Jussi Uusivuori

World forests, markets and policies.

This article examines the roles of markets and policies in addressing the challenges the worlds forests are facing today and in the foreseeable future. The threats and opportunities of increased government control versus more liberalized markets are discussed . In many instances markets and policies can be viewed as complements rather than substitutes to each other. Perhaps the biggest th reat of the globalization of the world economy is that local and national institutions,especially in the develop ing countries,become marginalized.Governments could,worldwide,work against th is possibility by suppo rting local structures that help the lesser-equipped nations and the forest people to reap the benefits, rather than suffer the damage, of the globalization process.Corruption and government failures should be reduced, e.g. through increased transparency, publicity and capacity building. Only then, and at a sufficiently high level of economic development, is it poss ible to reduce the transaction costs related to forest ownership and marketing . Defined ownership of forests and working marketing mechanisms of wood are preconditions for closing open access to forests. In turn, competitive stumpage markets can be created only when access to forests is closed .These, as well as new market-based instruments for various forest services, are among the fundamental preconditions towards sustainable forest management. In short, a balanced mix of government policies and markets is recommended.The involvement of all the players, including the marginalized poor, is a prerequisite for approaching the optimum mix of markets and policies. On this front, the keys are in the hands of national governments.

The Harvesting Decisions When a Standing Forest with Multiple Age-Classes Has Value

A solution is demonstrated to an infinite-horizon, discrete-time utility model describing the consumption and cutting behavior of a nonindustrial private landowner who is managing a multiple age-class forest and who values both consumption derived from harvesting the trees and amenity derived from the standing trees. A policy rule is derived to attain a normal forest from any initial age-class distribution. It is demonstrated that a noncyclical forest allowing a constant periodic harvest is typically not a normal forest. Therefore, an even-flow timber harvesting is not tied to the existence of a normal forest structure.

Impacts of economic reforms on rural forestry in China

Abstract This paper addresses the effects of economic transition policies on forestry in China. The effects of de-collectivization and market liberalization on the forest land area and timber harvest are studied using panel data from four provinces covering the period 1978–1995. Fixed effects ordinary least squares models for forest land cover and annual harvests per hectare are estimated, allowing for differences across provinces and prefectures in northern and southern China. The results show that land tenure reform in general has had a positive effect on forest land expansion, but the absolute size of the effects varies from province to province. The positive impact of the reform on timber harvesting has not taken place at the cost of forest land cover. The claim that market liberalization leads to over-harvesting of forest resources in developing countries is not supported by our results.

Forest taxation in multiple-stand forestry with amenity preferences

This paper investigates the impacts of forest taxes within an age-class forest model where the landowner derives utility from both consumption and the amenity values of standing forest. The model generalizes the existing models used to analyze forestry taxes. It is shown how the age-class model enables a more detailed analysis of the substitution and income effects of various taxes. These effects are shown to be linked to the properties of the utility function and to the distribution of the landowner’s assets between forests and nonforest assets. The results indicate that for most utility functions, income effect is unlikely to dominate the substitution effect of taxes on forest owner timber harvesting decisions. Numerical examples are used to demonstrate how the tax impacts can differ in the short run and long run. The results imply that higher consumption levels combined with profit or sales taxation applied in forestry will effectively reinforce each other in increasing optimal rotations. On the other ...

Consistent estimation of long-run nonindustrial private forest owner timber supply using micro data

In this paper, the effects of stumpage prices and forest and landowner characteristics on nonindustrial private forest owners’ long-run timber supply are examined using cross-sectional variation in a data set of 1860 landowners in Finland during 1994–1998. We estimate an inverse hyperbolic sine Tobit model allowing for heteroscedasticity and non-normality of errors. The hypotheses of the rotation model can be examined by decomposing the effects of the exogenous variables into the effects on the conditional mean of nonzero harvests and the effects on the probability of nonzero harvest. The results of the study are consistent with the Faustmann rotation model when the forest owner simultaneously decides both the optimal rotation age of an even-aged stand and the optimal life-cycle consumption of goods and services with in situ valuation of standing timber.

