949 covers all non-industrial private forestry. Stumpage price and volume growth processes are proxied by GBMs. Optimal harvesting age solutions and numerical results recognising price drift, price and growth volatility, volume growth, value growth and stand establishment costs, as well as thinning benefits, are provided for Scots pine. Moreover, comparative static and sensitivity solutions, including numerical results, show the impact of the discount rate, price drift, and price and growth volatilities on optimal harvesting age. Price volatility prolonged harvesting age by some 5–9 years, and growth volatility by about 1–2, but negative price drift for discount rates from 5 to 2% fell by roughly 6–10 years. Ignoring the future thinning benefits prolonged the harvesting age only by 1–2 years, but ignoring future stand establishment costs reduced it by 2–4 years. Including the price drift and volatility violated the 70 year age limit in the Forest Act for discount rates exceeding 3.5%. The recommended harvesting age of 80 years could be established only by ignoring the price drift. In all, this study produces solutions and programs that can be incorporated into a forest management planning software product widely used in Finland (Hynynen et al. in For Ecol Manage 207(1–2):5–18, 2005).

This paper analyses the effects of resin benefit on the optimal rotation age of Simao pine plantation. Timber growth and resin yield functions were first derived, and then an integrated formulation for Hartman rotation was solved by taking both timber and resin benefits into consideration through numerical optimization. Empirical results indicate that: (1) the inclusion of resin benefit results in lengthening optimal rotation age; (2) resin benefit has a greater effect on rotation age when discount rate is low than when it is high, ceteris paribus; (3) with an improvement of site productivity, resin benefit has a decreasing effect on rotation age, other factors being constant. These effects are also true with respect to benefit gains in present value.

We extend existing stand-level models of forest landowner behavior in the presence of fire risk to include the level and timing of fuel management activities. These activities reduce losses if a stand ignites. Based on simulations, we find the standard result that fire risk reduces the optimal rotation age does not hold when landowners use fuel management. Instead, the optimal rotation age rises as fire risk increases. The optimal planting density decreases. The level of intermediate fuel treatment, but not its timing, is sensitive to the magnitude of fire risk. Cost-sharing is shown to be an effective instrument for encouraging fuel treatment.

Summary Management of near-to-nature forests is frequently supplanted by faster-growing ‘industrial’ plantations on the basis of the latter’s superior economic return. These latter species often produce higher volumes of usable biomass in shorter periods of time. Increased yields come with a price, however. While some species provide a superior net present value, they may require a higher cash flow position on the part of the landowner. Other species may possess superior production capabilities but are susceptible to insect and disease attack. Under such conditions, less productive ‘native’ species might produce a satisfactory rate of return considering their reduced risk of attack. We examine two methods of evaluating differences in effective yield and rate of return. The first method, expected value analysis, is a deterministic method that uses decision tree methodology coupled with pre-determined probabilities of outcome for a given series of events and choices. The second method is a matrix model using stochastic transitions between healthy trees and different states of poor health. Markov processes are used to drive simulations of insect and disease attack, and then calculate net present value and optimal rotation age. We keep the final per-unit product price fixed to simplify the analysis and better validate the comparison between the deterministic and stochastic methods. We use longleaf (Pinus palustris Mill.), loblolly (P. taeda L.), shortleaf (P. echinata Mill.) and slash (P. elliottii Engelm.) pines as the species in our comparison. Longleaf is the slowest growing, but it is less prone to attack than the other three. Using more recent Forest Inventory and Analysis (FIA) data, both our Markov analysis and expected value analysis found loblolly and slash pines to be superior economic performers. Earlier FIA surveys support the selection of loblolly and slash over longleaf, but suggest that higher fusiform incidence might push the investment decision towards longleaf pine, particularly vis-a-vis slash pine at higher site indices. Both analysis methods provided the same outcomes, so long as they used the same data. Given this result, a decision tree methodology is a reasonable method for evaluating the economics of species choice in forest restoration activities.

The impact of a carbon subsidy and tax policy on slash pine (Pinus elliottii) plantations is investigated using a modified Hartman model. Such a policy is shown to increase the optimal rotation age, land expectation value and the supply of sequestered carbon. The supply of carbon increases at a decreasing rate with the price of carbon. The supply of sawtimber increases while the supply of pulpwood decreases. The increase in land expectation value was substantial, suggesting inclusion of carbon sequestration benefits and emission costs would benefit private forestland owners. As the value of forestland increases in response to a carbon policy, more land could be devoted to forestry as opposed to other land uses such as agriculture and urban development.

