Optimal Forest Management with Carbon Benefits Included

In this paper, we analyse how optimal forest management of even aged Norway spruce changes when economic values are placed on carbon fixation, release, and saved greenhouse gas emissions from using wood instead of more energy intensive materials or fossil fuels. The analyses are done for three different site qualities in Norway, assuming present climate and with a range of CO2 prices and real rates of return. Compared to current recommended management, the optimal number of plants per ha and harvest age are considerably higher when carbon benefits are included, and increase with increasing price on CO2. Furthermore, planting becomes more favourable compared to natural regeneration. At the medium site quality, assuming 2% p.a. real rate of return and (sic)20 per ton CO2, optimal planting density increases from 1500 per ha to 3000 per ha. Optimal harvest age increases from 90 to 140 years. Including saved greenhouse gas emissions when wood is used instead of more energy intensive materials or fossil fuels, i.e. substitution effects, does not affect optimal planting density much, but implies harvesting up to 20 years earlier. The value of the forest area increases with increasing price on CO2, and most of the income is from carbon. By using the current recommended management in calculations of carbon benefit, our results indicate that the forest's potential to provide this environmental good is underestimated. The study includes many uncertain factors. Highest uncertainty is related to the accuracy of the forest growth and mortality functions at high stand ages and densities, and that albedo effects and future climate changes are not considered. As such, the results should be viewed as exploratory and not normative.