Daigneault, Adam J.

Sohngen, Brent

English

Research Papers in Economics

 
 
  Role of New Zealand Forests in Global Climate 
Change Mitigation 
Adam Daigneault1 & Brent Sohngen2 
1Economic Researcher/Modeller, Landcare Research 
daigneaulta@landcareresearch.co.nz 
2Professor, Department of Agricultural, Environmental, and 
Development Economics, Ohio State University 
 
 
Paper presented at the 2011 NZARES Conference 
Tahuna Conference Centre – Nelson, New Zealand. August 25-26, 2011 
Copyright by author(s). Readers may make copies of this document for non-commercial purposes only, 
provided that this copyright notice appears on all such copies Role of Global Forests in Climate Change Mitigation 
Adam Daigneault and Brent Sohngen
1 
 
Introduction 
 
This paper uses a dynamically optimal global timber model that can measure 
responses in forest management and carbon sequestration from a global climate change 
mitigation policy.  There are a variety of policies that could influence specific changes in 
the management of existing forests, payments for avoided deforestation, and schemes 
that encourage afforestation.  While the mechanism in which a landowner is 
compensated for changes in forest land use can vary by the policy (e.g. clean 
development mechanism, carbon tax or subsidy, etc.), and by geographic region (Annex 
I, developing countries, etc.) this analysis simply estimates the changes in regional forest 
carbon sequestration through the introduction of two possible carbon price scenarios 
on all regions of the world through 2100.  More thorough reviews of existing forest 
carbon sequestration protocols can be found in Pajot (2007), Galik et al. (2009), and 
Erikson et al. (2011).  This paper also provides additional detail on the potential forest 
carbon sequestration in New Zealand.     
Forest Model Description 
For this analysis, we use a modified version of the Global Timber Model (GTM) 
originally developed by Sedjo and Lyon (1990), and subsequently updated by Sohngen et 
al., (1999) and Sohngen and Mendelsohn (2007).  GTM is an economic model capable of 
examining global forestry land-use, management, and trade responses to a variety of 
                                                 
1 The authors are, respectively, Economic Researcher/Modeller, Landcare Research, Auckland, New 
Zealand, daigneaulta@landcareresearch.co.nz ; and Professor, The Ohio State University, Department of 
Agricultural, Environmental, and Development Economics, Columbus, Ohio USA. policies, including climate change mitigation. In responding to a policy, the model 
captures regional afforestation, forest management, and avoided deforestation 
behavior, as well as changes in regional timber supply and global timber prices. The 
model is a partial equilibrium intertemporally optimizing model that maximizes total 
welfare in timber markets over time across approximately 250 world timber supply 
regions by managing forest stand ages, compositions, and acreage given production and 
land rental costs.  For expositional purposes, the results from these many forest types 
are aggregated into 9 regions, including New Zealand.   
Baseline 
The baseline policy assumes a business as usual scenario with no climate policy, 
and hence a carbon price of $0 per tonne of carbon dioxide equivalent ($/tCO2e).   
Timber demand is assumed to increase at a decreasing rate, growing initially at 0.5% per 
year, but then declining at a rate of 5% per year thereafter.  The demand elasticity is 
assumed to be close to unitary (1.1).  Timber yield functions are assumed to be constant 
over time, with the exception of subtropical plantations, which grow at 0.25% per year 
from improved technological innovation.  The baseline also assumes that harvesting and 
plantation establishment costs remain constant for the duration of the model.  The 
model is run from 2010 through 2150 at decadal time steps, but results are only 
presented from 2010 to 2100.   
Results for baseline global industrial roundwood price
2 ($/m3) and regional 
annual timber harvest quantities for the 9 aggregated regions are listed in Table 1.  The 
                                                 
