Economic Modeling of 

Effects of Climate 

Change on the Forest 

Sector and Mitigation 

Options: A Compendium 

of Briefing Papers

United States 

Department of 

Agriculture

Forest Service

Pacific Northwest 

Research Station

General Technical Report

PNW-GTR-833

October 2010

CARBON

CONTRIBUTORS

CARBON

SINKS

More

drought

Warmer

climate

Greater possibility

of fire

More productive

forests

Forest fire

 

Decomposition

 

Forest harvest

 

Bioenergy

 

Long-lasting

wood products

 

Urban tree growth

 

Afforestation of

crop land

 

Forest growth

(photosynthesis and

 long-term storage)

(forest lands converted 

to agriculture or 

more developed uses)

Deforestation 

 

Bioenergy

 

Climate

variability
Authors

Ralph J. Alig is a research forester, Forestry Sciences Laboratory, 3200 SW 

Jefferson Way, Corvallis, OR 97331.

The Forest Service of the U.S. Department of Agriculture is dedicated to the principle of 

multiple use management of the Nation’s forest resources for sustained yields of wood, 

water, forage, wildlife, and recreation. Through forestry research, cooperation with the 

States and private forest owners, and management of the National Forests and National 

Grasslands, it strives—as directed by Congress—to provide increasingly greater service 

to a growing Nation.

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opportunity provider and employer.
Economic Modeling of 

Effects of Climate Change 

on the Forest Sector and 

Mitigation Options: A 

Compendium of Briefing 

Papers

Ralph J. Alig

Technical Coordinator
Authors

Ralph J. Alig is a research forester, U.S. Department of Agriculture, Forest Service, 

Pacific Northwest Research Station, 3200 SW Jefferson Way, Corvallis, OR 97331.

Judith Dempsey is a graduate research assistant, Department of Agricultural and 

Resource Economics, Oregon State University, Corvallis, OR 97331.

Robert G. Haight is a research forester, U.S. Department of Agriculture, Forest 

Service, Northern Research Station, St. Paul, MN 55108.

Taeyoung Kim is a graduate research assistant, Department of Agricultural and 

Resource Economics, Oregon State University, Corvallis, OR 97331.

Christian Langpap is an assistant professor, Department of Agricultural and 

Resource Economics, Oregon State University, Corvallis, OR 97331.

Andrew J. Plantinga is a professor, Department of Agricultural and Resource 

Economics, Oregon State University, Corvallis, OR 97331.

Brent Sohngen is an associate professor, AED Economics, Ohio State University, 

2120 Fyffe Rd., Columbus, OH 43210.

Birger Solberg is a professor, Department of Ecology and Natural Resource Management, Norwegian University of Life Sciences, 1432 Aas, Norway.

Eric M. White is a research associate, Department of Forest Engineering, Resources 

and Management, College of Forestry, Oregon State University, Corvallis, OR 97331.
Abstract 

Alig, Ralph J., tech. coord. 2010. Economic modeling of effects of climate change 

on the forest sector and mitigation options: a compendium of briefing papers. 

Gen. Tech. Rep. PNW-GTR-833. Portland, OR: U.S. Department of Agriculture, 

Forest Service, Pacific Northwest Research Station. 169 p.

This report is a compilation of six briefing papers based on literature reviews and 

syntheses, prepared for U.S. Department of Agriculture, Forest Service policy analysts and decisionmakers about specific questions pertaining to climate change. The 

main topics addressed here are economic effects on the forest sector at the national 

and global scales, costs of forest carbon sequestration as part of mitigation strategies, and mitigation aspects for nonindustrial private and public forest ownerships 

in the U.S. forest sector. Salient findings from the literature are summarized in the 

synthesis of the literature, along with identified research needs. 

Keywords: Climate change, costs of forest carbon sequestration, nonindustrial 

private forests.
Contents

1 Overview

3 Chapter 1: The Forest Sector in a Climate-Changed Environment

by Eric M. White, Ralph J. Alig, and Robert G. Haight

3 Introduction

4 Observed Climate Changes and Projections for the Future

5 Climate Change and Forest Impacts

6 Conceptual Linkages Between Climate Conditions and the Forest

 Sector

7 Model Operation

8 Anticipated Timber Availability Factors Under Climate Change

9 Changes in Growth and Yield

9 Land-Use Changes

11 Species Shifts

11 Dieback and Disturbance Regimes

14 Public and Private Timberland Ownership

15 Timber Management Under Climate Change

15 Timber Rotation Lengths

16 Harvest Levels

18 Timber Price Changes

22 Consumer and Producer Welfare Under Climate Change

24 Timing of Welfare Changes

24 Climate Change and Urban Forests

26 Conclusions

30 Acknowledgments

30 English Equivalents

30 References

37 Chapter 2: The Forest Sector, Climate Change, and the Global 

 Carbon Cycle—Environmental and Economic Implications

by Brent Sohngen, Ralph J. Alig, and Birger Solberg

37 Introduction

38 Baseline

40 Ecological and Timber Market Implications of Climate Change

42 Short-Term Climate Impacts (2005–2025)

46 Medium-Term Climate Impacts (2025–2065)

49 Long-Term Climate Impacts (Beyond 2065)

51 The Role of Mitigation

55 Conclusions

58 Acknowledgments

58 English Equivalents

58 Literature Cited
67 Chapter 3: Modeling Land-Use Changes as Mitigation Options 

 Involving the Forestry and Agricultural Sectors

by Ralph J. Alig

67 United States Land Resources

73 Mitigation Options Involving the Forestry and Agricultural 

 Sectors

79 Summary

80 English Equivalents

81 Literature Cited

87 Chapter 4: What Explains Differences in the Costs of Carbon 

 Sequestration in Forests? A Review of Alternative Cost 

 Estimation Methodologies

by Judith Dempsey, Andrew J. Plantinga, and Ralph J. Alig

87 Introduction

88 Overview of Methodologies for Estimating Carbon Sequestration

 Cost

88 Modeling Choices

90 Econometric, Engineering, and Optimization Studies

93 Review of Representative Studies

93 Engineering Study

94 Econometrics Study

95 Sectoral Optimization Study

96 Comparison of Normalized Cost Estimates

104 Results and Conclusions

105 Acknowledgments

105 English Equivalents

105 References

109 Chapter 5: Literature Review: An Economic Analysis of 

 Incentives for Carbon Sequestration on Nonindustrial Private

 Forests (NIPFs)

