Forestry Investment Research Articles

Forest-based carbon sequestration, and the role of forward, futures, and carbon-lending markets: A comparative institutions approach

The sequestration of CO2 in forests is often suggested as a means to offset greenhouse gas emissions. New Zealand’s experience suggests the effects of government programmes to provide carbon credits to forest owners could be enhanced if forward markets, futures markets, or carbon-lending markets were used to manage risks. This paper provides a comparative institutions approach based on the history of commodity markets to argue that carbon lending markets, not forward or futures markets, are likely to be the most convenient form of a forestry carbon market. A carbon lending market will raise the total returns from forestry investments with minimal risks to forest owners, and simultaneously reduce the risks facing other firms contemplating carbon reducing investments. For this reason, governments wishing to include forest sequestration in an Emissions Trading Scheme may wish to encourage the development of a carbon lending market.

Оценка эффективности интеграции лесопользования и охраны лесной среды в России и Китае

Based on an integrated approach to assessing the integration efficiency in the field of forest manage-ment and forest protection in both Russia and Chi-na, the author analyzes the indicators of the change in forest area as a result of economic activity, the status of voluntary certification of forests and wood consumption for production that reflect business responsibility for addressing environmental and social issues. The study examines the availability of forests performing the functions of biodiversity conservation and environmental protection. A com-parative analysis of the properties under review identifies that China is a leader in the forest expan-sion, the decrease in forest product consumption and other indicators, which is a consequence of the successful implementation of environmental and economic policy mechanisms in the field of green-ing forest management and forest protection. The Russian Federation lacks sustainable development criteria, and as a planetary donor of resources and environmental services, it risks being involved in the raw-material development area of the forest econo-my. Forest condition, the dynamics of its change, trends in forest production development are crucial in making national policy and management deci-sions and determining the direction of public and private investment in forestry.

The influence of silviculture investment in fixed assets on forest water conservation in China

Abstract Forests play an important role in water conservation. It is important to study the relationship between forest water conservation (FWC) and forestry investment. Based on official statistics and ecological network observation data in China from 1999 to 2013, this paper for the first time uses correlation analysis and regression analysis methods to analyze the relationship between FWC and forest silviculture investment in fixed assets (FSIFA). Results show that FWC and FSIFA have a strong correlation and a strong influence, correlation coefficient is around 0.96. The amount of annual forest water conservation is increased with an increase in investment in fixed assets. The study also found that FSIFA affecting annual FWC lags more than 1 year, showing that FSIFA cannot play a role in water conservation immediately. The research also discussed other affecting factors on FWC, such as forest coverage rate, economic development level and forest quality improvement, etc. Their effects were also found to lag 1–5 years. Finally, the paper predicts the amount of annual FWC from 2014 to 2020 and gives some suggestions to strengthen investment in forest fixed assets and improve management of forest resources so as to promote the development of benefits of FWC.

Property Rights, Village Political System, and Forestry Investment: Evidence from China’s Collective Forest Tenure Reform

To investigate the effect of improved property rights and, in particular, village democracy under China’s Collective Forest Tenure Reform (Tenure Reform) on household forestry investments, we estimate both tobit models and the more general Cragg models for farmers’ labor and monetary inputs into forestry, using survey data of 652 households from the southern collective forest region of China. The results reveal that the improved forestland use and disposition rights had a significant effect on household investments in forestry, while the beneficiary right did not. In addition, the results suggest that village democracy had a positive effect on households’ forestry investments. More importantly, we find that village democracy was able to significantly strengthen the investment incentive effect of the improved property rights under the Tenure Reform. These effects may be explained by the fact that village democracy improved households’ perception, cognition, and, subsequently, confidence toward, in particular, the use and disposition rights of the forests entitled to them. Therefore, the findings suggest that to increase the investment incentives of the Tenure Reform further, governments could strengthen the bundle of households’ use and disposition rights, as well as their related policies. Also, our findings indicate that governments could significantly improve the performance of public policies by effectively employing democratic procedures in the process of policy implementation.

