Climate Impacts of forestry.Michael Hoel, Department of Economics, University of Oslo

Google-translated from

Klimavirkninger av skogbruk

Summary / introduction

Increased felling of trees would mean that less carbon is stored in forests. In

isolation, this is negative for the climate development. Increased logging may have

indirect effects by biomass replaces fossil fuels, as well as cement and steel in

buildings. Total effect can therefore in the long term might be beneficial for the

climate. However, even if the overall effect of increased logging is beneficial for the

climate, this should not necessarily suggest that one through various types of

instruments should seek to increase logging. If the use of fossil fuels are already

sufficiently strongly regulated through taxes or quotas, one should on the contrary

use measures that promote the protection rather than felling of forest.

1 Forest and Climate

The forest is an important stock of carbon. According to IPCC includes forests in the

world about 1200 billion tonnes of carbon, compared with 750 billion tonnes of

carbon found in the atmosphere. In Norway, the carbon storage in total Norwegian

forest is about 450 million tons of carbon. Gross annual increment is 12 million tons,

and annual felling amounts to 5 million tons of carbon. So there is a net increase

equal to 7 million tons of carbon per year (2014), which is a significant number when

one compares with Norwegian emissions of about 12 million tons of carbon (or 44

million tonnes of CO2) in 2014.

The high net growth in Norwegian forest shows that it is possible to increase the

logging to use biomass to produce bioenergy or building materials for permanent

storage in buildings. The Environment Agency (2010) discussed such as the ability to

increase logging by 50 percent for such purposes. There are also several large

industrial players in Norway who are working on plans of large-scale production of

biofuels from wood.

Production of biofuel from wood is costing substantially more than producing fossil

fuels. Such production must therefore receive subsidies or indirect support if the

plans are to be realized. The purpose of this article is to discuss whether there are

good reasons to subsidize logging and biofuel production for such plans to be

realized.

Both short- and long-term forest carbon stock will be lower the larger the annual

felling is. This is illustrated in Figure 1. Here are the forest's overall volume (S)

measured along the horizontal axis, while gross and net growth of the forest is

measured along the vertical axis. A very simplified description of forest growth is that

annual increment is given by the concave curve G (S). Without logging implies this

curve that no matter how big the forest initially is, it will grow until the volume

becomes (since G (S)> 0 for , and G (S) = 0 for ). If the forest volume is

today and we have constant felling equal to , the forest grow over time until the

volume becomes . The net growth is constantly equal to the vertical distance

between G (S) and . For a bigger harvests, net growth are lower, equal to the

vertical distance between G (S) and .The long-term volume of forest are also

lower, equal to , while the long-term level was when logging was . Since

carbon stores in forests is greater the larger the forest volume is, this means that

larger felling lower carbon stock in the forest, and hence more carbon in the

atmosphere.

The effects of more logging on carbon amount in the atmosphere is illustrated in

Figure 2. Time is measured along the horizontal axis while the amount of carbon in

the atmosphere is measured along the vertical. Assume that the evolution of carbon

in the atmosphere is given by when there is "low logging" ( in Figure 1).

Assume further that we increase logging on time (to in Figure 1). Then we get a

fairly rapid increase of carbon in the atmosphere since the net rate of forest growth

slows. As explained in connection with Figure 1, we will whatever the size of the

logging eventually have zero net contribution of carbon to / from the forest. In Figure

2, we have assumed that we have an increased growth of carbon in the atmosphere

from to , and then the same growth as before since there is zero net contribution

from the woods after . (Transition between and will of course in reality be more

smooth than the angular figure suggests, but the main image is not affected.) We will

therefore have a permanent increase in amount of carbon in the atmosphere, from

to .

2 Indirect climate impacts of logging

In a report from the Norwegian Environment Agency et al. (2016) climate effects of

conducting forest versus protecting the forest is discussed. As explained above, one

can from a climate perspective argue that forest conservation is better than logging,

since carbon stored in forest biomass will be higher the less felling it is. And the more

carbon stored in the forest the less carbon will be in the atmosphere, with the

negative climate effects this entails.