by Christian Langpap and Taeyoung Kim

109 Introduction

110 Carbon Sequestration in Forests

110 Afforestation of Agricultural Land

114 Carbon Sequestration in Existing Forests

117 Carbon Sequestration in NIPFs

119 Incentives and NIPF Landowner Behavior

127 Incentives for Carbon Sequestration in Agriculture

131 Additionality
134 Data Availability

135 Summary and Concluding Comments

135 Acknowledgments

136 English Equivalents

136 Literature Cited

143 Chapter 6: Public and Private Forest Ownership in the Context

 of Carbon Sequestration and Bioenergy Feedstock Production—

 Existing Research and Research Needs

by Eric M. White and Ralph J. Alig

143 Introduction

144 Public and Private Forest-Land Ownership

147 Carbon Sequestration

147 Carbon Flux

147 Carbon Stocks

150 Projections of Private Carbon Stock

151 Projections of Public Carbon Stock

152 Bioenergy Feedstock Provisioning

152 Timber Harvest Residues

154 Hazard-Fuel Reduction

155 Public and Private Timber Harvest Linkages

157 Goals and Decisionmaking

158 Needed Research

161 Conclusions

163 English Equivalents

163 References

167 Glossary
1

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

Overview

Global climate change from a buildup of greenhouse gases (GHG) poses physical, 

ecological, economic, and social issues. Forest ecosystems can transfer carbon 

from the air as part of the GHG complex and sequester it into plant tissue through 

the process of photosynthesis during the growth of trees and in other ecosystem 

components such as the understory and soil. Such forest sinks have a significant 

potential to help in mitigating climate change, and this report is a compilation of 

briefing papers prepared for U.S. Department of Agriculture, Forest Service policy 

analysts and decisionmakers about specific forest carbon sequestration topics. The 

briefing papers are part of a larger set prepared by agency scientists and cooperators, including a related one regarding forest bioenergy by White.1

 Given the large 

topic of climate change and forests, this report only touches on selected aspects and 

readers are referred to the growing literature for information on specific topics such 

as considerations when incorporating climate change considerations into specific 

natural resource management, e.g., Joyce et al.2

In the first chapter leading off the effects section, White et al. review the literature pertaining to national-scale economic modeling of effects of climate change 

on the U.S. forest sector. Across the globe and in the United States, forest resources 

are expected to be affected by changes in forest growing conditions induced by 

carbon dioxide “fertilization” and climate change. These changing forest conditions are expected to result in changes in forest management regimes, production 

practices, and, potentially, the uses of timberlands within the forest products sector. 

White et al. report studies that have used economic models to trace changes in forest growth resulting from climate change and changes in behavior within the forest 

products sector. 

Our second chapter, by Sohngen et al., assesses research pertaining to a 

global-scale examination of the effects of climate change on the forest sector. In 

considering the global carbon cycle, this provides a synthesis of recent research that 

investigates how climate change may affect the global forest sector. The near-term 

(to 2020), medium-term (2020–2060), and long-run impacts (beyond 2060) are 

assessed. Understanding these important interactions between forests, climate 

1 White, E.M. 2010. Woody biomass for bioenergy in the United States—a briefing paper. 

Gen. Tech. Rep. PNW-GTR-825. Portland, OR: U.S. Department of Agriculture, Forest 

Service, Pacific Northwest Research Station. 45 p. 

2 Joyce, L.A.; Haynes, R.W.; White, R.; Barbour, R.J., tech. coords. 2006. Bringing climate 

change into natural resources management: proceedings. Gen. Tech. Rep. PNW-GTR-706. 

Portland, OR: U.S. Department of Agriculture, Forest Service, Pacific Northwest Research 

Station. 150 p. 
2

GENERAL TECHNICAL REPORT PNW-GTR-833

change, and carbon flux remains an important research topic, not only for economists and ecologists separately, but more importantly for these scientists working 

together.

In the third chapter, leading into the mitigation section, Alig provides background information about U.S. land and forest resources and regional differences, 

along with potential interactions between the forestry and agricultural sectors 

regarding climate change mitigation. Selected examples of modeling studies involving the forestry and agricultural sectors are reviewed, centered on land-use changes. 

The fourth chapter reviews alternative methods for estimating costs of future 

forest-based carbon sequestration as part of mitigation activities. This includes 

examining key assumptions in cost studies of carbon sequestration, e.g., assumed 

timber harvesting practices. Dempsey et al. review representative cost studies and 

point out difficulties at times in directly comparing cost estimates from different 

studies. Differences in the estimates may be due to the cost estimation method, but 

also to the many other assumptions that the analyst must make. They summarize 

reviews of the literature that develop comparable cost estimates from groups of 

studies, involving normalizing the data. Many implementation issues must be carefully addressed before a large-scale carbon sequestration program can effectively be 

put into operation. 

The fifth chapter focuses on the large nonindustrial private forest ownership 

that contains many of the U.S. forest carbon sequestration opportunities. That 

ownership has some holdings of both forest and agricultural lands, and Langpap 

and Kim review what research indicates about how owners may respond to such 

incentives and how effective different policies might be in eliciting the desired 

forest management choices by nonindustrial private owners. They also review 

information from the literature about some implementation issues, such as dealing 

with additionality concerns. 

The sixth chapter focuses on the connections between private and public forest 

ownerships in the climate change context. Forests in both ownerships provide a 

variety of goods and services to society, and under climate change and climate 

change policies, there are likely to be some disparate impacts to public and private 

forest land as well as important interactions between those ownerships. White et 

al. review studies that have examined the distinctions, linkages, and interactions 

between public and private forest land in the context of climate change and climate 

change policy. They identify key points from some of the existing literature on the 

interactions of public and private forest land within the context of climate change, 

to help in identifying research needs. 
3

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

Chapter 1: The Forest Sector in a 

Climate-Changed Environment 

by Eric M. White, Ralph J. Alig, and Robert G. Haight

Introduction

Policies adopted to address climate change will influence the extent, composition, 

and management of future forests. At the same time as policy is causing forest 

changes, climate change itself is expected to yield changes to environmental 

conditions, influencing the characteristics and growth of forests in rural and urban 

settings. In response to changes in forest productivity, timber producers will likely 

change management regimes, production practices, and, potentially, the uses of 

timberlands. Similarly, climate-induced changes in composition and health of urban 

forests may change the service flows that urban residents receive from those forests. 

The effects of climate policies on the future conditions of forests are discussed 

in other reports. The focus of this paper is how the forest sector may change in 

response to future altered climate conditions. To accomplish this, we rely on a 

number of U.S. studies, including those that use economic models to trace changes 

in forest conditions to responses in forest sector markets and timber production. 

A number of studies have focused on changes in ecological processes in forested ecosystems as a result of an altered climate (e.g., Iverson et al. 2008, Joyce 

1995, Joyce and Birdsey 2000, Latta et al. 2010). Economic studies, including the 

ones discussed in this paper, extend that ecological research by explicitly including human activities (e.g., the demand for forest products by consumers, the desire 

to live in amenity-rich settings) in analyses of projected forest conditions and 

landscapes. In the United States, especially on private lands, landscape conditions 

reflect human activities (e.g., land-use change), forest management (e.g., silviculture 

systems), and the demands for products (e.g., timber) and services (e.g., recreation 

opportunities) from natural environments. The models described in this briefing 

paper focus on land-use changes involving forests, forest management activities, 

and the demand for timber products. The impacts of climate change on other forest 

products and services, such as recreation opportunities, have been discussed to a 

limited extent elsewhere (e.g., Irland et al. 2001). 

