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Forest Management Under Fire Risk When Forest Carbon Sequestration Has Value

  • Computer Science
  • Mathematics


Forest Management Under Fire Risk When Forest Carbon Sequestration Has Value Stéphane Couture∗ and Arnaud Reynaud† November 6, 2008 Abstract 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. Keywords: Forest Economics, Stochastic Dynamic Programming, Expected Utility, Fire risk, Carbon Sequestration JEL Codes: C61, D81, Q23 ∗INRA, UMR 356 Economie Forestière. 14, rue Girardet. CS 14216. 54042 Nancy cedex. France. E-mail: [email protected] fax: (33)-3-83-37-06-45, tel: (33)-3-83-39-68-60. Corresponding author. †TSE(LERNA), Université de Toulouse 1, Manufacture des Tabacs - Bât.F, 21 allée de Brienne, 31042 Toulouse. France. E-mail: [email protected], fax: (33)-5-61-12-85-20, tel: (33)-5-61-12-85-12. 1 1 Introduction Traditionally, forests have been viewed as a source of timber used for producing goods and services. It has rece

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