The paper presents an adjusted Faustmann Rule for optimal harvest of a forest when there is a social cost of carbon emissions. The theoretical framework takes account of the dynamics and interactions of forests’ multiple carbon pools and assumes an infinite time horizon. Our paper provides a theoretical foundation for numerical model studies that have found that a social cost of carbon implies longer optimal rotation periods and that if the social cost of carbon exceeds a certain threshold value the forest should not be harvested. At the same time we show that it could be a net social benefit from harvesting even if the commercial profit from harvest is negative. If that is the case, the optimal harvest age is decreasing in the social cost of carbon.
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1 April 2014
Research Article|
April 01 2014
Faustmann and the climate✩
Michael Hoel;
Michael Hoel
a
Department of Economics, University of Oslo
, P.O. Box 1095, Blindern, N0-0317 Oslo, Norway
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Bjart Holtsmark;
Bjart Holtsmark
*
b
Statistics Norway
, P.O. Box 8131 Dep., NO-0033 Oslo, Norway
*Corresponding author. Tel.: +47 98836198; fax: +47 21094963.
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Katinka Holtsmark
Katinka Holtsmark
a
Department of Economics, University of Oslo
, P.O. Box 1095, Blindern, N0-0317 Oslo, Norway
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✩The authors gratefully acknowledge valuable comments and suggestions from editor, two referees, Cathrine Hagem and participants at the BEER Conference held in Bergen in May 2012 and the SURED Conference held in Ascona, June 2012. While carrying out this research the authors have been associated with CREE-Oslo Centre for Research on Environmentally friendly Energy. CREE is supported by the Research Council of Norway (project number 209698/E20). While carrying out this research, Katinka Holtsmark was also associated with the Centre of Equality, Social Organization, and Performance (ESOP) at the Department of Economics at the University of Oslo. ESOP is also supported by the Research Council of Norway through its Centres of Excellence funding scheme, project number 179552.
*Corresponding author. Tel.: +47 98836198; fax: +47 21094963.
Received:
May 29 2013
Accepted:
April 11 2014
Online ISSN: 1618-1530
Print ISSN: 1104-6899
© 2014 Department of Forest Economics, Swedish University of Agricultural Sciences, Umeå. Published by Elsevier GmbH
2014
Department of Forest Economics, Swedish University of Agricultural Sciences, Umeå. Published by Elsevier GmbH
Licensed re-use rights only
Journal of Forest Economics (2014) 20 (2): 192–210.
Article history
Received:
May 29 2013
Accepted:
April 11 2014
Citation
Hoel M, Holtsmark B, Holtsmark K (2014), "Faustmann and the climate✩". Journal of Forest Economics, Vol. 20 No. 2 pp. 192–210, doi: https://doi.org/10.1016/j.jfe.2014.04.003
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