Timber production versus old-growth preservation with endogenous prices and forest age-classes

Abstract

This study combines timber production and environmental values, applying a dynamic forest-level economic model with any number of forest age-classes. The model includes endogenous timber price or nonlinear harvesting costs and various possibilities to specify the dependence of environmental values (related e.g. to species persistence) on the forest age-class structure. The nonlinearities in the net benefits from timber production have the consequence that fluctuations in optimal timber harvesting may totally vanish or at least become smaller than in forest scheduling models without ad hoc even flow constraints. If environmental values are specified to depend on the fraction of forest land preserved as old growth, the optimal long run allocation between timber production and old growth is represented by an equilibrium continuum. Thus the optimal long run allocation depends on the initial age-class distribution. The continuum and the dependence of initial age-class distribution vanish when the rate of discount approaches zero. If the environmental values of age-classes increase smoothly with age, the long run equilibrium may simultaneously include multiple rotation periods. The model determines the optimality of producing timber and environmental values separately at different parts of the forest or at the same piece of forest land. Numerical computation suggests that the optimal solution always converges toward some optimal long run stationary age-class distribution.