This paper analyses the effects of price and market size variables on the investment propensities in the pulp and paper industry. A panel of 15 European countries in the time period 1988-1997 is used in the regression analysis. We find the wages, the USD/ECU exchange rate, the price of paper and the installed production capacity to be the main determinants of large investments in this industry. Our measure of market size has no - or only very small - effects.
The Swedish pulp and paper industry's ability to exert monopsony power is tested both with a conjectural variation model, which parameterizes the firms' expectations about other firms' behavior, and with a model that estimates country-specific effects and effects of currency fluctuations on import prices. We use industry data for the 1970-1993 period and find only weak evidence of market power, in spite of the apparent lack of competition.
Economic studies concerning environmental functions of forests are often partial in the sense that they focus on either benefits or costs. In other words, benefit/cost analyses indicating whether it is economically motivated to change forestry to make it compatible with environmental demands are relatively rare. This benefit/cost analysis deals with the forest as recreation environment, where benefit estimates from a study conducted in the county of Västerbotten, Sweden, are compared with cost estimates from another study in the same county. It is shown that adjustments of forest management to meet recreational demands do largely affect both benefits and costs, and that the results are sensitive to how soon the effects on the recreation environment occur after the adjustments of forest management.
Coarse woody debris (CWD) is crucial for maintaining biodiversity in forests but conservation measures to increase CWD must be performed cost efficiently. We estimate least-cost combinations of CWD-increasing measures in a spruce-dominated Swedish forest estate. Specifically, we investigate how using combinations of the measures tree retention, creating high stumps, manual scarification, prolonged rotations, and retention of dying trees impacts the amount of CWD and net present value at the estate level. We found that by combining CWD-increasing measures in an optimal way the amount of CWD on the estate could be increased 322% with a decrease in present value of only 10%. The optimal combination of conservation measures depends on the desired increase in CWD. The analysis thus shows that huge improvements in cost-efficiency of biodiversity-oriented forestry are possible.
Using an integrated assessment model, we examine the implications of climate policies that do not fully recognize forest carbon. Specifically, we first investigate the impact of an asymmetric policy that recognizes carbon emissions from fossil fuels while fully ignoring forest carbon. Next, we investigate the relative importance of not recognizing emissions from a reduction in the stock of forest biomass compared to not recognizing sequestration from the growth of forest biomass. We show that asymmetric carbon policies lead to lower levels of welfare, as well as higher emissions and carbon prices. This occurs because the forest resource will be allocated inefficiently under these carbon policies. Broadly, we find that when the social planner does not account for emissions or sequestration from the forest, the planner will set bioenergy levels that are too high and afforestation and avoided deforestation levels that are too low. Our results further reveal that not recognizing forest emissions leads to larger welfare losses than not recognizing sequestration.
Deadwood is recognized as one of the most important resources affecting forest biodiversity.Its absence from the forest landscape is, therefore, of concern, such that one official Swedishenvironmental objective is to increase the volume of deadwood. However, increasing the useof renewable energy sources, another environmental goal, is likely to work against thisbiodiversity objective. In this study we utilize a regional economic forest sector model,focusing on northern Sweden, in order to estimate the effect of a large scale introduction ofstump harvest on the future use of forest fuel. In addition, an ecological model, describing therelationship between the availability of dead wood and the abundance of saproxylic beetles, islinked to the economic model.The parameters used in the economic model are derived from a data set spanning 28 yearswhile the ecological model is derived from a survey of ten clear cuts, undertaken seven yearsafter the clear cutting, in order to investigate the abundance of saproxylic beetles in stumps.We simulate the effects of an increased demand for wood fuels in northern Sweden, with orwithout stump harvest. The two scenarios have different effects on all major round woodmarkets in the region, as well as on the abundance of saproxylic beetles. More specifically,the harvest of stumps is associated with a 5% reduction in the mean abundance of saproxylicbeetles living in deadwood on future clear cuts and a 3% increase in the use of renewableenergy recourses in heating plants.