The report does not dispute that forestry in isolation is negative for the climate due to

the reduction in forest carbon stock that logging causes. But the report argues that

forestry has an indirect positive effect on the climate: It is argued that forest products

replace products that provide fossil fuel emissions. The examples provided are, inter

alia, that the construction materials of timber can replace steel, aluminum and

concrete, which requires more energy than forestry; and of course, bioenergy to

replace fossil fuels. There is no doubt that forestry has an indirect effect of this kind.

The report argues that the indirect effect (lower emissions of greenhouse gases)

more than offsets the negative direct impact forestry has on climate.

In Figure 2, we have disregarded the indirect effects discussed above and in the

Environment Agency et al. report (2016). The indirect effects suggests that the

increased logging, which is permanent, provides a permanent lower growth in carbon

amount in the atmosphere. The steepness of the curve A (t) is thus going down as a

result of increased logging, to make the image as in Figure 3 instead of as in Figure

2. It is asssumed that in the period between and there are increased growth of

carbon in the atmosphere due the increased logging (just as in Figure 2). After it is

assumed the indirect effects dominate: Other emissions of carbon goes so far down

that the growth of carbon in the atmosphere will be lower due to increased logging. In

the figure it is assumed that the lower growth of carbon in the atmosphere due to

increased cutting the long term (after in Figure 3) involves a lower level of carbon

in the atmosphere.

Environment Agency et al. (2016) believes that Figure 3 gives an accurate picture of

the impact of increased logging. Furthermore it is argued that it is the long-term

amount of carbon in the atmosphere that are important to climate. That is the total

cumulative emissions that are of importance for climate (long-term level of A (t) in the

figures) may, inter alia, justified by the following quote from Allen et al (2009): "the

relationship between the Cumulative emissions and peak warming is remarkably

insensitive to the emission pathway (timing of emissions or peak emission rate).

Hence policy targets based on limiting Cumulative emissions of carbon dioxide are

thunderstorms to be more robust to scientific uncertainty than emission rate or

concentration targets. "

Note that in the quote appears "peak warming", ie the maximum warming one

receives as a result of emissions. This maximum temperature increase is clearly of

great importance to the costs and risks associated with climate change. However, it

is also important how fast temperature change takes place. A rapid temperature rise

will certainly bring greater inconvenience for people and ecosystems than a slower

warming, even if "peak warming" is similar. Warming in the years between and

in Figure 3 will be faster under scenario than under scenario .

The length of time will depend on the strength of the indirect effect, ie how

much fossil fuel use goes down when the supply of forest products increase. Other

factors are also important, inter alia, how productive forest is and what logging is

used for. Holtsmark (2015) is based on a medium productive Norwegian spruce

forest and finds that the period is over 100 years and that it may also be

considerably longer.

Increased logging will thus contribute to faster climate change in the short term,

although the long-term climate change may be smaller. It is therefore not obvious

that scenario from a climate point of view overall is better than scenario .

It is not obvious that Figure 3 provides a more accurate description than Figure 2.

The Paris Agreement means that all countries have "committed" to the more or less

specific quantitative targets regarding greenhouse gas emissions. As far as I have

understood it is still unclear how much carbon and forestry are included in liabilities.

Assume therefore as a (gross?) Simplification that all emissions from fossil fuels is

within the obligations of the Paris Agreement, while emissions to and from the forest

is outside. Further assume (somewhat optimistic and unrealistic?) That these

countries are going to take their obligations seriously. Simplistically, one can then say

that emissions from fossil fuels in the years ahead is given by these obligations. If

first-order effect of increased felling of trees means that the use of fossil fuels goes

down (as explained above) this will in that case only mean that countries can meet its

commitments with slightly less stringent measures. The reduction in use of fossil

fuels as a result of increased logging will thus be offset by increased use of fossil

fuels in other parts of the economy. To the extent that this is a fair description of the

situation, increased felling of forests provides an image as illustrated in Figure 2, and

thus will be uniquely unfavorable for climate development.

