Towards a dynamic Ecol-Econ CGE model with forest as biomass capital

Abstract

This study presents a Dynamic Computable General Equilibrium model that combines economic and ecological aspects of forest biomass. A framework is introduced for modeling the growth of a biomass stock which interacts with economic sectors. Harvest of and demand for forest products and forest amenities are determined endogenously in an inter-temporally consistent way. The idea is based on a Markovian growth model of the forest. The study demonstrates an approach for incorporating non-market values of forests, such as carbon sequestration, recreation and biodiversity, into a growth model. A simulation illustrates harvest behaviour when the economy is subjected to shocks.Dynamic CGE; Markovian growth; Ecosystem modeling; Inter-temporal optimization; Infinite-horizon equilibria