Value of Carbon Sequestration: Implications for Slash Pine Forest Management in Florida

1 Graduate Student, School of Forest Resources and Conservation, University of Florida, Gainesville, FL 32611-0410 2 Assistant Professor, School of Forest Resources and Conservation, University of Florida, Gainesville, FL 32611-0410 This study investigates the impact of carbon subsidies and taxes on the optimal forest rotation and soil expectation value for slash pine forest in Florida. We use the shadow price of reducing carbon emissions as the basis for subsidies for carbon sequestration and taxes on carbon emissions. The results suggest that the inclusion of carbon sequestration benefits lengthen the optimal rotation for slash pine and increase the soil expectation value of the land. The magnitude of these changes depend on the value placed on carbon sequestration and emission and the products produced from the harvest. We also found that the inclusion of carbon subsidies and taxes would not significantly reduce the slash pine timber supply in Florida. INTRODUCTION Global climate change induced by anthroprogenic release of greenhouse gases, mainly CO2, is one of the world's greatest environmental challenges. Carbon dioxide is released mainly through the burning of fossil fuels but land management practices that convert biomass into CO2 also contribute to the problem (Sampson and Sedjo 1997). International discussion on how to reduce and mitigate greenhouse gas emissions has taken place in recent years. The sequestration of CO2 in the biomass of forest is one strategy being considered. Furthermore, it was widely recognized that changing forest management practices to sequester carbon has significant potential to mitigate CO2 emissions. Favorable climatic conditions for fast growing tree species and reductions in harvest in the Northwestern U.S. have made the Southeastern U.S. the future wood basket of the country. Shorter rotation lengths, due to faster growth rates, and the high proportion of forest in timber production in the Southeast make it suitable for sequestering CO2 in forest and forest products. However much of the forestland in the Southeast is privately owned. Since the sequestration of CO2 is a public good this poses a problem. Most landowners do not consider the effect of their land management practices on the global carbon budget when making management decisions. One way to address this problem is to provide incentives through changes in the tax code and/or subsidies to internalize the cost and benefits of land management practices onto private forest owners. The major decision made by a forest owner is when to harvest, or what rotation length should be used. There are three principle ways that forest managers usually determine the optimal forest rotation. One is the maximum sustainable yield (MSY) which simply maximizes the physical volume of wood that a forest produces. This approach considers only biological information. The second and most widely used method utilizes the Faustmann rotation. This method, developed by Martin Faustmann in 1849, includes the cost of regeneration, value of the product produced and the discount rate. In recent decades this approach has come under criticism. The Faustmann approach does not include other cost and benefits of forest growth and harvest such as aesthetics, wildlife and carbon sequestration and emission. As a result, another approach to the rotation problem, the Hartman rotation, has been utilized. The Hartman rotation maximizes net benefits like the Faustmann rotation but includes additional factors, such as wildlife habitat, that increase in value as the forest increases in wood volume. The Hartman rotation thus internalizes benefits and cost that previously were external to the rotation problem. Van Kooten et al. (1995) modeled the impact of including carbon sequestration and emission in the forest rotation problem for forest in British Columbia and Alberta by using a modified Hartman rotation. In the Hartman rotation external benefits are a function of the volume of timber. Carbon benefits however are a function of the growth rate of timber volume. Including this modification van Kooten et al. (1995) developed a model where the landowner would be paid a subsidy for sequestering carbon while timber was growing and be taxed for emissions when the forest was harvested. The amount of the tax depended on the proportion of stored carbon that was released into the atmosphere upon harvest or soon after harvest. Carbon that was sequestered in final products was not taxed. They used a range of values of carbon between $20 and $200 per metric ton. Including carbon sequestration and emission in the rotation problem increased the optimal rotation. The magnitude of this increase depended on the value of carbon, interest rate, value of timber and the amount of wood waste left at harvest (van Kooten et al. 1995). Hoen and Solberg (1997) did a similar study looking at spruce in Scandinavia. In their model, however, a factor that accounted for the carbon emissions resulting from the decay of final products was included. They obtained similar results as van Kooten et al. Both models showed that increases in carbon values increase the optimal rotation. In our study we want to answer three questions. 1) How would imposing carbon subsidies and taxes change the optimal forest rotation for plantations of slash pine (Pinus elliottii) in Florida? 2) How would these subsidies and taxes influence the value of forestland? 3) How would this policy impact the supply of slash pine timber in Florida? METHODOLOGY The paper is organized as follows. The details of model specification are provided in the next section and model simulation results are presented and discussed in the final section. We approach the analysis of carbon sequestration and emission using a modified Hartman rotation similar to the one used by van Kooten et al (1995). To model the growth of the stand and the volume of merchantable timber we follow Pienaar and Rheney (1993). Total stem volume is given as: where v(t) is total stem volume in cubic feet per acre and t is rotation length in years. The basal area of the stand is modeled by the function: where b(t) is basal area in square feet per acre, s is the site index value and n(2) represents the number of trees surviving at year two and is assumed to be 700 for this study. We used a site index of 70 to represent a typical slash pine plantation in Florida. Survival is modeled as: where n(t) is the number of trees surviving at rotation length t per acre, t2 is the rotation length and t1 is the age of the stand at some time before the final rotation age when the number of trees per acre is known. In previous studies of carbon sequestration forest were assumed to produce one product. However, forest in the Southeastern U.S. frequently produce several products, namely pulp and saw timber. The amount of each product produced is usually determined by the age of the stand. The volume that is capable of being utilized as saw timber is sold as such while the rest of the merchantable timber is used as pulp. Since the age of the stand can significantly change what is produced from a harvest, we modeled the forest stand to produce two products saw timber and pulpwood. The volume of saw timber is given by the function: and the volume of pulpwood is given as: where d(t) is the quadratic mean dbh in inches predicted as: s(t) measures the volume in cubic feet per acre to a 6 inch top outside bark for trees with at least a 10 inch dbh and w(t) measures the volume up to 51 . 2 ) 05 . 0 1 ( 7087 ) ( (1) t e t v − − = 208 . 1 950 . 0 ) 2 ( 00069 . 0 15 . 0 08 . 1 1 127 . 1 041 . 2 ) ( (2)