We briefly describe the observed changes in climate and projections of future 

climate conditions as identified by the fourth assessment report of the Intergovernmental Panel on Climate Change (IPCC). Further description of these expectations 

are available in IPCC reports (Field et al. 2007, IPCC 2007) and a short briefing 

paper for policymakers developed by the Pew Center (Pew Center 2007). Although 

At the same time as 

policy is causing forest 

changes, climate 

change is expected 

to yield changes in 

forests.

Economic studies 

extend ecological 

research by explicitly 

including human 

activities.
4

GENERAL TECHNICAL REPORT PNW-GTR-833

the literature on projected changes to forests from climate change is extensive and 

at times contradictory, we present a brief summary and rely on others (e.g. Field 

et al. 2007, Joyce and Birdsey 2000) to give this topic more comprehensive treatment. We describe the approaches that economists have adopted to trace expected 

changes in forest growth to impacts on the forest sector, including forest management; factors believed to be important in influencing future timber availability; and 

the modeled impacts on timber production, prices, forest management, and other 

factors as estimated from the existing models. We further treat the projected welfare impacts to wood product consumers and timber producers as result of climate 

change and examine some of the benefits received by society from urban forests and 

potential impacts of global change on those forests.

Observed Climate Changes and Projections for the 

Future

One challenge to projecting forest conditions is the uncertainty surrounding future 

climate. Published summaries of work being completed by the IPCC indicate 

that warming of the planet is now “unequivocal” (IPCC 2007, Pew Center 2007). 

Between 1955 and 2005, temperatures in North America increased moderately, with 

the increases becoming greater as one moves northwestward from the Southeast, 

toward Alaska and northwestern Canada (Field et al. 2007). Whether this warming 

is currently yielding changes in natural systems is less certain, with expert opinions 

indicating even likelihood and unlikelihood that some impacts of climate change on 

natural systems are now beginning to emerge. Looking forward, the IPCC has concluded that average global temperature increases over the 21st century are expected 

to range from 1.8 to 4.0 degrees Celsius (IPCC 2007, Pew Center 2007). In North 

America, average temperature increases are projected to be 1 to 3 degrees Celsius 

by 2040, increasing to 2 to 3 degrees Celsius late in the century (Field et al. 2007). 

For land areas, warming is anticipated to be greatest over the high northern latitudes. The IPCC has determined that such warming is “very likely” (> 90 percent 

probability) based on evidence that there will be an increase in the frequency of hot 

extremes, heat waves, and heavy precipitation (IPCC 2007). Uncertainty in these 

projections increases as anticipated global conditions are downscaled to regional 

conditions. The IPCC deemed it was “very likely” that precipitation will increase 

at high latitudes and “likely” (> 66 percent probability) that it will decrease in most 

subtropical regions. Areas in the Southern and Southwestern United States are 

considered to be in the subtropical zone. Precipitation in United States is projected 

to decrease in the Southwest but increase elsewhere (Field et al. 2007). Further, 

the IPCC reports “high confidence” (80 percent agreement) that areas such as the 
5

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

Western United States will experience a decrease in water availability as a result 

of climate change (Pew Center 2007). In some areas, such as the West, precipitation may increasingly be in the form of rain rather than snow, decreasing snowmelt 

water availability (Field et al. 2007). The current IPCC climate scenarios each 

project continued increases in greenhouse gases (GHG) (including carbon dioxide 

[CO2]) over the next several decades. However, GHG emissions in recent years have 

been below projections because of the global economic downturn. 

Climate Change and Forest Impacts

At the most general, forest responses to climate change are expected to involve 

changes in forest location, the combinations of forest species and classes on the 

landscape (i.e., forest compositions), and growth rate and timber yield (Shugart et al. 

2003). These expected changes result largely from climate-change-induced changes 

in temperature, precipitation, and atmospheric CO2 levels as well as a general 

lengthening of the growing season. Although these general relationships are fairly 

accepted, there remains a fair amount of uncertainty about the forest conditions 

in specific regions likely to result from climate change. Much of this uncertainty 

relates to ecosystem complexity, the variety of ecosystem conditions involved, and 

the ability of ecosystems to adapt (including through human intervention). In one 

example of uncertainty because of complexity, there is a lack of agreement on the 

extent to which increases in atmospheric CO2 will have a fertilizer effect on plants 

(e.g., McKinley et al. 2009, Norby et al. 2005, Reich et al. 2006, Thornton et al. 

Forest responses to 

climate change are 

expected to include 

changes in forest 

location, forest 

species, growth rate, 

and timber yield. There 

remains uncertainty 

about forest conditions 

in specific regions 

likely to result from 

climate change.

Changing forest conditions can affect the supply of timber available for use of wood products and 

storage of carbon in woody biomass.

Eric White
6

GENERAL TECHNICAL REPORT PNW-GTR-833

2009). Some believe that although increased CO2 promotes plant growth, over large 

areas, limitations in other inputs to plant growth (e.g., nitrogen or water availability) 

may reduce these increases. For example, nitrogen is required for tissue growth and, 

even in the presence of elevated CO2, limited nitrogen may limit increased growth 

rates (e.g., Joyce 1995).

Uncertainty in ecosystem response also results from the range of environmental 

conditions projected from the global circulation models (GCMs) commonly relied 

on for economic studies. Generally, however, tree physiology and growth are 

expected to be altered by increases in atmospheric CO2 concentration and changes 

in temperature and water availability conditions (Field et al. 2007). How these 

changes interact with the limiting factors and existing ecosystem processes and 

linkages will differ by region. Over large areas, it may take many decades for the 

impacts of climate changes on forests to be evident. However, localized impacts 

(e.g., warming in sensitive alpine ecosystems) may be evident much faster. 

Bosworth et al. (2008) described a number of uncertainties related to how 

forest conditions may be influenced by climate change. First, there is potential for 

forest condition changes to result in feedbacks that may mitigate or enhance forest 

changes. For example, increased forest growth or migration of forests into areas 

largely nonforested may reduce surface albedo—increasing the localized warming that influenced initial growth increases or migration (see Chapin et al. 2002 

and Thompson et al. 2009 for discussions). Second, increases in ozone, which can 

damage tree leaves and slow growth, may offset any increases in growth as a result 

of increased atmospheric CO2, water availability, or growing season. Third, the 

impacts that increased vigor of invasive weeds, responding to improved growing 

conditions, may have on stand productivity is uncertain. There is some evidence 

that invasive weeds, similar to trees, respond well initially to increased levels of 

CO2 (Ziska 2003). The items identified by Bosworth et al. (2008) are not explicitly 

incorporated in the economic studies considered here.