This study solves the problem of optimal spatial harvest planning when forest stands are faced by risk of windthrow and the risk depends explicitly on the features of the stand and its neighbours as well as on the geographical structure and orientation of the forest. First, we estimate the optimal rotation age and expected net present value for a range of discount rates and windthrow hazards for an unprotected stand. Next, the influence of shelter is evaluated for a ‘forest’ with two stands. Two different windthrow probability models are analysed. Relative to the one-stand case, the optimal rotation age and the corresponding net present value change significantly when an extra stand is included. This is due to the shelter effect reducing the risk of windthrow. Shelter also increases the optimal rotation age from the lower limit, being the optimal rotation age of a single stand, towards the upper limit being the case without risk. The optimal rotation age is shown to depend on geographic orientation as well as the age difference between the two stands of the ‘forest’. For forests with a higher number of stands, the optimal rotation ages may increase considerably due to the shelter effect. To illustrate this, we investigate the optimal harvest policy for a ‘forest’ with four stands where one of the stands is surrounded by the three others. The sensitivity towards geographic orientation is again analysed. Finally, a ‘forest’ with 16 stands is investigated to exemplify how an optimal short-term policy can be identified for an even higher number of stands, though the optimal harvest ages cannot be calculated within reasonable time.

Near-natural silvicultural regimes for beech (Fagus sylvatica L.), in the form of uneven-aged selective felling, receive increasing interest in Denmark. This is partly due to the ability of this system to preserve the forest climate and maintain important ecological functions such as bio-geochemical cycling and biodiversity conservation. The optimal age to convert from even-aged management to uneven-aged selective felling seems to be as early as possible, about 55 years, when sufficient natural seeding can be expected. A fixed conversion period of 100 years is assumed. This regime, here analysed by the use of a so-called chessboard model, appears to be economically superior to clear felling if the regime is initiated in medium-aged stands down to the age of 55 years, assuming a high site quality and a real discount rate of 3% per annum. Uneven-aged selective felling seems to be economically superior to even-aged natural regeneration, assuming that: (i) the stumpage prices of regeneration harvests are increased by 10%, or (ii) the diameters of regeneration harvests exceed those of even-aged management by about 17% simultaneous with an identical increase of the maximum stumpage price. Clear felling seems to be the more profitable regime only if: (i) the stand is close to the economic optimal rotation age for clear felling, and (ii) when the stumpage prices of regeneration harvests achieved by use of the uneven-aged selective management regime are reduced by 10% or more due to quality defects caused by prolonged rotation ages. The above results are sensitive to variation of stumpage prices, but less so to variation of regeneration costs associated with near-natural management systems. However, the near-natural silvicultural regimes may be unable to fulfill the liquidity objectives following from the application of traditional management systems.

The optimal thinning and rotation age policy for a stand subject to risk of destruction by windthrow is investigated. In particular, risk is not assumed exogenous as in previous research, but is modelled as endogenous to stand management. It is shown that the optimal solution when risk is endogenous differs significantly from the optimal solution to a problem where risk is assumed absent or exogenous. We find that in spite of substantial fixed costs related to thinning, the optimal number of thinnings increases and the optimal intensity of each thinning decreases. Furthermore, we find that the shortening effect of risk on the optimal rotation age is reduced substantially, when the thinning strategy is optimized subject to the effect on the risk levels. We conclude that the presence of endogenous risk strongly affects the optimal management strategy, and that an ecologically better founded approach to stand management is optimal in such cases. A group of solutions centred around a local optimum was characterized by fewer, more intense thinnings and a drastic shortening of the rotation age. If fixed costs were to increase substantially, this local optimum may become global, but still result in a longer rotation and more frequent thinnings than in the case of exogenous risk. Finally, features of the model's risk dynamics allow an analysis of the effect of changing the stand's resistance to and ability to recover from (i.e. the stand's resilience) the disturbances caused by thinnings, measured as changes in the susceptibility to windthrow. We find that in spite of the fixed costs related to thinning, a decrease in resistance or resilience makes it optimal to increase the number of thinnings, while at the same time making each thinning less intense.

Due to rapid change in timber prices in the Japanese market most likely affected by imported timber from countries such as the U.S., Canada, and the Nordic countries, the domestic forest managers have been facing a large degree of future price uncertainty. Because of this, it becomes necessary to take the future price uncertainty into account within the forest management framework. In this paper, the continuous time stochastic process, i.e., the geometric Brownian motion, has been used to model the log price process. The binomial option pricing approximation was then applied to value the Sugi (Cryptomeria japonica) and Hinoki (Chamaecyparis obtusa) forested land under stochastic log prices in order to search for an optimal rotation age. Our experiments with the proposed two state stochastic dynamic programming model showed that when the current log price is high enough to cover all costs, an optimal rotation age from the stochastic price and deterministic price models coincides, although the total expected present net value from management activities differs. Also it was shown that as the current log price decreases, an optimal rotation age derived from the stochastic price model becomes longer than that from the deterministic price model. If the current log price further decreases, then forest management will be abandoned, and the forest stand will be converted into alternative uses.

