Land Allocation and Multiple Use

FRST 318, March 12, 2013

Harry Nelson 2010

Economic Issues Determining:

Land Allocation:

Identifying the use that will generate the greatest value

Selecting among alternative forest management approaches: Choosing the use or combination of uses that will

maximize return

Management Intensity: Given forest management objective most efficient use of

inputs

Allocation Between Alternative Uses

We are often forced to decide between alternative uses like agriculture, forestry, recreation, etc.

In order to decide which option to pursue, we must determine the rents generated under different land use scenarios and compare them.

A number of factors will affect how much rent is ultimately generated.

Example of a Land Use Decision

Distance from market (or urban centre) can be an important factor when it comes to land use decisions.

Land Rent ($)

Distance from Urban Centre (km)

Commercial

Residential

Farming

Forestry

a b c d eSo not just productivity, climate, etc…

Identifying Optimal Use

The rule is to maximize differential rent Differential rent is the rent generated in excess of the

opportunity cost.

But keep in mind markets are imperfect when it comes to allocating land among alternative uses as markets often fail to capture externalities. (reasons why we provide preferential tax treatment

for agricultural land, forest land)

Harry Nelson 2010

Detroit…

http://www.hantzfarmsdetroit.com

The Extensive Margin

Top panel shows market for timber

The bottom panel illustrates how much land can be used profitably for timber production

While more productive land earns rent

But the last hectare-the least productive-earns no rent

This last hectare-limit of rent-is the extensive margin

price$/m3

P

q Annual harvest

Productive timberland(hectares)

supply

demand

Intensity of Forest Management

Choosing the optimal combination of labour and capital to generate maximum land rent

General rule is to keep applying the input up to the point the benefit (marginal revenue gained from employing it) equals the cost

The point where marginal revenue product (MRP) equals the marginal cost of labour (wage) defines the intensive margin of land use. Payment to

labour

Land Rent

Value of forest crop$/ha

Marginal revenue product of labour $

P wage

q

Quantity of Labour

Quantity of Labour

Efficient quantity of labour

Example: PruningManaging trees in a radiata pine woodlot

Pruning and thinning are carried out to improve tree growth and timber quality.

Timing depends on how well trees are growing, on the site selected.

A shelter-belt or timber-belt has a lot of outside edge, with potential to grow

extra volume of timber, being exposed to extra light and fertility from adjacent

pasture. A good regime is:

Prune all possible stems annually

Prune as high as possible, leaving a green crown of one half to one third of the

tree height at all times.

Annual average volume and net revenue, maximizing either net revenues or volume

Scenario 1 (no volume constraints)

Scenario 2(even flow -2.8-

3.3)

Scenario 3 (even flow -

3.0-3.5)

Scenario 4(even flow -3.5-

4.0)

Scenario 5(volume

maximization)

Annual average volume (m3)

288,230 293,215 306,216 383,064 823,745

Annual average net revenue

$3,515,727 $1,191,596 $685,918 ($536,244) ($2,473,528)

Annual Average Harvest Levels under Core Scenarios

Allocation among Multiple Uses

Three key questions: Is the proposed use technically feasible? Is the proposed use socially and economically desirable? How much of the land do we allocate to this particular

use?

Production Possibilities The key idea is that a trade-off must be made (most of

the time) when choosing between alternatives:

Timber

Recreation

Example: Timber harvesting and recreation

Could have OT timber, no recreation…Or OR recreation, no timber…or some combination on the curve R

T

O

Mutually Exclusive Uses

Ex: Timber harvest vs. Preservation for scientific research

Timber Harvest

Preservation

Highly Conflicting Uses

Example: Timber harvest has a major initial impact on amenity values, but only incremental impacts afterwards

Timber Harvest

Recreation

Constantly Substitutable Uses

Ex: Harvesting for industrial timber vs. Harvesting for fuel

Industrial Timber

Fuel

Independent Uses

Ex: Watershed management vs. Recreational values

Watershed Management

Recreation

Complementary Uses

Example: Forest management vs. Wildlife habitat

Timber harvest management

Wildlife habitat

Production Possibilities

So returning to the traditional production possibility frontier

We will have multiple use when we face this kind of trade-off where Point O represents the optimal combination

