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Consequences of Discount Rate Selection for Financial and Ecological Expectation and Risk in Forest Management

From Source to Sink: Past Changes and Model Projections of Carbon Sequestration in the Global Forest Sector

The common assumption of risk neutrality in forest decision making is generally inadequate because the stakeholders tend to be averse to fluctuations in the return criteria. In Markov decision processes (MDPs) of forest management, risk aversion and standard mean-variance analysis can be readily dealt with if the criteria are undiscounted expected values. However, with discounted criteria such as the fundamental net present value of financial returns, the classic mean-variance optimization is numerically intractable. In lieu of this, this paper (i) presents a linear-programming method to calculate the variance of discounted criteria conditional on any specific policy and (ii) adopts, as an alternative to the variance measure of risk, the “discount normalized variance” (DNV), an economically meaningful criterion consistent with income-smoothing behavior. The DNV is then used in procedures analogous to mean-variance analysis and certainty-equivalent optimization tractable by quadratic programming. The methods are applied to the management of uneven-aged, mixed-species forests in the southern United States. The results document the trade-off between the expected net present value and risk of financial returns, as well as the consequences for selected ecological criteria.

The GFPMX projects forest area and stock, consumption, production, imports, exports, and prices of industrial roundwood, fuelwood, sawnwood, wood-based panels, wood-pulp, and paper and paperboard, in 180 countries, and currently from 2018 to 2070. The core principle of the model is the Cobweb theorem, according to which markets are not necessarily in equilibrium, but take some time to adjust to shocks, such as demand shifts, leading to oscillatory dynamics of prices and quantities. The paper presents the model structure and the estimation of its parameters from international statistics on production, trade, forest area, and forest stock. This is followed by an application of the GFPMX to the impact on the global forest sector of the economic recession caused by the COVID-19 pandemic.

Starting from the cobweb theorem, a model of demand, supply, multilateral trade, and prices was formulated for the softwood lumber and newsprint markets in Canada, the United States (US), and the rest of the world. Parameters were estimated with panel data from multiple years and countries. The model was used to project the effects of US tariffs on softwood lumber and newsprint imports from Canada. To assess the uncertainty of the projections, multiple replications were performed by repeated sampling from the parameters’ statistical distributions. The results suggested that the initial shock of the tariffs dampened out and took 3 to 4 years to stabilize. In the long run, other things being equal, a 20.83% US tariff on softwood lumber imports from Canada decreased US imports from Canada by 4.7% to 8.0% and raised the US price by 0.3% to 2.3% and the US production by 0.9% to 1.7%, with 95% probability, while it lowered the Canadian price by 0.7% to 3.0% and Canadian production by 1.1% to 2.4%. A 28.69% US tariff on newsprint imports from Canada decreased US imports from Canada by 3.2% to 7.0% and raised the US price by 1.4% to 3.3% and the US production by 2.9 to 6.3%, while it lowered the Canadian price by 0.8% to 1.9% and the Canadian production by 1.6% to 3.5%.

To judge the accuracy of international forest product statistics, we checked the consistency of the reported consumption of wood and fiber with the production of wood products. Using goal programming, we estimated for 180 countries the consumption of industrial roundwood and of paper-making fibers nearest to the reported consumption, given the reported production of sawnwood, wood-based panels, pulp and paper and paperboard, and prior estimates of the input–output coefficients. The results suggested that for the 3-year average 2013–2015, industrial roundwood consumption was under-reported in 57 countries by a total amount of 368 million m³ and over reported in 44 countries by a total of 16 million m³. The largest under-reporting was for China for which the reported consumption of industrial roundwood was 237 million m³, or 57 per cent less than the estimated. The largest over reporting was for India, by 11 million m³, or 24 per cent. For paper-making fibers, reported consumption was less than the estimated in 62 countries for a total of 11.3 million t, and it was more than the estimated in 61 countries, for a total of 3.2 million t. The largest under-reported amount was for India: 2.6 million t, or 20 per cent of the estimated, a difference that was entirely attributed to the under-reporting of recovered paper consumption. The largest over reported consumption of paper-making fibers was for Spain, nearly 1 million t, or 24 per cent, attributed to over reporting of recovered paper consumption. The main source of the discrepancies was in the production statistics rather than trade. Only in some instances was the presumption of illegal logging consistent with the discrepancy, or lack thereof, between reported and estimated consumption of industrial roundwood.