2 All prices in this paper are in 2010 New Zealand dollars roundwood price starts at $179/m
3 and rises at a slightly declining rate over the next 
century.  Global timber production also rises over time, increasing from about 1.8 billion 
m3/yr in 2010 to more than 2.2 billion m3/yr in 2100.  Large producers such as USA and 
EU-27 are expected to remain key suppliers over the course of the century, but 
emerging regions such as Brazil and Asia are expected to contribute to a larger 
proportion of global supply over time.  New Zealand’s timber harvests are estimated to 
fluctuate dramatically over time because of the currently uneven age class distribution 
of its pinus radiata and other exotic plantations which produce nearly all of the nation’s 
logs.  
Table 1.  Baseline Global Timber Price ($/m3) and Annual Regional Harvest (M m3/yr) 
Year
Global 
Price
NZ USA Canada EU-27
Rest of 
Annex I
Brazil
Rest of 
America
Asia Africa Total
2010 179 $  16.0 457 240 361 221 169 71 212 83 1829
2020 194 $  26.5 412 234 285 166 182 109 359 124 1898
2030 211 $  16.6 474 188 352 159 175 92 383 87 1927
2040 229 $  17.6 264 162 387 167 193 100 524 129 1945
2050 242 $  31.5 406 142 411 184 186 99 430 94 1983
2060 249 $  18.8 538 161 366 203 202 100 349 132 2068
2070 257 $  21.0 274 219 506 201 209 106 498 88 2122
2080 263 $  35.1 449 243 337 198 211 101 497 113 2184
2090 267 $  20.6 622 215 346 204 201 108 414 108 2238
2100 278 $  26.0 389 219 475 237 218 108 437 116 2226  
Table 2 shows the baseline estimates of global forest area, which is estimated to 
decline over the next century.  This decline is projected to occur in the regions of Brazil, 
the Rest of America, Africa and Asia are estimated to have the largest decline in 
forestland due to increased pressure on land use for agriculture.  The total area of 
forestland (indigenous and plantation forest) in New Zealand is expected to increase 
slightly (2%) over the next century all due to a 200,000 ha expansion in exotic plantations.  These findings are consistent with trends reported in the most recent MAF 
National Exotic Forest Description (2010), which indicate that the annual area of new 
plantings have recently been larger than the area of deforestation.        
 
 
Table 2.  Baseline Forestland Area (M ha) 
Year NZ USA Canada EU-27
Rest of 
Annex I
Brazil
Rest of 
America
Asia Africa Total
2010 8.2 202 413 187 1069 549 349 449 240 3466
2020 8.2 200 414 189 1074 543 337 425 213 3403
2030 8.2 203 415 189 1068 532 326 413 203 3357
2040 8.2 203 415 190 1071 520 319 405 198 3329
2050 8.3 202 417 192 1078 509 311 407 197 3321
2060 8.3 204 415 194 1075 497 304 397 190 3284
2070 8.3 205 418 197 1082 487 299 400 195 3291
2080 8.4 210 420 193 1089 482 293 411 193 3301
2090 8.4 213 421 197 1090 471 292 403 180 3275
2100 8.4 217 424 205 1095 463 286 401 168 3268  
Table 3 shows the change in total forest carbon stocks
3 over the next century.  
Estimates indicate that total global forest carbon stocks will decline by about 2% 
between 2010 and 2100, however above ground carbon stocks are expected to decline 
by about 15%.  This difference can be attributed to a relatively constant stock of below 
ground (soil) carbon and an increasing pool of carbon in harvested wood products.    At 
the regional level, large sources of forest-based emissions occur in Brazil, Rest of 
Americas, Asia and Africa, while most developed countries increase their forest sinks.  
Carbon stored in harvested wood products is expected to increase at a rate of nearly 1 
                                                 
