Optimal timber-harvesting programmes in a model with adjustment costs

Abstract

In the Swedish forest policy debate, the current roundwood supply, the capacity of the forest-based industry, etc., are regularly related to a standard "appropriate" level. This level is based on a constant sustainable harvesting concept, i.e., the harvested volume of today (this decade) must not exceed the available volume of tomorrow (any decade in the future). This "steady-state" rationing norm has been criticized. The uneven age composition of the Swedish forest suggests that it would be optimal to increase cuttings temporarily during the current and the next decade. On the other hand, an increase in total supply may decrease the price of roundwood and therefore, variations in supply should not be too large. This paper reports on a linear age-class model that is used to calculate optimal long-run harvesting programmes. The model maximizes the present value of the income stream from cutting subject to the constraints of a linear technology of forest production. Thinnings are exogenous. Adjustment costs, proportional to changes in timber supply, are introduced. The results indicate that with an uneven age distribution, "overcutting" may be optimal even when adjustment costs are relatively high. This conclusion is confirmed by some results from simulations using the more specific, but nonoptimization, long-range forestry planning model of the Swedish Board of Forestry.