This study explored the consequences for long-term projections and impact analysis of the uncertainty in model parameters and initial conditions. Using the Global Forest Products Model, multiple replications of projections were carried out with parameters or initial condition data sampled randomly from their assumed distribution. The results showed that parameter uncertainty led to uncertainty of the projections increasing steadily with the time horizon, and more rapidly than the uncertainty stemming from initial conditions. Among the parameter uncertainties, those in the supply and demand elasticities tended to dominate the uncertainty in the other parameters describing forest growth, manufacturing activities, and trade inertia. In an application to impact analysis it was found that, due only to the uncertainty of the model parameters, and conditional on other assumptions, an assumed rise in global temperature of 2.8 °C over a century caused the forest stock in 2065 to be 2.4% to 4.0% higher in developed countries, and 2.5% to 3.9% lower in developing countries, with 68% probability, a conservative estimate of the true uncertainty given all the other factors involved in such a prediction.

This study explored the consequences for the forest sector of a trade agreement between Australia, Canada, Chile, Brunei Darussalam, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam (TPP12), and of an extension to include India, China and the Republic of Korea (TPP15). The forecasts used a partial equilibrium model to predict the effects of reduced trade costs due to tariff elimination and of forest product demand shifts resulting from the macroeconomic impacts of TPP12 and TPP15 predicted by Narayanan and Sharma (http://wtocentre.iift.ac.in/workingpaper/workingpaper14.pdf). The results showed the effects of the agreements on the consumption, production, and trade of roundwood, sawnwood and panels, and pulp and paper, for the countries directly involved in the agreements, the European Union, and the rest of the world (ROW). Under TPP12, the main total welfare gains of wood producers and forest product consumers were in the United States and Vietnam, and the greatest losses in China and Korea. Global welfare gains were considerably larger under TPP15, to the advantage of China, Japan and Korea, but to the detriment of the United States, the European Union and the ROW.

The importance of international trade for the welfare of actors in the forest sector was estimated by comparing the current state of the world with a world in pure autarky with zero imports and exports of roundwood and manufactured wood products. The analysis was done with a comparative statics application of the Global Forest Products Model. The model was first calibrated to replicate observations in the base year 2013, and then solved under autarky conditions. The results showed much variation in the effects of international trade on production, consumption, and prices across countries and sub sectors. Globally international trade did have a positive effect on the economic welfare of the sector. This was due mostly to the positive effect on the surplus of consumers, and to a lesser extent on the increase in value added in forest industries. But value added profited manufacturers in developed countries much more than in developing. Furthermore, while wood producers in developed countries increased their profits with trade, those in developing countries incurred heavy losses that negated any incentive to invest in forest conservation, management and new plantations.

Markov decision process models were extended to reflect some consequences of the risk attitude of forestry decision makers. One approach consisted of maximizing the expected value of a criterion subject to an upper bound on the variance or, symmetrically, minimizing the variance subject to a lower bound on the expected value. The other method used the certainty equivalent criterion, a weighted average of the expected value and variance. The two approaches were applied to data for mixed softwood–hardwood forests in the southern United States with multiple financial and ecological criteria. Compared with risk neutrality or risk seeking, financial risk aversion reduced expected annual financial returns and production and led to shorter cutting cycles that lowered the expected diversity of tree species and size, stand basal area, stored CO2e, and old-growth area.

The objective of this study was to determine if the establishment of a monetary union in European countries had affected the international trade of forest products between the euro-using countries. A differential gravity model of bilateral trade flows was developed and estimated with panel data for the bilateral trade between 12 euro countries from 1988 to 2013, for commodity groups HS44 (wood and articles of wood), HS47 (pulp of wood, fibrous cellulosic material, waste, etc.), HS48 (paper and paperboard), and their sum. The parameters were estimated by ordinary least squares and fixed-effects methods. The results showed a positive or neutral effect of the euro on trade, for all products and countries, with both estimation methods. According to the most general result, the introduction of the euro had increased the average annual rate of growth of the bilateral trade of forest products by 6.5 ± 1.3% from 2002 to 2013.

Technical change is developing rapidly in some parts of the forest sector, especially in the pulp and paper industry where wood fiber is being substituted by waste paper. In forest sector models, the processing of wood and other input into products is frequently represented by activity analysis (input–output). In this context, technical change translates in changes over time of the input–output (I–O) coefficients and of the manufacturing cost (labor, capital, and materials, excluding wood and fiber). In the case of the global forest products model, the I–O coefficients and the manufacturing costs are determined empirically from historical data, while correcting for possible reporting errors. The method consists of goal programming. The objective function is the sum of the weighted absolute value of the deviations from estimated and observed production in each country of interest. The constraints express the relationship between the multiple output (sawnwood, panels, pulp, paper) and input (wood, waste pap...

