Forest industry investment in tree improvement-a wise business decision or a bottomless pit? Answers from a new tree improvement valuation model for Alberta, Canada

Abstract

Continued investment in tree improvement (TI) in Alberta is currently at a crossroads despite the demonstrated benefits of TI worldwide. According to private industry, the major roadblock for further investment is the minimal amount of genetic gain currently recognized in the annual allowable cut (AAC) set by the provincial government. In order to better understand the key parameters that drive profitability in TI programs, we developed the "Tree Improvement Investment for Forestry in Alberta" valuation model (TIIFA). Besides the large effect of the annual discount rate, sensitivity analyses using the TIIFA model revealed that not only genetic gain, but also the area on which improved seed is deployed represent key parameters influencing the profitability of TI programs. Furthermore, results show that the benefits of TI programs largely outweigh associated program costs, whether they were set at $1, $3 or $5 million dollars per decade. We conclude that despite the current levels of genetic gain recognized in the AAC for private industry, investment in TI still remains a profitable enterprise and a viable option for increasing or maintaining timber supply, if the area planted is maximized on which improved seed is deployed.