Stationary Forestry with Human Interference

Capital Return Rate and Carbon Storage on Forest Estates of Three Boreal Tree Species

In this study, the capital return rate and carbon storage on forest estates with three boreal tree species are discussed. A growth model is applied, along with verified yield models of sawlogs and veneer logs. Using the normal forest principle, thinning schedules and rotation ages maximizing the estate-level capital return rate are clarified. Regeneration expenses are amortized at the end of any rotation. Capitalizations are greater and rotations longer than in recent studies. The capital return rate is a weak function of initial stem count and rotation age but differs by tree species. The initial stem count strongly contributes to biomass stored in trees. Omission of thinnings increases carbon storage very effectively but requires financial compensation. The most promising way of increasing the capital return rate is the reduction of regeneration expenses. Thinnings are triggered by stand volumes of at least 200 m3/ha. The average commercial trunk volume of trees removed in thinnings always exceeds 200 L. Risk aversion theory proposes short rotations and low stem count in seedling planting unless carbon storage compensation exists. Even a small carbon storage compensation justifies increased seedling counts and extended rotations.

Diversity of Carbon Storage Economics in Fertile Boreal Spruce (Picea Abies) Estates

A “normal forest”, an idealized estate with a uniform distribution of stand ages, can be used in the study of sustainable management practices. As the normal forest contains a variety of stand ages, the characteristics of the stands can be represented in terms of a “normal stand”, with properties known as a function of age. This paper takes seven never-thinned stands as seven “normal stands”, which describe seven estates of normal forest. The intention is to study the robustness of carbon storage microeconomics to varying estate characteristics. It was found that the economically optimal rotation ages vary. The state sums of volume and capitalization, corresponding to any optimal rotation, also vary significantly. Growth rates vary more than the optimal expected stand volumes. Consequently, any excess volume related to carbon storage adds on to an almost unified basic volume. For all seven normal estates, the most economical way of increasing carbon storage is to increase the size of trees retained in thinning from above.

The Effect of Empirical Log Yield Observations on Carbon Storage Economics

An empirical model for log yield from trees is established and applied in microeconomics of carbon storage in a boreal spruce estate. The transition from pulpwood to sawlogs is a smoother function of stem diameter in the empirical data, in comparison to literature values. Correspondingly, the value transition of trees along with increasing size is gentler. Due to price premiums of sawlogs from clearcuttings, all economically feasible treatment schedules terminate in clearcutting. Best capital return rates are gained with two heavy thinnings from above before clearcutting. Present carbon emission prices allow moderate carbon storage increment if the increment is compensated by proportional carbon rent. Doubling the present carbon prices would allow strong carbon storage increments if compensated by carbon rent. Application of nonproportional carbon rent is proposed.

Estate-Level Economics of Carbon Storage and Sequestration

The expense of carbon sequestration in terms of capital return deficiency is investigated at estate level, in the case of a fertile boreal estate dominated by spruce forest. Thinnings from below result as a high expense of increased rotation age, thinnings from above as a small expense. The expense of increased timber stock is greater than any proportional carbon rent based on present carbon prices. Application of nonproportional carbon rent is proposed.

The effect of capitalization on financial return in periodic growth

A capital return rate function for growth processes is introduced and applied to financial considerations in periodically growing multiannual plants. The capital return rate function is composed of a momentary capital return function, a probability density function in the time domain, and their integration over time or age. It is shown that the expected value of capital return rate within a single stand equals momentary capital return rate within an estate, integrated over an even distribution of stand ages. We distribute the capitalization to operative and non-operative capitalization. In the case of a low non-operative capitalization, financially sound operations favor relatively small amount of operative capital. In the case of a high, but constant non-operative capitalization, optimal practices correspond to those resulting in maximum sustainable yield. Appreciating non-operative capitalization favors small operative capitalization. Optimal rotation and operative capitalization are weak functions of increasing level of non-operative capitalization, even if they are strong functions of its increment rate. It is argued that large but non-appreciating non-operative capitalization, favoring practices corresponding to maximum sustainable yield, would not appear frequently. In summary, it is found that appreciation of non-operative capitalization dominates financially sustainable management practices.

Wealth accumulation in rotation forestry - Failure of the net present value optimization?

The rate of wealth accumulation is discussed, and an expression for a momentary rate of capital return is presented. An expected value of the wealth accumulation rate is produced. The return rates depend on any yield function. Three different yield functions are applied, two of them published in the literature, and a third one parametrized using a comprehensive growth model. A common economic objective function, as well as a third known objective function, are applied and compared with the clarified wealth accumulation rate. While direct optimization of wealth appreciation rate always yields best results, procedures gained by maximizing the internal rate of return are only slightly inferior. With external discounting interest rate, the maximization of net present value yields arbitrary results, the financial consequences being at worst devastating.

Harvesting Design by Capital Return

One can suspect that capital return rate in forestry can be maximized by growing trees experiencing a value-adding assortment transition. Such a situation may or may not endure. We investigate the financial feasibility of a few harvesting schedules for a semi-shade-tolerant tree species. Some example stands have experienced commercial low thinning, whereas others have experienced young stand cleaning only. High thinning is computationally combined with quality thinning, and further growth of trees is estimated using an applicable growth model. High capital return rates are gained by diameter-limit cutting to the transition diameter between pulpwood and sawlogs. Repeated thinnings lead to a reduction in the capitalization during several decades, the system approaching a stationary state. The transient forest stands investigated show a significant excess capital return, in relation to the stationary state, and this excess return is due to transient tree size distribution. Correspondingly, capital return rate gained in rotation forestry is somewhat higher than that of stationary continuous-cover forestry, and the volumetric yield is much higher. The productive capacity of stands previously thinned from below has been apparently ruined by that treatment.