climatic change and canada's boreal forest: socio-economic issues and implications for land use

Climatic Change and Canada's Boreal Forest: Socio-economic Issues and Implications for Land Use

G. Cornelis van Kooten

Department of Agricultural Economics and Depurtment of Forest Resources Management, University of British Columbia, Vancouver, B.C., V6T 222.

Received 26 July 2994, accepted 5 January 2995

This paper reviews the effect of climatic change and policies to sequester carbon on forest land use. Eficient mitigation strategies often require the conversion of agricultural land to forestry in order to sequester carbon, but such strategies couM be wrong for Canada's boreal forest region ifglobal warming is inevitable. It is argued that, from both an economic and a social perspective, conversion of the southern boreal forest to grassland or agriculture might be a better policy.

L'article passe en revue l'effet des changements climatiques et des politiques utilisles pour capter le gaz carbonique, sur 1 'utilisation des terres forestiPres. Pour ftre eficace, les stratigies d'attinuation nicessitent souvent la reconversion des terres agricoles a 1 'exploitation forestiPre afin de capturer le bioxyde de carbone mais, cette stratigie pourrait se rlviler mauvaise pour la forfr boriale canadienne advenant 1 'inivitabiliti d 'un richauflement planitaire. L 'auteur estiment qu 'autant dans la perspective iconomique que dans la perspective sociale, une meilleure solution serait plutdt de reconvertir le sud de la forft borlale ii la prairie ou ci l'agriculture.

INTRODUCTION Global climatic change is the result of anthropogenic activities that have increased concentrations of carbon dioxide ( C 0 3 and other greenhouse gases (GHGs) in the atmosphere (Schneider and Rosenberg 1989), although the link between increasing concentrations of GHGs and global temperature rise is a tenuous one (Sedjo and Wisniewski 1993; Ball 1994). Because the U.S. Administration has declared climatic change to be the single most important environmental threat facing the world and has adopted an active stance on global warming (Clinton and Gore 1993; Kane 1994), environmental policies will continue to focus on climatic change in the near future.

The focus in this paper is on C02 because of its importance in plant growth and because trees remove CO, from the atmosphere and store it in biomass (Bazzaz

and Fajer 1992). The importance of C02 relative to other GHGs is illustrated in Table 1 . It is clear that the problem of climatic change is one of carbon (Manne and Richels 1991), and forests play an important role in mitigating global climatic change (Moulton and Richards 1990; Richards 1994). Forest sector policies can mitigate climatic change by :

increasing the standing inventory of biomass and, thus, the sue of the carbon (C) sink; increasing storage of C in wood products; reducing C emissions by substituting wood for nonwood products, such as cement, which release large quantities of CO,; and substituting he1 from wood biomass for fossil fuels (Sedjo and Wisniewski 1993; Richards and Stokes 1994).

Canadian Journal of Agricultural Economics 43 (1995) 133-148 133

134 CANADIAN JOURNAL OF AGRICULTURAL ECONOMICS

Table 1. Summary of key greenhouse gases affected by human activities

Carbon Nitrous AtmosDheric concentration dioxide Methane CFC-11 CFC-12 Oxide ~~~ ~~

Atmospheric lifetime (years)a3b 50-200‘ 10 65 130 150 Global warming potentialaxc 1 21 4,500 7,100 290 Relative instantaneous contribution to warmingd 53.2% 17.3% 21.4%‘ 21.4%‘ 8.1% Relative total contribution to warmingd 80.3% 2.2% 8.8%‘ 8.8%‘ 8.7% Emission reductions to stabilize concentrations

at current levelsa >60% 15-20% 70-75% 75-85% 70-80%

a Source: Grubb (1990, 14-17). Atmospheric life refers to the average time that a molecuke of the gas remains in the atmosphere

before it is reduced to a non-GHG form via a chemical reaction. Based on release of 1 kg of gas in 1990 and 100-year horizon. Source: Nordhaus (1991, 39). Absorption of CO, by Oceans and biosphere is not known, so a range of values is provided for carbon

Values are for CFCs and are not broken down by type. dioxide.

For the U.S., it has been suggested that these forest policies could reduce costs of mitigation by as much as 80% (Richards, Moulton and Birdsey 1993).

A change in climate will affect land use, particularly in Canada, because northern latitudes are forecast to experience the greatest temperature rise (Rizzo and Wiken 1992; Wheaton et a1 1987), but mitigation policies that seek to create carbon sinks will also impact on land use. The purpose of the current paper is to review the economics of land use as it relates to global warming, and to examine the impacts of potential changes in forest land use for Canada. The focus is on the boreal forest zone of western Canada. The effect on forest management of carbon subsidies and taxes is examined, as is the question of whether northern forests should be managed primarily for their ability to mitigate climatic change or for the future climate. Finally, socio-economic issues relating to potential land use changes (conflicts) in the boreal forest region are addressed.

