Optimal Forest Management with Carbon Sequestration Credits and Endogenous Fire Risk

  • Daigneault A
  • Miranda M
  • Sohngen B
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We use a stochastic dynamic profit maximization model to investigate the effects of forest carbon sequestration credits on optimal forest management practices for stands facing wildfire risk. Landowners that periodically thin a stand can increase growth rates and mitigate loss of timber and carbon stocks from wildfire. Results indicate that thinning and shortening rotations are cost-effective strategies to mitigate wildfire risk. Carbon prices cause landowners to delay both their thinning treatments and the final rotation age. Thinning and extending timber rotations are thus a viable climate-change mitigation option even when stands are susceptible to risks of fire. (JEL Q23, Q54)

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  • Adam J. Daigneault

  • Mario J. Miranda

  • Brent Sohngen

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