Carbon rentals and silvicultural subsidies for private forests as climate policy instruments

A forest model with an endogenous growth description and age-class structure is applied to study the impacts of potential climate policy instruments on the carbon services of privately owned and managed forests. The model describes the behaviour of a utility-maximizing private nonindustrial landowner who optimizes consumption flow, harvest timing, and the intertemporal allocation of silvicultural investments. Two policy options, one in which the landowner is granted periodic carbon rental payments and one in which the government subsidizes the costs of silvicultural investments, are studied. The rules for when the policy measures have both intended and unintended effects are derived. Using numerical examples, we demonstrate that the effectiveness of both policy options depends on the age-class structure of forests when future carbon benefits are discounted. In that case, carbon rental payments are more effective for forests with old age-class structures, while silvicultural subsidies are more effective fo...

Effects of forest taxation and amenity preferences on nonindustrial private forest owners

The effects of profit and land value tax on harvesting decisions of nonindustrial private forest owners are investigated. We use a model of a utility-maximizing forest owner with amenity preferences for timber, which extends the basic two-period harvesting model to include both thinning and clear-cutting harvests. It is demonstrated that with no amenity preference, the profit and land value taxes are neutral to clear-cutting and thinning decisions. Under small to medium amenity preferences, the profit tax decreases the optimal clear-cutting volumes. However, the effect on thinning may be positive or negative, depending on the amenity preference level. The total effect of the profit tax on the short-run timber supply is negative. The effects of the land value tax contrast with those of the profit tax. Also, a tax regime with a lowered profit tax rate combined with a land value tax is analysed. It is shown to be able to bring Pareto-improvement to a regime that uses a higher profit tax but no land value tax.

Forest-based Development in Finland — a Unique Success?

Japan, the Republic of Korea, Sweden and Finland are unique among the industrialized countries in the sense that, in these countries, economically sustainable forest management has been achieved at a high level of forest cover. In fact, 59-77% of their land areas are forest covered, while the world average is 27% (FAO 1997).

Modeling Causes of Deforestation with 477 Subnational Units

This paper examines the pantropical causes underlying tropical deforestation phenomenon. Forest resource data represent 67 tropical countries, of which 35 in Africa, 20 in Latin America, and 12 in Asia. The total number of 477 observations from subnational geographical units are used for modeling stock variables. Change variables were available from 13 countries with a total of 54 observations. The empirical data are based on the original random year panel observations of FAO FORIS database from 1953 to 1991. Multiple regression analysis with ordinary least squares (OLS) estimation was applied. Modeling was made with ten different dependent variables. Nonforest area variables were found to be inferior to forest area based variables in the pantropical data. Change (forest area decrease) variables were also used to test the validity of stock variables. Both were found operational but change variables are available only in limited supply. National and subnational population pressure and national income (GDP) were found to be the most important factors causing deforestation at the subnational level. The subnational and national populations are considered to reflect the direct and indirect effects of population pressure on deforestation. Furthermore, the results suggest that ecological conditions, as well as the reliability of data, play relevant roles in deforestation.

On The Economics of Forest Carbon: Renewable and Carbon Neutral But Not Emission Free

First-best optimal forest sector carbon policy is examined. Using a comprehensive forest sector model with a detailed carbon cycle section we show that the renewability and carbon neutrality arguments do not warrant emission free treatment of forest bioenergy. However, under the biomass stock change carbon accounting convention followed by UNFCCC and IPCC, the forest owners pay for the roundwood emissions and, to avoid double counting, the use of roundwood is treated as emission free. The bioenergy from harvest residues cannot be treated as emission free either. Their emission factors are determined through the decay time-scales specific to residue fractions and discount rate used in welfare assessment. In addition, we show that an optimal policy subsidizes the production of wood products sequestering carbon. The relative magnitude of the subsidy is based on the fraction of the carbon stored, the lifetime of the products and the discount rate. Correspondingly, the carbon removals by biomass growth are subsidized and the harvest residue generation taxed. Further, we show that the supply side policies are independent of final use of harvested timber. Numerical solution of the model shows that, although the use of wood is not emission free, it is optimal to increase the use of wood, possibly also in the energy sector. Before the wood use can be increased, the forest biomass has to be increased. This initial carbon sink speeds up the convergence to the lower steady-state atmospheric carbon stock.