MODELING THE EFFECT OF UNCERTAINTY ON TIMBER HARVEST: A SUGGESTED APPROACH AND EMPIRICAL EXAMPLE

A method is suggested for modeling uncertainty when there is a lack of information concerning the effect of forest management decisions on tree growth. Dynamic programming is used to investigate the optimality of alternative management strategies. The model is illustrated with an empirical example for a boreal forest region of western Canada. Three tentative conclusions follow: (a) silvicultural strategies to reduce uncertainty or to increase stand growth may not be worth pursuing, at least in northern forests; (b) the discounted cost of ignoring uncertainty may be substantial if taken over the entire forest; and (c) given uncertain forest growth, flexible harvest policies are preferred to a fixed harvest age.Agricultural Finance, Resource /Energy Economics and Policy, Risk and Uncertainty,

Biological Carbon Sinks: Transaction Costs and Governance

Activities that remove CO2 from the atmosphere and store it in forest and agricultural ecosystems can generate CO2-offset credits that can thus substitute for CO2 emissions reduction. Are biological CO2-uptake activities competitive with CO2 offsets from reduced fossil fuel use? In this paper, it is argued that transaction costs impose a formidable obstacle to direct substitution of carbon uptake offsets for emissions reduction in trading schemes, and that separate caps should be set for emissions reduction and sink-related activities. While a tax/subsidy scheme is preferred to emissions trading for incorporating biologically-generated CO2 offsets, contracts that focus on the activity and not the amount of carbon sequestered are most likely to lead to the lowest transaction costs.carbon sequestration; transaction costs; climate change

Elephants and the Ivory Trade Ban: Summary of Research Results

economics of elephant conservation, economics of ivory trade,trade bans

Smoke and Mirrors: The Kyoto Protocol and Beyond

The Kyoto Protocol (KP) is considered a necessary first step towards an effective future climate accord. As argued in this paper, however, the KP will likely fail because it has too many loopholes, inadequate governance structures and insufficient compliance provisions. This view is supported by case studies of Canada, Japan and the Netherlands. These countries are unlikely to achieve their self-imposed targets, or, if they do, the costs of compliance will be unacceptably high. Consequently, the difficulty of achieving agreement to reduce global emissions by half (as required to mitigate climate change) is greatly increased.Climate change mitigation, Kyoto Protocol and implementation, Carbon sinks

Wind Power: The Economic Impact of Intermittency

Wind is the fastest growing renewable energy source for generating electricity, but economic research lags behind. In this study, therefore, we examine the economics of integrating large-scale wind energy into an existing electrical grid. Using a simple grid management model to investigate the impact of various levels of wind penetration on grid management costs, we show that costs of reducing CO2 emissions by relying more on wind power depend on the generation mix of the existing electricity grid and the degree of wind penetration, with costs ranging from $21 to well over$1000 per tonne of CO2 reduced. Costs are lowest if wind displaces large amounts of fossil fuel production and there is some hydroelectric power to act as a buffer. Hydro capacity has the ability to store wind generated power for use at more opportune times. If wind does nothing more than replace hydro or nuclear power then the environmental benefits (reduced CO2 emissions) of investing in wind power are small.Wind power, carbon costs, electricity grids, mathematical programming

Biotechnology in Agriculture and Forestry: Economic Perspectives

Economists are rarely brought into the interdisciplinary research until the biophysical scientists have developed their models, made their measurements or completed their research task. The research economist is then brought in to do what amounts to a consulting task – provide some numbers that indicate impacts on the economy and employment. In this paper, I begin by illustrating cases from forestry where this leads to erroneous and costly policy outcomes. However, the main objective of this paper is to examine the role of genetic engineering in forestry and agriculture. In forestry, planting of genetically-modified (GM) tree species is nearly non-existent, with the exception of hybrid poplar that is used to produce pulp or fuel. However, as explored here, there is a role for GM tree varieties, particularly ones that are resistant to such things as the mountain pine beetle which has adversely impacted forests in British Columbia. I also examine the role of GM crops in addressing concerns about future food scarcity. As discussed here, there are various factors that suggest the world might encounter future scarcity. These include on the demand side a growing and wealthier global population, and greater demand for energy crops. On the supply side, there are fewer opportunities to expand farmland at the extensive margin, a decline in the rate of increase in productivity, limits to the amounts of inputs that can be applied at the intensive margin, and the closing of the gap between actual and potential crop yield. GM crops are one way to circumvent the potential shortages. However, there are many obstacles that need to be overcome before farmers globally can take advantage of transgenic research, including most importantly barriers put up by the European Union and various environmental NGOs on the grounds of the precautionary principle. These are discussed in some detail.precautionary principle; economics of genetically-modified organisms; agriculture and forestry; mountain pine beetle

Biological Carbon Sequestration and Carbon Trading Re-visited

Under Kyoto, biological activities that sequester carbon can be used to create CO2 offset credits that could obviate the need for lifestyle-changing reductions in fossil fuel use. Credits are earned by storing carbon in terrestrial ecosystems and wood products, although CO2 emissions are also mitigated by delaying deforestation, which accounts for one-quarter of anthropogenic CO2 emissions. However, non-permanent carbon offsets from biological activities are difficult to compare with each other and with emissions reduction because they differ in how long they prevent CO2 from entering the atmosphere. This is the duration problem; it results in uncertainty and makes it difficult to determine the legitimacy of biological activities in mitigating climate change. While there is not doubt that biological sink activities help mitigate climate change and should not be neglected, in this paper we demonstrate that these activities cannot be included in carbon trading schemes.carbon offset credits from biological activities, climate change, duration of carbon sinks

A Perspective on Carbon Sequestration as a Strategy for Mitigating Climate Change

Environmental Economics and Policy,