A method for estimating the economic loss in timber production resulting from extending the rotation age was studied. Basically, optimal rotation age depends on the stated objectives. If the objective comprises only timber production, the rotation age is derived from maximizing the net present value (PV) of timber production. If, on the other hand, the objective function includes, for example, the maintenance of biodiversity and scenic values, the optimal rotation age is likely to be extended. In the present study, PVs from successively extended rotation ages were estimated for a sample of economically mature stands. The PVs were based on no thinning allowed (case A), and thinning allowed in the first 5‐yr period (case B). By using regression analysis, functions were estimated that predict the inoptimality loss from extending the rotation age for both cases. Stand data collected by subjective (ocular) inventory methods were the regressors. Only the problem of economic loss in timber production from extend...

Global climatic change may threaten the earth's environment, including the potential loss of species, coastal inundation, and loss of agricultural production potential (Reilly and Anderson). Although several greenhouse gases (GHGs) often play a role, anthropogenic emissions of one of these-carbon dioxide (CO2)are the main cause of global climatic change (Manne and Richels). Governments throughout the world are actively considering policies to reduce their GHG emissions, including regulation, transferable emission permits, GHG offsets, and financial incentives (i.e., taxes, subsidies, etc.). Also included are sectoral policies, particularly those that relate to transportation (e.g., convert vehicles to natural gas), energy (e.g., greater use of nuclear, hydro, wind, and solar power), and forestry. Because CO2 is important for plant growth, and because trees remove CO2 from the atmosphere and store it as carbon in biomass, forests play a significant role in helping the global community mitigate climatic change, at least in the short term (Nordhaus; Richards). When trees are harvested, however, CO2 is released The authors are professor, dean, and graduate student, respectively

