Effects of Climate Change on Forestry and Forest Ecosystems

1. Effects of Climate Change on Forestry and Forest Ecosystems A presentation by Aaron Mamula for AGEC 695 2/22/05

2. Basic Outline • Effects of Climate Change on the Timber Industry • Land Use Change Policies

3. Effects of Climate Change on the Timber Industry: An Overview • Natural Disturbances a. Fire b. Drought • Biodiversity • Impacts on Regional Economies • Impacts on Forest Productivity and Welfare Changes a. National b. Global

4. Natural Disturbances - Fire • USGCRP (national assesment) report a likely increase of 10% in the seasonal severity of fire hazzard. • Flannigan et al. report a range of 10-50% for increase in seasonal severity rating for a doubling of atmospheric CO2. • Prince and Rind (1994) suggest a 44% increase in lightening caused fires with associated 78% increase in areas burned (under a doubling scenario). • Gan (2004) finds a 22-24% increase in risk of fire using the Canadian GCM and a 5-10% increase using Hadley.

5. Natural Disturbances - Pests Climate Change could alter the patterns of disturbance from insects and pathogens • Increases in the interannual variation in minimum winter temperature could lead to more northerly outbreaks of southern pine beetles (National Assessment) • Gan (2004) finds an overall increase in the risk of Southern Pine Beetle outbreaks.

7. Effects of these natural disturbances include: • Effects on forest recreation • Effects on wood production • Impacts on ecological processes • In the case of fire, there is a cyclical effect on climate change

8. Role of Economics: • Non market valuation techniques such as travel cost models and contingent valuation to asses impacts on forest recreation and ecology • Effects of potential shocks on timber markets – what if we did experience a 78% increase in area burned, how would that affect prices? employment? etc.

9. Biodiversity: • Effects of climate change on distribution of tree species • Impact of changing species range on wildlife • Potential contribution of the economist

10. Species Movement • Sugar maples and birch contract greatly in the U.S with sugar maples moving entirely into Canada • Southern forest types expand while high elevation and northern forest types decline in area • Oak-pine likely to expand by 290% while spruce-fir and aspen-birch decline by about 90% Source: National Assessment 2000

11. Impact of these changes is uncertain • We don’t know how birds, reptiles, mammals, and amphibians will respond to shifts in the location of, or changes to habitat. • Under climate change species richness for birds declines (in the U.S) while cold blooded reptiles and amphibians increase in species richness. • We don’t know what kind of effect this will have on forest ecosystems.

12. Areas for Economic Contribution: • value of biodiversity (Gobbi 2001) • value of an ecosystem • costs vs. benefits of more aggressive management

13. Assessing impact of climate change on regional economies • Regional effects of climate change 2. Importance of regional assessments 3. Under-researched topics

14. Regional Effects • Southern regions may experience more severe job loss effects from declining timber prices • Northern regions may suffer reductions in tourism associated with fall foliage change • Western states may benefit from additional precipitation

15. Importance of regional consideration Not everyone suffers (or gains) the same Example: Tree species movement due to climate change may result in high value timber moving out of one area and into another. One region inherits high dollar timber while an area previously dependent on that crop is left to harvest a lower grade product.

16. Topics for further research • Potential Pareto based welfare analysis: Is there a way to let winners compensate losers? • Macro approach to job loses: Will job loses (if they occur) in the forest products sector be absorbed somewhere else in the economy?

17. Effects of Climate Change on Forest Productivity • National • International

18. U.S Forest Productivity Under Climate Change: Issues • Climate change induces a shift into forestry from marginal agricultural land • Increases productivity of existing timber stands Aber et al. (2001) expect a 20% increase in forest productivity at the national level

21. Present Value of Net Welfare Effects for North America Under 4 Transient Scenarios (1990 US$, billions; r = 5%)from Sohngen, Mendelsohn, and Sedjo (2001)

22. Impact of Climate Change on Global Timber Markets: Issues Many of the issues are similar to ones already considered at the national level. • altered global productivity • shifting distribution of tree species

23. Different Regions Affected Differently • high latitude forest likely to expand deeply into tundra • mid-high latitude could undergo severe dieback and large changes in species distribution • low latitudes likely to increase productivity

24. Economic Role: • Identifying the distribution of welfare effects It has been suggested that producers in low-mid latitude regions are able to react to climate change induced productivity increases faster.

25. Discussion of Sohngen, Mendelsohn, and Sodjo: • Background • Assumptions • Results

26. Basics • They use a dynamic model of ecological and economic change which captures the impact of climate change on world timber markets. • They use two GCM’s: The Hamburg T-106 model and the UIUC model. • The baseline case is current atmospheric CO2 (340 ppmv) which is compared to a doubling (550 ppmv).