3 Total forest carbon stocks are tabulated as a sum of above ground carbon, soil carbon in forests, and 
carbon stored in harvested wood products (HWP). PgCO2e
4/yr globally over the next century.  New Zealand is estimated to have a 
relatively stable but increasing level of total forest carbon sequestration from 2010 
through 2100 (4%), while above ground carbon could grow by more than 11% from an 
increase in exotic plantations.     
Table 3.  Baseline Carbon Sequestration (PgCO2eq) 
Year NZ USA Canada EU-27
Rest of 
Annex I
Brazil
Rest of 
America
Asia Africa Total
2010 5.0 187 524 103 1118 508 314 333 172 3265
2020 5.0 185 523 104 1109 504 309 341 168 3249
2030 4.9 186 524 108 1107 500 306 346 163 3244
2040 5.0 187 525 111 1106 496 302 346 158 3235
2050 5.1 191 526 113 1106 491 298 333 154 3218
2060 5.0 195 528 114 1107 486 295 322 151 3203
2070 5.1 194 529 117 1109 481 291 328 148 3202
2080 5.2 199 530 116 1111 475 288 332 149 3204
2090 5.1 202 530 119 1113 471 285 332 147 3204
2100 5.2 201 531 122 1116 468 282 328 145 3199  
 
Climate Change Policy Scenarios 
  This analysis assumes all baseline conditions with the exception that the forestry 
market faces a climate policy that starts in 2010 and continues through 2100.  Because a 
global climate change policy is still under development and the overall stringency of the 
caps and roles that forests will play in the global carbon market is still undefined, we 
investigate changes in forest carbon under two potential carbon price paths that start at 
prices of $25 and $50/tCO2e and remain constant for the duration of the policy.  Both 
scenarios assume a policy that compensates landowners for positive changes in forest 
management, afforestation, and avoided deforestation relative to the baseline case.   
                                                 
4 1 metric tonne is equivalent to 1 mega gram (Mg) or 10
6 grams. 1 tera gram (Tg) = 10
12 grams (1 million 
tons) and 1 peta gram (Pg) = 10
15 grams (1 billion tonnes).    Estimates show that a global carbon price will increase the price of industrial 
roundwood in the near term as landowners opt for carbon payments that lengthen 
rotations or reduce the conversion of forests to other land uses, such as agriculture 
(Table 4).  As a result, the quantity of timber supplied in 2010 is reduced by 200 million 
m
3/yr or more.  Over time, the amount of timber supplied increases as forests planted in 
the early periods become mature and are felled.  This causes the global timber price to 
actually become lower than the baseline levels in 2050 and 2100.   
Table 4.  Global Roundwood Price, Harvests and  Forest Area for Scenarios  
Base $25/t $50/t Base $25/t $50/t Base $25/t $50/t
2010 179 $       198 $       223 $       1829 1633 1435 3466 3466 3466
2020 194 $       206 $       224 $       1898 1777 1616 3403 4123 4547
2030 211 $       215 $       228 $       1927 1891 1772 3357 4103 4527
2040 229 $       226 $       233 $       1945 1965 1909 3329 4091 4517
2050 242 $       239 $       237 $       1983 2018 2033 3321 4087 4514
2060 249 $       235 $       235 $       2068 2200 2203 3284 4093 4518
2070 257 $       226 $       223 $       2122 2452 2482 3291 4083 4511
2080 263 $       227 $       217 $       2184 2571 2704 3301 4096 4513
2090 267 $       221 $       211 $       2238 2762 2909 3275 4085 4500
2100 278 $       228 $       210 $       2226 2770 3019 3268 4057 4521
Quantity (million m3/yr) Timber Price (NZD/m3)
Year
Forest Area (million ha)
 