Conceptual Linkages Between Climate Conditions and 

the Forest Sector

To project how future climate conditions may impact the forest sector, economists 

must link expected forest changes to the inputs and parameters used in forest sector 

economic models. Conceptually, climate change could affect both the existing 

timber stands (the existing “stocks” of resources) as well as the incremental growth 

rates of existing and new timber stands (the “flows”) (Sohngen and Sedjo 2005). 

Mortality, as a result of fire or insect disturbances or long-term changes in environmental conditions, may result in losses in the existing stocks of forests. At the same 

Climate change is 

expected to affect 

current forests through 

magnified disturbance 

regimes and future 

forests through 

changes in growth 

rates, mortality rates, 

and seed production.
7

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

time, the “flows” of incremental growth in forest stands may increase or decrease as 

a result of the changes in growing conditions (e.g., temperature, precipitation, CO2) 

from climate change. Impacts on the stocks and flows of forest resources, along 

with other factors such as changing management practices, will combine to yield 

the future forest conditions. Stated differently, climate change is expected to affect 

current forests through magnified disturbance regimes (e.g., fire, insects, and disease) and future forests through changes in growth rates, mortality rates, and seed 

production (especially in unmanaged stands) (Alig et al. 2004a). Combined, these 

factors will influence future forest conditions and forest management activities. 

Humans (as consumers) are connected to forested ecosystems through the 

market (e.g., timber) and nonmarket (e.g., recreation opportunities) products and 

services we receive from forests. Changing forest conditions affect the supply 

of timber available for use in the production of wood products. Changes in supply of wood products are reflected in short-term changes in the prices of wood 

products, all else being equal. Increases in the price of wood products may reduce 

the consumption of wood products generally and the substitution for some wood 

products (e.g., dimensional lumber) by others (e.g., engineered wood products) or by 

nonwood products (e.g., steel 2 by 4s). Conversely, declines in wood product price 

would likely increase the consumption of wood products, all else being equal, and 

possibly result in the substitution of wood products for nonwood products. 

In addition to changes in the behavior of consumers that result from changing forest conditions, producers of wood products and timber may change their 

practices in response to changing forest conditions. Timber producers may alter 

their management strategies to take advantage of changing growing conditions 

and timber markets. For example, if incremental growth rates experience a marked 

increase, timber producers may extend rotation lengths to take advantage of additional revenue from growth that could be generated, net of forest management costs. 

Manufacturers may alter the types of products they produce in response to changes 

in the forest supply (e.g., a greater reliance on producing dimension lumber relative 

to engineered wood products or vice versa). Over longer timeframes, the wood 

products sector may change timber processing infrastructure and material handling 

systems in response to changes in the flow and quality of supplied timber. 

Model Operation

Two general approaches have been adopted to examine the potential impacts of climate change on the forest sector using economic models. The first general approach 

uses the output of GCMs to inform changes to the forest growth rates (the flows) 

and forest extent and disturbance (the stocks) used as inputs in the economic model. 

Timber producers may 

alter their management 

strategies to take 

advantage of changing 

growing conditions and 

timber markets.
8

GENERAL TECHNICAL REPORT PNW-GTR-833

Often an intermediate model is used to translate the changing environmental conditions identified in the GCM to changes in net primary productivity (or other parameters) that can be used to modify inputs in the economic model (e.g., Joyce 1995, 

Perez-Garcia et al. 2002). In all the cases described in this study, timber yields in 

the economic model are modified to reflect the changing growing conditions under 

climate change (i.e., the flows) (e.g., Alig et al. 2002, Irland et al. 2001, Joyce 1995, 

Perez-Garcia et al. 2002, Sohngen and Sedjo 2005, Sohngen et al. 2001). A limited 

number of studies have also changed input parameters for existing stocks to reflect 

dieback of existing stands as a result of climate change (e.g., Sohngen and Mendelsohn 1998, Sohngen et al. 2001). The timing of the expected climate conditions is 

important because most forest sector economic models project conditions for many 

decades into the future. Typically, in the studies considered here (e.g., Mills and 

Haynes 1995, Perez-Garcia et al. 2002, Sohngen and Mendelsohn 1998), the GCM 

has been used to depict climate conditions mid-21st century (e.g., 2065) for the equilibrium that would result with atmospheric CO2 at some projected future increased 

level (e.g., 625 parts per million [ppm]) (Shugart et al. 2003). A linear trend between 

current conditions and estimated future conditions is then often used as input to 

the intermediate model or as direct changes in the growth and yield parameters. A 

limited number of studies have estimated decadal conditions from GCMs as inputs 

to an ecosystem model and economic model (e.g., Irland et al. 2001). 

The second approach to examining the impacts of climate change on forests 

using economic models is to use sensitivity analysis (e.g., McCarl et al. 2000). 

Rather than using the output of GCMs and intermediate models to identify new 

values for inputs and parameters under a changed climate in the economic model, 

the sensitivity analysis approach examines a range of new values for model inputs 

and parameter values. The response to these changes in inputs and parameters is 

then used to identify likely responses of the forest sector to changes in forest characteristics such as growth and yield. If the range of input values considered is large 

enough, a sensitivity analysis approach is useful in that it can provide “sideboards” 

on the likely future changes in the forest sector in response to climate change. The 

sensitivity approach is accommodating to changing expectations on forest growing 

conditions because a range of future conditions have already been simulated. 

Anticipated Timber Availability Factors Under Climate 

Change

A number of factors will influence the availability of timber in a climate-changed 

environment. Perhaps most recognized are the anticipated changes in growth and 

yield of timber (the flows described above) as a result of climate change. However, 

Several factors could 

affect the availability of 

timber, including landuse changes; shifts in 

species distribution; 

dieback associated 

with heat, drought, and 

increased disturbance; 

and land ownership 

patterns.
9

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

several other factors could affect the availability of timber, including land-use 

changes; shifts in species distribution; dieback associated with heat, drought, and 

increased disturbance; and land ownership patterns. 

Changes in Growth and Yield

In the studies considered here, over broad geographic areas, climate change is 

expected to increase the growth and yield of timber (e.g., Alig et al. 2004a, Joyce 

1995, Sohngen et al. 2001). In the study by Irland et al. (2001), timber growth in 

the United States was projected to increase by 1 to 3 percent per decade relative to 

the baseline projections under all the scenarios considered. In their global analysis, 

Sohngen et al. (2001) projected global forest productivity increases of 29 and 38 

percent relative to the baseline by 2145, for the University of Illinois at UrbanaChampaign and Hamburg climate scenarios available at the time. The increases 

projected for North America (17 percent) by 2145 were less than the global increase 

because the higher latitudes are projected to suffer some losses to productivity from climate change. In addition to the productivity increase, Sohngen et al. 

