Part IV. Renewable Resources

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Part IV. Renewable Resources

1. Fish
2. Forests temperate
3. Water
4. Biodiversity

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A. Temperate Forests

• Chapter 12

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Forest Ecology

• Temperate forests in North America are found
  north of the Tropic of Capricorn and south of the
  Tropic of Cancer.
• The forest is more than a collection of trees.
• It is a collection of plant, animal, bacterial,
  and fungal organisms that interact with the
  physical environment and with one another.
• A forest is an example of a climax community.

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Climax community

• Defined an ecosystem that has arisen out of
  competition with other communities of organisms.
• An area of land may be first populated by
  grassland, then small woody plants, then fast
  growing trees, and finally slower growing trees,
  such as oak and maple.
• The process of soil formation and nutrient
  cycling is a good example of how organisms
  interact with the physical environment.

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Nutrient cycling

• Process by which the basic life nutrients (P, K,
  and N) are absorbed from the physical environment
  by various organisms in the ecosystem,
  transferred from organism to organism, and
  eventually returned to the soil.
• As Figure 12.1 illustrates, nutrients in soils
  are absorbed by roots of trees and other plants.
• These nutrients return when plants die and decay,
  when animals eat plants and their waste is
  returned to soil and when other animals eat these
  animals and waste is returned to the soil.

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Carbon sequestering water absorption

• Forests play an essential role in carbon cycling
  when they remove CO2 from the atmosphere and
  sequester it in their woody tissue.
• Carbon is then available to other organisms who
  consume the tree.
• Forests also play an important part in the
  hydrological cycle.
• Leaves of the forest slow the velocity of the
  rain, allowing a slow trickle of water to organic
  matter below.
• The result is more water absorbed by the soil,
  more water reaching underground aquifers and less
  soil erosion due to run-off.

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Ecological services

• In addition to the forests contribution
  discussed above, forests are important to flood
  protection, biodiversity, soil formation, and
  erosion control, carbon sequestration. (lumber
  argument?)
• Forests also provide important aesthetic and
  recreational benefits and production activities.
• Productive activities include harvesting animals,
  mushrooms, berries, mining and grazing of
  livestock and the harvesting of wood.

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The Privately Socially Optimal Management of
Forests

• Optimal management of forests is ultimately
  linked to the type of ownership.
• Forest ownership can be divided into 3 primary
  categories
• Forests owned by households
• Forests owned by firms in the forest industry
• Publicly owned forests.
• Difficult to identify a single management
  strategy for 1st type, HH owned forests.
  Strategies vary by owner and can take the form of
  profit maximization, utility maximization or a
  combination of both.

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2. Forest product industry

• These firms, which include Boise-Cascade,
  Weyerhaeuser, and Georgia-Pacific, seek to
  maximize the present value of earnings derived
  from the forest.
• In addition to harvesting timber from their own
  land, these firms also lease harvesting rights on
  both private and public lands.

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3. Publicly owned forests

• Include national parks, national forests, and
  state and local parks and forests, as well as
  publicly owned tracts of forests, wildlife
  refuges, game management areas, and nature
  preserves.
• Generally these publicly owned forests are
  managed for multiple uses and not just the
  generation of income from timber harvesting.

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Maximizing the Physical Quantities of Harvested
Wood

• There are 2 basic methods for maximizing the
  physical quantity of wood derived from the
  forest.
• 1. Peak volume letting the forest grow until
  it reaches its peak volume and then cutting it.
  The forest is then replanted, and the process is
  allowed to repeat itself.
• 2. Rotation of forest chooses the length of
  the harvest-replant-harvest cycle to maximize the
  total harvests of wood that can be achieved over
  time. The length of the rotation cycle is chosen
  to maximize the flow of wood.

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Growth

• The length of time in the rotation for either of
  these 2 strategies is critically dependent upon
  the way in which trees grow.
• The growth of trees is dependent on the density
  of the stand of trees, the soil condition,
  weather and rainfall, and the incidence of
  disease and pests.
• It is important to consider growth of the stand
  of trees and not the individual trees.
• After replanting, the trees initially grow at a
  rapid rate, but the mass of wood is relatively
  small.
• As trees mature growth eventually slows.
• Growth can become negative as disease and death
  associated with aging has a greater impact.

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As illustrated in Table 12.1, Figure 12.2a, and
Figure 12.2b, growth of a hypothetical stand of
trees can be expressed as a function of the age
of the trees in the stand.
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Optimal time to harvest?

• It is not as easy to see when the total amount of
  wood that is harvested over time is maximized
  tradeoffs
• One way to increase the flow of wood is to
  harvest more frequently.
• However, the more frequently you harvest, the
  younger and smaller the trees.
• The alternative is to harvest less frequently and
  have bigger harvests.
• The optimal time to harvest is at the age that
  maximizes the average growth (MAI) of the tree
  over its lifetime.
• If average growth is maximized over a sequence of
  multiple rotations, then total growth will be
  maximized as well.