Investment Uncertainty Analysis in Eucalyptus Bole Biomass Production in Brazil

Forestry investment projects for the biomass production of the eucalyptus bole can be characterized by uncertain environments, which result in economic risk to the forest producer, however that can be measured by applying probabilistic techniques. This was our motivation and justification for analyzing the economic-financial viability of different silvicultural practices for eucalyptus bole biomass production under conditions of uncertainties, running Monte Carlo method for risk management. The experiment was carried out in the state of São Paulo, Brazil, using 5 treatments with spacings of 3 × 2 m; 3 × 1 m; 1.5 × 2 m; 3 m × 0.5 m; and 1.5 m × 1.0 m, i.e., different spacings between planting lines and plants. These treatments were characterized as investment projects. To develop stochastic models, we relied on technical-economic deterministic variables. We evaluated the investment projects based on the cash flows under conditions of uncertainty, discounted at the attractiveness rate calculated by capital asset pricing model. With the results of these economic flows, the net present value, the modified internal rate of return and the profitability index values were estimated, commonly used in the analysis of investments in projects. The results showed that based on economic metrics, the three-year rotation cycle for forest stands for biomass production of the main bole of eucalyptus, with a spacing of three meters between rows and two meters between plants, had an 83% probability of economic success. The sensitivity analysis showed that the bole biomass of eucalyptus is the most important variable for determining the economic-financial feasibility of the investment project.

Carbon sequestration or water yield? The effect of payments for ecosystem services on forest management decisions in Mediterranean forests

Abstract A decrease in net benefits from market-based forest products over the last three decades seems to be connected to the increasing abandonment of forestland in Mediterranean areas of Europe. In this paper, we estimate spatially distributed probabilities of continuing with forest management practices in mainly native pine and oak forests in Andalusia (southern Spain). The continuation of active forest management encompasses landowners' investment in operations that promote the recruitment of new individuals of the same species once a stand reaches its rotation age. On the contrary, abandoning forestry investment involves natural self-regeneration including tree densification, shrub encroachment and forest species replacement. We estimate the long-term effects of alternative scenarios of forest management on carbon sequestration and water provisioning services (blue water, i.e. surface discharge and ground water recharge). We examine the effect of payments for carbon sequestration, or alternatively for increasing blue water, on forest management decisions. Results are provided as spatially disaggregated values over different time frames up to 2100 and consider the sensitivity of forest investment decisions to a wide range of price levels and discounting rates.

Natural resource sector FDI, government policy, and economic growth: Quasi-experimental evidence from Liberia

Governments use a variety of policies to increase the impact of foreign investment on economic growth. An increasingly popular policy is to require that foreign companies provide public goods near the communities where their commercial investments are sited. This approach seeks to crowd in additional investments, create clusters of interconnected firms, and set in motion economic agglomeration processes. Post-2006 Liberia represents an ideal empirical setting to test the effectiveness of this approach. We construct a new dataset that measures the precise locations of 557 natural resource concessions granted to investors. We then merge these data with a remotely sensed measure of nighttime light growth at the 1 km × 1 km grid cell level and analyze it using a matched difference-in-differences strategy. We find heterogeneous treatment effects across sectors and investor types: mining (specifically iron-ore) investments projects have positive growth effects, while agriculture and forestry investment projects do not; furthermore, concessions granted to Chinese investors have positive growth effects while those given to U.S. investors do not. These patterns of heterogeneous treatment effects across sectors and investor types are consistent with the theory of change underpinning the government’s development corridor strategy.

Tree cover and species composition effects on academic performance of primary school students.

Human exposure to green space and vegetation is widely recognized to result in physical and mental health benefits; however, to date, the specific effects of tree cover, diversity, and species composition on student academic performance have not been investigated. We compiled standardized performance scores in Grades 3 and 6 for the collective student body in 387 schools across the Toronto District School Board (TDSB), and examined variation in relation to tree cover, tree diversity, and tree species composition based on comprehensive inventories of trees on school properties combined with aerial-photo-based assessments of tree cover. Analyses accounted for variation due to socioeconomic factors using the learning opportunity index (LOI), a regional composite index of external challenges to learning that incorporates income and other factors, such as students with English as a second language. As expected, LOI had the greatest influence on student academic performance; however, the proportion of tree cover, as distinct from other types of “green space” such as grass, was found to be a significant positive predictor of student performance, accounting for 13% of the variance explained in a statistical model predicting mean student performance assessments. The effects of tree cover and species composition were most pronounced in schools that showed the highest level of external challenges, suggesting the importance of urban forestry investments in these schools.

