Land Expectation Value Research Articles

Effects of Swiss Needle Cast on the Profitability and Optimal Management of Douglas-fir Plantations in Western Oregon

Abstract This study conducts an economic analysis to evaluate the impact of Swiss needle cast (SNC) caused by Nothophaeocryptopus gaeumannii on Douglas-fir (Pseudotsuga menziesii) plantations at the stand level in western Oregon. We examine timber and nontimber benefits across varying degrees of SNC severity considering timber benefits and carbon sequestration benefits. By comparing these values with unaffected Douglas-fir stands, our aim is to quantify the economic losses associated with SNC in terms of the land expectation values. The total land expectation value for a stand affected by SNC ranges from $556 to $2,179/ac, representing an average decrease of 50% ($1,066/ac) in economic revenues compared with a Douglas-fir stand without SNC infestation. Engaging in cost-effective annual management activities, with maximum costs of $43–$56/ac, could offset the profitability decline. On average, the total losses in profits for the current plantations affected by SNC are estimated to be around $206.5–430 million. Study Implications: In this study, we examine the economic impacts of Swiss needle cast (SNC) on the profitability of western Douglas-fir in Oregon. Our results reveal that profits for landowners can be, on average, reduced by $1,066/ac when their stand is infested by SNC, representing a 50% loss in profitability. Landowners could potentially mitigate these losses by engaging in annual management activities aimed at preventing Douglas-fir infestation, incurring a cost ranging between $43–56/ac, which could offset the reduction in profitability.

Reducing the negative impact of wildfire disasters through multi-scenario risk analysis of land investment

Natural meteorological and climatological hazards and vulnerable vegetation are frequent triggers of natural disasters, such as wildfires. These cause loss of life and significant economic damage, likely to increase due to climate and socio-economic changes. The increase in wildfires in recent decades has affected the decision-making of technocrats and policy experts and created the need for more sophisticated risk management. This paper develops a theoretical framework for reducing the economic impact of wildfire risk on forests. Also provides insight into land use decisions regarding losses that this increased risk of forest land management can cause. The impact of wildfire risk on economic land value is evaluated by comparing three scenarios, i.e. the deterministic risk-adjusted land expectation value with its risk-free counterparts calculated assuming the stationary risk and predicted increasing risk as time goes by. Also, for this purpose, we evaluate the economically optimal length rotation period pine stands and the risk premium. Fire risk is described as the probability of pine stands destruction due to their age and meteorological conditions in the experimental area Záhorská lowland (western Slovakia). Our findings highlight the importance of alerting forest policymakers to carefully incorporate assessment of the increasing risk of random natural disasters due to climate change into sustainable forest management. The study's results will also help current or future forest owners estimate and evaluate the economic/investing risk when buying or selling forest land.

Managing ecosystem services in oleaginous forests for bioenergy provision and climate change mitigation

Oleaginous forests provide diverse ecosystem services, including timber, seed yield (a vital feedstock for biodiesel production), and substantial carbon savings. These carbon savings encompass carbon sequestration related to timber growth and carbon savings resulting from substituting fossil fuel with biodiesel. However, oleaginous forests are vulnerable to seed wasp attacks (disservice), which significantly threaten both seed yield and carbon savings. Using an integrated ecological-economic model that includes Faustmann's Land Expectation Value model and a pest damage control model, we aim to understand the intricate relationship among multiple ecosystem services and disservices of oleaginous forests. The results reveal four distinct phases contingent on varying pesticide application rates: the pesticide under-use phase, substitution phase, complementary phase, and over-use phase. Notably, a potential avenue to minimize pest damage is identified during the complementary phase by reducing the optimal rotation age at the expense of decreased carbon sequestration and bioenergy provision, posing a challenge to climate change mitigation. These findings have implications for formulating policies to manage conflicting ecosystem services of energy forests, offering valuable insights into the intersection of sustainable forest management and climate policy.