CLIMATIC CHANGE ECONOMICS AND THE FOREST SECTOR: A REVIEW

The sectors of the global economy most affected by climatic change are agriculture,

forestry, other natural resources (mainly coastline resources and continental wetlands), and health and recreation. In developed countries, agriculture and forestry account for only 3-5% of gross national product, and it is likely that larger economic costs from climatic change will be experienced by health and recreation than by natural resources sectors. In low-income countries, agriculture and forestry account for a much higher proportion of economic activity, so these countries will experience a greater impact from global warming. There have been no studies estimating the costs to low-income countries of business-as-usual warming; such studies are available only for developed countries, primarily the U .S.

Economic research concerning the effects of climatic change has focused principally on agriculture, because impacts are thought to be largest in that sector (Rosenberg and Crosson 199 1). American research has concentrated mainly on economic welfare (costs and benefits) using a production function approach (Adams 1989; Adams et a1 1990). Since this approach does not allow for substitution among different land uses (although farmers are permitted to choose crops that are better suited to the changed climate), Mendelsohn,

CLIMATIC CHANGE AND CANADA’S BOREAL FOREST 135

Nordhaus and Shaw (1994) proposed a Ricardian method based on a causal relation between climate (and other) variables and agricultural land values. Unlike the decline in welfare estimated for the U.S. using the production function approach, the Ricardian approach suggests that global warming could lead to an increase in social well-being. In contrast, Canadian agricultural research has focused primarily on the income redistribu- tional impacts of global warming, rather than on economic welfare (Williams et a1 1987; Arthur 1988; Mooney and Arthur 1990; Arthur and van Kooten 1992).

There are lessons to be drawn from the agricultural research, particularly as these relate to the benefits of adaptation and public policy. Research indicates that farmers can adapt to climatic change by adopting different crops andlor cropping practices, thereby reducing its costs (Mooney, Jeffrey and Arthur 1991; Kaiser et a1 1993). In agricultural regions experiencing lower available moisture for crop growth, for example, there should be increasing reliance on livestock, a shift to irrigation or abandonment to wildlife (Delcourt and van Kooten 1994). Agricultural policy should direct funds toward grasslands and forage research, provide economic incentives to establish permanent pastures in semi- arid regions that are projected to become drier and, where economically feasible, encourage development of water resources for irrigation. Research into new crop varieties and drought- resistant ones should also be pursued. Further, investments in public infrastructure need to recognize not only present needs, but also those under a changed climatic regime. This requires ongoing research into economic activities, how they are linked and the dynamics of how economies change.

Early studies of the impacts of global warming on forestry focused primarily on location of forests, species adaptation, and pests and disease. Forest economists began by considering the impacts of global warming on forest product prices. Binkley (1988) estimated a small positive benefit to the forest products sector from global warming, while van Kooten and Arthur (1989) pointed out that

international trade in forest products plays a crucial role in determining whether a country will gain or lose. Given the importance of forest policy to mitigation strategies, economists soon directed their attention to estimating the costs of sequestering C in forest biomass (Sedjo and Solomon 1989; Moulton and Richards 1990).

The purpose of C sequestration programs is to develop plantation forests with fast- growing species or to use silviculture to enhance growth of existing forests. The new or enhanced forests sequester C from the atmosphere so that an increase in forest biomass will reduce the buildup of atmospheric C02. Once plantation forests reach harvestable age, prices of timber products could be driven down to unacceptable levels. One proposal, therefore, is to use the wood as a biomass fuel, replacing fossil fuels. Other suggestions are to “pickle” wood in structures by providing incentives for house construction, for example, or simply to bury the wood. In that case, carbon is not released to the atmosphere (as with burning), while the new plantations sequester additional C. Incentives will be required to implement these schemes, although firms or individuals could be required to purchase emission permits from those engaged in tree planting. Compared with other means for mitigating climatic change, forest policies that encourage greater C uptake are economically feasible (Binkley and van Kooten 1994; Richards and Stokes 1994; Richards, Moulton and Birdsey 1993; Sedjo and Wisniewski 1993).

Dudek and LeBlanc (1990) considered offsetting new C02 emissions in the U.S. by planting trees on land put into the Conser- vation Reserve Program under the Food Security Act of 1985. This option was estimated to cost between US$25 and US$45 per tonne of carbon removed from the atmosphere. A similar range of values was found for Canada by van Kooten, Arthur and Wilson (1992), who determined that affore- station of marginal agricultural land and reforestation of forest lands denuded by clear- cutting or natural causes were preferred to switching fuels (e.g., oil to natural gas).’