What is important here is the tradeoff is determined by the relative value of the alter-natives; that is, the slope of the exchange line

Harry Nelson 2010

Alternative A

Alternative B

b Vb

Va

a O

Other Production Possibilities

Would also have multiple use where we have independent uses and complementary uses

But where land use is mutually exclusive or highly conflicting you should specialize

This is also the case where they are constantly substitutable (pick the one generating the highest rent)

Harry Nelson 2010

Triad Approach

Economic Results

So What Do We Do in BC?

So What Do We Do in BC?

Land Use Planning

Land and Resource Management Plans (LRMPs) started in 1996

“Multistakeholder” groups develop plans for government approval

Zoning approach protected sensitive integrated uses intensive forestry

Completed for 85% of the province

BC Liberals “New Direction” ILMB Report:

A New Direction for Strategic Land Use Planning in BC (December 2006)

Brings end to provincial scale, comprehensive strategic land use planning

New planning will be undertaken only where business drivers demonstrate a need New policy and legislative changes FNs’ interests and values Major environmental changes such as Mountain Pine Beetle

infestation

Forest Conservation PolicyApproaches

Coarse Filter Land use – protected areas and zoning

Fine filter Species at Risk Legislation (Federal) Identified Wildlife Management Strategy (Provincial)

27

Conservation and Protected Areas in BC

As of March 2011, 14.27%, or 13.5 million hectares of land, is the overall size of the protected areas system in the whole of the province of British Columbia (this includes national parks and national park reserves, as well as provincial parks and protected areas).

Class A, B, and C Parks

Conservancies

Recreation Areas

Ecological Reserves

http://atlas.nrcan.gc.ca/site/english/maps/environment/protectedarea/protectedareasthroughtime

A number of recent Forest Practices Board reports highlight:

• The lack of an integrated, landscape level, strategic planning process.

Managing Forest Land

Courtesy: Ken Zielke

Rules and constraints in a typical BC Management Unit

Site plans Sustainable Forest Management Plans for Certification

Forest Stewardship Plans

TFL Management Plans

Timber Supply Reviews

Silviculture Strategies

Forest Operations Schedules

Habitat Supply modelling & Plans

Community Wildfire Protection Plans

IFPA Forestry Plans

Forest Health Strategies

LRMPs and LU plansGAR ordersLand use orders

Ecosystem Restoration Plans

Climate Change Strategies

IWAPCWAP

Courtesy: Ken Zielke

BC’s forest management is:

• Leading to declines in forest diversity.

• Creating a growing understocked area.

• Not adequately addressing future timber supply problems.

• Harvesting high value species and reforesting with lower value species.

• Not dealing adequately with climate change.

We need to define and commit to:

• Clear timber objectives

• Stewardship principles

• Performance measures

Courtesy: Ken Zielke

Bill 8: Converting Volume-based to area-based

VICTORIA - Forest Act amendments introduced today will help improve forest stewardship and support community resiliency in mountain pine beetle impacted areas.

The legislation fulfils recommendations made by the Special Committee on Timber Supply in their August 2012 report, which was based on public hearings and written submissions from First Nations, local communities, industry stakeholders and the public.

The legislation proposes a new section 34.1 be added to the Forest Act that will create the ability to convert volume-based forest licences to area-based tree farm licences at the minister's invitation. Invitations will be publicly advertised, and applicants must make their application for an area-based licence available for public review and comment for at least 60 days and indicate how they have incorporated public feedback before submitting to the minister.

The minister may reject an application if the best interests of the public are not met. This summer, the ministry will consult with the public on the evaluation criteria and use the results to refine policy before the first application for a conversion to an area-based tenure occurs.

http://www.newsroom.gov.bc.ca/2013/02/new-legislation-supports-mid-term-timber-supply.html

(BILL 8)