(2001) projected an increase in yield of timber (accounting for shifts of productive 

southern species northward) in North America, of between 34 and 41 percent by 

2145. Perez-Garcia et al. (2002) assumed a direct relationship between forest carbon 

and forest productivity, and they projected forest carbon increases in the U.S. west 

coast of between 2 and 15 percent and from less than 2 to 10 percent in the East by 

2040, with increasing forest carbon under higher CO2 emissions/hotter temperature 

scenarios. In Perez-Garcia et al. (2002), softwoods were projected to have a greater 

positive response to climate change than hardwoods. 

Changes in growth and yield are projected to differ by U.S. region, with the 

Northeast generally projected to benefit. The South is projected to lose productivity under some scenarios because of a combination of warmer temperatures and 

decreased water availability. Alig et al. (2002) estimated that growth rates in the 

Northeast would increase, such as 0.3 percent annually for oak/hickory, but growth 

rates would decline across the South. Sohngen and Sedjo (2005) stated the South 

appears to be the most “vulnerable region” in terms of forest growth and the forest 

sector economy because of climate change. Additionally, those authors suggested 

that the northern conifer forests and those in the Mountain West are most susceptible 

to damage because of a changing growing environment and increased disturbance.

Land-Use Changes

Most studies thus far have assumed that the total area of land in agriculture and the 

total area of land in forests will remain about the same even as climate changes. 
10

GENERAL TECHNICAL REPORT PNW-GTR-833

Although the total area of land in agriculture and forestry may indeed remain 

relatively constant over time, climate change could alter the distribution of land 

uses over time. Given that forest areas could be affected and the potential human 

and social consequences of these impacts, it is important to consider and assess the 

implications of climate change on the distribution of U.S. land uses. 

Differential impacts of climate change in agriculture and forestry could lead to 

land-use shifts as one possible adaptation strategy by landowners. For example, if 

climate change results in relatively higher agricultural productivity, some land may 

be converted from forests to agricultural use. Such changes would alter the supply 

of products to national and international markets, changing the prices of forest 

products and the economic well-being of both producers and consumers. If climate 

change affects yields and costs of production for forest stands and agricultural 

crops, land could shift between forestry and agricultural uses as these two sectors 

adjust to climate changes. Given that the agricultural and forestry sectors sometimes compete for the same land, shifts in productivity of agricultural land could 

affect the ultimate distribution of forest land, and vice versa. 

Using four climate change scenarios from the national assessment of climate 

change, Alig et al. (2002) found that less forested area was projected under four 

climate scenarios relative to the base case (no climate change). Furthermore, less 

cropland and more pasture land were projected to convert to forests under all 

scenarios. With their modeling of the forest and agricultural sector and exogenous 

estimates of productivity impacts at the time, Alig et al. (2002) provided regional 

results. Although climate change is likely to affect the margin between forestry and 

agriculture in specific locations, aggregate productivity changes in forestry appear 

to outstrip aggregate productivity changes in agriculture. 

Economic impacts of climate change on land-use distribution could also involve 

human migration patterns and affect the area of urban and developed areas by 

region. Regional patterns of growth and decline in the United States have shifted 

population and property value to more vulnerable areas (van der Vink et al. 1998), 

and concerns about climate change and severe weather events could alter coastal 

settlement patterns. A large amount of uncertainty surrounds any such movement 

of population and land-use impacts. 

In addition to effects from adaptation, climate change policies may involve 

mitigation actions that can markedly impact the land-use distribution in a region. 

Although outside the scope of this chapter, Alig in chapter 3 in this volume summarizes recent results from studies that have examined possible implications of 

different climate change mitigation policies for land use in the United States that 

would promote reduced deforestation and active afforestation on former agricultural 

land to increase net carbon sequestration strategies. 

In addition to effects 

from adaptation, 

climate change policies 

may involve mitigation 

actions that can 

markedly impact the 

land-use distribution in 

a region.
11

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

Species Shifts

Changes in forest type and tree species distributions could have a number of 

ecological and forest sector consequences. Within regions of the United States, 

the forest sector has developed infrastructure and management systems based on 

current forest type distribution and dominant market species. Changes in forest 

type and species distribution may, over the long term, lead to changes in the equipment used in harvesting and processing timber and in forest management practices. 

Shifts in the distribution of species in response to changing habitat conditions may 

occur as a result of natural migration of species in response to changes in growing 

conditions or, perhaps more likely, as a result of changes in forest management and 

the tree species selected for reforestation or afforestation. Changes in tree species 

distribution could include land-use changes, if forests are established on land currently used for agriculture or other uses. 

Modeling the projected shift in suitable habitat over the next century or more, 

Iverson et al. (2008) projected shifts northeastward of many eastern tree species. 

Some species were projected to move up to 800 kilometers (500 miles) under the 

highest emissions/hottest temperature scenario considered. In addition to shifting 

suitable habitat location, the area of suitable habitat for individual tree species may 

also change. About half of the species considered by Iverson et al. (2008) were projected to have an increase in habitat area. Both oak and pine species were projected 

to experience increases in habitat area, with a stretch toward the northeast. Losses 

in habitat area in the United States were projected for the northernmost forest types, 

including the maple-beech-birch, spruce-fir, and aspen-birch types (fig. 1-1). Those 

forest types are projected to have expansions in suitable habitat area in Canada. The 

types of shifts identified by Iverson et al. (2008) are reflected generally in the inputs 

in some of the economic models considered here (e.g., Sohngen et al. 2001). Iverson 

et al. (2008) noted that it is very unlikely that expanding tree species would widely 

colonize newly suitable habitat without human intervention. 

Dieback and Disturbance Regimes 

In addition to the changes that may occur in the flow of resources, the stocks of 

current resources may be reduced through dieback that results from climate change. 

Dieback is typically modeled as a reduction in the suitability of growing conditions 

or as increased mortality from more frequent or more severe disturbance. Dieback 

from change in growing conditions is anticipated to result from increased heat and 

reduced water availability. The southern United States is thought to be the U.S. 

area with the greatest potential to experience limited water availability and heatinduced dieback in timber over the next several decades, although increased growth 

Shifts in the distribution of species 

may occur as a result 

of natural migration of 

species in response 

to changes in 

growing conditions 

or as a result of 

change in forest 

management and the 

tree species selected 

for reforestation or 

afforestation.
12

GENERAL TECHNICAL REPORT PNW-GTR-833

Figure 1-1—Current and projected forest type shifts in the Eastern United States as a result of climate change 

under low and high emissions scenarios. FIA = Forest Inventory and Analysis; GCM3_Avg = average of 

Hadley, PCM, and Geophysical Fluid Dynamics Laboratory global circulation models, PCM = Parallel 

Climate Model, RF = Random Forest Regression Model. Data source: Climate Change Tree Atlas: http://www.

nrs.fs.fed.us/atlas/tree/ft_summary.html.
13

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

is projected later in the decade as managers respond to changing environmental 

conditions (e.g., Alig et al. 2004b). 

