1. Environmental and Natural Resource Economics 3rd ed. Jonathan M
Environmental and Natural Resource Economics 3rd ed. Jonathan M. Harris and Brian Roach Chapter 14 – Ecosystem Management: Forest Ecosystems
Copyright © 2013 Jonathan M. Harris

2. Figure 14.1: Forest Growth over Time
Volume of Wood
This biologically-derived graph shows the cumulative biomass of a forest stand, and demonstrates the same logistic curve pattern as stock growth in a fishery. The difference is that the forest harvest is not continual, but rather takes places after a certain period of time. In this graph, the year 30 shows the point of maximum Mean Annual Increment or highest average growth over time. If the only criterion for harvest was maximum volume of wood, the optimum harvesting period would be 30 years. But other economic factors must be taken into account, as shown in the following graphs. 30 50
Years

3. Figure 14.2: Timber Revenues and Costs over Time
Total Revenue and Total Costs TR TC
The harvest value can be translated into economic terms by multiplying wood volume by wood price to get a Total Revenue (TR) curve that shows the revenue that can be obtained from harvesting in any given year. Total Costs (TC) of harvesting are also shown, roughly based on the total volume of wood harvested. The difference between the two (TR –TC) is net profit in the year of harvest. Since the planned harvest will take place years after planting, calculation of the economic optimum requires the use of a discount rate for a Present Value calculation (shown in the next graph).
Years

4. Figure 14.3: Optimum Harvest Period with Discounting
Total Revenue Minus Total Costs
Optimal Harvest Period with Increasing Discount Rate
Undiscounted TR – TC
Discounted PV
Applying a discount rate has the effect of “shrinking” the profit (TR –TC) back towards the origin. The higher the discount rate, the more the “shrinkage”. The economic optimum is shown by the maximum discounted profit, at the top point of the curve. Without discounting, total profit is largest at point A, but with discounting the economic optimum is at point B. Thus a higher discount rate implies a shorter optimum harvest period. Slower-growing trees will tend to be less profitable, because the wait to maturity involves a higher discount factor. B A
Years
A: Optimum Harvest Period without Discounting
B: Optimum Harvest Period with Discounting

5. Figure 14.4: Deforestation and Tree Cover
Proportion of
Land under Trees
Total Forests
Planted
and Second-
Growth
Forests
The economic logic of harvesting implies a transition between old-growth forest (which is already mature and can be harvested immediately) and second-growth or plantation forestry employing faster-growing species. Even if total forested area is increasing as second-growth expands, the ecological value of the original forest may have been significantly diminished due to industrial forestry.
Natural Forests
Population Density

6. Figure 14.5: Regional Breakdown of Drivers of Deforestation
Drivers of deforestation vary by region, with subsistence and intensive agriculture dominating in Africa and South East Asia, while conversion for ranching and pasture are the dominant factors in Latin America. Logging is not the major cause of deforestation, but logging roads often open up forest areas for agricultural exploitation.
Source: Project Catalyst, 2009.

7. Figure 14.6: Threatened and Endangered Species9 35 30 25 20 15 10 5
Mammals
Birds
Reptiles
Amphibians
Fish
% Vulnerable
% Endangered
% Critically Endangered (CR)
8.1
3.5
1.9
3.7
6.8
7.8
10.3
4.3
5.1
12.1
The decline of old-growth forests and other habitats has led to an increasing number of threatened and endangered species. The value of species is not included in economic calculations of commercial forest value. Together with the inherent bias in commercial forestry towards shorter harvesting periods, this leads to a disregard for the ecological values of mature multi-species forest ecosystems. If these values are to be internalized into decision-making, specific policies for species and ecosystem conservation are required.
Source: IUCN, 2011.

8. Figure 14.7: Regional Change in Forest Area
Regional forest trends can be compared as a percent of the base year The increase in forest cover in East Asia is a result of large-scale reforestation policy in China, following disastrous floods resulting from watershed forest loss. Temperate forest areas in Europe and North America show little change, while tropical forests in South America, West and Central Africa, South and South East Asia, and Eastern and Southern Africa have all declined significantly. The fastest rates of decline are in Central America, though the largest total area loss is in South America, as shown on the previous graph. (Note that the numbers for Western and Central Africa are very close to numbers for South America, so that the lines are inseparable in the graph.)
Source: FAOSTAT , 2011,

9. Figure 14.8: World Paper and Wood Production, 1961-2009
Increasing demand for wood products puts continued pressure on forests. While roundwood demand has not increased significantly since 1990, paper demand continues to rise. The recession of caused a downward shift in demand, but growth is likely to resume with development pressures in China, India, and elsewhere in the developing world.
Source: FAO online database, 2011,