Economics of mixed forests

Abstract

This chapter introduces the economic framework of, but also challenges to, modern financial theory when applied in environmental and particularly forest science studies. It demonstrates the characteristics of financial models to capture the effects of mixing tree species. In addition, the chapter demonstrates how a portfolio-based approach for deriving the long-term forest structure as applied to the example of species composition and timber quality could form a new tool for forest management planning at the company level. Furthermore, it is shown how transitioning to the stand level through the consideration of interactions between tree species will alter the results compared to forest-level studies. The chapter concludes with advances in modelling the economics of near-natural forestry, where mixing of tree species is a key issue. This is done by means of optimising the distribution of timber harvests over time simultaneously with the composition of tree species.