It is recognized that the marginal cost of sequestering C in forest biomass is upward sloping. Moulton and Richards (1990) estimated costs of US$18.50/Mg when 125 Tg of C are to be sequestered annually, but US$38.5O/Mg for sequestering 640 Tg of C per year’. The latter figure represents almost one-half of total U.S. emissions of C. Adams et a1 (1993) analyzed the costs of sequestering carbon in forests on agricultural lands. The Agricultural Sector Model (ASM) (McCarl et a1 1993) was used to take into account the effect of higher agricultural prices on land rents as land was shifted from agriculture into forestry, while the U.S. Timber Assessment Market Model (TAMM) (Adams and Haynes 1980) was used to account for the impact on timber prices. The authors estimated that the marginal costs of sequestering C rise from US$18.50 to US$60.00 per Mg for reductions in C release of 125 Tg and 640 Tg, respectively. By growing trees on agricultural land, total costs of reducing U.S. carbon emissions by 2.5% (or about 30 Tg) were estimated to be US$500 million per year, while they were US$21 billion per year to reduce emissions by almost one-half (or 640 Tg).

There are four problems with the fore- going types of analysis. First, the marginal costs of reducing C emissions via biomass uptake need to be considered in the context of other policies; different C uptake forest projects need to be ranked alongside other strategies such as fuel switching to determine the true marginal cost function for mitigating climatic change (van Kooten, Arthur and Wilson 1992). Second, all of the studies are for the U.S. There are about 300 million hectares of forest land in the U . S . , compared with 450 million hectares in Canada (Table 2). Clearly it makes little sense to examine U.S. policies for sequestering C in forest biomass in isolation when there is free trade with Canada. Unless forest sector carbon policies (e.g., subsidies and taxes) are coordinated, efforts to sequester C in the U.S. may simply be offset by countermeasures in Canada, thus voiding any estimates of costs. Third, planting trees on agricultural lands could result in significant external, noncarbon-related benefits

(e.g., scenic amenities, shelter for wildlife), and these are neglected in all of the models. Finally, the dynamic nature of the problem suggests that any policies must take into account effects over time, including interactions between agriculture and forestry. The aforementioned studies employ static optimization models.

Only the last of these concerns has been addressed by U.S. researchers, by development of the Forest and Agricultural Sector Optimization Model (FASOM) (Callaway 1994; Callaway et a1 1994). FASOM is a mathematical programming model that maximizes the discounted sum of producers’ and consumers’ surpluses over a 90-year time horizon, subject to dynamic constraints; it is a dynamic optimization model. The structure of FASOM is based on elements of TAMM and ASM but, unlike TAMM and ASM, it allocates activities in an optimal fashion over time, albeit by decade. FASOM relies on a joint, price-endogenous market structure to allocate land uses among different crop and forest activities in the model’s 11 supply regions. Because it includes incredible detail on land uses, along with carbon budgets and timber inventories, it can be used to investigate the effects on land use and welfare of climatic change, subsidies and taxes, technological change, recycling policies, tree planting programs, and so on. However, it fails to deliver correct answers on the basis of the second critique mentioned above: by not considering land use changes in Canada, welfare measures will be unreliable.

Economists are also concerned that climatic change could bring about losses in ecological amenities derived from forests. One example is habitat loss, which results in forgone options (loss of some unknown species could have contributed to the eventual cure of an existing or future disease) and lost preservation benefits (i.e., loss of biological diver- sity). These losses can be valued, but with great difficulty (Fisher and Hanemann 1994). Even if measures of biodiversity value exist, a challenge for forest managers is to take into account these amenity benefits along with the benefits of commercial timber harvest and


carbon uptake in makmg silvicultural investments (Thompson, van Kooten and Vehnsky 1994).

There are also possibilities for extending the life of forest products and substituting wood for nonwood products (Binkley and van Kooten 1994). However, additional research is required, because the current trend in Canada and the U.S. is in the opposite direction, namely, reducing access to commercial timber and thereby encouraging wood substitutes.

Restructuring of the world forest economy is already under way (Lyon and Sedjo 1992), and climatic change will have an impact on this. Economists will be asked to assess the changes that are likely to occur. Since agriculture and forestry are competing land uses in many regions, it is clear that changes in agricultural practices will affect forestry, and vice versa. FASOM is a step in this direction, but it needs to be applied at a larger scale. At such a scale, such models will exhibit the large-scale characteristics of global circulation modes (GCMs) and require super- computing power to solve.