Economic evaluation of reopening a dormant tree improvement programme: a case study with Scots pine in Scotland

Abstract The deployment of improved forest reproductive material (FRM) selected to yield greater timber volume and quality than unimproved material could help to maintain productive, sustainable, and resilient forests and increase resistance to abiotic and biotic threats under extreme climate change events. In Scotland, Scots pine (Pinus sylvestris L.) is a productive species that aligns with these objectives. However, confidence in Scots pine has been low in recent years due to damage caused by the needle blight Dothistroma septosporum. Recent provenance/progeny trials using native Scots pine material from the Caledonian pine woods indicate a favourable genetic correlation between growth and resistance to D. septosporum, suggesting that simultaneous improvements are possible. The Scots pine breeding programme in Scotland was closed in 2002. Here, we present an economic case for reopening the breeding programme to further improve Scots pine FRM. Specifically, we evaluate the costs and potential benefits of supporting a new programme. We conduct an analysis using three improvement scenarios using a Faustmann formula (amended with thinnings) to maximize the land expectation value. Our results indicate that further improvement of Scots pine FRM would be cost-effective, outperforming the current Scots pine timber production and financial outcomes. The analysis shows that the Central scenario’s land expectation value rises by £883 ha−1 compared to the baseline of £79 ha−1, assuming a 3.5% interest rate. We employed both annuity calculations and a break-even analysis to show improved FRM could maintain a breeding programme investment of £3.5 million per year over a 30-year period with a break-even cost threshold increase of ~52% for purchasing improved planting materials from £0.33 to £0.50 per seedling. In conclusion, the study provides economic evidence of the commercial benefits for reopening the Scots pine breeding programme to increase timber production and financial returns.

Economic comparison of loblolly pine and solar power in South Georgia, United States

In the face of deforestation from urbanization and population growth, there is a potential for an additional loss of forests from solar power generation as forest landowners may look to alternative sources of income. We compare the profitability of loblolly pine (Pinus taeda) plantations and solar power generation in South Georgia. The analysis was completed at two different scales, one acre (0.405 ha) and five acres (2.02 ha), based on the large number of small acreage forest landowners in the state. The Land Expectation Values (LEVs over 25 years project cycle) for a 350 kW (occupying one acre or 0.405 ha) and a 1 MW (occupying five acres or 2.02 ha) solar power systems are -$30,183 and $29,607 at an 8 % interest rate, respectively. In comparison, LEVs for one acre (0.405 ha) and five acre (2.02 ha) loblolly pine stands (at the site index 80 ft/24.4 m) for the same rotation cycle are $1,380 and $6,900 at a 6 % interest rate and $611 and $3,055 at an 8 % interest rate, respectively. The potential profitability of solar power systems varies, depending on whether the solar generation and pricing are high enough to overcome the significant installation, upkeep, and recycling costs. Since the potential profitability of the larger-scale solar power systems is significantly higher than loblolly pine stands at around five acres, there is a chance that small family forest landowners could convert their forestlands into solar farms, especially if their forestlands are close to a high-capacity power transmission line. This information could feed into ongoing policy deliberations on promoting conservation and renewable energy generation at the state level and beyond.

Functional traits to predict financial value of enrichment planting in degraded tropical forests

Demand for tropical timber is expected to rise due to an increased global need for sustainable renewable materials. However, sustainable tropical timber production remains a challenge for the global wood product supply chain, especially for high-value tropical hardwoods. Restoration of degraded lands through enrichment planting of native hardwood species could provide a solution, but the financial viability of using native tropical tree species remains largely unknown. We evaluated the financial viability of 22 hardwood tree species native to northern Borneo in enrichment plantings of a degraded forest in Sabah, Malaysia. We investigated how the species’ financial value, expressed as an internal rate of return (IRR) based on land expectation value, varied with their functional trait composition. We found that high financial value was positively correlated with trait values associated with a conservative growth strategy, i.e., financial value was negatively correlated with leaf calcium, magnesium, and nitrogen content, as well as with leaf pH and specific leaf area. Trees with these traits showed a high IRR, partly explained by relatively fast growth and high survival rates. For the most economically promising species, Shorea macrophylla, we estimated that enrichment planting for forest restoration could reach IRRs up to 7.8%. Our results showed that enrichment planting for high-value hardwood production in degraded forests can be financially viable, with variation among species, and that various traits associated with a more conservative growth strategy were linked to high financial value.

