Hedging Strategies in Forest Management

The paper focuses on forests management strategies for natural hazards of nonindustrial owners, in the case where the forest provides nontimber services. We introduce a basic two-period model where the private owner manages natural hazards on his forest thanks to the accumulation of savings on his individual income, or to the adoption of sylvicultural practices. We show that: 1/ the harvesting rule, in the presence of amenity services and a random growth rate for forest, is smaller than the one predicted under the Faustmann's rule; 2/ savings and sylvicultural pratices may be seen as perfectly substitutable tools for the management of natural hazards. However, our analysis predicts that the harvesting rule displays a specific sensibility to price effects and/or changes in the distribution of natural hazards, depending on whether forest owners opt for the financial strategy or undertake sylvicultural practices.Risk; Forest; Amenities; Savings and Sylvicultural Practices

Amenities and Risk in Forest Management

The objective of the paper is to analyze the risk management behavior of a non-industrial private forest owner under uncertainty about timber production. Two types of hedging strategies with harvesting decisions are studied: a financial practice versus a physical one. We develop a two-period model of hedging and harvesting decisions when the forest owner values the amenity services of forest. We study the properties of optimal current and future harvesting and hedging decisions. We show that, except when both hedging instruments are perfect substitutes, the forest owner chooses a single tool, her/his choice depending on the rate of return of the hedging instrument. We also prove that the greater the marginal utility of amenity services, the smaller the harvesting amount. We provide a comparative statics analysis on current and future harvesting and on the hedging strategies. We are interested in the impact of an increase in initial stocks (wealth and timber), timber prices (periods 1 and 2), opportunity costs of the hedging instruments (rate of return for savings and cost of the regeneration process for physical practice) and expected risk. We show, for example, that an increase in expected risk has a negative impact on period 1 harvesting and the use of hedging tools for both strategies, while the impact on period 2 harvesting is positive for savings and null for physical practice.forest management, forest growth and natural risk, self-protection in forestry, savings and risk

Forest Management under Fire Risk when Forest Carbon Sequestration Has Value

In this paper, we develop a multiple forest use model to determine the optimal harvest date for a forest stand producing both timber and carbon benefits under a risk of fire. The preferences of the representative non-industrial private forest (NIPF) owner are modeled though an expected utility specification. We introduce saving as a decision of the forest owner at any time. The problems of forest management and saving decisions are solved simultaneously using a stochastic dynamic programming method. A numerical programming method is used to characterize the optimal forest and saving policies. We apply this framework to model the behavior of a representative NIPF owner located in the Southwest of France. The empirical application indicates that a higher risk of fire will decrease the optimal rotation period, while higher carbon prices will increase the optimal harvesting age. We show that increasing the risk of fire leads to a reduction in rotation duration. On the contrary, a higher carbon price makes carbon sequestration more profitable, thereby leading to increasing the rotation duration. We then show how the carbon price/risk of fire frontier is affected by risk aversion

Forest Management under Fire Risk when Forest Carbon Sequestration Has Value

In this paper, we develop a multiple forest use model to determine the optimal harvest date for a forest stand producing both timber and carbon benefits under a risk of fire. The preferences of the representative non-industrial private forest (NIPF) owner are modeled though an expected utility specification. We introduce saving as a decision of the forest owner at any time. The problems of forest management and saving decisions are solved simultaneously using a stochastic dynamic programming method. A numerical programming method is used to characterize the optimal forest and saving policies. We apply this framework to model the behavior of a representative NIPF owner located in the Southwest of France. The empirical application indicates that a higher risk of fire will decrease the optimal rotation period, while higher carbon prices will increase the optimal harvesting age. We show that increasing the risk of fire leads to a reduction in rotation duration. On the contrary, a higher carbon price makes carbon sequestration more profitable, thereby leading to increasing the rotation duration. We then show how the carbon price/risk of fire frontier is affected by risk aversion

Assurances et activités de réduction des risques en foresterie : une approche théorique

Cet article propose un modèle théorique (utilité espérée et risque multiplicatif) de choix d’activités de réduction des risques ou d’assurance d’un propriétaire forestier faisant face à un risque de catastrophe naturelle. Notre réflexion part du constat que ces modes de couverture sont rarement utilisés contre les risques naturels. Un tel risque en foresterie se caractérise par un nombre d’états de la nature infini et par une fonction de dommage proportionnelle à la valeur de la forêt. L’article présente des résultats de statique comparative et analyse l’impact sur les décisions privées de subventions versées par l’Etat en cas de catastrophes naturelles. Nous montrons qu’une valeur plus importante du peuplement a généralement un effet ambigu sur le choix des activités de réduction des risques. Cet impact dépend de trois effets : risque, richesse et perte dont le résultat global peut être ambigu. L’effet du coût des activités de gestion des risques dépend des préférences du propriétaire forestier et du caractère risqué ou réducteur de risque de ces activités. Nous démontrons aussi que, si ces activités sont considérées comme un investissement réducteur de risque (risqué), alors plus un propriétaire forestier est riscophobe, plus il choisit un montant d’activités de prévention élevé (faible). Nous montrons également que l’existence d’un programme public d’aide peut inciter les propriétaires forestiers à diminuer leurs activités de prévention ou d’assurance.insurance, risk-reducing activities, public intervention, forest

Household Energy Choices and Fuelwood Consumption: An Econometric Approach to the French Data

In an international context of soaring oil prices and growing awareness of the need to combat global warming, wood would appear to be becoming increasingly competitive and desirable for our environment. France is the leading consumer of fuelwood in the EU, mainly for home consumption and for heating, although the share of wood in primary energy consumption is still very low (4%). It is therefore important to understand how domestic consumer fuelwood demand is determined. We propose an econometric analysis of fuelwood consumption by modeling the choice made by consumers of the type of use of wood for heating, and the possible combination between one energy used as a main source of heating and another used as a back-up. Our estimations show that this choice is mainly determined by income. Wood is chosen as the main energy source by the poorest households. Consumption is price sensitive in the case of main use of wood (price elasticity of -0.4), but price elasticity is lower in the case of back-up use, and varies according to the type of energy used as the main source (electricity, gas, fuel oil)

Household Energy Choices and Fuelwood Consumption: An Econometric Approach to the French Data

In an international context of soaring oil prices and growing awareness of the need to combat global warming, wood would appear to be becoming increasingly competitive and desirable for our environment. France is the leading consumer of fuelwood in the EU, mainly for home consumption and for heating, although the share of wood in primary energy consumption is still very low (4%). It is therefore important to understand how domestic consumer fuelwood demand is determined. We propose an econometric analysis of fuelwood consumption by modeling the choice made by consumers of the type of use of wood for heating, and the possible combination between one energy used as a main source of heating and another used as a back-up. Our estimations show that this choice is mainly determined by income. Wood is chosen as the main energy source by the poorest households. Consumption is price sensitive in the case of main use of wood (price elasticity of -0.4), but price elasticity is lower in the case of back-up use, and varies according to the type of energy used as the main source (electricity, gas, fuel oil)