Long-term projections for the global forest sector are particularly sensitive to the parameters of the demand equations for the end products. To get more precise estimators, and test statistics with more power than with pure time-series, the elasticities of demand are typically estimated from panel data, pooling time-series across countries, and thus assuming that the elasticities are the same in all countries. The objective of this study was to recognize potential differences between countries, while using the prior information obtained by pooling. The proposed method estimated with quadratic programming country-specific elasticities that minimized the sum of squares of the errors across countries and over time, while keeping the country elasticities within the confidence intervals of the pooled elasticities. The method was applied to international data for seven product groups from 1992 to 2016. Compared with pooling, country-specific elasticities reduced the root mean square error of in-sample predictions by 7% to 43% depending on the product. The country-specific elasticities had smaller standard errors than the pooled elasticities, and they tended to cluster near the bounds of the confidence intervals of the pooled elasticities. With country-specific elasticities in a global sector model the projected world prices in 2065 were 3% to 13% higher, depending on the product, than with pooled elasticities. World consumption in 2065 with country-specific elasticities was from 2% lower to 42% higher depending on the product, with large differences across countries and product groups.

Long-term effects of policies to induce carbon storage in forests were projected with the Global Forest Products Model. Offset payments for carbon sequestered in forest biomass of $15–$50/t CO 2 e applied in all countries increased CO 2 sequestration in world forests by 5–14 billion tons from 2009 to 2030. Limiting implementation to developed countries exported environmental damage from North to South, as developing countries harvested more, decreasing their stored CO 2 e. Substantially more CO 2 e was sequestered by allocating a given budget to all countries rather than to developed countries only. As offset payments increased wood prices relatively more than they decreased production, timber revenues generally increased. In the few countries with timber revenues losses they were more than compensated by the offset payments.

SUMMARY Some of the long-term consequences of China's collective forests tenure reform were projected with the Global Forest Products Model (GFPM). The reform had a positive effect on the wood supply and demand balance. By 2020 the reform led to a 14 to 36 percent decrease of China's imports of industrial roundwood. Concurrently, the rest of the world produced less, but several other countries especially in Europe, imported more. Despite the positive short-term effect of the reform on supply, China's industrial roundwood deficit was still increasing, but at a slower rate, after the reform was complete, due to the high demand induced by China's fast growing economy. Furthermore, while the tenure reform on collective forests mitigated China's timber shortage, it also decreased China's forest stock, with adverse effects for biodiversity and carbon sequestration. Nevertheless, globally, this negative effect was compensated by a more than equal increase of forest stock in the rest of the world.

The genetic variability in height growth and autumn cold hardiness were evaluated in a full-sib family of Scots pine (Pinus sylvestris (L.)) in a field trial in northern Sweden and 358 open pollinated families generated from the progeny of the full-sib cross. Height and autumn cold hardiness were assessed in the progeny of the full-sib cross at 9–19 years of age and on 3995 open pollinated progenies at three years of age. The autumn cold hardiness [critical temperature (CT)] of trees and progenies was tested by artificial freeze testing of detached needles at various temperatures. Significant genetic variation was found among progenies in both height growth and cold hardiness with a narrow sense heritability of 0.16 and 0.37, respectively. There was also a significant positive genetic correlation (r a =0.39) between height growth and CT with taller trees showing later autumn cold acclimation. It was concluded that there is significant additive genetic variance for height and CT which warrants a p...

Markov decision process (MDP) models generalize Faustmann's formula by recognizing that future stand states, prices, and interest rates, are not known exactly. Buongiorno (Forest Science 47(4) 2001) presents a dynamic programming and a linear programming formulation of the MDP model with a fixed interest rate. Both formulations are generalized here to account for a stochastic interest rate. The objective function is the expected present value of returns over an infinite horizon. It gives, like Faustmann's formula, the value of the land and the eventual standing trees. The changes between stand states, prices, and interest rate, are represented by Markov chains. Faustmann's formula is a special case where the change from one state to another has 0 or 1 probability, and the interest rate is constant. The MDP model applies to any stand state, even- or uneven-aged, and the best decisions are tied uniquely to the current system state. An example shows the effects of recognizing variations in interest rate on the land expectation value, and the cost of ignoring them.