Summary Ashgate Publishing Limited, Gower House, Croft Road, Aldershot, Hants GU11 3HR, England ( www.ashgate.com ). 498 p. £ 100.00. ISBN 0-7546-2237-1 (hardback). Being one volume in the series of the International Library of Environmental Economics and Policy (T. Tietenberg and W. Morrison, gen. eds.), this book is a collection of some of the most significant journal essays in forest economics and forest policy. In compiling this volume, Roger Sedjo did a great service to the forest economics profession. This volume includes twenty-five essays originally published between 1849 and 1996 in a dozen journals, and one chapter from the Third Assessment Report of the International Panel on Climate Change (IPCC, 2001) which addresses the biological sequestration of carbon in terrestrial ecosystems. These are organized into four parts: the harvest rotation issue, timber supply, multiple-use and non-timber outputs, and global issues. An introduction essay to this volume, written by the editor, provides an overview of the major issues in forest resource management and discusses some the most important contributions to the forest economics literature. The eleven essays in the first part of the book provide a rather complete coverage of the most important contributions to the literature on optimal rotation age, which is a fundamental issue in forest management and forestry investment. Four of the essays (Faustmann 1849, Ohlin 1921, Bentley and Teeguarden 1965, and Samuelson 1976) address the basic formulation and interpretation of the optimal rotation model. Four essays (Lofgren 1985, Newman, Gilbert and Hyde 1985, Reed 1984, and Brazee and Mendelsohn 1988) extend the basic rotation model to examine the rotation age decision in the presence of deterministic trends and uncertainty in timber yield and price, respectively. Based on the Faustamnn rotation model, Klemperer (1976) and Chang (1982) examine the impacts of taxation on forest value and on the optimal rotation age. Koskela (1989) provides a detailed analysis of the impacts of taxation on timber harvest decisions under price uncertainty. What I feel missing in this part is a comparative statics analysis examining the impacts of changing economic parameters on the optimal rotation age. Part II includes five essays on economic analysis of long-run timber supply. Clawson (1979) reviews the historical development of forest resource and forest utilization in the United States. Vaux (1973) examines the long-run potential supply of timber from forest plantations in California. Berck (1979) investigates the difference in harvesting behavior between private forest owners and public managers. Lyon (1981) and Lyon and Sedjo (1983) examine the optimal exploitation of old-growth natural forests and the transition to steady state. While these essays all focus on the long-run timber supply in the United States, the methods developed and used in these papers could be applied for any other region. The exploitation of old-growth natural forests and the long-term availability of timber have been without doubt two major concerns in the United States. In many parts of the world, however, concerns about timber supply in the short-run have also had great influences on the development of forest policy. It would have been appreciated if a couple of essays addressing the short-run supply of timber had been included. Part III contains three essays dealing with the problem of multiple-use forest management. Gregory (1955) develops an economic framework for multiple-use management based joint production theory. Hartman (1976) examines the multiple-use rotation age decision. Swallow, Parks and Wear (1990) investigate the problem of non-convexities involved in multiple-use rotation age decisions. The merits of these essays lie in that they use rather simple models to demonstrate the importance of incorporating non-timber benefits in forestry decisions and the complexities of the multiple-use problem. In his 1976 essay, Hartman points out that in many situations management practices applied to one stand affect the value of non-timber outputs derived from the adjacent stands; such interdependence needs to be incorporated into multiple-use decision analysis. I certainly would like to find in this volume one or two essays examining the impacts of stand interdependence on the optimal decision. Another important issue in multiple-use management, which is not covered in this volume either, is the valuation of non-market priced outputs and services. Yet I believe that this omission is well motivated, for there are two separate volumes in this series devoted to non-market valuation methods (R. T. Carson, ed. Direct Environmental Valuation Methods , Volumes I and II). The seven essays in Part IV deal with a set of forest economic and policy issues related to global warming and biodiversity conservation. Parks and Hardie (1995) examine the cost-effective subsidies to convert marginal agricultural land to forests for the purpose of carbon sequestration. Hoen and Solberg (1993) analyze the potential and cost-effectiveness of increasing carbon sequestration in existing forests by changing forestry practices. van Kooten, Binkley and Delcourt (1995) examine the effect of carbon taxes and subsidies on the optimal rotation age. The chapter from the Third Assessment Report of IPCC (2001) provides a comprehensive review of the literature on the ecological, environmental, social and economic aspects of carbon sequestration in terrestrial ecosystems. While forests and forest management could play an important role in mitigating climate change, increasing level of atmospheric dioxide and climate change would inevitably affect the productivity of forest ecosystems, thereby could have significant impacts on future timber growth, harvest and inventory as well as carbon storage in forest ecosystems. Joyce et al. (1995) present a framework for analyzing the potential effects of climate change on the forest sector. The remaining two essays in this part examine the costs and benefits of biodiversity preservation, respectively. Montgomery, Brown and Adams (1994) estimate the marginal cost of preserving the northern spotted owl. Simpson, Sedjo and Reid (1996) examine the expected value of the marginal species as an input to pharmaceuticals. The editor points out in the introduction chapter that there are many other important contributions that are not included in this volume, some of these are mentioned, others not. In addition to the few omissions noted earlier, several important economic and policy issues such as uneven-aged stand management, deforestation, international trade, sustainable forestry, forest recreation, wildlife management and so on are not discussed. Moreover, none of the journal essays published since 1997 is selected. That there are many other important contributions does not mean the essays included in this volume are less important, however. While each forest economist may present a different list of the most important papers, most (if not all) of the essays in this volume would appear on anyone's list. I strongly recommend this book for research scientists and graduate students of forest economics as an essential addition to their reference library.

This paper systematically analyzes the problem of the determination of the optimal rotation age. Using the land expectation value model, it shows that at the optimal rotation age t ∗ , the marginal revenue product (MRP) of letting the stand grow one more year must equal the marginal input cost (MIC) of doing so. The relationships between regeneration cost (C), interest rate (r), stumpage price level P(t) and the optimal rotation age are then analyzed graphically. The relationships between the land expectation value model, the present net worth model, the forest rent model and the traditional biological model are also examined. It is shown that the last three models are special cases of the land expectation value model.

This paper analyzes the optimal harvest age of a forest if the forest provides a flow of valuable services while standing in addition to the value of the timber when it is harvested. A basic conclusion is that the presence of recreational or other services provided by a standing forest may well have an important impact on when or whether to harvest.

A debate that has raged for centuries is unlikely to be resolved by me in one lecture. However, I shall do my best to set forth the issues and indicate what ought to be the crucial factors that a jury should consider in rendering its verdict on the matter. The issue is one between forestry experts and the general public on the one side and professional economists and profit-conscious businessmen on the other. At first blush this would seem to suggest that economists are on the side of the interests and are not themselves members of the human race. But, as I hope to show, sound economic analysis is needed to do justice to the cases put forward by either of the adversary parties.