Abandoning conversion from even-aged to uneven-aged forest stands – the effects on production and economic returns

ABSTRACT There is growing interest in continuous cover forestry in Sweden. The historical domination of even-aged forest management means there is a need to focus on methods for transforming even-aged to uneven-aged stands. Practical conversion management today is highly adaptive, and the possibility of failures, such as persistent lack of tree recruitment, must be allowed for. We used simulations to evaluate various scenarios in which conversion management is introduced at different development stages in even-aged stands and then abandoned in favour of clear-felling. A shift towards an inverse J-shaped diameter distribution at the end of the simulations was most evident in northern Sweden and with an early introduction of conversion forestry. The largest losses were incurred in a scenario where the conversion management started with removing larger trees at pre-commercial thinning: it reduced the volume of production by up to 25% and, if clear-felled, resulted in a lower land expectation value than conventional management. Earlier decision to abandon conversion management reduced the losses, but the effect of timing was minor. In summary, the results indicate that conversion management could be started and abandoned without any major economic loss during the timeframe of a normal rotation.

Aiming at a moving target: economic evaluation of adaptation strategies under the uncertainty of climate change and CO2 fertilization of European beech (Fagus sylvatica L.) and Silver fir (Abies alba Mill.)

Key messageDrought severely worsened till 2100 and eventually outplayed growth-enhancing CO2 fertilization turning productivity gains into losses for beech and fir. Most scenarios generated notable losses in profitability but economic tipping points were later than for productivity due to lag effects related to discounting. Time mixture of fir and shortening rotation can counteract economic risks under climate change, but requires early admixture and moderate establishment costs.ContextAdaptation strategies to climate change (CC) such as establishing mixed forests are often based on ecological understanding while economic rationale is often disregarded.AimsThis paper studies CC uncertainty on productivity and profitability of European beech (Fagus sylvatica L.) and Silver fir (Abies alba Mill.). Besides, the economic consequences to actively adapt beech forests by admixing Silver fir are investigated.MethodsWe used the process-based forest growth model GOTILWA + to simulate RCP2.6, RCP4.5 and RCP8.5 climatic projection by the MPI-ESM-LR global circulation model (MPI-ESM-LR) with the CO2 fertilization effect (eCO2) switched on and off. We analysed the sensitivity of the land expectation value (LEV) on CC and economic parameters.ResultsCC initially increased productivity, but declined after a tipping point (2040–2070) and later also profitability (2045–2100). RCP8.5 had positive, RCP2.6 negative and RCP4.5 neutral effects on LEV. Switching off eCO2 turned RCP8.5 from the most profitable to the least profitable scenario and the opposite for RCP2.6. CC generally reduced optimal rotation (Ropt) being scenario dependant, but comparatively more for fir than beech. Admixing fir created an economic benefit when implemented before stand age 50 of beech. This benefit was nullified with protection costs for browsing control (fencing or tree shelters).ConclusionsEconomic parameters (not CC) were the major source of uncertainty stemming from discounting factors and establishment costs. Admixture of fir and shortening rotation can provide a solution to tackle economic and climate uncertainties, but requires early admixture and browsing control.

Implications of incorrectly determining site index on stand-level management activities and financial returns in older generation loblolly pine plantations

