Irreversibility and the economics of forest conservation
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Irreversibility and the economics of forest conservation Adriana Piazza1 · Santanu Roy2 Received: 29 August 2017 / Accepted: 12 January 2019 © Springer-Verlag GmbH Germany, part of Springer Nature 2019
Abstract Regenerating forest on land used for non-forest economic activities can be difficult; this introduces some irreversibility in the process of deforestation. We analyze the effect of such irreversibility (reforestation cost) on the efficiency of forest conservation in a general model of optimal forest management where trees are classified in age classes and land has alternative economic use. Irreversibility may lead to a continuum of optimal steady states that differ in the area under forest cover; increase in irreversibility can only add steady states with smaller forest cover. High irreversibility discourages expansion of forests but at the same time, makes it optimal to conserve a minimal forested area in the long run; in particular, it is optimal to maintain a forested area above a critical size if the initial forest cover lies above it, while forests that are initially smaller than the critical level are optimally managed at constant size. We characterize the exact condition under which it is optimal to avoid total deforestation; the extent of irreversibility does not matter for this. Weak irreversibility may be associated with cyclical fluctuations in optimal forest cover; we characterize upper and lower bounds on the forest cover along an optimal path. Keywords Irreversibility · Deforestation · Conservation · Optimal forest management · Renewable resources
This paper is dedicated to Professor Tapan Mitra on the occasion of his 70th birthday; the beauty and elegance of his fundamental work on some of the most challenging problems in the economic theory of dynamic resource allocation inspires and paves the path for generations of researchers. Adriana Piazza gratefully acknowledges the financial support of FONDECYT Project 1180409 and Basal Project CMM, U. de Chile and the hospitality of Southern Methodist University during several research visits. We are grateful to two anonymous referees for their helpful comments and suggestions.
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Santanu Roy [email protected] Adriana Piazza [email protected]
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Escuela de Negocios, Universidad Adolfo Ibáñez, Diagonal Las Torres 2640, Peñalolén, Santiago, Chile
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Department of Economics, Southern Methodist University, 3300 Dyer Street, Dallas, TX 75275-0496, USA
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A. Piazza, S. Roy
JEL Classification Q23 · C61
1 Introduction Deforestation is an important environmental concern. The Global Forest Resources Assessment 2015 of the Food and Agricultural Organization of the United Nations (FAO 2015) indicates that the average rate of global forest loss for the period 2010– 2015 is 3.3 million hectares each year (about 0.08% of the total forest area). Though the rate of deforestation is alarmingly high, it is about half of the rate observed in the 1990s. Encouragingly, an expansion of forest area is observed in some regions where such area had been shrinking unt
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