Large changes in temperature (increases of 4” C or more) and precipitation can cause vegetation zones to migrate by 400 to 600 kilometres. Depending on the sensitivity of individual species to such changes, it is possible that trees planted today are not suited to the climate and environment that will exist in the region in 50 to 70 years (Pollard 1990). This is a concern not only for foresters but also for economists, because the income distributional impacts of planting “wrong” species may have a large impact on the future of the forest industry in a region and, hence, on community viability. This is a problem that has not been adequately addressed in the literature, but again FASOM-type models are a step in the right direction.

There has been very little economic research into adaptation of forestry to climatic change. Most research has focused on biophysical aspects, while economics has largely been ignored. However, the issue of adaptation versus avoidance has important implications not only for government policy,

but also for optimal harvesting decisions, particularly since current projections suggest that anthropogenically induced climatic change, if it is to occur, will be unavoidable.

CLIMATIC CHANGE AND CANADA’S BOREAL ECOSYSTEM

Over the period 1980-89, global release of carbon from fossil fuel consumption amounted to 5.4 * 0.5 Pg of C per year, while changes in land use (e.g., deforestation) accounted for the release of 1.6 f 1.0 Pg of C per year (Dixon et a1 1994). While oceans absorb 2.0 f 0.8 Pg of C per year and 3.2 f 0.1 Pg of C per year remains in the atmosphere, some 1.8 f 1.4 Pg of C per year remains unaccounted for (Dixon et a1 1994). Forests are a net source of carbon, primarily because of tropical deforestation (see Table 2). While boreal forests had previously been considered neutral with respect to the carbon cycle, evidence indicates that they are a net sink (Table 2). “Boreal forests store signifi- cantly more carbon in their soils and associated peatlands than do tropical forests. This makes the boreal biome much more important as a global carbon sink” (Kronberg and Fyfe 1992, 73).

Attention has generally focused on the role of tropical deforestation as a contributor to global warming, with some on harvest of old-growth temperate forests (particularly in the coastal region of the Pacific Northwest of North America) (Harmon, Ferrell and Franklin 1990). There has been little discussion pertaining to the management of boreal forests. Yet, it is changes in the productivity of boreal forests, rates of harvest, boreal silviculture, and genetic research into boreal species that could have an impact on both global forest product markets and climate.

Global warming is projected to have the greatest impact on northern latitudes, with Canada warming to a greater extent than the continental U.S. Canada’s grain belt will migrate northward; the grasslands ecoclimatic province is predicted to increase from 5% to 12% of Canada’s total land area, while transitional grasslands will increase from 0 to

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CLIMATIC CHANGE AND C IANADA'S BOREAL FOREST 139

8% (Rizzo and Wiken 1992). Only the presence of the Canadian Shield (i.e., poor soil conditions) will prevent similar increases in arable land. For a double-C02 climate, the cropping area in northern Manitoba will increase by almost 4.5 million hectares, while that in northern Saskatchewan and Alberta will increase by about 0.4 million and 1.1 million hectares, respectively (Mooney, Jeffrey and Arthur 1991). Arable areas will also become available in northern B.C. and the Northwest Territories, but not to the extent suggested by the Rizzo and Wiken (1992) analysis because of soil capability limits. In addition, some regions of Canada's grain belt may no longer be suited for annual cropping without expensive imgation projects (Delcourt and van Kooten 1994).

The remainder of this paper examines issues related to the economics of climatic change on forestry by focusing on the boreal forest region of western Canada. Particular consideration is given to the effect of carbon subsidies and taxes on management of boreal forests, adaptation versus avoidance, and socio-economic issues arising from changes in forest land use in Canada's northern forests.

What Harvest Strategy for Mitigating Climatic Change? What should be the harvest strategy for Canada's boreal forests if mitigation is a serious consideration? The boreal forest region is characterized by short growing seasons and high rates of loss due to fire, pests and disease. In 1981, 5.5 million hectares of forest were burned in Canada. Lower annual burn levels of 700,000 to 2 million hectares were experienced through most of the 1980s, but, in 1989, a record 6.4 million hectares were destroyed by fire. While contributing to atmospheric C02, it is not clear to what extent this natural activity reduces the amount of C stored in the ecosystem. The reason is that fires do not burn trees completely. In addition, timber volume equivalent to about two-thirds of the annual harvest is lost each year due to pests and

disease (Jackson 1990). Again, it is not clear to what extent this contributes to increases in atmospheric C02.