Most economic studies of forest decision making under risk assume a fixed interest rate. This paper investigated some implications of this stochastic nature of interest rates. Markov decision process (MDP) models, used previously to integrate stochastic stand growth and prices, can be extended to include variable interest rates as well. This method was applied to Douglas-fir/western hemlock forests in the Pacific Northwest of the United States. An MDP model was used to find the harvest decisions that maximized the forest value of a stand in a particular state, given the price level and interest rate. This optimal policy was compared with the policy that would hold in the same context but with an interest rate fixed at its historical average. The results showed that when the interest rate was lower than its historical average, the best decision differed for 52 of the 192 possible combinations of stand state and price level. Assuming a fixed interest rate underestimated the forest value by 4% to 16% depending on the initial condition. However, applying the harvest policy derived with a fixed interest rate led to a loss of no more than 7% depending on the initial condition. Taking explicit account of the variability of interest rate in setting harvest policies had some unexpected ecological benefits.

The Global Forest Products Model (GFPM) was applied to project the consequences for the global forest sector of doubling the rate of growth of bioenergy demand relative to a base scenario, other drivers being maintained constant. The results showed that this would lead to the convergence of the price of fuelwood and industrial roundwood, raising the price of industrial roundwood by nearly 30% in 2030. The price of sawnwood and panels would be 15% higher. The price of paper would be 3% higher. Concurrently, the demand for all manufactured wood products would be lower in all countries, but the production would rise in countries with competitive advantage. The global value added in wood processing industries would be 1% lower in 2030. The forest stock would be 2% lower for the world and 4% lower for Asia. These effects varied substantially by country.

The relative value of currencies varies considerably over time. These fluctuations bring uncertainty to international traders. As a result, the volatility in exchange rate movements may influence the volume and the price of traded commodities. The volatility of exchange rates was measured by the variance of residuals in a GARCH(1,1) model of the exchange rate. We estimated the effect of this exchange rate volatility on export quantity and price with autoregressive distributed lag models based on monthly data of US exports and prices to 14 countries for eight commodity groups. The most general and statistically significant results were obtained by pooling the time series data across destination countries and products. They suggested that an increase in exchange rate variability of 1% led to a short-run decrease in export quantity of 0.3%–0.4% and to a short-run decrease in export price of 0.1%. Both the quantity and the price effect faded away over time. The effects were less systematic and statistically significant for specific export destinations or individual products. Thus, in contrast with exchange rate level, exchange rate volatility may not be a major policy issue for US forest product exports.

The Global Forest Products Model (GFPM) was modified to link the forest sector to two scenarios of the Intergovernmental Panel on Climate Change (IPCC), and to represent the utilization of fuelwood and industrial roundwood to produce biofuels. The scenarios examined were a subset of the “story lines” prepared by the IPCC. Each scenario has projections of population and gross domestic product. These projections were used as input in the GFPM simulations. The IPCC also makes projections of forest area, which were integrated in the timber supply sub-model of the GFPM. The IPCC scenarios also predict bioenergy production. These projections were used in the GFPM to determine forest area, forest stock, and the demand, supply, prices, and trade of forest products up to 2060. The main finding concerns the important impact of the high demand for biofuels implied in some of the IPCC scenarios. In particular, scenario A1B would induce a nearly 6-fold increase in the world demand for fuelwood by 2060. As a result, the real price of fuelwood would rise and converge towards the price of industrial roundwood by about 2025. At that point, industrial roundwood, which was used in the past to manufacture sawnwood, panels, and pulp, would begin to be used for energy production. The price of all wood would then continue to rise steadily up to 2060, and the price of manufactured product would increase in concert. The high fuelwood harvest would imply ecologically stressed forests in several countries, even under scenario A2 with a nearly 3-fold increase in fuelwood production by 2060.

SUMMARY International data from 1961 to 2005 showed that the coefficient of variation of consumption per capita across countries had tended to decrease over time for all forest products except sawnwood. This convergence of per-capita consumption was confirmed by the trends in Theil's inequality coefficients: the distribution of forest products consumption across countries had become more similar to the distribution of population. The rate of convergence had tended to accelerate during the last 10 years of observation: countries had become more similar in their use of all forest products except sawnwood. The rate of convergence was most rapid for fiberboard, veneer and plywood, and paper and paper board excluding newsprint and other printing and writing paper. The convergence of per-capita consumption of forest products stemmed in large part from lower rates of growth of consumption at higher levels of per-capita consumption, and not from a convergence of per-capita income.

Utilization efficiency has been defined as the ratio of the amount of industrial roundwood (or wood pulp) consumed in a country and year to the amount that would have been consumed to produce the same output with a reference technology. The reference technology was described by the average input–output relationships in countries of the Organization for Economic Cooperation and Development (OECD), from 1961 to 2005. The results showed that the efficiency of industrial roundwood utilization increased in most OECD countries from 1961 to 2005. There was also a strong decrease in the amount of wood pulp used for a given level of paper and paperboard production. Regression analysis with cross-sectional data suggested that the main determinant of the differences in efficiency of wood utilization between countries was the forest area per capita. The wood pulp price and population density were the main variables explaining the differences in wood pulp utilization between countries.