The IPCC has expressed high confidence that the North American forest sector 

will likely be sensitive to changes in disturbance regimes from climate change 

(Field et al. 2007). Increases in disturbance are most frequently projected for the 

Western United States via more frequent or severe wildfires and insect and disease 

outbreaks (e.g., Bosworth et al. 2008). Citing the research of others, the IPCC 

suggested that the period of high risk for wildfire ignitions could increase by 10 to 

30 percent and burned area could double under climate change (Field et al. 2007). 

Gan (2004) found that the infestation risk of the southern pine beetle (Dendroctonus frontalis Zimmermann) may increase by 2.5 to 5 times under changed climate 

conditions. If southern pine shifts northward, the risk might be 4 to 7.5 times the 

present risk. Research completed in the Pacific Northwest has found that increased 

winter temperature and spring precipitation have contributed to the occurrence of 

Swiss needle cast (Phaeocryptopus gaumannii) disease (Stone et al. 2008). Anticipated continued increases in temperature and precipitation from climate change are 

expected to lead to increasing spread and severity of that disease. Increased disturbance under climate change also includes the potential for increased frequency and 

magnitude of wind events (e.g., windthrow) and ice storms, which are more often 

associated with eastern forests. 

Disturbance events can be modeled through changes in the existing stocks of 

forest resources. Historical dieback patterns are implicit in the growth and yield 

functions used to project future forest volumes. In the economic modeling literature, few studies account for dieback events that depart from historical patterns. 

However, the IPCC has (Field 2007) “very high confidence” (i.e., > 90 percent 

agreement in statement) that disturbances are currently increasing relative to 

historical patterns and will continue to increase. Currently, Sohngen (e.g., Sohngen 

and Mendelsohn 1998, Sohngen et al. 2001) has the most explicit inclusion of 

additional dieback anticipated from climate change. Under the assumptions adopted 

in Sohngen et al. (2001), 75 percent of the trees killed from dieback are available for 

timber salvage at their current volume. Future increases in value that would have 

occurred for the killed stocks are lost in the Sohngen et al. (2001) treatment. 

One potential positive outcome of dieback is that timber producers can replant 

affected stands with species or varieties appropriate for the new growing conditions 

(e.g., Joyce 2007). Sedjo and Sohngen (1998) pointed out that although extensive 

dieback could result in “substantial damage” if forests were unable to provide their 

current levels of ecosystem services, natural systems tend to respond quickly to 

disturbance. Additionally, if dieback were to increase significantly from historical 
14

GENERAL TECHNICAL REPORT PNW-GTR-833

levels, we could expect increased human intervention to mitigate at least some of 

the impact of that disturbance. This pattern has been exhibited in the increased 

attention to fuels treatment and expansion in fire suppression capacity as a result of 

previous years’ increases in wildfire costs and burned areas. In later sections, when 

possible, model results are discussed both with and without dieback outcomes. 

Public and Private Timberland Ownership

The patterns of forest ownership may also factor into future timber availability 

under climate change conditions. Land ownership may influence timber availability 

because of differential impacts to growing conditions on lands in different ownership groups and because different ownership groups may respond in divergent ways 

to changes in forest growing conditions. Private timberlands provide the vast majority of the timber currently produced in the United States, with much of the timber 

coming from private lands in the South (Adams et al. 2006). If climate change were 

to have greater negative impacts on growth and yield on private lands, this could 

magnify the consequences for U.S. timber production. Currently, the economic 

studies considered here do not explicitly incorporate land ownership patterns into 

projections of climate change growth and yield; however, in general, most timber is 

assumed to come from privately owned timberlands (e.g., Irland et al. 2001, McCarl 

et al. 2000).

Differential impacts, by land ownership, from climate change in the United 

States are most likely in topographically rich landscapes, but could occur anywhere 

with systematic spatial patterns of land ownership. In many areas of the Western 

United States, private lands are concentrated at lower elevations, and public lands 

are concentrated at higher elevations. If climate change has a differential impact on 

the growing conditions of low-elevation forests, the private/public pattern of land 

ownership in the West could impact future timber production. In Washington and 

Oregon, Latta et al. (2010) have projected that private forest lands at low elevations 

would experience declines in productivity, while the higher elevation forests (in 

public ownership) would experience productivity increases. If such systematic differences are not adequately captured in economic models, gains in timber production, as estimated from the models, could be reduced because private timberlands 

provide most of the timber but suffer under climate change. However, because the 

West is most likely to experience systematic ownership differences in forest growing conditions from climate change and the East currently accounts for the majority 

of U.S. timberland and timber production, the impact of systematic ownership 

patterns on projected timber production is probably minor. 

If climate change 

were to have greater 

negative impacts on 

growth and yield on 

private lands, this 

could magnify the 

consequences for U.S. 

timber production.
15

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

Private individuals and corporations own forest land for a variety of reasons. 

Individuals who own timberland tend to do so for reasons other than timber production, such as aesthetics, privacy, and recreation (Smith et al. 2009). Private individuals are much less likely to have written forest management plans. Corporations tend 

to manage land for financial returns, including returns from timber production. 

Because their ownership objectives and management capacities differ, the responses 

of private individuals to changes in forest conditions may be different from those of 

private corporations. It is possible, that private corporations may respond aggressively with mitigating activities to changing forest conditions and disturbance, 

whereas private individuals respond more passively. None of the modeling studies 

considered here differentiates growth and yield changes or dieback magnitude 

under climate change by type of private ownership. In considering mitigating 

behaviors and future conditions, it is useful to consider that different strategies for 

responding to climate change (e.g., planting newly suitable species, responding to 

increased disturbance regimes) may need to be tailored for the different private 

ownership groups. 

Timber Management Under Climate Change

With climate change, forest management activities by producers, including choices 

of planting stock, thinning regimes, and harvesting practices, could be changed 

to take advantage of both new growing conditions and changes in forest sector 

markets (Alig et al. 2004a). For example, private timberland owners suffering 

production declines as a result of climate change (and wishing to maintain current 

production levels) would need to intensify management systems (e.g., planting 

improved stock or conducting more aggressive thinning or fertilizing activities) 

(Latta et al. 2010). Conversely, landowners facing increased productivity may 

need to change management regimes to accommodate increased growth or to take 

advantage of other market opportunities (e.g., carbon offset payments). In addition 

to forest management activities during the rotation, harvesting choices (e.g., rotation 

ages, silviculture systems) could also be modified in response to changing growing 

conditions or forest product markets (Alig et al. 2004a). 

Timber Rotation Lengths

In general, the yields of forest communities in North America are expected to 

increase because of the fertilization effect of CO2 and a longer growing season 

(Field et al. 2007). In those places where timber yields increase, timber production 

is generally projected to increase and stumpage prices are projected to decline. This 

results in lengthened timber rotations relative to current practice (Irland et al. 2001, 

Where timber yields 

increase, timber 

production is generally 

projected to increase 

and stumpage prices to 

decline.
16

GENERAL TECHNICAL REPORT PNW-GTR-833

McCarl et al. 2000). Timber rotation is the length of time producers allow timber to 

grow prior to harvest. If the opposite climate impact occurs and forest productivity 

declines, rotation lengths are expected to shorten, particularly over the short term. 