Predicting future yields normally requires an estimate of site quality. A commonly used measure is site index (SI). SI is often incorrectly quantified operationally due to the ambiguity associated with selecting “site” trees. Plus, error in the measurement of height itself occurs. This study quantifies the impacts on the number and timing of thinnings, and the final harvest ages, as well as financial returns when incorrectly determining SI. Three values of SI (base age 25 years) were examined using two older generation loblolly pine plantation growth and yield simulation models from the Western Gulf, USA; 16.76 m, 21.34 m, and 25.91 m. Firstly, a particular SI was assumed to be the “true” value, growth and yield estimates were obtained, and financial assessments were conducted. The same process was then conducted again, but assuming that the SI was incorrectly determined by varying positively and negatively the SI by up to 1.22 m from the assumed “true” value. For these older generation plantations, incorrectly determining SI did impact the age of the first thinning by as much as 5 years. In some cases, errors of +/- 1.22 m in SI estimation had little impact on the estimated timing of the first thinning. Errors in SI of up to +/- 1.22 m had little impact on the number of thinnings across economic rotation ages. For both unthinned and twice-thinned stands, final harvest (clearcut) ages differed by as much as 4 years for SI errors up to +/- 1.22 m. These errors led to differences in Land Expectation Value (LEV) up to $406.50 ha-1. Across the three SI (16.76, 21.34, and 25.91 m), differences in LEV ranged from $237.49 to $406.50 ha-1. These differences in LEV could be enough to incorrectly not conduct, or incorrectly conduct, a silvicultural operation such as an herbicide treatment or a fertilization treatment across a rotation, among other treatments.

Effect of climate change on the land rent of radiata pine plantations in Chile: Site productivity and forest fires

Climate change can severely affect forest plantation productivity and fire regimes in temperate regions. The economic evaluation of these impacts is challenging because of the spatially differentiated effects expected to occur across planted areas. We calculated the combined effect of projected climate change on the stochastic land expectation value (SLEV) for a random sample of stands covering the Pinus radiata plantations in central-southern Chile. To simplify the stochastic evaluation problem with changing productivity and fire frequencies over time, we divided rotations into stages, before and after commercial thinning, and assumed that reforestation is at the end of each stage. The SLEV was calculated through Monte Carlo simulations using the coefficients from previously estimated productivity and fire risk statistical models. The predicted combined effect on the SLEV is negative in most regions except those in the southern limit of the specie distribution. In the economically crucial coastal area of the central regions, the negative effect of more frequent fires outweighs faster growth. In the northern drier areas, the SLEV becomes negative due to a large drop in site productivity. Anticipatory reassignments of management regimes have a large adaptation value in these low-productivity sites. Our optimization-simulation results suggest that relative to prescribed management regimes, the optimal rotation age in most low-productivity sites is longer and in most high-productivity sites shorter. Shortening the rotation age by one to two years has an important adaptation value in highly productive coastal sites.

Impact of carbon price on the relative profitability of production forestry and permanent forestry for New Zealand plantations

New Zealand has an Emissions Trading Scheme (ETS) under which forest growers can earn carbon units for increases in carbon stock. Between March 2020 and March 2022 carbon price increased from $24/NZU to $74/NZU. Carbon price increased to the extent that the Land Expectation Value (LEV) of permanent forestry (without clearfelling) exceeds the LEV of production forestry (with clearfelling) on many sites. This paper reports on an analysis comparing the LEV of permanent forestry with the LEV of production forestry for land of different site productivity, harvest difficulty (i.e. slope) and location (i.e. distance to market). Breakeven carbon price (when LEV for permanent forestry equals LEV for production forestry) is calculated for each combination to reveal overall trends. The effect of carbon price on the proportion of national afforestation for which permanent forestry gives a higher LEV is estimated. Results indicate that, at a carbon price of $50/NZU, permanent forestry is more profitable than production forestry on 71% of area with measured carbon and 26% of area with look-up table carbon. When carbon price reaches $100/NZU, permanent forestry is more profitable for all area.

Active timber management by outsourcing stumpage price uncertainty with the American put option

Timber production is risky, with price uncertainties caused by stumpage price fluctuations. In this study, the American put option is employed to outsource such uncertainty and establish the reservation prices at various stand ages. Put option values and the reservation prices derived thereof, thus, help forestland owners decide whether the stumpage price is high enough to justify an immediate timber harvest. With a series of simulations, we demonstrated that using an American put option to cover the downside price risk could substantially increase the average land expectation value compared to the certainty case. Besides, the simulations confirm that buying an American option as a price insurance would deduct land expectation values compared to the methods proposed by Brazee and Mendelsohn. In addition, we proposed a rolling put option method that allows forestland owners to buy partial length put options to balance their cost and price uncertainty protection. Overall, with the help of American put option, forestland owners for the first time could actively make their harvest decisions from the price setter perspective instead of being pure market price taker like they have been since the beginning of commercial forestry.

