Challenges in Forest Economics

Transcription

1 Challenges in Forest Economics Presentation at International Conference Current problems in forest economics Puszczykowo, Poland, June 7-9, 2011 Birger Solberg, Prof. Dr Norwegian University of Life Sciences

2 I. What is forest economics? II. What are main challenges? III. How could we meet those challenges? 2 NORWEGIAN UNIVERSITY OF LIFE SCIENCES 2

3 3 I. What is forest economics? Forest economics is part of resource/environmental economics, which again is a part of general economics. Economics originates from the Greek word oikos (which means house, home or household) and the word nemein which means to manage. This implies that economics could be translated as to manage the house. More exactly the following definition is often used: Economics = the study/science about how scarce resources (i) are used or (ii) should be used. - i.e. one descriptive part (without should) and one normative part (including should ) ) 3

4 Forest economics is then that part of economics which deals with management of timber production AND the provision of other benefits from forests like wildlife, hunting, biodiversity, recreation/health, water catchment, preventing soil erosion, carbon sequestration/global climate mitigation, etc. 4 4

5 Institutt for naturforvaltning 2 classical examples of issues which are central in forest economics What is economic optimal silviculture investments and rotation ages for various species and site classes when only considering industrial wood harvest? What are the costs in reduced timber harvest income by emphasizing more strongly biodiversity? Or recreation? Or soil erosion prevention? Or greenhouse gas (GHG) mitigation? Or all of these at the same time? 5 5

6 Institutt for naturforvaltning Example from Norway We have rather good bio-economic models of forest management in Norway. To include biodiversity, I have used these models to estimate the costs of taking biodiversity into consideration. It works, but is not very precise as we do not know how much the biodiversity will increase. 6 I have therefore tried to cooperate with ecologists to provide me with functions which gives me: Number of a specific species per ha (N) as a function F of forest age, tree species, tree density, site class, diameter disribution etc. simple regressions. I have struggled for 3 years now I hpefully will get a first version by end of this year. THINGS TAKE TIME! 6

7 7 Institutt for naturforvaltning The problems analysed in forest economics are often characterized by being: 1. Long-term i.e. the time aspect is important: How to weight costs and benefits which occur at different points in time. 2. Having a multiple output production (timber, biodiversity, recreation, water, soil erosion prevention, GHG emission/sequestration etc,) 3. Being interdisciplinary i.e demand knowledge/inputs from biology, ecology, silviculture, harvest technology wood utilisation, general economics political science, sociology. Forest economics is a synthesis of many disciplines. Much more complicated than ordinary economics. 7

8 8 Institutt for naturforvaltning Two main issues: I. Market prices exist and give a reasonably good estimate of the marginal price of getting one unit more (i.e. the cost of production) and/or the marginal willingness to pay for one unit more. Example here is industrial timber sold in markets where competition is reasonably well. This is relatively easy to manage (although difficult enough when distributional impacts occur like considerations to rural employment and income). II. Much more difficult when no (or limited ) market prices exist (like biodiversity, recreation, water catchment, GHG emission). Can approach II in principally 2 ways: A. Using various valuation/willingness to pay methods (contingent valuation, transport cost methods, etc). B. Bio-economic modelling estimating the reduced income from timber production of increased consideration of nonmarket benefits. 8

9 9 Institutt for naturforvaltning The non-market benefits can thus be valued approximately. But then comes the interesting question: WHO SHOULD PAY? (because all constraints usually imply costs for the society at large and for groups in the society). Economics (as well as no other science) cannot decide this as this is a distributional question and as such is a political question. What economics can make is (at best) to clarify the order of magnitude of the costs and benefits of the actual forest management alternatives considered, thus making it possible to concentrate the attentio/analyses on the decisive issues. Just an example from Norway: 9

10 An example NPV in NOK NPV REF-scenario NPV LS-scenario NPV BM-scenario C sequestration REF-scenario C sequestration LS-scenario C sequestration BM-scenario CO2 equivalents Max CO2 CO2 price NOK/ton Figure 1: Net present value NPV (in NOK) of timber production and net carbon sequestration (in discounted net present tons of CO 2 equivalents) as a function of CO 2 -price for the reference, LS and BD scenarios and discount rate 4%p.a.. 10

11 11 III How to improve the present situation? 1. Cooperate with biology/ecology, silviculture, general economics, sociology, political science. 2. Use bio-economic modelling as the meeting point in interdisiplinary research 3. Establish research environments where such cooperation is possible (in particular between economics and ecology/silviculture). 4. Arrange M.Sc. and Ph.D courses where interdisciplinary cooperation is necessary. 5. Specify the end-use needs as clearly as possible what kind of information/knowledge is really needed? Remember: Forestry is complicated a general economist takes years to obtain the basics forestry understanding, if he manage at all. That is a vital strength of forest economists who have a general forestry background. 11

12 A lot to be done to improve forest economics and a lot of possibilities and gains ahead. THANK YOU FOR YOUR ATTENTION! 12 NORWEGIAN UNIVERSITY OF LIFE SCIENCES 12

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