Research by Kurz and Apps (1994) suggests that such disturbances will increase C release, but only slightly. However, incidents of fire and disease are likely to increase under an altered climate. In contrast to the analysis by Kurz and Apps, which assumes natural regeneration within a 10-year period, replanting disturbed areas as quickly as possible with faster-growing species and practicing intensive silviculture may increase C uptake compared with the unmanaged state, plus there will be a benefit from future harvest of the timber (Thompson et a1 1992). Indeed, if foresters have reasons to suspect that certain stands are highly susceptible to natural disturbance, it may be socially benefi- cial to harvest those sites as soon as possible, and grow a new crop of trees primarily because of their carbon uptake benefits.

If government wishes to pursue policies that mitigate climatic change, carbon subsidies and taxes could be employed. If trees are planted for both the purpose of sequestering C and for future harvest, how is the optimal harvest age affected under a subsidy- tax regime?

The maximum sustainable yield (MSY) rotation age is found by setting the rate of growth of timber, which is a function of age, t , equal to the inverse of the forest's age, and solving for t . Denote the rate of growth in timber volume over time as v(r). Then the MSY rotation age is that rotation age which solves:

where T is the rotation length, and the left- hand side of Eq. 1 is the instantaneous rate of change in timber volume.

As an illustration, the following growth function for black spruce on good sites is estimated using data from the Alberta Forest Service (1985, 47-51):

140 CANADIAN JOURNAL OF P LGIUCULTURAL ECONOMICS

Log of the likelihood function = -479.3482

where v is timber volume measured in cubic metres, and asymptotic t-statistics are provided in parentheses. From Eq. 1, the MSY rotation age is 152 years. Of course, determination of this rotation length ignores the possibility of fire and loss of timber due to other natural causes. If one's desire is to maximize the welfare of society, however, the MSY rotation is not the appropriate one on which to base decisions.

The financial rotation age maximizes the present value of the returns from harvesting timber. By taking into account the potential of land to grow more than one stand of trees, the harvest period is actually shortened compared with what it would be if the harvest decision is based on a single cut. The reason is that, by cutting trees sooner, it also makes available a second and third harvest sooner than would otherwise be the case. The optimal rotation age can be found mathematically by finding the rotation age T* that maximizes the following present value formula:

where P v(7) is the value of timber growing on the site at the time the trees are to be cut.

For convenience, it is assumed that price is net of costs (i.e., that it includes harvesting costs); then the financial rotation age is independent of price, as long as P > 0. The real rate of discount is denoted r and is assumed to be 4%. The solution to Eq. 3 is given by:

rotation age. However, decisions based on the Faustmann criterion may not necessarily yield the greatest net benefit to society.

In order to determine the harvest age that yields the highest welfare to society, it is necessary also to take into account the amenity values of the forest. But it is difficult to determine how, for example, recreational values (i.e., hunting, hiking, camping, fishing, viewing) or biodiversity values would enter into calculations of the optimal rotation age, because these values may be only partly related to the amount of timber growing on a site. In some cases, by appropriate management, harvesting may enhance some values while reducing others (see Bowes and Krutilla 1989; Thompson, van Kooten and Vertinsky 1994).

Where nonmarket values are related to the age of a stand of trees or to the volume of timber growing on the site, it is possible to take them into account in determining optimal harvest ages. Unlike commercial timber benefits, which accrue at the time the stand is harvested, external or amenity benefits accrue in each period and must be counted at that time (Clark 1990, 274-75). Although this is true of carbon uptake benefits, such benefits are a function of the change in the volume of biomass, not biomass itself or stand age. Following van Kooten, Binkley and Delcourt (1994), carbon sequestration at any time is given by 01 dvldt, where a is megagrams of carbon per cubic metre of timber biomass. The proportion of carbon in biomass varies with tree species, although it is generally in the range of 0.200 Mg/m3 (van Kooten, Thompson and Vertinsky 1993). The present value of the carbon uptake benefits, PVc, over a rotation of length T is:

Eq. 4 is known as the Faustmann formula (Bowes and Krutilla 1989,95-96; Clark 1990, 270). For the growth function in Eq. 2, the financial or Faustmann harvest age is about 49 years and is much shorter than the MSY

where Pc is the value to society from sequestering a tonne (Mg) of carbon. Since this value is unknown, values of $20/Mg, $50/Mg, $100/Mg and $300/Mg are chosen, where the latter represents a likely upper

CLIMATIC CHANGE AND CANADA'S BOREAL FOREST 141

limit to the value of carbon removed from the atmosphere (Manne and Richels 1991).

The present value of timber, PV,, harvested at time T is given by the discounted value of the commercial timber minus the discounted external cost of the carbon that is released: that is:

where the first term on the right-hand side represents the value of the timber and the second term the value of the carbon released, with PF being the net price of timber per cubic metre. The amount of carbon released into the atmosphere depends on the fraction, P , of timber that is harvested but goes into long-term storage in structures and landfills.