ARTICLE I NFO We assessed the impact on the world forest sector of a progressive elimination of illegal logging. The analysis compared predictions from 2007 to 2020, with and without a gradual reduction of illegally logged industrial roundwood from 2007 to 2011. A large part of the curtailment of timber supply due to the stoppage of illegal logging would be compensated by increased legal production incited by higher prices. As a result, without illegal logging the world annual production of industrial roundwood would decrease by no more than 1%, even though it would decrease by up to 8% in developing countries. World prices would rise by 1.5 to 3.5% for industrial roundwood and by 0.5 to 2% for processed products, depending on the assumption on illegal logging rates. World consumer expenditures for wood products and producer revenues would rise by 1 to 2% without illegal logging. World value added in forest industries would remain the same. However, the changes in consumer expenditures would be more than double the changes in producer revenues in countries dependent on illegally logged timber of domestic or foreign origin such as Indonesia and China. Symmetrically, changes in producer revenues would be almost twice the changes in consumer expenditures in countries with little illegal logging and efficient industries, such as Canada, Germany and the United States. Value added in forest industries would decrease most in countries with heavy illegal logging (12% in Indonesia and up to 9% in Brazil), and it would increase most in Germany, Canada (4%), and the United States (2%). Without illegal logging, the world forest inventory would increase slightly, as the increase in developing countries would more than compensate the decrease in developed countries.

Three studies of the global economic implications of eliminating illegal logging are summarized. Processors of illegally sourced wood would lose from the elimination of illegal logging through high prices for logs and decreased production of wood products. Associated with these changes could be losses in employment and income. Beyond these losses to the processing industry, eliminating illegal logging has positive effects on sustainable forestry practices, and economic, environmental and social values in countries with illegal logging. The effects of illegal logging also extend beyond the countries in which illegal logging occurs. In almost all countries without illegal harvests the elimination of illegal logging is predicted to lead to significant increases in the price and production of wood products. This suggests that an economic incentive exists for legitimate producers in all countries to support measures to reduce illegal logging.

Russia is the world's largest exporter of roundwood, mainly to China, Finland and Japan. The Russian government recently announced an increase in its export tax on softwood roundwood from the present 6.5% of export product value to 80% by January 2009. The effects of this policy on the world forest sector to 2020 were simulated with the Global Forest Products Model. The predicted results were lower Russian roundwood exports and prices, lower global wood supply and higher world roundwood prices. In response, the USA, Germany and New Zealand would increase production and export of roundwood. Major consumers of Russian roundwood would suffer a reduction in production and export of wood products. By 2020 Russian harvests and roundwood exports would be 49 million m3 (19%) and 51 million m3 (50%) lower, respectively. The price of roundwood in Russia would be 16% lower. This would encourage a modest increase in Russian forest product production: 1–3% higher. However, Russian export revenues would be US ...

Ecological integrity is important to fully describe the development of an economy. We calculated an aggregate index that quantifies the closeness of a forested region to a natural state. This naturalness index was based on the diversity of native tree species and sizes for ecological subregions in a seral condition. The index used the spatial–temporal array of sample plots from the Forest Inventory and Analysis (FIA) database of the USDA Forest Service. In the 70 survey units of the southern US between 1961 and 2005 the naturalness of forests generally improved with per capita personal income and population. The increase with income was consistent with the hypothesis of an environmental Kuznets curve for forested landscapes.

In the context of forest management, a fixed harvesting policy consists in trying to convert stands of trees to a chosen state at fixed intervals, regardless of the stand state and of the state of the market. In an adaptive policy, instead, the post-harvest state and the timing of the harvest depend on the stand and market states at the time of the decision. The objective of this study was to determine the practical gain from the theoretically superior adaptive policies. To this end, we compared optimal fixed and adaptive policies obtained with identical models and assumptions, and with data from the Douglas-fir/western-hemlock forests in the Pacific Northwest of the United States. In maximizing economic returns from harvests over an infinite time horizon, the net present value was 17 percent higher with an adaptive than with a fixed policy. It was 22 percent higher when the objective was to maximize annual harvest. The adaptive policy was even more superior with undiscounted, non-economic objectives, such as the area of spotted owl habitat (+37 percent gain), or the area of late-seral forest (+51 percent), but less so in maximizing the stock of high quality logs (+6 percent). The adaptive formulation also lent itself readily to multi-objective management.