Forest adaptation strategies to reconcile timber production and carbon sequestration objectives under multiple risks of extreme drought and windstorm events

This article aims to compare different forest adaptation strategies based on stand diversification from an economic perspective in order to reduce extreme drought- and windstorm-induced risks of dieback. We tested the efficiency of the strategies individually and then combined through a simulation study in which we evaluated the financial loss and the reduction of the carbon sequestration capacity. We used a stochastic forest growth model to simulate forest growth and carbon sequestration and developed a forest economic approach based on the land expectation value (LEV) to account for the stochastic simulations. Results showed that diversification increased timber production (from +4 to +81%) and LEV (from +27 to +398%), but reduced carbon storage (from −9 to −49%). Trade-offs between the financial balance and the carbon balance (adaptation vs. mitigation) are achievable. The valorisation of carbon services in addition to timber ones increases the forest value and changes the strategy that provides the highest economic return for a carbon price of 110 EUR/tC. Our study presents a new approach for the economic valuation of multiple risks in forest management, highlighting the importance of integrating several risks in a common analysis rather than investigating one risk at a time (traditional economic approach).

The Extension and Improvement of the Forest Land Net Present Value Model and Its Application in the Asset Evaluation of Cunninghamia lanceolata Forest Land

In order to solve the problem in that the classical forest land expectation value method ignores the actual forest stock volume when assessing the income at the end of the current production cycle in the forest, and fill the research gap in this area, the technical system of the forest land asset evaluation was enriched. The forest land returns were divided into two parts, i.e., the segmented forest land return price from the growth of the actual forest stand to the end of the growth cycle (Bu1), and the segmented forest land return price for an infinite number of growth cycles after the growth of the actual forest stand to the end of the growth cycle (Bu2). Through structure, the forest land gain price expansion model was obtained, and the stand quality including the average diameter at breast height, average height, stock volume, and outturn of stand as dummy variables were used to construct the growth harvest model related to asset evaluation. Taking Cunninghamia lanceolata forest land as an example, the traditional asset evaluation methods were comparatively analyzed. The residual standard deviation (RSD) of the growth model was less than 10%, the total relative error (TRE) and mean system error (MSE) were within ±10%, the mean prediction errors (MPE) were less than 5%, and the mean percentage standard errors (MPSE) were less than 10%, respectively. Combining the forest land net present value expansion model with the traditional evaluation method, the evaluation value of the forest land assets was subsequently calculated, and accordingly, the forest land asset evaluation prime stand factors were predicated. It was found that the valuation results of the forest land net present value expansion model were consistent with the actual situation. The forest land net present value expansion model can therefore be used for asset evaluation of tree forest land (including natural uneven-aged forest land), bamboo forest land, shrub forest land, and economic forest land, and provide new technical support for forest land asset evaluation.

Towards sustainable and accountable subsidy design: Identifying effective subsidisation systems for forest stands

Governments often subsidise forest stands to ensure a sustainable supply of wood and environmental services. Governments need to design subsidy systems to effectively achieve policy goals with less government expenditure. This study explored effective subsidy systems for forest stands by comparing four subsidy systems using a simple forest resource model. Although a system formulated with minimal constraints required minimum government expenditure in all cases, the rotation age in a stand could change cyclically with the target supply. Assuming that forest owners cooperate with the government, the maximisation of a cost-effectiveness index in each stand could provide the second-lowest government expenditure for almost all cases. However, when we assumed that forest owners were economically rational and strived to maximise their land expectation values, the optimality of this system was disturbed. In this situation, alternate optimisations of rotation ages by forest owners and subsidy rates by the government converged on the subsidy system with the third-lowest government expenditure. The system adjusts the subsidy rate so that the maximum land expectation value is zero, which is the pure-strategy Nash equilibrium between the forest owners and the government.