What is your discount rate? Experimental evidence of foresters’ risk and time preferences

The elicited time preference rate of German foresters is around 4.1%. Foresters working for private enterprises are more risk-averse and have a lower time preference than other foresters. This group difference should be taken into account for modeling and policy making. Due to very long rotations, forestry investment calculations heavily depend on the underlying discount rate. There is an ongoing debate about the appropriate discount rate to apply in forestry, particularly in light of concerns regarding inter-generational justice, forest risks, and the provision of future positive externalities from forestry. For sound policy making however, knowledge is lacking on the risk and time preferences of foresters. The present study aims to provide detailed information about risk and time preferences as essential aspects of the discounting behavior. Therefore, we conducted an economic experiment with 142 German foresters. Both risk and time preferences affect discounting behavior, which is why they are estimated jointly but analyzed specifically. Participating foresters’ risk attitudes range between risk-neutral and very risk-averse, where the sample can be mostly characterized as risk-averse. Time preference discount rates range mostly between 0 and 7%, with 4.1% as a central value. These results are group-specific: foresters working for a private forest enterprise are more risk-averse and have a lower discount rate than other participating foresters. Foresters’ time preferences exceed the usual rates of return in German forestry, which might be explained by additional utility attributed to forest amenity values or the risk-decreasing effects of forest assets in their portfolio.

АНАЛІЗ РОЗВИТКУ ВИРОБНИЦТВА СІЛЬСЬКОГОСПОДАРСЬКОЇ ТЕХНІКИ ДЛЯ ЗЕРНОВОГО ГОСПОДАРСТВА В УКРАЇНІ ЗА ЧАСІВ НЕЗАЛЕЖНОСТІ

The article emphasizes the importance of the agrarian sphere for the stabilization and development of the Ukrainian economy. It is determined that agrosphere is the object of research of representatives of various scientific directions. Terminological inconsistency was found in the definition of such concepts as agrobusiness, agro-industrial complex, agrarian sphere (industry, sector), agriculture, in connection with which their differentiation was made and an attempt was made to outline their content. It is noted that with the development of market relations, the term “agrobusiness” is the most successful and acceptable for defining all processes that occur in the agro-industrial complex. The attention is drawn to the lack of a unified methodology for statistical accounting and a system of generalized indicators of inflow of investments. The principles are generalized, taking into account the international experience, according to which today the collection and analysis of statistical data in the agrarian sector are carried out in Ukraine. The existing problems of statistical accounting of foreign investments into agrarian business are highlighted. A retrospective analysis of foreign investment in the agrarian business of Ukraine was conducted. It was revealed that from 2009 to the present day, the pre-crisis indicators of inflow of foreign investments did not succeed. An estimation of modern tendencies of foreign investment in the agrarian business of Ukraine is carried out. The following perspective factors of investment revival, such as the permanent growth of demand for its products, the reduction of risks, the positive impact of reforms, the diversification of markets, and the expansion of sown areas, are highlighted. The structure of foreign investments in agrarian business is considered. It is noted that the most attractive for investors are such industries as crop production (sunflower growing, barley, corn, rape, wheat, honey, soybeans) and livestock farming, as well as auxiliary activities in agriculture and post-harvest activities. TOP-5 of the largest investor-countries of agrobusiness activity of Ukraine are allocated. The territorial features of financial revenues from foreign investors in Ukrainian agrobusiness are presented. It is generalized that in the regional dimension, the leaders in the volume of foreign investments received are the Kyiv and Ivano-Frankivsk regions, and more than a third of all foreign investment in agriculture, forestry and fisheries of Ukraine falls on the city of Kyiv, where the head offices of many agricultural producers are located. As a conclusion to the article, measures were proposed to improve and improve the structure of foreign investment in agrobusiness in Ukraine both at the state and corporate levels.