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Max quantity an efficient policy?

• Inefficient. The costs and benefits associated
  with different quantity levels have not been
  incorporated
• Must consider costs and benefits of making
  rotation longer or shorter

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The Optimal Rotation

• The choice of optimal rotation is conceptually
  very simple. The forest manager must ask Are
  the benefits of making a rotation a year longer
  (or a year shorter) gt the costs?
• The complexity is in determining the costs and
  benefits and evaluating then over time.
• Figure 12.3 illustrates the time paths of
  benefits and costs from timbering.

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• Start with newly planted trees. Revenue is
  generated at harvest and is referred to as
  stumpage value.
• Then the costs include planting, maintenance
  such as disease control, fire prevention,
  thinning, pruning and removal of deadwood and
  pest control.

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The Optimal Rotation

• Benefits come at a set of intervals, costs at
  another
• The forest manager's job is to maximize the PV of
  this stream of costs and benefits by deciding the
  optimal rotation length.

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Costs

• The costs of letting trees grow for another year
  include both
• Out-of-pocket costs Disease prevention,
  thinning, fire prevention and control of pests
• Opportunity costs Based on foregone income plus
  2 other categories interest income and potential
  rent
• Interest income (rV) is income that would have
  been earned if trees had been harvested, sold,
  and the money invested
• Potential rent/opp cost of land (OCL) is
  associated with trees being harvested and the
  land rented.

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Costs and benefits

• Assume out-of-pocket expenses are 0 (just include
  opp costs). Implies that periodic cutting
  efficient.
• If out-of-pocket expenses are sufficiently high,
  then it is possible that the forest should never
  be cut.
• Benefits of allowing the trees to grow (waiting)
  come from the possibility of greater quantities
  of wood to sell critically dependent on the
  shape of the marginal growth (annual increment)
  function of the trees.

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The Optimal Rotation

• The additional revenue associated with increasing
  the length of rotation is represented by DV/Dt ,
  change in revenue if wait 1 more year.
• The stumpage value function reaches its maximum
  when DV/Dt0, that is when lengthening the
  rotation has no impact upon stumpage value.
• The opp cost of land function OCL. This is the
  interest that could be earned from the sale of
  land. ( annual rent that could be earned)
• The max value for OCL will occur when rotation is
  at its optimal length. Here the forest will be
  most valuable.

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The Optimal Rotation

• When rV OCL (the sum of the two opportunity
  costs) marginal benefits of changing rotation
  length (DV/Dt), the PV of the whole future stream
  of harvests is maximized.
• Any external changes that shift DV/Dt upward
  will, ceterus paribus, lengthen the optimal
  rotation.
• Likewise, any external changes that shift either
  rV or OCL upwards will, ceterus paribus, shorten
  optimal rotation.
• An example would be an increase in the price of
  timber that would increase the stumpage value
  (V), which would increase DV/Dt and increase rV
  and OCL.

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An increase in DV/Dt lengthens the rotation while
an increase in rV and OCL shortens the rotation.
Which effect dominates depends upon the interest
rate.
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The Optimal Rotation

• One shortcoming of the optimal rotation model is
  the failure to include benefits associated with
  standing forests, which includes watershed
  protection, wildlife habitat, and recreation and
  so on.
• Bowes and Krutilla point out in their study that
  relationships between the length of the harvest
  rotation and non-harvest benefits are likely to
  be irregular, illustrated by the multi-peaked
  function in Figure 12.4.
• Figure 12.6 illustrates the optimal rotation when
  non-harvested benefits are considered.

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The maximum of the total benefits function is to
the right of the maximum of the timber harvested
function, implying that considering non-harvested
benefits will lengthen optimal rotation.
If non-harvest benefits are large enough, the
optimal harvest rotation may be to never harvest.
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The Optimal Rotation

• Both harvested and non-harvested benefits from a
  particular stand of forest are dependent on the
  quantity and quality of other forest stands.
• The price of timber is determined by the quantity
  and quality of other forest stands.
• Elimination of non-harvest benefits by harvesting
  may have an impact upon non-harvest benefits of
  other forest stands.
• Clear cutting scars the landscape and reduces the
  recreational value of remaining landscape.
• The degree of forest fragmentation caused by
  harvesting is extremely important to species
  habitat and biological diversity.

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Multiple Use Management

• The Multiple Use Sustained Yield Act (MUSYA) of
  1960 specifically charges the U.S. Forest Service
  with managing to promote benefits from both
  timber and non-harvest benefits.
• One set of uses of forest specified by the MUSYA
  includes those that generate revenue for forest
  service such as timber, grazing, mineral and
  energy mining, and fee recreation.

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Multiple Use Management

• Grazing is possible because a forest is generally
  defined as an area in which at least 10 of land
  area is covered by a canopy of trees.
• Approximately 100 million acres of national
  forest land is currently available for ranchers,
  of which 50 is suitable of grazing.
• Bowes and Krutilla charge that the payment made
  for use of this land is below market price.