Van Kooten, Binkley and Delcourt (1994) show that the optimal rotation age when both commercial timber and C uptake benefits are taken into account is determined from:

1 v(t) e-" dr s: Setting Pc = 0 gives the Faustmann result (Eq. 4); setting PF = 0 gives the formula for calculating the rotation age for carbon benefits only (assuming p # 0):

P v(ZJ

As a particular case, if the proportion of carbon entering land fills also equals zero (P =O), then the rotation age is calculated from:

r 1 - e - r T (9)

v(ZJ - -

v(t) e-"dt

In order to calculate the effect that carbon uptake benefits would have on the socially optimal harvest ages for black spruce, data from van Kooten, Thompson and Vertinsky (1992) are employed; in particular, (Y =0.203 Mg/m3 and 0 ~ [ 0 , 1 ] . The results are presented in Table 3 for different values of 0, carbon uptake value and reasonable net prices of pulpwood.

When decisions are based on maximizing both commercial timber benefits and external values, the rotation age generally falls some- where between the carbon-only and financial ages. However, if the value of C is sufficiently high (Pc > $100/Mg, say) and there is little chance to store carbon in wood products, then the economically optimal rotation age increases beyond the MSY age. Ceteris paribus the rotation age declines with an increase in the proportion of C that gets permanently stored in wood products and with an increase in the commercial value of logs.

For some forests, the external benefits (which could include preservation value) might be so great that it would not be economically feasible to harvest the forest. Thus, in contrast to the Faustmann criterion, the age of the inherited stocks may matter. If the age of the timber exceeds the harvest age that is optimal from the standpoint of C uptake benefits, it may be preferable to delay harvest or never harvest. The existing flow of amenity values associated with "over- mature" forests may be sufficient to justify their preservation, especially if such forest lands are relatively scarce and highly valued. With commercial timber value alone, the optimal strategy is to cut the trees as soon as possible when their age exceeds the Faust- mann age.

Because of its benefits in storing carbon, preservation is unlikely to be an optimal strategy in the case of black spruce for four reasons (contrary to the findings of Wheaton et a1 1987). First, the value of carbon is likely


Table 3. Harvest criteria for black spruce in the boreal forest regiona

Price of carbon ($/Mg)

Item 20 50 100 300

PF = 0: p = 0.0 p = 0.5 p = 1.0

>200 yrs >200 yrs >200 yrs >200 yrs >200 yrs >200 yrs >200 yrs >200 yrs

198 yrs 198 yrs 198 yrs 198 yrs

pF = $25/m3: p = 0.0 56 yrs 71 yrs >200 yrs >200 yrs p = 0.5 55 yrs 66 yrs 88 yrs >200 yrs p = 1.0 55 yrs 63 yrs 75 yrs 107 yrs

PF = $30/m3: p = 0.0 55 yrs 66 yrs 102 yrs >200 yrs

= 0.5 54 yrs 63 yrs 80 yrs >200 yrs p = 1.0 54 yrs 61 yrs 71 yrs 101 yrs


= 0.5 53 yrs 59 yrs 71 yrs 143 yrs p = 1.0 53 yrs 58 yrs 66 yrs 91 yrs


= 0.5 52 yrs 57 yrs 66 yrs 116 yrs p = 1.0 52 yrs 56 yrs 60 yrs 84 yrs

a Financial rotation age is 49 years; MSY rotation age is 152 years.

wood that is harvested and permanently stored, not releasing C into the atmosphere. PF refers to the stumpage price or net value of commercial timber, while is the proportion of the

quite a bit less than $100/Mg. Second, there is the question of risk related to fire, pests and disease, which will lower the socially optimal rotation age below 200 years. There has been no research concerning the effect of risk and uncertainty on amenity values and the associated optimal harvest strategy. It would appear that one should harvest trees faster if there is a risk of fire or other natural denudation, as noted above.

Third, it is possible that we can do better (in the sense of increasing society’s welfare) by harvesting trees and replacing them with faster-growing varieties. There would be an immediate gain from timber harvest plus greater annual C sequestration benefits as a

result of faster-growing trees. While Harmon, Ferrell and Franklin (1990) indicated that it would take 450 years to recover the carbon released by harvesting old growth on the Pacific coast, it is not clear the same would be true for the boreal forest region.

