Charles Sims

Bioeconomics of invasive species: using real options theory to integrate ecology, economics, and risk management

Policy makers face two countervailing incentives in invasive species management—the Pull-incentive to move quickly and the Push-incentive to wait-and-see before making irreversible investments. Real options theory is used to help understand this fundamental trade-off both in design and application. In designing policies, real options theory shows how the management of invasive species should account for the intertwined concepts of ecological risk/ecological irreversibility and economic risk/economic irreversibility. In applying policies, real options theory shows for species spreading slowly with little uncertainty, the push-incentive dominates, advocating a wait-and-see approach. In contrast, for fastspreading species, their diffusion is too fast and too unpredictable to do anything other than act immediately – the pull-incentive dominates. In addition, results indicate both the source and the magnitude of uncertainty matter, but the nature of the impact depends on the irreversibility of the policy decision highlighting the key value of flexibility in policy design and application.

How Ecosystem Service Provision Can Increase Forest Mortality from Insect Outbreaks

Climate change is believed to be the root cause of the unprecedented mountain pine beetle (MPB) outbreak currently underway in the western United States. While climate change is undoubtedly a factor, changes in public forest management have resulted in more host trees in MPB habitat. We employ a novel approach to separate the contribution of changing preferences for ecosystem services from the effects of fire suppression and climate change in the current MPB outbreak. Simulations illustrate how an increased emphasis on nontimber ecosystem services induced a shift from a climate-independent disturbance process (timber harvesting) to a climatedependent one (insect outbreaks). (JEL Q23, Q57)

Complementarity in the provision of ecosystem services reduces the cost of mitigating amplified natural disturbance events

Significance Climate change has been implicated as a root cause of the recent surge in natural disturbance events, leading to a greater focus on disturbance-mitigating benefits of ecosystem management. Quantifying these benefits requires knowledge of the relationship between natural and anthropogenic disturbances, which is lacking at the temporal and spatial scales needed to inform ecosystem-based management. This study investigates a specific relationship between timber harvesting and climate-amplified insect outbreaks. If harvesting is located to mitigate long-distance insect dispersal, there is potential for a win–win outcome, in which both timber production and forest conservation can be increased. This spatially targeted harvesting strategy lowers the cost of providing disturbance-mitigating ecosystem services and produces net gains in forest conservation across various stakeholder groups. Climate change has been implicated as a root cause of the recent surge in natural disturbance events such as storms, wildfires, and insect outbreaks. This climate-based surge has led to a greater focus on disturbance-mitigating benefits of ecosystem management. Quantifying these benefits requires knowledge of the relationship between natural and anthropogenic disturbances, which is lacking at the temporal and spatial scales needed to inform ecosystem-based management. This study investigates a specific relationship between timber harvesting and climate-amplified outbreaks of mountain pine beetle. If harvesting is located to mitigate long-distance insect dispersal, there is potential for a win–win outcome in which both timber production and forest conservation can be increased. This spatially targeted harvesting strategy lowers the cost of providing disturbance-mitigating ecosystem services, because valuable timber products are also produced. Mitigating long-distance dispersal also produces net gains in forest conservation across various stakeholder groups. These results speak to ongoing federal efforts to encourage forest vegetation removal on public forestlands to improve forest health. These efforts will lower the cost of responding to climate-amplified natural disturbance events but only if vegetation removal efforts are spatially located to reduce disturbance risk. Otherwise, efforts to improve forest health may be converting forest conservation services to timber services.

Economic Control of Invasive Species

In response to expanding global numbers of invasive species, policies to manage the potential damages have expanded in scope and magnitude. These public policies require a detailed knowledge of (1) the economic and ecological foundations of the problem and (2) the portfolio of risk reduction technologies (prevention, control, and adaptation) available to managers. This article uses an endogenous risk approach within an optimal control setting to best manage the prevention and control of invasive species. The framework evaluates the trade-offs and feedbacks inherent in designing and implementing policies directed at invasive species; the need for more scientific information is stressed.

Influencing Natural Forest Disturbance through Timber Harvesting: Tradeoffs among Disturbance Processes, Forest Values, and Timber Condition

Governments provide technical, political, and financial incentives to encourage timber harvesting for the purpose of mitigating natural forest disturbance. To provide guidance concerning these incentives, this paper integrates a natural disturbance regime into a dynamic model of forest management. The model is used to estimate live and salvage timber harvest subsidies needed to incorporate disturbance-mitigating benefits before and after three types of natural disturbance: insect outbreak, storm, and wildfire. While not specific to a particular country or state, results indicate that the degree of forest mortality may be a poor metric for gauging management response due to various degrees of endogeneity across different types of disturbance events. The live timber harvesting subsidy is substantial but quickly declines after a disturbance event. In contrast, salvage subsidies increase following a disturbance event but remain modest. Copyright 2013, Oxford University Press.

Listing and Delisting Thresholds under the Endangered Species Act

We consider the case where a species provides a flow of economic benefits, is at risk of extinction, and is being considered for addition to the Endangered Species List. Listing a species as endangered is costly but increases the flow of social benefits and reduces the likelihood of extinction. If the species recovers sufficiently, additional costs can be incurred to subsequently delist the species. By treating listing and delisting as a pair of linked investment options, we provide an alternative to current practice for listing and delisting decisions that maximizes the return from public conservation investments. Under this alternative framework, we show that economic considerations may actually afford greater protection for at‐risk species if these decisions are initiated early. However, biological sources of uncertainty may cause those species most in need of protection to be passed over in favor of more stable species that represent a “sure bet” for species preservation.

Opposing Irreversibilities and Tipping Point Uncertainty

Irreversible environmental damage can lead to a more “conservationist” policy than would otherwise be optimal while sunk costs create an economic irreversibility that leads to policies that are less “conservationist” than they otherwise would be. The economic irreversibility effect is often larger than the effect of irreversible damage. We revisit this result with multiple uncertainties and a tipping point that triggers irreversible damage. An optimal stopping model over dynamic environmental lotteries is developed to characterize the optimal timing and stringency of an environmental policy subject to two kinds of irreversibility (economic and an environmental tipping point), two tipping point mechanisms (critical damage thresholds and random events), and two kinds of uncertainty (uncertain system dynamics and uncertainty in when the tipping point will be crossed). Using a bioinvasion example, results illustrate how differing definitions of precaution and beliefs about the degree of irreversibility may help explain persistent debates in environmental policy.

The Treatment of Uncertainty and Learning in the Economics of Natural Resource and Environmental Management

Environmental and resource economists often use models that include uncertainty and ways to reduce that uncertainty through learning. Using a standard environmental and resource economics framework, this article parses several different forms of uncertainty and learning that are commonly considered in the literature. We then review the applied theory literature using that framework to assess whether there is support for four hypotheses associated with uncertainty and learning in environmental management that have been raised in policy circles. We find that these hypotheses are often true for one type of uncertainty or learning but not another, highlighting how a lack of clarity can lead to confusion among researchers and policymakers.