Forest Land Expectation Value or Maximum Sustained Yield? Resolving A Long-Standing Paradox

The Faustmann formula, equivalent to the land expectation value (LEV), yields the present value, starting with bare land, of an infinite series of future timber rotations for a stand. If this formula is used to find the rotation age that maximizes the present value, a lower annual harvest will result when compared to a maximum sustained yield (MSY) regime for an ownership with many stands. However, the LEV is strongly preferred by economists. This is the LEV vs. rents paradox. Herein, this paper demonstrates that an infinite series of annual harvests for an ownership under an even flow regime, discounted to the present using any interest rate, will provide the same optimal rotation age as the time of the peak MAI for a single stand, though with different estimates for the profitability, depending on the interest rate. Thus, rotations producing the MSY and the maximum financial return are identical when analyzed at the ownership scale but are not the same when based on the analysis at the stand scale using the Faustmann formula (LEV). This is the solution to the paradox. The formulas for internal rate of return (IRR) and the land valuation for transaction purposes are also presented.

Optimal harvest decisions for the management of carbon sequestration forests under price uncertainty and risk preferences

Forestry carbon sequestration represents a critical way to achieve the goal of mitigating climate change and carbon neutrality in China. However, fluctuations in timber and carbon prices pose greater risks for forest farmers in their management decisions. Thus, risk preferences play an important role in forestry production decisions. This study develops a dynamic Faustmann model to evaluate the impact of market uncertainty and risk preferences for the harvesting decisions on Chinese fir plantations in southeastern China. The model is solved by employing a dynamic programming algorithm with the Monte Carlo simulation method. Specifically, we use a linearization function to describe the land expectation value of the future rotation period, simplifying the model's solution. The regression results of the linearized function are significant and can fully represent the future land expectation value of different optimal risk tolerance levels with different discount rates and timber and carbon prices. The results indicate that risk-seeking forest farmers generate more revenue than risk-aversers to maximize the land expectation value. The results of the dynamic Faustmann model generally show a shorter optimal rotation period and a higher land expectation value when compared with the static Faustmann model. Sensitivity analysis shows that timber price is a key parameter affecting the management decisions on the carbon sequestration forests, and forest farmers can obtain additional revenue from the increased timber price volatility. In contrast, the impact of carbon price fluctuations is relatively small, but higher carbon price can help forest farmers generate more revenue from the projects. Our results demonstrate that the Chinese government should improve the long-term equilibrium level of the carbon price, which fully reflects the carbon sequestration benefits of forest stands, and motivates forest farmers to participate in carbon sequestration projects. In addition, advising forest farmers to select the appropriate rotation period for forest carbon projects based on their risk preferences enables them to maximize the benefits of carbon sequestration and timber harvesting.

An economic analysis and seed yield assessment of alternative breeding strategies in a white spruce tree improvement program

Tree improvement programs in Alberta have been primarily based on selections from open-pollinated wild stand trees, without systematic breeding of elite parents through controlled pollination. This strategy has resulted in relatively slow advancements in genetic gain in most programs, given their age. Our objective was to compare seed yield, genetic parameters, and economic implications of three different breeding strategies to advance Alberta’s white spruce (Picea glauca (Moench) Voss) improvement programs. Eighteen genotypes, identified as ‘elite’ based on height breeding values (BV), were selected from a first-generation white spruce orchard and controlled crosses (CC) and controlled polymix (PM) crosses performed to compare seed yield and genetic parameters with open-pollinated (OP) seedlots from the same parent. Results show, that on average, OP seedlots had 29 seeds/cone and weighed 2.7 grams/1000 seeds, significantly larger than the CC seedlots with a mean of 10 seeds/cone and 2.2 g/1000 seeds. Polymix crosses produced intermediate mean values with 19 seeds/cone and 2.5 g/1000 seeds and were not significantly different from the other two breeding strategies. No statistical differences were found for cone length or germination percentage among the CC, PM, and OP breeding strategies. Significant phenotypic variability was found for seeds/cone (yield) and seed weight among families from CC, and these traits had moderate narrow-sense heritabilities of 0.49 (±0.11) and 0.29 (±0.13), respectively. There was no significant correlation between the general combining ability (GCA) of seed yield and BV for seedling growth, but females F132, F138, and F927 and males M966, M1002, and M1045 showed the best performance in seed yield and growth and would be good candidates to include in future controlled crosses. If CC breeding is considered a strategy for operational seed production, as conducted elsewhere, the highest land expectation value (LEV) was $141 CAD/ha at age 60, and the best net present values (NPV) were for both discount rates (2%, 4%) with log prices ($90 CAD/m3, $200 CAD/m3) tested. However, this advantage of CC vs PM and OP only occurred on the highest quality sites (i.e., Site Index (SI) 13 and 18). On the low-productivity site (SI = 6), with the various scenarios, improved material did not show any financial benefit. Our results show that seeds produced from the controlled crosses breeding strategy were inferior to those produced from the controlled polymix and open-pollinated strategies. However, with sufficient investment and company support, the CC breeding strategy could be used as a cost-effective method to increase genetic gain and advance white spruce breeding programs in Alberta.