We assessed the impact on the world forest sector of reducing the risk of exotic pest spread by curtailing the roundwood trade. The analysis compared predictions from 2006 to 2015, with and without a gradual ban of roundwood exports between 2006 and 2010. With a ban on roundwood trade, world consumer expenditures for wood products and producer revenues would rise by 2.2 percent and 1.9 percent respectively. World value added would remain unchanged. However, producer revenues would decrease for the main log exporters (16 percent for the Russian Federation, and 10 percent for New Zealand). Value added would decrease most for the main log importers (13 percent in Japan, 7 percent in Korea, and 4 percent in China). Although the global cost of banning roundwood trade seems modest compared to the cost of catastrophic pest invasions, its varying effects on countries must be taken into account in forging equitable policies. SUMMARY

The objective of this study was to determine the relationship, or lack thereof, between growth and diversity of tree species and size in conifer stands of western North America. Growth was measured by net basal area growth and its components: survivor growth, recruitment, and mortality. The analysis used inventory data from permanent plots in the Douglas-fir/western hemlock forest type in Oregon and Washington, and in the mixed-conifer forest type in California. The methods consisted of generalized least square regression with spatial autocorrelation, controlling for the effect of other stand characteristics. Other things being equal, in the two forest types under study there was a strong positive relationship between net basal area growth and tree-species diversity. This effect was associated with higher recruitment in stands of higher tree-species diversity. Neither mortality nor growth of survivors was related to tree-species diversity. The relationship between growth and tree-size diversity was less clear. For Douglas-fir/western hemlock, net basal area growth was negatively correlated with tree-size diversity, essentially because recruitment waslower onplots of high tree-size diversity.Formixed conifers, netbasal area growthtended alsoto be lower inplots of high tree-size diversity, but this was mostly because mortality was higher in plots of higher tree-size diversity. # 2007 Elsevier B.V. All rights reserved.

Background This paper explored the long-term, ceteris-paribus effects of potential CO 2 fertilization on the global forest sector. Based on the findings of Norby et al. (PNAS 2005, 102(50)) about forest response to elevated [CO 2 ]. Methods Forest productivity was increased in the Global Forest Products Model (GFPM) in proportion to the rising [CO 2 ] projected in the IPCC scenario A1B, A2, and B2. Projections of the forest area and forest stock and of the production, consumption, prices, and trade of products ranging from fuelwood to paper and paperboard were obtained with the GFPM for each scenario, with and without CO 2 fertilization beginning in 2011 and up to 2065. Results CO2 fertilization increased wood supply, leading to lower wood prices which in turn induced modest lower prices of end products and higher global consumption. However, production and value added in industries decreased in some regions due to the relative competitive advantages and to the varying regional effects of CO 2 fertilization. Conclusion The main effect of CO 2 fertilization was to raise the level of the world forest stock in 2065 by 9 to 10 % for scenarios A2 and B2 and by 20 % for scenario A1B. The rise in forest stock induced by fertilization was in part counteracted by its stimulation of the wood supply which resulted in lower wood prices and increased harvests.

This paper seeks ways of managing forests for landscape diversity, tree species and size diversities and timber production in a stochastic environment. A Markov chain model was developed to describe stand transition between pre-defined states, with high-frequency shocks and rare natural catastrophes. Stochastic optimization was then used with this model to study the trade-off between landscape diversity and other management objectives. This approach was applied to the mixed loblolly pine (Pinus taeda L.) and hardwood forests in the southern United States. The results showed that natural catastrophes enhanced the diversity of the landscape, but impaired the tree species and size diversities. Following current management would generate high landscape diversity, but low timber productivity. A highly diverse landscape could be maintained while keeping the tree species and size diversities near the achievable maximum. But managing to maximize tree size diversity or species diversity would much decrease landscape diversity. The opportunity cost of preserving a highly diverse landscape was high in terms of foregone timber production.

Wood supply, the link between roundwood removals and forest resources, is an important component of forest sector models. This paper develops a model of international wood supply within the structure of the spatial equilibrium Global Gorest Products Model. The wood supply model determines, for each country, the annual forest harvest, the annual change of forest stock and the annual change of forest area. The results suggest that global forest area would decline by 477 million ha between 1999 and 2030, with the largest decline in Asia and Africa. However, global forest stock would increase by 25 billion m 3 , with the largest increase in Europe, and North and Central America. Higher global harvests and lower prices were predicted than those predicted in the past with exogenous timber supply assumptions.

