Forest economics

Title of the subproject:
Modelling and economics valuation of different forest land use strategies

Introduction:
A third of the German land area is covered with forest. Thus the forestry sector is the second largest land user in Germany.

German forests store large amounts of carbon in trees, in biomass of ground vegetation and in mineral soil. Additionally, storage in wood products increases the indirect carbon storage of forests. Thus forests and forest management have an active influence on the carbon balance and on climate change and climate protection.

On the one hand, by increasing carbon stored in the forest stands and in harvested wood products, forestry helps improving the carbon balance (mitigation). On the other hand, possible global warming and the associated changes in growth conditions challenge forestry to adapt (adaptation).

This subproject investigates the impacts of climate change on forests and forestry, with a special focus on changing demands on land use. This subproject consists of two parts:

Institution:
Institute of International Forestry and Forest Economics

The objective of the forest management part is to quantify the impacts of changed production conditions on:

• The yield level of German forestry enterprises   
• The domestic production of raw wood and
• Carbon storage in forests and wood products.

The environmental economic part of the subproject analyses the impact of measures for climate change adaptation and mitigation on the value of various ecosystem services of forests from the population’s perspective. The aim is a monetary valuation of changed ecosystem services of forests, particularly nature protection and landscape conservation services.

For this purpose attributes of forests were selected, which are

• particularly affected by climate-related forest policies and
• visible for the population.

Forest attributes to be valuated are

• Share of forest in the landscape,
• Size of single fields and woodland,
• Forests with undergrowth,     
• Share of coniferous trees,   
• Age of forests,    
• Biodiversity in forests,    
• Unused forest areas and
• Tree species from other countries.

Forest economic research approach

A forest economic simulation model (FOBESIMO) was developed in order to achieve the forest economic aims of the subproject. This makes the analysis of forest economic decisions under the impact of climate change possible. On the basis of developed model enterprises, changed production conditions and resulting forestry adaptation methods are simulated and analyzed using different strategic aims. The model was created on the basis of six working steps:

Selection of study regions

The selection criteria were to ensure that results will be valid and interpretable at national level. After intensive testing and preparation of the available national data surveys of the forestry test network (TBN Forest) and the German Forest Inventory II (BWI II) all of Germany was selected as the study region.

Development of Model Enterprises

Due to differing state laws and the fact that German forests are owned by three large groups (state, private, community) with different aims, here spatial and professional differences adapted to these factors were chosen. For each German federal state (a total of 13 federal states with rural areas) three different ownership model farms could be distinguished. A model enterprise is comprised of four building blocks:

• Market data: economic enterprise statistics and market parameters derived from the TBN forestry
• Enterprise data: owner specific use strategies resulting from the project "Studies of forest utilisation behavior"
• Forest stand data: for tree types and age classes as well as other yield relevant statistics based on the data of the BWI II
• Site data: climate sensitive location variables drawn in cooperation with the Potsdam Institute for Climate Impact Research (PIK)  and the Northwest German Forestry Research Center (NW-FVA)

Definition of measures to steer production

Measures must be defined in order to model different strategies with specific management elements. Production methods designed to reach the strategic aims are steered with these measures. Thirteen single measures were defined for this purpose, and combined into bundles of measures depending on the targets, and thus making the implementation of the strategies in model enterprises possible.The following measures were defined:

• Tree species selection,
• Afforestation,
• Reforestation,
• Start of thinning,
• Frequency of thinning,
• Extent of thinning,
• Type of thinning,
• Target diameter,
• Number of trees in final stand,
• Harvest volume,
• Harvest period,
• Preprocessing and
• Protection areas (utilisation waivers).

Definition of management under the status quo

The basis for the Status Quo enterprise is the WEHAM Basic scenario (WEHAM stands for Wald Entwicklungs- und Holz-Aufkommens Modellierung) which was developed by the Thünen Institute of Forest Ecology. It was adapted for FOBESIMO and updated with current forest management. The third step to be defined is defining the management principles and control parameters. They provide the possibility of distinguishing management concepts by owner, region and tree type. Thus each of the illustrated model enterprises can be individually addressed and studied.

Detailing management strategies

A bundle of measures was defined for each strategy. Thus, in addition to status quo management, varying forestry concepts in the different strategies (climate protection, biomass, nature and environmental protection) are possible. Each bundle of measures serves a single form of management in a named strategy. For the establishment of the measurement features, stakeholders have been interviewed and professional literature consulted.

Combine the simulators SILVA 2.3 (forest growth) and Strugholtz-Englert (enterprise) and develop them further

The Strugholtz-Englert simulator and the Forest growth simulator Silva 2.3 were developed further and adapted to the model requirements. For this purpose yield tables were extracted from the Strugholtz-Englert simulator and replaced with the forest growth simulator Silva 2.3. This variable data includes data on the three ecological factors nutrients, temperature and moisture, and allows different production strategies to be simulated under the influence of climate change. This modification makes it possible to find the influence of climate-related changes in site and economic conditions in the model enterprises.

Environmental economic research approach

For the environmental economic part of the subproject various empirical valuation methods are available that allow analyses of changes in the provision of ecosystem services of forests. There is no market for public goods, so their value is not reflected in prices. An example for this is the impact of nature protection and landscape conservation services of forests on the visible landscape. According to current knowledge they will be particularly affected by different forest management strategies and thus are at the centre of political conflicts over forest management.

For the economic valuation of public goods, the population’s willingness to pay is elicited using stated preference methods (choice experiments). The questionnaire and a choice experiment are developed and applied in a nationwide population survey. The landscape attributes of the environmental economic project part are matched with the measures developed in the forest management project part. They show both the measures and their impact on nature protection and landscape conservation services.

To valuate nature protection services the following attributes are used:

• Biodiversity in forests and 
• Unused forest areas.

To valuate landscape conservation services the following attributes are used:

• Share of forest in the landscape, 
• Size of single fields and woodland,    
• Forests with undergrowth and 
• Age of forests.

To see the existing forest characteristics the attributes   

• Tree species from other countries and
• Share of coniferous trees are used.

All the attributes used are partially relevant to both nature protection and landscape conservation services, but have a major impact on the overall landscape.

In a choice experiment several of these forest attributes with different corresponding levels are combined to landscapes, and respondents are asked to choose one on each choice card (see example in section Results). On the various choice cards the landscape attributes are kept but the levels are changed, so successively different trade-offs and choice decisions have to be made.

The collected values of environmental services of forests are useful information when trading off different strategies for climate change adaptation and mitigation in forests and wood products.

The forest economic simulation model (FOBESIMO):

The development and completition of the forest economic simulation model (FOBESIMO) provide the basis for the analysis and assessment of different forest management decisions with relation to climate change. FOBESIMO allows by using model enterprises to simulate different strategies with various management concepts and forced by changed on site-specific and economics parameters. The figure shows the simulation model (FOBESIMO) schematically.