Rotation lengths shorten because timber supply is reduced (leading to increased 

stumpage values) and the annual growth of trees (representing the opportunity cost 

of forgoing future additional stumpage value) is less than under previous growing conditions. Additionally, timber rotation lengths could shorten if disturbance 

regimes increase markedly, reducing timber supply, or because producers choose to 

harvest sooner to avoid risk of timber losses to disturbance. 

For the U.S. South, where productivity losses appear to be most likely to occur 

(although not certain), McCarl et al. (2000) projected that a 1 percent reduction in 

growth would shorten rotation length in that region by about 0.2 percent for the first 

20 years after yield reduction, regardless of what happens to forest growth in other 

U.S. regions. Two decades post-change, McCarl et al. (2000) projected rotation 

lengths in the South would decrease further, with a mostly linear continued shortening in length as decades progress. If yields in southern U.S. forests were unchanged 

and northern forest yields increased, rotation lengths in the South were projected to 

remain largely unchanged (McCarl et al. 2000). In the North, rotation lengths were 

expected to increase by about 0.1 percent for the first 25 years under almost all scenarios (McCarl et al. 2000). However, when there is no change in timber growth in 

the South and the North experiences an increase in timber growth, rotation lengths 

were projected to remain largely unchanged in the North (and the South). 

Harvest Levels

Under climate change, Perez-Garcia et al. (2002) projected that the global forest 

sector will increase harvest levels by 1.5 to 2.7 percent above the baseline by year 

2040. The authors noted these global changes are very small, but some regional 

changes are greater. The Southern Hemisphere accounts for the greatest increases 

in harvest levels. For example, timber harvest in Chile was expected to increase 

by between 10 and 13 percent by 2040 relative to the baseline depending on the 

scenario (fig. 1-2). New Zealand was projected to increase harvest by 8 to 12 percent 

relative to the baseline. In the United States, the West was projected to increase 

harvest between 2 and 11 percent, with the greatest increases projected under the 

hottest/highest emission scenarios (Perez-Garcia et al. 2002). The U.S. South is 

projected to increase harvests under the moderate and high heat/emissions scenarios 

but reduce harvest under the lowest heat/emissions scenario. This projected reduction reflects reduced prices because other global regions are able to take greater 

advantage of changing growing conditions and increase timber production. Canada 
17

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

is projected to reduce harvest levels by up to 3 percent relative to the baseline under 

all scenarios (Perez-Garcia et al. 2002). 

The results of the global study completed by Sohngen et al. (2001) are generally 

consistent with those of Perez-Garcia et al. (2002) for projected harvest levels over 

the next several decades. Sohngen et al. (2001) projected a 5 to 6 percent increase in 

harvests globally (relative to the baseline and depending on scenario) for the 1995 

to 2145 period. Sohngen et al. (2001) also showed that most of the gains in timber 

harvest over the next several decades occur in the low mid-latitude forests, particularly in South America (10 to 19 percent) and India (14 to 22 percent). In the near 

decades, Sohngen et al. (2001) projected that North American harvests (Canada and 

United States combined) will decline by about 1 percent. This decline reflects some 

of the assumed dieback in the Sohngen et al. (2001) model and the general productivity losses projected for Canada. Global timber harvests in the latter half of the 

century are projected to have a more substantial increase, relative to the baseline, 

of between 18 and 21 percent. These later gains reflect the increased productivity 

of forests and increased demand for wood products in response to decreased prices. 

Most of this later-century increase is driven again by the low mid-latitude forests; 

however, North American harvests are projected to be about 14 percent above the 

baseline during that period. 

In one of the initial studies examining the effect of climate change on the U.S. 

forest sector, Mills and Haynes (1995) projected that U.S. harvests would increase 

-4

-2

0

2

4

6

8

10

12

14

U.S. W

est

U.S. South

Canad

a

Chile

Japan

S

candina

via

Region

C

h

ang

e fro

m

bas

elin

e (p

erce

nt)

High

Moderate

Low

Fig.1-2 Figure 1-2—Approximation of projected harvest levels in 2040 under three carbon dioxide 

emission/temperature scenarios. Adapted from Perez-Garcia et al. 2002. 
18

GENERAL TECHNICAL REPORT PNW-GTR-833

by 1 to 3 percent by 2040 relative to the baseline under climate change. The authors 

reported that most of the projected increase would take place several decades after 

climate-induced growth increases began. Regionally, Mills and Haynes (1995) 

projected that harvest levels would increase in the South and West (with slightly 

greater increases in the South owing to model assumptions) but decrease in the 

North. These projected increases in harvest levels in the South and West are consistent with the finding of Perez-Garcia et al. (2002) in their moderate and high emissions/temperature scenarios. In the Mills and Haynes (1995) study, harvest shifted 

toward regions with established production capacity and lower costs of production. 

Industry timberlands, relative to nonindustrial lands, experienced the greatest gains 

in timber harvest in the Mills and Haynes (1995) study. In the Pacific Coast States, 

harvest levels were projected to decline on nonindustrial lands, although industry 

timber harvest was projected to increase. Irland et al. (2001), using a dynamic optimization model, also found that total U.S. timber harvests would increase slightly 

under climate change, regardless of the climate change scenario. The South has the 

most consistent harvest gains across the climate scenarios modeled by Irland et al. 

(2001).

Timber Price Changes

In general, forest sector prices are expected to decline as a result of climate change 

(e.g., Irland et al. 2001, Perez-Garcia et al. 2002, Sedjo and Sohngen 1998, Sohngen et al. 2001). In the Sohngen et al. (2001) study, global timber prices, under all 

scenarios (including those with dieback) decline relative to the baseline (fig. 1-3). 

Prices are projected to depart from the baseline in a mostly linear fashion between 

the present time and 2050. In the presence of dieback, prices in Sohngen et al. 

(2001) are slightly closer to but still below the baseline. Although dieback mitigated 

the price changes to some extent, the modeled dieback did not dramatically change 

the general relationship between climate change and timber prices. In the Sohngen 

et al. (2001) model, the greatest departures from baseline prices were projected to 

occur post 2060. In the first 20 years of the Sohngen et al. (2001) simulation, prices 

remain close to the baseline projections, allowing timber producers in low midlatitudes to take advantage of climate-change-induced yield increases and increase 

output. 

In the Perez-Garcia et al. (2002) model, global timber prices under climate 

change are projected to be 0.8 to 3.1 percent below the baseline projection in 2040. 

These timber prices are projected to translate to wood product price decline. PerezGarcia et al. (2002) pointed out, as with the projected harvest changes described 

above, projected global price changes are minimal, although there are larger 

Although dieback 

mitigated the 

price changes to 

some extent, the 

modeled dieback 

did not dramatically 

change the general 

relationship between 

climate change and 

timber prices.
19

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

regional changes. As the climate scenarios represent even hotter temperatures/

higher emissions, prices are projected to decline farther below the baseline because 

timber productivity continues to increase in modeled scenarios. 