Finally, there is the avoidance-adaptation dilemma. If global climatic change is unavoidable, then forestry efforts should perhaps be directed at adapting to warming, and not at mitigation. Under mitigation, the optimal strategy may be not to harvest trees. But the optimal policy under adaptation may be quite different. In some regions, natural denudation may increase as trees are more susceptible to fire, pests and disease, and the best strategy

CLIMATIC CHANGE AND CANADA'S BOREAL FOREST 143

may be to harvest trees now rather than later. Monitoring may be required to determine the optimal time of harvest. This is much like farmers in dryland cropping regions who monitor soil moisture in the spring to determine whether they should plant a crop or summerfallow, except that the time scale or "window for decision taking" is longer (from a few days to a number of years, perhaps even a decade). The point is that decision makers will have to be flexible in their forest management decisions.

Associated with the avoidance-adaptation dilemma is the issue about how scarce forest management resources should be allocated. How much money should be set aside for adaptation should avoidance fail? After all, any money spent to avoid climatic change, such as reforestation expenditures, means that there is less money available for research into species that are better suited to the future climate.

Avoidance, Adaptation and Socioeconomic Consequences Economists have determined that global warming would result in significant structural changes to the agricultural economy. Since these changes would occur over a period of 50 to 60 years, and based on past changes in the agricultural sector, the consensus is that farmers and forward- and backward-linked industries would be capable of adapting without undue hardships. If there is a problem, it will likely reside with the public sector. Public investment in infrastructure and subsidies to farmers have resulted in distortions that have hindered private decision makers from adapting to changes in the social and biophysical constraints that they face. Direct government subsidies have encouraged environmental degradation and have prevented farmers from abandoning farms that were not sustainable in the long run, resulting in hardships at a later date. Public investment in hospitals and recreational facilities in declining rural communities provide inappropriate signals to private investors, leading to misallocation of both private and public investment funds.

Although forestry is less able to respond to changes than agriculture, the time horizon is still sufficiently long to enable private decision makers to adjust. Flexibility in responding to climatic change varies with location. In the U.S. Southeast, pine plantation forests mature over a period of 15-25 years; in the Pacific Northwest, cottonwood trees mature in less than 20 years, with some plantation varieties maturing in less than 10 years when treated as an agricultural crop. In the tropics, tree plantations also mature relatively quickly, while agro-species provide their annual yields of nuts or fruits after a period of only a few years. Certainly, it would be possible for individuals in these regions to adjust to changes in climate. The only limiting factor is lack of mobility of resources (including labor) because they are tied to a region that is adversely affected by climatic change. While this might be true for some low-income countries, it is unlikely for developed countries. Where resources are mobile, one would witness a decline in forestry investments in regions that experience a reduction in the potential for growing trees, but these investment funds would be directed either toward other forest regions or into other sectors.

With some exceptions, it is unlikely that the regions currently gaining in comparative advantage in timber production (for reasons unrelated to climatic change) will also be adversely affected by global warming. The northern latitudes will experience the greatest climaric change and the boreal forest region is likely to be most affected. For example, while global temperatures are forecast to increase by an average of 2-5" C, the Cana- dian Climate Centre GCMII projects much higher changes in temperature under a double- C02 climate for Canada. Average temperatures increases of 6" C, plus increases in precipitation are projected for northern regions. The boreal zone is projected to change dramatically; the southern boundary of the boreal forest zone is projected to shift northward by 250 to 900 kilometres, while the northern limit could move some 100 to 700 kilometres. Parts of the current boreal


vegetation zone are projected to become aspen parkland and/or boreal temperate; even parts of the subarctic might become aspen parkland (Wheaton et a1 1987). Thus, in some areas, boreal species will come into competition with southern deciduous ones, while grazing and farming may replace current forest activities in other regions. As a consequence, are there likely to be socio-economic problems associated with adjustment to a changed climate?

The answer to such a question is rife with speculation. In Sweden, Norway and Finland, where forest tenures are characterized by private ownership and plantation forests are the norm, climatic change is projected to be less dramatic than for interior continental regions (such as Canada and Russia). In all probability, given existing institutions, the forestry sector in Scandinavia will be able to benefit from increased biomass potential, if it exists. If potential for increased timber harvest does not exist, farming and opportunities for employment in other sectors may be present.

In Canada and Russia, the boreal forests are more pristine in the sense that large areas have never been harvested. Roads and long distances to pulp mills and saw mills, as well as to market, have precluded development of a forest industry in some areas. Until recently, the technology to employ many boreal species for pulp (such as aspen) was not available. However, exploitation of the boreal resource is now taking place with new pulp mills and expansion of existing mills in northern Alberta and Saskatchewan. In these regions, large areas will be harvested in the next several decades.

