Financial returns under uncertainty for conventional and reduced-impact logging in permanent production forests of the Brazilian Amazon

Abstract

Reduced-impact logging (RIL) techniques are designed to improve the efficiency of timber harvesting while mitigating its adverse effects on the forest ecosystem. Research on RIL in select tropical forest regions has demonstrated clear ecological benefits relative to conventional logging (CL) practices while the financial competitiveness of RIL is less conclusive. We conduct a comparative analysis of financial returns to one and two cutting-cycle logging entries for representative RIL and CL operations of the eastern Amazon. Observed variability in harvest efficiency and uncertainties of forest productivity are introduced in a stochastic simulation of future biological and financial returns to the alternative logging systems. Despite the perceived investment risks, RIL harvesting operations generate competitive or superior returns relative to CL for a wide range of discount rates due to gains in harvest efficiency and forest conservation.