The importance of the will to improve: how ‘sustainability’ sidelined local livelihoods in a carbon-forestry investment in Uganda

ABSTRACTThis paper describes a ‘win–win’ discourse on local sustainable development and global climate change mitigation regarding Kachung, a Swedish–Norwegian climate forestry investment in Uganda certified under the Clean Development Mechanism (CDM). In many ways, this investment is a typical example of how private interests and capital accumulation are prioritised over local concerns in natural resource management under neoliberalism. This study, however, indicated that investors had genuine intentions of creating mutual benefits for the global environment and local people. Drawing on Li (2007), we show that this ‘will to improve’ was nevertheless constructed in ways that resulted in prioritisation of global climate change mitigation over local context-specific concerns.We identify three core factors making the win–win discourse around Kachung plantation especially resilient: (i) the perceived urgency of climate change mitigation, (ii) the apolitical framing of ‘sustainability’ as an environmental issue that can be fixed through external technical interventions and (iii) the devaluation of local and context-specific knowledge. We end by suggesting that research on the neoliberalisation of nature focus more on analysing the rationales behind specific interventions. This would leave us better equipped to suggest how such interventions should be modified to produce true wins for local contexts.

Is forestry really more profitable than upland farming? A historic and present day farm level economic comparison of upland sheep farming and forestry in the UK

There are currently 3.16 million hectares of woodland cover in the United Kingdom. At a European scale, the UK is one of the countries with the lowest woodland cover, currently extending to only 13% of the total land area of the UK, this is less than half of the European Union (EU) average of 37 per cent. A significant study carried out by Read et al. (2009) identified that UK wide there is a need to increase significantly levels of new planting and forest creation by more than 23,000ha each year over the next 40 years if a substantial influence on reversing climate change is to be realised. It is clear that expansion of the total forested area in the UK necessitates the establishment of new woodland and forest cover on farmland which is either owner occupied or rented out.The main barriers to woodland establishment on farmland cited in the literature, include cultural resistance notably a dichotomous view of farming and forestry as being competing land uses; and lack of awareness of the potential economic benefits of woodland. This study intended to provide information that will improve farmers and landowners understanding of the potential economic differences between business as usual (sheep farming) and woodland creation in the uplands of the UK. The aim of this study was to evaluate the bio-economic potentials of temperate upland clear fell forestry systems in the UK over the last 60 years and determine if afforestation of upland farms has historically produced, and will in the future produce better financial outcomes than conventional upland sheep farming. The study used a bio-economic model based on discounted cash flow analysis to compare and evaluate a conventional upland sheep grazing system against a temperate upland forestry system.Historic investments to cease upland sheep grazing and afforest upland farms in the UK based on historic financial budgeting information available to farmers and landowners in 1956, 1976 would not have been an economically viable and profitable land use change compared to continuation of upland sheep grazing in the UK. Historic markets in 1956 and 1976 were not strong enough to render potential forestry investments profitable without a need for grant assistance. Investments to cease upland sheep grazing and afforest upland farms in the UK in 1996 would have been economically viable and profitable land use investment as timber markets alone were strong enough to render potential forestry investment profitable without a need for grant assistance. Without subsidy, investments to switch from upland sheep grazing and afforest upland farms in 2016 would not be an economically viable and profitable land use change. Current day timber markets alone are not strong enough to influence new woodland establishment.

Agricultural Sector Investment Need in Increasing Economic Growth

This paper is aimed to analyze the need of investment in agricultural sector in increasing economic growth in Aceh Province. The priority in developing agricultural commodities increases economic growth in Aceh Province. This research used secondary data sources from Indonesian Statistic Board (BPS) and other related data sources. Meanwhile, the research method used is Incremental Capital Output Ratio (ICOR) Analysis. Based on the research results, it is found that the ICOR in crop plantation, livestock, forestry, and fisheries sub sectors are 2.926, 0.000, 0.108, and 0.298. This means that in achieving economic growth by 1 percent in all four commodities, its need the growth of investment in crop plantation, livestock, forestry, and fisheries sub sectors as much as 2.926, 0.000, 0.108, and 0.298 percent each. Furthermore, in achieving 4 percent economic growths, the developing of commodities that have the effect on economic welfare, it needs the investment for the five years period as much as 286 billion rupiah or equivalent with 58.1 percent of Gross Domestic Regional Product (GDRP) of Aceh Province. Thus, based on the research results, it is recommended that the Aceh Government should promote investment in agricultural sector in promoting economic growth in Aceh Province.