Table 5 lists the net changes in total forest carbon sequestration (TgCO2e/yr) 
relative to the baseline case.  For both carbon price scenarios, most net sequestration is 
expected to occur in Asia, Rest of America, Brazil, and Africa.  Interestingly, most of the 
countries have low or negative net sequestration in 2010.  This is generally because 
some less productive ‘natural’ forests are being felled to meet timber demand and being 
replaced with fast growing timber plantations.  With a carbon price of $50/tCO2-e, all 
regions increase their carbon sequestration over time, resulting the net increase in total 
carbon stock in 2100 by 715 PgCO2e relative to the baseline, or more than 22%.  New 
Zealand is not expected to see large increases in forest carbon sequestration over time from carbon payments. Instead, it benefits from its highly productive plantations, which 
spurs and increase in forest area and annual harvests to meet shortfalls in global timber 
supply.  This finding counters some of the projections of forest mitigation potential 
under the current New Zealand Emissions Trading Scheme, which does not assume that 
all forests in all regions of the globe are eligible for carbon payments. 
Table 5.  Net Carbon Sequestration for Carbon Policy Scenarios (TgCO2e/yr) 
$25/tCO2e
Year NZ USA Canada EU-27
Rest of 
Annex I
Brazil
Rest of 
America
Asia Africa Total
2010 0.0 -2 0 -6 -12 -10 -29 -58 -27 -144
2020 0.3 74 14 55 875 631 1,014 1,411 497 4,571
2030 1.8 563 179 89 1,277 2,549 2,806 3,937 1,148 12,550
2040 3.4 1,047 361 209 1,547 3,872 4,221 7,117 1,773 20,150
2050 0.9 1,407 510 389 1,771 4,955 5,064 10,496 2,076 26,668
2060 0.2 1,596 627 510 2,053 5,758 5,633 14,120 2,422 32,720
2070 0.2 1,929 771 782 2,254 6,741 6,489 15,238 2,849 37,053
2080 0.0 1,606 755 1,199 2,484 5,211 6,819 17,098 2,543 37,715
2090 -2.1 1,967 735 1,411 2,704 6,538 7,458 17,874 2,928 41,614
2100 -0.4 938 565 1,760 2,984 7,632 8,310 19,535 3,334 45,058
$50/tCO2e
Year NZ USA Canada EU-27
Rest of 
Annex I
Brazil
Rest of 
America
Asia Africa Total
2010 0.0 -4 0 -22 -16 -75 -44 -75 -53 -288
2020 0.8 129 28 116 927 1,634 1,495 1,631 809 6,770
2030 4.3 894 327 191 1,397 5,314 4,581 5,143 2,322 20,174
2040 6.8 1,701 646 391 1,777 7,483 7,012 9,192 3,742 31,952
2050 -0.2 2,277 909 693 2,078 8,925 8,781 13,764 4,848 42,274
2060 3.8 2,556 1,119 982 2,458 9,773 10,244 17,843 5,733 50,712
2070 3.4 3,128 1,400 1,509 2,788 10,487 11,374 19,748 6,440 56,878
2080 -2.7 2,584 1,244 1,945 3,247 12,231 12,441 22,216 6,714 62,620
2090 2.2 3,059 1,258 2,387 3,613 10,917 13,221 24,148 7,167 65,772
2100 2.0 1,617 936 3,224 4,128 12,383 14,078 27,380 7,729 71,477 
Conclusion 
  This paper presents the results of a scenario analysis exploring how various 
carbon prices could potentially affect the amount of carbon sequestration in global 
forests.  Special attention is paid to the estimates for New Zealand.  While baseline 
results show a decline in global forestland area and carbon sequestration over the next century, the climate change policy scenarios estimates that this trend could be reversed 
if forest landowners are eligible for carbon payments in all regions of the world, and 
that while New Zealand can provide a relatively small source of the global timber supply 
and forest carbon sequestration, the region can still benefit from a global forest carbon 
sequestration policy by using its highly productive exotic plantations to increase its 
supply of logs to global markets.  Additional analysis needs to be conducted to estimate 
the changes in timber price, supply, and carbon sequestration under policies where not 
all countries face a forest carbon price as well as the impacts of including the 
agricultural sector into a land-based climate mitigation policy. 
 
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Role of New Zealand Forests in Global Climate Change Mitigation

Role of New Zealand Forests in Global Climate Change Mitigation

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