Accounting for Active Management and Risk Attitude in Forest Sector Models

Abstract

Given the importance of anthropogenic determinants in forest ecosystems within Europe, the objective of this paper is to link the evidence arising from biological models to socio-economic determinants, where the expected returns of forest investments represent the main driver. A micro-economic area allocation module is therefore coupled with an inventory-based forest dynamics module and a partial-equilibrium market module in a national-level forest sector model for France (FFSM++). Running long-term scenarios (until 2100), we show the implication of an active management policy on forest composition: when the most profitable option drives forest investments, coniferous forests are generally preferred over broadleaved ones. This result is, however, reappraised when the risk aversion of forest owners is explicitly considered in the model, given the higher risk associated with the former. We further show the strong stability of forest ecosystems that, due to the very long cycles, undergoes very small variations in volume stocks, even in scenarios where the initial forest regeneration is strongly influenced.