Opportunity Costs of In Situ Carbon Storage Derived by Multiple-Objective Stand-Level Optimization—Results from Case Studies in Portugal and Germany

Considering in situ carbon storage in forest management has gained momentum under increasing pressure to decarbonize our economies. Here, we present results from case studies in Portugal and Germany showing the opportunity costs of in situ carbon storage derived by multiple-objective optimization. We used a stand-level model to optimize land expectation value under uncertainty as a reference, then derived opportunity costs by including the enhancement of the average carbon storage in aboveground biomass as a second objective. Using the optimal (compromise) solution when considering both objectives simultaneously, we show opportunity costs of EUR 119 (Portugal) and EUR 68 (Germany) per Mg CO2eq. These opportunity costs are higher than conservative, but lower than alternative cost estimates for future damages caused by current CO2 emissions. An important result was that suggested reference solutions in both countries (though only for low discount rates in Portugal) were mixed forests without clearfelling. In Germany, this implicitly elevated carbon storage. Such “closer-to-nature-forest-management” systems were also mostly suggested by the optimization tool when carbon storage was an objective.

An Ecological-Economic Approach to Assess Impacts of the Expansion of Eucalyptus Plantations in Agroforest Landscapes of Northern Ethiopia

The conversion of fertile croplands to Eucalyptus woodlots in Ethiopian highlands, due to its business attractiveness to smallholders, raises concerns related to food production, water resources, carbon and other ecosystem services. This study was therefore designed to examine land allocation and plantation management decisions. Our emphasis was on the analysis of tradeoffs between the economic gains obtained from harvesting Eucalyptus timber and food production, carbon and water use. For that purpose, we considered a 1987 ha agroforest landscape in the Amhara region, Northern Ethiopia. With a planning horizon covering nine one-year periods, we developed and used nine Model I single objective linear programming (LP) models, and analyzed tradeoffs between objectives (e.g., land expectation value (LEV), Carbon, volume of ending inventory (VolEI), crop production and water use) using an LP-based Pareto frontier approach. The study revealed that the objective of maximizing the total economic gain from the sale of Eucalyptus wood poles favored a complete conversion of the available cropland into Eucalyptus woodlots. To meet the minimum annual crop production/consumption/requirements of households in the study area, the land under Eucalyptus should be limited to 1772 ha, with a sequestration potential of 1.5 to 1.57 × 107 kg yr−1 of carbon in the aboveground biomass. However, this land cover limit should be decreased to 921 ha so as to limit the total annual water use (for biomass production) below the amount available from rainfall (11,000 m3 ha−1 yr−1). Moreover, the study highlighted that maximizing the harvested wood volume or LEV would come at the cost of a decreased aboveground carbon stock and volume of ending inventory and higher total water use. It also provided alternative optimal Pareto-front points, among which decision makers will be able to select their preferred targets. The current study also showed the potential for the application of Pareto frontier approaches to support the development of effective ecological/economic management strategies and the design of land use policies in an Ethiopian context.