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Multiple Use Management

• An alternative set of uses for the forest
  resource does not generate revenues and is often
  called nonmarket use.
• These include OA (unpriced) recreation, watershed
  maintenance, wilderness, and fish and wildlife
  value.
• Not only do market and nonmarket uses conflict
  but also many nonmarket uses conflict with one
  another.
• Too many recreationists can lead to environmental
  degradation which leads to a decline in wildlife
  numbers and diminished watershed attributes.
• Hikers conflict with trail bikers or skiers with
  snowmobiles.

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Comparative advantage

• When applied to forests, the theory of
  comparative advantage argues that even though
  some of the best wood in the world can be
  produced from old growth red wood, spruce, fir
  and sequoia forests in the Pacific Northwest, the
  comparative advantage of these forests is in the
  production of ecological services, aesthetic
  benefits and recreational opportunities.
• Can substitute wood, cannot substitute ecological
  services.

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Below-Cost Timber Sales

• Many critics of U.S. Forest Service policy feel
  that management has been slanted towards timber
  production.
• In the late 1970s, the National Resources Defense
  Council focused on the existence of below cost
  timber sales (sales of timbering rights on public
  land, where revenues do not cover the timber
  related forest management expenses) and the
  inefficiencies that they create, including
  depressing the profitability of privately owned
  forests.

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Proper use

• A general guideline for proper use of public
  forest land is that a forest should be used for
  timbering if the PV of the net benefits (net of
  all management costs) of all multiple uses is gt
  it would be without timbering.
• The cost of road building is often not included
  in this analysis because it is viewed as a
  benefit to multiple uses.

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Costs of roads

• The problem is that the quantity of roads
  necessary for harvest of timber may be gt that
  optimal for recreational use, and as a result may
  cause environmental degradation.
• In addition, building these roads precludes the
  designation of the forest as a wilderness area.
• The cost of the roads is viewed as sunk by the
  Forest Service and is not linked to the
  acceptance of bids for use of the forest land.

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Excess harvesting

• Figure 12.7 illustrates the excess harvesting
  which will result when the full costs associated
  with use of the timber resource are not reflected
  in the decision to harvest.
• M1 represents the square miles harvested when the
  timbering firm does not recognize the cost of
  road building or the other opportunity costs.
• As additional costs are added to the MPC, the
  optimal quantity of timber harvested falls.
• Timbering companies choose too to harvest TOO
  MUCH since true costs not included

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Special case optimal harvest 0

• Figure 12.8 illustrates a special case where
  failure to recognize the full costs of harvesting
  timber can lead to inefficient harvests.
• By comparing MR to MPC plus additional external
  costs it is possible to see that the optimal
  level of harvest is zero.
• Failure to incorporate the other costs would
  result in a positive level of harvest.

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Panel A MSC lies entirely above MR optimal
harvest 0.
Panel B When include foregone benefits from
other uses (recreation, wildlife, watershed
protection), MSC again lies entirely above MR
optimal harvest 0.
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Ancient Growth Forests

• In the US, the only remaining old growth forests
  are in the Pacific Northwest and Alaska.
• Old growth or ancient forests are forests that
  have never been logged and therefore, are in
  their original state.
• From an ecological perspective, replanted forests
  are a poor substitute for an old growth forest.

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Ancient Growth Forests

• Huge trees shape the ecosystem within which they
  live.
• Standing trees serve as homes for many species.
• Falling trees clear a swatch through the forest,
  open up the floor of forest to sunlight, and
  promote growth of plants. Provide homes for
  animals.
• Deadwood provides nutrients for new generations
  of trees.

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Owls or jobs?

• Jobs issue often used to justify subsidizing
  harvesting of forests
• Actually, this process involves a net loss for
  society as a whole, because it costs as much as
  3 of govt expenditure for every 1 timbering
  job wage created
• In some cases, timbering may even destroy more
  jobs than it creates ecological damages
  (downstream, erosion affects salmon fishers,
  etc.)
• Additionally, subsidization lowers market price
  of wood, adversely affecting employment in
  privately harvested areas.

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Ancient Growth Forests

• In addition to the direct monetary costs of
  timbering old growth forests, there are also the
  costs to society of the loss of the ancient
  forests.
• These costs are likely to be high, since the
  amount of ancient forests has shrunk so
  drastically in recent years.
• See box 12.1 measuring the value of spotted
  owls
• Benefit of preserving owls represents huge Pareto
  improvement appropriate policy may be to
  compensate those in timber industry who lose from
  preservation

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Summary

• Since the forest is the only source of economic
  activity in many remote rural areas, it is often
  felt that the forest must be harvested to provide
  jobs to support the region's population.
• There are COSTS associated with saving jobs in
  the timber industry.
• These include the inefficiency associated with
  road building, the potential loss of species, for
  instance the decline in salmon fishing due to
  destruction of streams.
• As fewer and fewer old growth forests remain, the
  cost associated with clear cutting these forests
  rise.
• The value of the last of any species is very
  great.