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Economic Value of Forestland: - Market Values - Direct

The document discusses the economic value of forestlands, including both market and non-market values. Market values include direct values from wood products, non-wood forest products, minerals, and other extracted resources. Indirect market values include transportation and other services related to bringing forest resources to market. Non-market values include environmental amenities such as scenery, recreation opportunities, and existence value. Methods for assessing the economic value of non-market services include stated preference approaches like contingent valuation and choice experiments, as well as revealed preference approaches like travel cost models and hedonic pricing analyses.

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Agung Jati Pramono
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74 views21 pages

Economic Value of Forestland: - Market Values - Direct

The document discusses the economic value of forestlands, including both market and non-market values. Market values include direct values from wood products, non-wood forest products, minerals, and other extracted resources. Indirect market values include transportation and other services related to bringing forest resources to market. Non-market values include environmental amenities such as scenery, recreation opportunities, and existence value. Methods for assessing the economic value of non-market services include stated preference approaches like contingent valuation and choice experiments, as well as revealed preference approaches like travel cost models and hedonic pricing analyses.

Uploaded by

Agung Jati Pramono
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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Economic value of Forestland

• Market values – Direct

The values of forest resources that are traded in the market. Associated
with resources such as wood products, non wood forest products
(mushrooms, herbs, etc.), minerals, fisheries, forage for livestock, drinking
water, water used for hydroelectric production, outfitter services, etc. . Also
land (property) values

• Market values – Indirect


The economic values associated indirectly or tangentially with bringing a
forest resource to market. Sometimes includes transportation, lodging,
food, and materials needed to harvest or produce an extractive commodity.
Also the indirect economic value of businesses and services associated with
the outdoor recreation industry.
Economic value of Forestlands (Continued)

• Non-market values
The economic value of environmental amenities and services, such as scenery, the
atmosphere, waterways, clean air, clean water, pollination, etc.. Also includes
– Use value
Includes recreation; benefits derived from direct contact with the resource
– Consumptive value
Includes hunting, fishing, collecting, etc.
– Option value
Value associated with the knowledge that the potential for future use exists
– Existence value
Value to people who benefit from the knowledge that an ecosystem continues to exist
How can we assess the economic value of
non-market environmental services?
1. Stated (direct) preference approaches:
These are methods that allow people to state a value that directly relates to a specific
environmental change that would be incurred by a change in policy.

• Contingent Valuation Method (CVM)


– Relies on surveys
– Willingness to pay for a service with a hypothetical assumption of a plausible market
– This is the only method allowed by the U.S. government for assessment of existence value.

• Choice experiments
– Based on conjoint analysis, which is used in marketing to determine the attributes of a product
likely to result in the greatest market share
– Uses surveys to rank alternative options in terms of combinations of goods and services

 Criticism: How would people react in a real situation?


How can we assess the economic value of
non-market environmental services?
2. Revealed preference approaches:

These methods are based on observing how people behave in markets that are indirectly
related to the ecosystem good or service that is to be valued.

• Travel cost methods


– A method for determining the economic value of recreational use
– Based on cost of travel time and distance to a potential recreation site

• Hedonic pricing
– Used to value environmental amenities (or disamenities such as pollution) in the
context of residential home markets
– Evaluates the combination of environmental amenities and disamenities to explain
wage differentials and home purchase price
Decision Analysis
Common techniques include:
1. Benefit-cost analysis which compares the benefits and costs of alternative
with the ratio or net benefit selected
2. Marginal analysis is a variant of BC analysis in that you’re analyzing the
change in benefits and the change in costs as you go from one alternative to
another
3. Optimization addresses problems where that are a seemingly infinite
number of alternatives when you combine stand conditions, each with
numerous alternatives, that could be selected over a variety of planning
horizons; essentially involves the allocation of scarce resources among
alternative uses to fit a single goal
i. Linear programming
ii. Quadratic programming
iii. Goal Programming
iv. Nearly all management texts written in the 1990’s devoted a substantial
portion of the text to these techniques
Valuation of the Tree
I. Whole tree methods
II. Log based methods
1. Determine lumber value per MBF by grade and
diameter
 Lumber prices, lumber grade recovery, etc.
2. Determine log value per MBF by diameter, grade, and
log length delivered to the mill.
 Cost analysis of milling, conversion from mill to log
scale.
3. Determine stumpage value of logs in standing trees
 Include cost analysis of logging
4. Apply stumpage value by log grade to standing trees.
a. Variable cost (direct costs)
b. Fixed cost (indirect costs)
c. Conversion surplus at a processing stage
d. Conversion return at a processing stage
Value development in a log

1. Standing log value


2. Felling and limbing
3. Yarding and bucking
4. Roadside log value
5. Hauling
6. Delivered log value (log scale)
7. Realized log value at the mill (lumber scale)
Valuation of Timberland
• Forest Inventory
• Harvest Schedule
• Market information
• Non-timber assets  This is increasingly important and
difficult
• Financial information
-annual management
-Legal expenses
- property taxes
- planning, capital improvements, boundary maintenance, etc.
Scheduling and Rotations

1. Classical forest regulation


A. Area control
 Regulated forest can be achieved in one
rotation, but harvests often become
unstable in the near future
B. Volume control
 Stable harvest can be achieved in near
future, but fully regulated forest not
achieved in one rotation
Volume control

1. Austrian formula
Annual cut = I + (Ga –Gr) / a
Where I = annual increment
Ga = present growing stock
Gr = desired growing stock
a = adjustment period (may be one full rotation)
I may be adjusted so that I = (Ip+Ie) /2
Volume control

2. Hanzlik’s formula
Annual cut = (Vm / R) + I
Where Vm = volume of merchantable timber above
rotation age
R = rotation adopted for future stand in years
I = forest increment
Scheduling and Rotations (continued)
2. Application with different rotation lengths
A. Forest divided into compartments based on

- site index
- forest types
- silvicultural regime
- management objectives
- non-timber products
- wildlife
- recreation
- environmental objective, etc.

B. Can incorporate extended rotations


C. Can incorporate reserves
Harvest Scheduling Continued

“Base Harvest Policy” (USFS):


1. Harvest schedule does not result in declining yield – must
exhibit non-declining yield (NDY)
2. Regeneration harvests at or beyond CMAI
3. Planning horizon equal to 2 x max. CMAI or more
Canadian “Area-based Allowable Annual Cut Analysis
Project:”

http://www.for.gov.bc.ca/hre/areaaac/index.htm
Three Choices for Area-Based Allocable Cut
a. relative oldest first;
b. absolute youngest first; and
c. random stand selection.
Lowering the maximum constant area
harvest rate may increase volume
production in some, but not all, cases.
Decision Analysis
Common techniques include:
1. Benefit-cost analysis which compares the benefits and costs of alternative
with the ratio or net benefit selected
2. Marginal analysis is a variant of BC analysis in that you’re analyzing the
change in benefits and the change in costs as you go from one alternative to
another
3. Optimization addresses problems where that are a seemingly infinite
number of alternatives when you combine stand conditions, each with
numerous alternatives, that could be selected over a variety of planning
horizons; essentially involves the allocation of scarce resources among
alternative uses to fit a single goal
i. Linear programming
ii. Quadratic programming
iii. Goal Programming
iv. Nearly all management texts written in the 1990’s devoted a substantial
portion of the text to these techniques
ASSISI Forest management software
ASSISI Forest management software

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