27. Model • Climate predictions made by the GCM’s are used in a global terrestrial biosphere model to estimate changes in distribution of timber species and productivity of those species. • The global timber market model choses land harvested, new plantings, new hectares of forest land, and management intensity to maximize NPV of net global timber market surplus.

28. Important Results • Large loss of existing timber stands in high latitude regions with overall global forest expansion between 19 and 27% • Global productivity increases 29-38% • Global net market surplus increases predicted between 3 and 6.7%

30. Forestry and Sequestration: Overview Land Use Change: 1. Effects on Timber Markets 2. Co-Benefits A. Recreation B. Environmental

31. Land Use Change: In the context of this presentation, I use the phrase “land use change” to refer to a policy induced conversion of agricultural land into forest.

32. Why land use change? • Biological sequestration is one alternative to mitigation. • Afforestation involves benefits other than sequestered carbon known as co-benefits. • Costs of carbon sequestration in forests are comparable to the costs of many alternative approaches such as fuel subsidization (Moulton and Richards 1990; Adams et al. 1999; Stavins 1999)

33. Afforestation subsidies and timber markets: • Supply response pushes prices down ceteris paribus • Consumers gain from lower prices • Producers lose

35. Price Effects: • At a sequestration rate of 35 million tons, prices in sawtimber and pulpwood markets decrease by 28% relative to base. • The price decrease with a sequestration rate of 700 million tons is approximately 90%. Results from Adams et al. 1993

36. Future Research Topics • Integrate afforestation policy into a global framework such as Sohngen et al. 2001 • Consider demand expansion e.g the possiblity of using woody biomass for energy

37. Co-benefits: • Recreation a. Hunting b. Observation • Environmental a. Soil erosion b. Biodiversity c. Ground water/surface water runoff

38. Recreation • Afforestation improves habitat for many wildlife specie which may mean more allowable hunting days. • Afforestation also improves biodiversity which may increase the benefits of non-consumptive uses of wildlife (such as viewing).

39. Environmental • Carbon sequestration policies promoting conversion of agricultural land to forest can reduce agricultural pollutants such as nitrogen and atrozine (Plantinga and Wu 2003) In groundwater nitrates are a cause of blue-baby syndrome while in suface water they can cause premature eutrophication of lakes. Atrazine is classified by the EPA as a possible human carcinogen.

40. Plantinga and Wu 2003“Co-benefits from carbon sequestration in forests: evaluating reductions in agricultural externalities from an afforestation policy in Wisconsin • Authors estimate an econometric model for land use in Wisconsin then use it in a simulation of subsidies for conversion of agricultural land to forest. • Subsidies (G) are given uniformly for each unit of land converted and the authors experiment with 5 values of G chosen to achieve conversion of 5, 10, 15, 20, and 25% of baseline agricultural land.

42. Some Interpretation: • Nitrogen pollution from runoff decreases 6.2% under the 5% conversion scenario and 24.8% under a 25% conversion scenario. • Atrazine runoff falls 3.8% under 5% conversion and 17.8% under 25% conversion.

43. Valuation of benefits using Ribaudo’s (1989) estimates for the CRP • Ribaudo’s per acre estimates imply benefits of $42 million per year from soil erosion reduction under 25% conversion. • With 25% conversion the cost of the sequestration program amortized over the 60-year time horizon (using a 5% discount rate) is between $101 and $132 million. soil erosion benefits cover between 32 and 42% of the cost

44. Valuing improved wildlife habitat using Ribaudo’s hunter participation model (1990) • Ribaudo estimates the value of additional hunting days at $42 per acre per year. • Amortized at 5% over 60 years this implies approximate hunting benefits of $30 million per year under 25% conversion. hunting benefits between 23% and 30% of cost

45. Valuing non-consumptive uses wildlife using Feather, Hellerstein, and Hansen’s (1999) travel cost method: • Feather et al. give a nationwide estimate of $10.02 per acre, per year. • Approximately $31 million per year using the 25% conversion scenario. benefits between 23% and 30% of cost

47. Concluding Remarks • Climate change will likely increase the incidence of forest fires and pest outbreaks. • Timber supply is expected to increase pushing prices down. • Global net market surplus between 3% and 7% predicted without afforestation policy.

48. Considering afforestation policy exacerbates the effect on timber producers but offers environmental and recreational co-benefits.

49. Areas Ripe for Contribution: • Labor Economics:  can we simulate/predict job lose in the forest products sector?  will the displaced be absorbed by other sectors? • Non-market valuation:  can we extend/improve Ribaudo’s estimates of the value of certain co-benefits? • Demand Analysis:  much of the analysis to date has assumed that timber supply increases while demand for forest product remains unchanged, what about the possiblity of new markets for timber such as biofuels?

50. Question: • Suppose we wanted our own estimates of the value of additional forest land for people like hunters or birdwatchers, what techniques could we use? What kind of data would we want/use?