Impacts of exchange rates on international forest products trade are widely debated, but the empirical evidence regarding this issue is still inconclusive. Here, we report findings of the impacts of the exchange rates on the main forest product imports and exports of the US, from January 1989 to November 2004. Export data consisted of monthly series of the main products exported by the US to different countries. For imports we used monthly series of the principal products imported by the US from Canada, the major source of imports. The strongest evidence was obtained by pooling the data across countries and products. In the short run, exports were very elastic with respect to the exchange rate (−2.6), while imports were moderately elastic (1.2). In the long run, the elasticity decreased but remained significant (0.5 for both exports and imports). Appreciation of the US dollar tended to matter more than depreciation, but the hypothesis that the effect of exchange rate was symmetric could not be rejected.

A density-dependent matrix model was developed for Douglas-fir (Pseudotsuga menziesii (Mirb.) Franco) - western hemlock (Tsuga heterophylla (Raf.) Sarg.) forest stands in the Pacific Northwest of the United States. The model predicted the number and volume of trees for 4 species groups and 19 diameter classes. The parameters were based on species-dependent equations linking individual tree growth, mortality, and stand recruitment to tree and stand characteristics, including stand diversity in terms of tree species and size. The equations were estimated with individual tree and stand data from 2706 permanent plots in western Washington and Oregon, largely from private and state lands, measured twice at an average interval of 10 years. Other things being equal, diameter growth increased slightly with species diversity and decreased with size diversity. Recruitment increased with species diversity and decreased with size diversity. Mortality was independent of species diversity and tended to increase with size diversity. There was practi- cally no relationship between individual tree volume and species or size diversity. The number of trees predicted by the model over the interval between successive inventories was generally unbiased. Long-term predictions with different initial conditions were consistent with standard yield tables and compared favorably with those of the Forest Vegetation Simulator. The model also implied that, independently of its initial condition, an undisturbed stand would eventually reach a steady state dominated by western hemlock more tha n1mi n diameter,with few trees of other species and size. Resume : Un modele matriciel dependant de la densite a ete developpe pour des peuplements de douglas (Pseudotsuga menziesii (Mirb.) Franco) et de pruche de l'Ouest (Tsuga heterophylla (Raf.) Sarg.) dans la region du Nord-Ouest du Pacifique aux Etats-Unis. Le modele predit le nombre d'arbres et leur volume pour quatre groupes d'especes et dix- neuf classes de diametre. Les parametres sont bases sur des equations dependantes des especes reliant la croissance in- dividuelle des tiges, la mortalite et le recrutement a l'interieur des peuplements aux caracteristiques des arbres et des peuplements, incluant la diversite des peuplements en termes d'espece et de taille des arbres. Les equations ont ete es- timees a partir de donnees d'arbres individuels et de peuplements provenant de 2706 parcelles echantillons permanentes localisees dans l'ouest des Etats de Washington et de l'Oregon, principalement sur des terrains prives ou appartenant a l'Etat, et qui ont ete mesurees deux fois a intervalle moyen de 10 ans. Toutes choses etant egales, la croissance en dia- metre a augmente legerement avec la diversite specifique et elle a diminue avec la diversite en taille. Le recrutement a augmente avec la diversite specifique et il a diminue avec la diversite en taille. La mortalite etait independante de la diversite specifique et tendait a augmenter avec la diversite en taille. Il n'y avait pratiquement pas de relation entre le volume individuel des arbres et la diversite specifique ou en taille. Le nombre d'arbres predit par le modele dans l'intervalle entre des inventaires successifs etait generalement non biaise. Les predictions a long terme avec differentes conditions initiales etaient consistantes avec les tables de rendement standard et se comparaient favorablement a celles du modele « Forest Vegetation Simulator ». Le modele assumait aussi qu'un peuplement non perturbe, independam- ment de sa condition initiale, atteindrait eventuellement un etat stable domine par des pruches de l'Ouest de plus de un metre de diametre, avec peu d'arbres d'autres especes ou dimensions.

SUMMARY A growth model for uneven-aged mixed-conifer stands in California was developed with data from 205 permanent plots. The model predicts the number of softwood and hardwood trees in nineteen diameter classes, based on equations for diameter growth rates, mortality and recruitment. The model gave unbiased predictions of the expected number of trees by diameter class and species group over eight to twelve years, on 28 validation plots that were not used in model estimation. The results of predictions of undisturbed growth over more than a century were consistent with previous knowledge about succession and productivity in this forest type. The growth model, embedded in the CalPro simulator, was applied to project the effects of managing stands to maintain the current average stand state over the observed plots, with cutting cycles of ten or twenty years. The results suggested that uneven-aged management could match the productivity of even-aged systems. The ten-year cutting cycle led to higher productivity, higher present value of harvests, higher tree species diversity but lower tree size diversity than the twenty-year cycle.

