Climate-related subsidies for CO₂ absorption and fuel substitution: Effects on optimal forest management decisions

This study investigates rational ways to optimize stand-level management decisions from an economic perspective to adjust alternative subsidies, aiming to reduce the CO₂ level in the atmosphere and consequently, to mitigate the global warming impacts. An objective function consisting of two parts is used to maximize the current production value that forests represent and the value of forests under the effects of different types of subsidies intended to reduce CO₂ levels. The optimal ways of adjusting stand-level management decisions are determined using a general comparative statics analysis, which takes into account alternative forms of climate-related subsidies. The optimal changes to stand-level management decisions are functions of the initial conditions of the stand of trees on which the decision will be made. The results have shown that there are one or two of the alternative forms of CO₂ subsidies increase: if the initially optimal values of the stock level after harvesting {V₁} is lower than the stock level that maximizes the sustainable yield {V_MSY}, and the time interval between harvests {t} is sufficiently short, then the initially optimal value of V₁ and t increase; if the initially optimal value of V₁ is lower than V_MSY, and t is sufficiently long, then the initially optimal values of V₁ and t may vary or stay unchanged; if the initially optimal value of V₁ is equal to V_MSY, and t is very short, then V₁ and t are not changed; if the initially optimal value of V₁ is higher than V_MSY, and/or t is sufficiently long, then the initially optimal values of V₁ and t decrease. Our approach of providing decisions at the stand-level can be extended to the broader scales at forest landscapes to address the related challenges.