Economic Tools to Improve Forest Practices' Outcomes

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Virginia Tech


This PhD dissertation work delves into critical issues within the forestry business related to carbon sequestration, land value maximization and climate change vulnerability. The study proposes different tools to enhance the efficiency and outcomes of forest practices. Chapter two involves an enhanced forest rotation deferral methodology for carbon dioxide sequestration, focusing on the forest's final product destination passed the Faustmann optimal rotation age. Instead of giving the same value for pulp wood and saw timber, the research acknowledges the benefit of increased carbon dioxide stored in saw timber materials. To drive landowners to the socially optimum rotation age, where the marginal benefits of extended carbon storage equal the private marginal cost of postponing forest rotation, an incentive based mechanism is proposed, using subsidies. Through sensitivity analysis on the underlying assumptions, the socially optimal rotation is consistently greater than the currently applied one-year harvesting deferral, and smaller than longer extensions, such as 20 years deferred rotations. In chapter three, a novel approach to design Streamside Management Zones widths that vary according to different landscape characteristics is presented, as opposed to the constant command and control width currently used in Virginia. This adaptive approach allows landowners to maximize land value, while ensuring water quality protection. To determine the sediment retention equation as a function of SMZ slope, width, and soil texture, we use data derived from the Watershed Erosion Prediction Project. By simulating different regulatory constraints concerning accepted sediment delivery, the study shows the tradeoff between water quality and land expectation value through the changes in the opportunity cost of Streamside Management Zones. Lastly, chapter four centers on a dataset collected in India about tree planting species choice followed by a second model that incorporates socio-economic, as well as revealed preference management choices, and tree planting species as explanatory variables in a binary crop loss model. The findings reveal that tree planting, except for fruit trees, compared to agricultural crops, diminishes the household's probability of facing losses due to climate change, extreme weather events and pest attacks. Specifically, there is a 14.4% reduction in the probability of facing a loss when planting Eucalypt and Casuarina trees, a 7.6% reduction when planting palm trees, and 13.5% reduction when planting multiple trees, which evidences how trees are less vulnerable. Throughout this dissertation, the interdisciplinary research uses rigorous methodologies, comprehensive data analysis, and environmental economics theoretical foundation, culminating in valuable insights and potential policy recommendations to enhance forest practices in environmental challenging times.



carbon dioxide, Best Management Practices, optimal decision, food safety, climate change, policy