The growth of an even-aged stand usually follows a S-shaped pattern, implying that the growth function is convex when stand age is low and concave when stand age is high. Given such a growth function, the Faustmann model could in theory have multiple optima and hence an interior local minimum solution. To ensure that the rotation age at which the first derivative of the land expectation value equals zero is a maximum, it is often assumed that the growth function is concave in stand age. Yet there is no convincing argument for excluding the possibility of conducting the final harvest before the growth function changes to concave. We argue that under normal circumstances the Faustmann model does not have any interior minimum. It is neither necessary nor proper to assume that the growth function is concave in the vicinity of the optimal rotation age. When the interest rate is high, the optimal rotation may lie in the interval on which the growth function is convex, i.e. before volume or value growth culminates.
A classical problem in forest economics is the determination of the optimal rotation age. It is commonly acknowledged that Martin Faustmann and Max Robert Pressler contributed the most to the solution of this problem. Faustmann formulated the renowned land expectation value formula, which laid the foundation for economic analyses of the optimal rotation problem. He also provided several hints on how to correctly solve the problem. Pressler's work focused on the growth of the capital in a forest stand. He invented the concept of Indicator Per Cent, and argued that the Indicator Per Cent should be used to guide forestry decision-making. Pressler correctly stated how to use the Indicator Per Cent to determine when a stand should be harvested. However, his suggestions about the choice among silviculture options indicate that he did not fully understand the economic implication of the Indicator Per Cent.
Using a partial equilibrium model of the Swedish forest sector, this study analyzes the impacts of an increasing bioenergy production on the timber harvest and forest growing stock. The impacts on the carbon balance of forests are also examined. The results suggest that, when compared with the base scenario, in which the current use pattern of forests continues, increased bioenergy production will lead to a 10–14 million m3 (Mm3) increase in the total harvest, depending on the extraction rate of forest residues. Increasing the use of forest residues will reduce the harvest and leave more room for accumulation of the forest stock in the early years, while the stock accumulation will be partially offset by the increased timber harvest in the long run. Increasing bioenergy production will have a negative impact on the carbon balance primarily due to a net loss of carbon stored in forests. Overall, the joint contribution of forest-based mitigation is significant, equivalent to or higher than 65% of the country’s annual GHG emissions. To achieve an ambitious bioenergy target in the long run, a fraction of pulpwood will be consumed as fuelwood that will inevitably intensify the competition between the two timber products, though increasing the use of forest residues could slightly reduce the competition in the short run.
Non-timber values of the forest have been subject to much attention in Sweden during the last decades. Of special interest in this respect are the diminishing and species rich broad-leaved forests in southern Sweden. During the late 1900s many of these forests were converted to monocultures of Norway spruce (Picea abies L. Karst.) and other conifers at a high and accelerating pace. While the consequences of this change on biodiversity are currently studied on a broad scale, recreational values, although recognized, have only been subject to a limited number of scientific studies.
In the current study, we focused on timber values and recreational values of coniferous and broad-leaved forests in southern Sweden. The first objective was to model the timber value of different management alternatives including spruce or beech (Fagus sylvatica L.) at a typical southern Swedish forest site. The site expectation value for spruce was considerably higher than for beech. The second objective was to include recreational values in monetary terms in the model. The estimated required level of marginal willingness-to-pay for an increase in the area of beech forest in the county of Skåne was very low, indicating that regeneration of beech may be superior to spruce from a socio-economic point of view.
In 2012 the Swedish Environmental Protection Agency was provided with 100,000 ha of productive forest land. The Agency swapped the land to obtain conservation-worthy forests, and these were turned into natural reserves. Conservation without reference to both benefits and cost typically results in inefficient solutions. In this paper we discuss how to select the forest stands to preserve in a cost-effective manner. We also discuss how to design a cost-benefit analysis of the swapping program. We provide several new results regarding the economics of preservation, when land swaps is a viable instrument.
In this note, we consider a case when a forestry property may lose its market value through "political risk", illustrated here by it being classified as containing a key biotope. If a key biotope is found on a forest property in Sweden, the wood is almost impossible to sell. We show how the Faustmann formula is modified in this case and identify a "balance sheet" effect and a shortened rotation period. The theory seems to have some empirical support, given observed changes in bank lending contracts and alleged changes in forester's behavior to reduce the "political risk".