Whatever the details of the Paris Agreement, an optimistic outlook on future climate

policy imply that CO2 emissions gradually approaches zero regardless of the extent

of logging. When emissions approaches zero, the amount of carbon in the

atmosphere go towards a positive constant which is higher the higher earlier

emissions have been (about 25% of all carbon emitted into the atmosphere will

roughly remain there "forever" see eg Archer (2005) and Joos et al. (2013)). Instead

of the rising curve for the scenario in Figure 2 we obtain a curve that eventually

flattens out. If we receive such a flattening without widespread use of CCS, this

means that the use of fossil fuels goes to zero. In that case there is no fossil fuels left

that forest products can replace, and the indirect effects described above must

necessarily go to zero. We will therefore have a figure similar to Figure 2 except that

both curves gradually flattens out. In this case, therefore, increased logging will be

unconditionally unfavorable for climate development.

It is also conceivable that we get large-scale use of CCS in the future so that CO2

emissions gradually approaches zero while there is a significant use of fossil fuels. If

so, increased logging and increased use of forest products can replace fossil fuels,

so this combined with CCS may provide decreasing carbon in the atmosphere. When

the situation becomes as in Figure 3 except that the curve for now gradually

becomes horizontal whilst the curve for is gradually falling.

To summarize the discussion above, it is not obvious that more logging is beneficial

for climate change, even if we take into account the beneficial indirect effects. I will in

the rest of the article still assume that this is the case. I look at a situation where

increased logging in isolation is detrimental to the climate, but beneficial to the

climate when the indirect effects (lower use of fossil fuels) is taken into account. A

question then arises: once more logging has a beneficial effect on the climate, should

we then through incentives aimed at forestry encourage more logging? At first sight

one could perhaps think that the answer is an unqualified yes. I will show that this is

not the case.

3 Means

To discuss whether one should use measures that encourage more logging, it is

useful first to look at a related issue. Coal and gas both provide CO2 emissions but

gas less than coal (per unit of energy). Furthermore, it may well be that subsidies

from the use or production of gas will give so much less use of coal that total

emissions go down. Hopefully no one still think that subsidies for gas is part of a

good climate policy. Standard principles for optimal use of instruments indicates that

both coal and gas should taxed, but at a lower fee (per unit of energy) on gas than on

coal. The charge per unit CO2 should be the same for coal and gas, and the tax level

should be set in accordance with the level of ambition for climate policy. The use of

instruments geared towards gas gives, in isolation less use of gas, but it is not

obvious in which direction the use of gas is changed as a result of the overall use of

remedies aimed at gas and coal. Whether the use of gas goes up or down is

however climatic irrelevant; the point is that climate objectives are achieved at the

lowest possible cost with the use of these instruments.

The analogy to the forest is straight forward: The direct effect of increased logging is

negative for the climate (due to lower carbon sequestration in the forest). The use of

instruments in forestry should contribute to there being less logging than what is

profitable when one disregards climate considerations. With proper use of

instruments also against all use of fossil fuels it may still be so that more logging

becomes profitable than if one had no climate policy.

4 Next best climate policy

What if one for some reason do not tax the use of fossil fuels as much as one should,

given the climate goals one has? Again, it is helpful to start by analogy with coal and

gas. If the tax on the use of coal is too low, should then tax on gas be increased to

compensate for this? Or should the tax on gas be lower than in a first-best situation?

Should one maybe even subsidize the use of gas to reduce the use of coal? Answers

to these questions are given in a simple model in the appendix, which is based on

Hoel (2012).

