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Valuing the Impact of Climate Change Policies on Forestry

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dc.contributor.author Meade, Richard
dc.date.accessioned 2015-02-11T21:39:04Z
dc.date.accessioned 2022-07-06T22:46:38Z
dc.date.available 2015-02-11T21:39:04Z
dc.date.available 2022-07-06T22:46:38Z
dc.date.copyright 1/05/2006
dc.date.issued 2006
dc.identifier.uri https://ir.wgtn.ac.nz/handle/123456789/19068
dc.description.abstract Conventional forest valuation approaches do not account for discretions foresters have in making key irreversible decisions such as when and if to harvest in the light of uncertain future decision variables. Furthermore where they are sufficiently sophisticated as to make explicit forecasts of future valuation parameters such as log prices at harvest date as is the case for discounted cash flow (DCF) analysis they do so with unavoidable imprecision. These shortcomings - as well of those of even less sophisticated methodologies such as cost- or transaction-based valuations - become telling when attempting to assess the impacts of long-term climate change policies on forest values. This paper presents an alternative approach using real options analysis that captures enough complexity to meaningfully model the impacts of climate change policies on forest value while remaining relatively straightforward to implement using Monte Carlo simulation. It shows that foresters' discretions as to when and if to harvest or to convert to non-forest land uses give rise to real options whose value is captured by real options analysis but ignored by conventional forest valuation methodologies. It furthermore shows how forest values differ and conversion rates vary over time depending on which climate change policies or policy uncertainties are assumed. In short Kyoto forests (those first planted after 1989) are more valuable when carbon credits and harvest liabilities under the Kyoto Protocol are devolved by the Crown to their owners. Non-Kyoto forests (those planted before 1990) are more valuable when deforestation liabilities are not devolved to their owners. Current New Zealand policy under which deforestation liabilities are retained by the Crown only within limits encourages the early conversion of Non-Kyoto forests into non-forest uses. en_NZ
dc.format pdf en_NZ
dc.language.iso en_NZ
dc.publisher Te Herenga Waka—Victoria University of Wellington en_NZ
dc.rights Permission to publish research outputs of the New Zealand Institute for the Study of Competition and Regulation has been granted to the Victoria University of Wellington Library. Refer to the permission letter in record: https://ir.wgtn.ac.nz/handle/123456789/18870 en_NZ
dc.subject forestry en_NZ
dc.subject climate change en_NZ
dc.subject Kyoto protocol en_NZ
dc.title Valuing the Impact of Climate Change Policies on Forestry en_NZ
dc.type Text en_NZ
vuwschema.contributor.unit New Zealand Institute for the Study of Competition and Regulation en_NZ
vuwschema.contributor.unit Victoria Business School: Orauariki en_NZ
vuwschema.subject.anzsrcfor 149999 Economics not elsewhere classified en_NZ
vuwschema.type.vuw Working or Occasional Paper en_NZ
vuwschema.subject.anzsrcforV2 389999 Other economics not elsewhere classified en_NZ

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