Community forest management in Indonesia: Avoided deforestation in the context of anthropogenic and climate complexities

Abstract Community forest management has been identified as a win-win option for reducing deforestation while improving the welfare of rural communities in developing countries. Despite considerable investment in community forestry globally, systematic evaluations of the impact of these policies at appropriate scales are lacking. We assessed the extent to which deforestation has been avoided as a result of the Indonesian government’s community forestry scheme, Hutan Desa (Village Forest). We used annual data on deforestation rates between 2012 and 2016 from two rapidly developing islands: Sumatra and Kalimantan. The total area of Hutan Desa increased from 750 km2 in 2012 to 2500 km2 in 2016. We applied a spatial matching approach to account for biophysical variables affecting deforestation and Hutan Desa selection criteria. Performance was assessed relative to a counterfactual likelihood of deforestation in the absence of Hutan Desa tenure. We found that Hutan Desa management has successfully achieved avoided deforestation overall, but performance has been increasingly variable through time. Hutan Desa performance was influenced by anthropogenic and climatic factors, as well as land use history. Hutan Desa allocated on watershed protection forest or limited production forest typically led to a less avoided deforestation regardless of location. Conversely, Hutan Desa granted on permanent or convertible production forest had variable performance across different years and locations. The amount of rainfall during the dry season in any given year was an important climatic factor influencing performance. Extremely dry conditions during drought years pose additional challenges to Hutan Desa management, particularly on peatland, due to increased vulnerability to fire outbreaks. This study demonstrates how the performance of Hutan Desa in avoiding deforestation is fundamentally affected by biophysical and anthropogenic circumstances over time and space. Our study improves understanding on where and when the policy is most effective with respect to deforestation, and helps identify opportunities to improve policy implementation. This provides an important first step towards evaluating the overall effectiveness of this policy in achieving both social and environmental goals.

Including public-health benefits of trees in urban-forestry decision making

Research demonstrating the biophysical benefits of urban trees are often used to justify investments in urban forestry. Far less emphasis, however, is placed on the non-bio-physical benefits such as improvements in public health. Indeed, the public-health benefits of trees may be significantly larger than the biophysical benefits, and, therefore, failure to account for the public-health benefits of trees may lead to underinvestment in urban forestry. In addition, the distribution of trees that maximizes bio-physical benefits may not maximize public-health benefits.

The Mechanism of Corporate Social Responsibility Fulfillment to Promote Forest Investment

Forestry investment is potentially effective way for enterprises to fulfill their social responsibility. Based on the analysis of connotation and realization mechanism of corporate social responsibility, the paper points out that the coupling of forestry investment and social responsibility is embodied in the comprehensive benefit and social responsibility connotation of forestry investment, and the consistency between forestry investment and social responsibility investment. The results show that the ecological and social benefits of forestry investment are far superior to economic benefits. It is proved that forestry investment is a feasible way for enterprises to fulfill their social responsibilities. The paper analyzes the forestry investment patterns of different enterprises under the social responsibility fulfillment, and points out that the forestry enterprises can participate in the investment projects matching their strategic social responsibility and forestry core social responsibility. Non-forestry enterprises can participate in the business based on the social responsibility investment idea forestry investment projects, and invest in public welfare forestry projects based on responsive social responsibility inputs. It is suggested that the government should improve the social responsibility system construction and strengthen public opinion propaganda to guide forestry and non-forestry enterprises to increase forestry investment by innovating forestry management mode.

Study on Socioeconomic Impacts of Private Forest Plantations on Local Livelihood in Pyu Township, Taungoo District, Bago Region, Myanmar

Forest Department of Myanmar has called for private investment in plantation forestry by granting forest land concession right since 2006-07. On the other hand, rural peoples of the country, representing about 70% of total population, rely on forest resources and forest land for their livelihood. This paper explores the socio-economic impacts of private forest plantations on rural communities in Pyu Township, Taungoo district, Bago Region, Myanmar. According to our results private forest plantations have the potential to positively impact on local people’s wealth and well-being, if enough emphasis is paid attention to minimize the negative impacts. The household survey data of 213 observations from two villages were analyzed using binary and multinomial logistic regression analyses. The study reveals that forest plantations make threat the basis of traditional rural livelihoods by reducing the availability of natural resources. However, investments gave also supported the diversification of livelihood strategies in the communities by providing formal employment and by increasing business and trading activities. As a rapid growth of populations and traditional agricultural practices have led to the overexploitation of natural resources, non-natural resource-based livelihood strategies increase the resilience of a household. Most respondents give the facts on plantations to have either no overall impact or a positive impact on the well-being of their household. According to our results, socio-economic household characteristics only marginally point out respondents’ perceptions of the impacts of forest plantations but perceptions differ significantly between individual villages.