The main result is as follows: Let p be the price of carbon that is needed to reach a

quantitative emission target, and let and be tax on respectively coal and gas

(per unit of energy). Emissions per unit of energy is respectively and for coal

and gas, where . First-best optimum is given by and .

Assume, however, that for some reason is exogenously provided and below .

What then is optimal? The answer to this is

(1)

where (assumed to be positive) measures how much coal usage is reduced by

one unit increased use of gas (all in energy units). We see immediately that if the tax

on coal is equal to the optimal carbon price p, the tax on gas should also equal first-

best level. We also see that if then .

Equation (1) can also be written as

(2)

Assume first that the last part is zero. Then is positive or negative depending on

whether the bracket is positive or negative. The bracket measures the overall impact

on greenhouse gas emissions of increasing the use of gas, ie including the indirect

effect through the impact of coal use. If this total effect is negative, ie the use

of the gas should be subsidized (provided . This result is modified if : For

a sufficiently high value of , no matter how large value the negative bracket

has.

The interpretation of the last term in (2) are as follows. When coal is taxed with per

unit, this means that users' appreciation at the margin is greater than marginal cost

(or import price). A measure that reduce coal use with one unit gives a societal loss

(excluding climate effect) equal to the difference between the valuation and the cost,

ie equal to . This societal loss is part of the indirect costs associated with the

increased gas use, and should therefore be included in the fee for gas.

Back to the forest. Same principle as above applies: If (2) gives a negative value of

we should, with subsidies or other measures, encourage logging beyond what one

would have received without the incentives aimed at forestry. If is positive,

however, we should use instruments that provide more protection of the forest than

we would have without incentives aimed at forestry. It is reasonable to interpret the

reasoning of the Environmental Agency et al. (2016) that the mean square brackets

in (2) is negative. Although this is the case it may still be appropriate to apply

measures that promote the protection of the forest rather than cutting, since the

second part (2) can be positive. In Norway, this term is clearly positive, since the

products in question being replaced by forest typically is either taxed or regulated

through quotas.

5 Conclusion

Increased felling of trees would mean that less carbon is stored in forests. In

isolation, this is negative for climate development. Increased logging may have

indirect effects in terms of lower use of fossil fuels such as, inter alia, pointed out in

the Environment Directorate (2016). Total effect may overall be beneficial for the

climate, but as discussed in Section 2 this is not obvious. Increased logging gives

initially a long period of increased accumulation of CO2 in the atmosphere, even if

one has indirect effects on the use of fossil fuels. Thus one gets in this period a faster

heating, which can be negative. And although the overall effect of increased logging

would be beneficial for the climate, this should not necessarily suggest that one

should, through various types of instruments, seek to benefit from increased logging.

If the use of fossil fuels is already sufficiently strongly regulated through taxes or

quotas, one should on the contrary use measures that promote the protection rather

than felling of forest.

Appendix

The country's income is given by where is the amount used of three

inputs; all other inputs are assumed constant. The function F is assumed concave in

its arguments, it is further believed that and are negative (explained below).

Emissions of CO2 are given by . In the absence of climate targets the

country's income is maximized by the combination giving .

Assume however that we have a quantitative emission target stating that total

emissions shall not exceed a target M. Given this constraint, income is maximized by

the combination that gives

(3)

where p is the shadow price to the constraint . This will be higher the

lower the M is.

Assume inputs x and y are taxed respectively and per unit. Then market

participants maximize income minus taxes so we get

(4)

and we see immediately that an economic optimum is achieved for and

.

Now assume that is exogenously given and below . Then it follows from the

equation that we can write x as a function of ie . It is

straightforward to show that this function is decreasing in y and z because of the

assumption that the two cross derivatives and is negative. The economic

optimization problem is now to maximize with respect to y and z

given the condition . We are particularly interested in what this

means for y (variable z is only to ensure that it is possible to satisfy the counter

regardless of the value of M). Outright calculation provides the condition

(5)

Where

Together with (4), this gives (2).

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