The theory of demand and supply implies a positive relationship, or “price transmission” between the prices of products at different stages of manufacturing. This relationship was investigated with quarterly prices of softwood stumpage in the US South, and national prices of forest products, from 1977 to 2002. All prices, net of inflation, were found to be nonstationary and there was no evidence of co-integration between prices. Vector autogressive models, augmented by Granger causality tests and multiplier analysis showed that there was a one-to-one permanent positive response of the southern sawtimber stumpage price to a permanent change in the national lumber price. There was also a one-third permanent positive response of the national paper price to a permanent change in the national pulp price. There was no relation between regional pulpwood prices and national pulp or paper prices. When price transmission was significant, the full adjustment took about 2 years.

Conversion from even-aged management of beech (Fagus sylvatica) to target diameter harvesting was analysed by the use of diameter class models. Results were compared with traditional even-aged shelterwood natural regeneration regimes for a highly productive site. It was found that for discount rates from 0.5 to 3%, the profitability of the two silvicultural systems differs by up to 5%, with target diameters of 45–55 cm and rotation ages of 80–110 years in the traditional regimes. Target diameter harvesting tends to be preferred if the discount rate is >2% and traditional even-aged management if it is ≤1%. The results of target diameter harvesting are weakly sensitive to the regeneration pace and success and to variations of the quality of logs from large and old trees. Owing to the almost equal profitability of target diameter harvesting compared with the traditional regimes, the former may be preferred for ecological reasons since it better resembles the natural dynamics.

Static and dynamic models of the derived demand for forest product imports were estimated for each of 10 major forest products covering industrial roundwood, wood-based panels, pulp, and paper and paperboard. The models were estimated with panel data from 64 countries for 1970–1987, by pooled ordinary least squares, first differencing, fixed effects, random effects and the Arellano–Bond approach. The predictive accuracy of the demand equations was tested with postsample data from 1988–1997. Based on multiple criteria, the best results were obtained with the dynamic model estimated by the Arellano–Bond method. For most products the demand for imports was found to be inelastic with respect to price. For all products the demand for imports was elastic with respect to income.

The growth of pulp and paper mills in the US from 1970 to 2000 depended mostly on size and age. Mills grew according to Gibrat's law, and post-1970 mills grew faster than pre-1971 mills. Mills stopped growing at approximately 22 years of age. But most mills survived beyond that, thus growth was not necessary for survival, but characteristic of the early phase of the mill life cycle. Less integrated mills grew slower. So did more specialized mills and more so if they produced mostly paper. Mill location was uncorrelated with growth, but location mattered indirectly by facilitating or hindering mills with growth-conducive characteristics.

SUMMARY A site- and density-dependent matrix growth model for naturally-regenerated stands of mixed shortleaf pines (Pinus echinata Mill.) and hardwoods was developed. The data came from 1,047 re-measured plots in seven states in the southern United States. Growth, mortality and recruitment equations gave the parameters to predict the number of shortleaf pine, soft hardwood, and hard hardwood trees per unit area in each of 13 diameter classes. Equations to calculate the volume of trees growing in different stand conditions are also presented. The model predictions were tested on observations on 209 random plots not used in model estimation. Long-term simulations of the model suggested that, with natural succession and without major disturbance, hardwood trees would gradually replace the currently dominant softwood trees.

Background Forest managers must deal with inherently stochastic ecological and economic processes. The future growth of trees is uncertain, and so is their value. The randomness of low-impact, high frequency or rare catastrophic shocks in forest growth has significant implications in shaping the mix of tree species and the forest landscape. In addition, the fluctuations of wood prices influence greatly forest revenues. Methods Markov decision process models (MDPs) offer a rigorous and practical way of developing optimum management strategies, given these multiple sources of risk. Results Examples illustrate how such management guidelines are obtained with MDPs for combined ecological and economic objectives, including diversity of tree species and size, landscape diversity, old growth preservation, and carbon sequestration. Conclusions The findings illustrate the power of the MDP approach to deal with risk in forest resource management. They recognize that the future is best viewed in terms of probabilities. Given these probabilities, MDPs tie optimum adaptive actions strictly to the state of the forest and timber prices at decision time. The methods are theoretically rigorous, numerically efficient, and practical for field implementation.