In the provinces mentioned, exploitation is now beginning in the southern regions of the boreal forest, albeit with the aid of government subsidies. This may be a good strategy if the southern extent of the boreal zone is indeed going to shift some 250 or more kilometres to the north. The question that remains is: What should be done with the land after harvest? If climatic change is real and its projected effects on the boreal forest are more than mere speculation, policy makers

need to make hard choices between avoidance (e.g., plant fast-growing trees) and adaptation. Adaptation in this case could involve preparing the region for farming or ranching (e.g., selling public land), or by encouraging investment in alternative tree species. If farminghanching is going to be the future land use, then public infrastructure needs to be oriented in that direction. For example, road and rail infrastructure would be different under forestry (direct lines to mills) as opposed to agriculture (a larger, more spread- out network).

In some areas, the conflict between a projected future use of land for agriculture and its current use in forestry will be difficult to resolve. It will require policy makers with a vision for the future, but it may be that private decision makers would be better able to make these choices. Hence, a policy of governments with substantial holdings of land in northern latitudes, as in Canada, may be to divest themselves of such holdings.

In Canada’s boreal zone, Aboriginal people comprise a significant proportion of the population, and often constitute a majority. Climatic changes that result in significant changes in land use (forestry to farming or ranching) or make logging more profitable will have an impact upon Aboriginal communities. Conflict among Aboriginals and between Aboriginals and the rest of society has already started in Alberta and Saskatchewan as a result of pulp mill investments. Some Aboriginals see logging as a threat to their traditional lifestyles (hunting and trapping), while others are pleased that they are able to find jobs in the forestry sector. Such conflicts could intensify and Aboriginal communities, including Inuit communities in the high Arctic, will experience the greatest disruption from climatic change. Government policies need to be sensitive to such disrup- tions and prepare Aboriginals to cope with the changes that they will likely face.

CONCLUSION As a leading producer of agricultural and forestry outputs, Canada could play an


important role in global efforts to mitigate climatic change. Both U.S. and Canadian research indicates that carbon uptake policies are a cost-effective means for offsetting emissions of COz, although it could mean a reduction in land used in agriculture. However, it could be that mitigation policies and the land uses they bring about are not appropriate if global warming is inevitable. Rather, optimal policies in regions such as the boreal zone of western Canada might call for more rapid harvests and conversion of forest lands to agriculture, instead of the opposite. Clearly, this is an area for further research using models such as FASOM.

It is important to recognize that, while the international market in wood products is vola- tile, the long-term prospect is for a shift in comparative advantage of timber production toward warmer regions (e.g., U.S. Southeast) where plantation forests and technical advances are more feasible (Lyon and Sedjo 1992). Real wood prices are unlikely to rise because of increased reliance on plantation forests and development of yield-enhancing , wood-saving and wood-extending technolo- gies, as well as wood substitutes. Unless energy prices make biomass fuels feasible on a large scale, boreal forest regions are unlikely to benefit to a large extent from a warmer climate that increases productivity. Land use in the boreal zone will change to grasslands, only part of which will be capable of supporting crop production. This implies that there will be greater opportunities for cattle. However, the large changes that are projected could cause significant and important socio-economic changes on a regional scale, but these are likely to be unimportant on a global scale (except for the likely release of carbon that these changes will cause), because the economies of the boreal zone are undeveloped. Nonetheless, how one resolves conflicts between future or projected versus present uses of the land is not clear, and that could have far-reaching implications.

NOTES ’ Carbon emissions are measured in grams (g): P refers to peta (lo’’), T to tera (lo”), G to

giga (lo9), and M to mega (lo6) grams. By weight, the CO, molecule is 27.2% carbon.

For British Columbia, van Kooten, Thompson and Vertinsky (1993) found that uneconomic reforestation investments on backlog, not- sufficiently-restocked forestlands could sometimes be justified on the basis of their carbon uptake benefits.

One important feedback not included in Table 2 is the CO, “fertilization effect”: “CO, doubling experiments with seedlings of boreal forest species have shown an average increase in growth of 38%” (Apps et a1 1993,47). Total forest biomass increases of 10% and 20% have k n projected for the U.S. and the USSR, respectively (Lave 1991, 11).

This provides an economic explanation for the conclusion reached by Harmon, Ferrell and Franklin (1990) that old growth on the Pacific coast should not be harvested. Amenity values from C sequestration are too high.

See Lyon and Sedjo (1992) for a discussion of comparative advantages in timber supply.

The southern boundary is delimited by 1,300 growing degree days (number of days temperature is above 5” C, with each day multiplied by the number of degrees above 5 O C), while the northern boundary is delimited by 600 growing degree days.

ACKNOWLEDGMENT An earlier version of this paper was presented at the “Forests and Climate Change Policy” Session of the 69th Annual Conference of the Western Eke nomics Association International, Vancouver, 29 June-3 July 1994. The comments of three anony- mous Journal reviewers are greatly appreciated.

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