Private Capital, Public Goods: Forest Plantations' Investment in Local Infrastructure and Social Services in Rural Tanzania

With the rapid expansion of private forest plantations worldwide, their impacts on local development are under scrutiny by NGOs and researchers alike. This study investigates the impacts of private forest plantations on local infrastructure and social services in rural Tanzania. We take a comparative approach involving households living in villages adjacent to private forest plantations and households in villages adjacent to a state-owned plantation. We use survey data from 338 households to analyze their perceptions about the impacts of the plantations on the number and quality of roads, bridges, and health centers, as well as on school enrolment and quality of education. We triangulate the results from a logistic regression model with observations of the size and quality of infrastructure and social services in the villages and with findings from focus group discussions. The results show that the private forest plantations have positively affected local infrastructure and social services in adjacent villages. The results suggest that large-scale private forest plantations can contribute to rural development in developing countries. We highlight the importance of taking into account the perceptions of various groups in society when assessing the sustainability of forestry investments and their impacts on local communities.

The contribution of forest carbon credit projects to addressing the climate change challenge

ABSTRACTThis article addresses the question of how forestry projects, given the recently improved standards for the accounting of carbon sequestration, can benefit from existing and emerging carbon markets in the world. For a long time, forestry projects have been set up for the purpose of generating carbon credits. They were surrounded by uncertainties about the permanence of carbon sequestration in trees, potential replacement of deforestation due to projects (leakage), and how and what to measure as sequestered carbon. Through experience with Joint Implementation (JI) and Clean Development Mechanism (CDM) forestry projects, albeit limited, and with forestry projects in voluntary carbon markets, considerable improvements have been made with accounting of carbon sequestration in forests, resulting in a more solid basis for carbon credit trading. The scope of selling these credits exists both in compliance markets, although currently with strong limitations, and in voluntary markets for offsetting emissions with carbon credits. Improved carbon accounting methods for forestry investments can also enhance the scope for forestry in the Nationally Determined Contributions (NDCs) that countries must prepare under the Paris Agreement.POLICY RELEVANCEThis article identifies how forestry projects can contribute to climate change mitigation. Forestry projects have addressed a number of challenges, like reforestation, afforestation on degraded lands, and long-term sustainable forest management. An interesting new option for forestry carbon projects could be the NDCs under the Paris Agreement in December 2015. Initially, under CDM and JI, the number of forestry projects was far below that for renewable energy projects. With the adoption of the Paris Agreement, both developed and developing countries have agreed on NDCs for country-specific measures on climate change mitigation, and increased the need for investing in new measures. Over the years, considerable experience has been built up with forestry projects that fix CO2 over a long-term period. Accounting rules are nowadays at a sufficient level for the large potential of forestry projects to deliver a reliable, additional contribution towards reducing or halting emissions from deforestation and forest degradation activities worldwide.

THE IMPACT OF RDP 2007–2013 MEASURES IMPLEMENTATION ON LITHUANIAN RURAL AREAS

After joining EU Lithuania for more than a decade is receiving support for agricultural production modernization, maintaining farmers' income, for upgrading rural areas, for improving quality of life of rural population. Support coming for municipalities from RDP 2007–2013 measures implementation differs very much and it could be supposed that the impact of the support had to be different. The aim of the study was to assess the impact of the implementation of RDP 2007– 2013 program measures for Lithuanian rural regions. For the investigation purposes Lithuanian municipalities were divided into three groups according to received support per 1 ha of agricultural land: the biggest, medium and least. According to the chosen system of indicators describing the rural areas as a whole, it has been studied the impact of support demographic situation, economic, social and natural environments. Average data of two periods: 2004–2008 without the support were compared to the average data of the period of 2009–2015 when the support has already been obtained. The investigation showed that the municipal group that received the highest support, compared with the other two municipal groups demonstrated better results: the net emigration and depopulation trend slowed, a significant increase in capital investment in agriculture, forestry and fisheries is observed, the overall area declared and the area per one application is stated. Differences in number of operating SMEs and the share of employed out of the working-age people were not as great to compare with other two municipality group indicator’s values.