For the United States, Perez-Garcia et al. (2002) projected price declines in the 

U.S. South and West ranging from less than 1 to about 3.5 percent (fig. 1-4). Under 

the smallest temperature changes, projected U.S. price declines are 0.5 percent or 

less. Similar patterns are expected for the U.S. North. In the Perez-Garcia et al. 

(2002) model, the greatest price declines were projected for Scandinavia and Western Europe (not shown). Studies completed for only the United States have found 

slightly greater projected price declines than those projected in the global models. 

In a study by Mills and Haynes (1995), stumpage prices are projected to decline by 

6 to 35 percent under climate change scenarios (Joyce 1995). In a later study, Alig et 

al. (2002) projected prices for sawtimber to decline by 3 to 6 percent relative to the 

baseline for the period 2020 to 2050 under climate change. 

The price impact results of the sensitivity analysis by McCarl et al. (2000) 

depart slightly from the other studies. For the United States, prices for timber are 

projected to slightly decline, relative to the baseline, in scenarios where the South 

50

70

90

110

130

150

200

0

202

0

204

0

206

0

208

0

210

0

212

0

214

0

Year

Tim

b

er price (1990 dollars

p

er cubic

m

eter)

Baseline

Dieback

Regeneration

Figure 1-3—Projected timber prices under baseline and two climate change scenarios, including two with forest 

dieback. Adapted from Sohngen et al. 2001. 
20

GENERAL TECHNICAL REPORT PNW-GTR-833

experiences no change in growth and the North increased productivity. This pattern 

of growth change is one possible outcome of climate change. If the South experienced a 1 percent loss of productivity and the North experienced a corresponding 

gain in productivity, McCarl et al. (2000) projected that prices would increase 

slightly (less than 1 percent). In cases where both U.S. regions experienced a loss 

in productivity, greater price increases were projected. Note that the McCarl et al. 

(2000) study included forest sector imports only from Canada, potentially limiting 

the price-mitigating effect of forest sector imports. In the Sohngen et al. (2001) and 

Perez-Garcia et al. (2002) models, low mid-latitude timber producers would be the 

primary gainers (and timber exporters) under climate change and Canada would 

suffer production losses. 

Because softwoods are projected to have greater increases in productivity than 

hardwoods (e.g., Perez-Garcia et al. 2002) in response to climate change, softwood 

prices may experience greater price declines (Mills and Haynes 1995). Regionally, 

Mills and Haynes (1995) projected that softwood stumpage prices might experience 

the greatest declines in the U.S. South and Pacific Coast regions. The other studies 

considered here do not report results separately for hardwoods and softwoods, often 

because the model results are similar for the two forest types (e.g., Irland et al. 2001, 

McCarl et al. 2000). 

Figure 1-4—Approximation of projected log price changes in 2040 under three carbon dioxide emission/

temperature scenarios. Adapted from Perez-Garcia et al. 2002.

-7

-6

-5

-4

-3

-2

-1

0

U.S. West

U.S. South

Canada

Chile

Ja

pan

Scandinavia

Region

C

h

ang

e fro

m

bas

elin

e (p

erce

nt)

High

Moderate

Low

Fig. 1-4
21

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

Climate change is projected to generally lead to faster growing trees that 

become larger in a shorter period of time. Further, at least one study (Mills and 

Haynes 1995) suggested that softwoods may experience a disproportionately 

positive response. These factors combine to suggest some potential differences 

between sawtimber and pulpwood production in a climate-changed environment. 

Pulpwood is typically produced from trees that are too small or not of high enough 

quality to produce sawtimber. In the Northern United States, much of the pulpwood 

is produced from hardwood species. As climate change produces trees that can 

become larger more quickly, potentially displaces hardwoods north to Canada, 

and potentially yields feasible growing conditions in the Northern United States 

for productive southern pine species, the production of pulpwood is projected to 

decline. Irland et al. (2001) projected declines in pulpwood harvest of approximately 

3 percent during the 2020 to 2050 period, regardless of which climate scenario is 

considered. Because of decreased production, pulpwood prices are projected to 

increase during this period (Irland et al. 2001). Irland et al. (2001) projected that in 

the 2000 to 2020 period, pulpwood prices would remain generally unchanged. Note 

that even with pulpwood price increases and sawtimber price declines in the 2020 

to 2050 period, sawtimber prices are still high enough and timber growth rates fast 

enough to increase sawtimber production and decrease pulpwood production.

The Pacific Northwest has relatively more mitigation opportunities through altered forest management 

as compared to afforestation. Climate change is 

projected to generally 

lead to faster growing 

trees that become 

larger in a shorter 

period of time.

Eric White
22

GENERAL TECHNICAL REPORT PNW-GTR-833

Consumer and Producer Welfare Under Climate Change

The basic relationships between changes in forest productivity and consumer and 

producer welfare are fairly straightforward and consistent among the studies considered. As Sohngen and Sedjo (2005) stated, “...if climate change makes forests more 

productive, then timber prices will fall, consumers will benefit (consumer welfare 

will rise relative to the baseline) and (forest product) producers will lose (producer 

welfare will decline from the baseline).” The opposite will occur if climate change 

makes forests less productive. In nearly all results, under a positive change to forest 

productivity, total welfare (the net combination of consumer and producer welfare) 

in the United States is projected to slightly increase from the baseline because the 

gains to consumer welfare are greater than the losses to producer welfare. Alig et al. 

(2002) projected U.S. total welfare increase of between 0.05 and 0.18 percent. Using 

a global economic model, Sohngen et al. (2001) estimated total welfare in North 

America would increase by $55 to $65 billion, depending on the climate scenario 

and not accounting for any potential forest dieback. The greater total welfare gains 

in Sohngen et al. (2001) can be traced to the projected global increase in timber 

supply, which leads to even larger consumer surplus gains relative to the baseline. 

Although welfare gains are projected in aggregate for the United States as a 

whole, some locations and groups may suffer losses. Within the United States, 

the South and West regions and timber and wood product producers are projected 

to suffer welfare losses under some climate scenarios. In the Perez-Garcia et al. 

(2002) model, total welfare is positive under climate change relative to the baseline 

in the U.S. North and West (table 1-1). Both regions are major consumers of wood 

products, and the gains to those individuals overcome losses to producers. However, 

the U.S. South is currently the major timber-producing region in the United States 

(Adams et al. 2006), and because timber producers suffer losses relative to the 

baseline, that region is projected to experience total welfare losses under a climate 

scenario of 592 ppm CO2 in 2100 and a temperature rise of 1.6 degrees Celsius. 

Under higher CO2 and temperature levels, Perez-Garcia et al. (2002) projected 

greater gains in consumer surplus in the South, offsetting producer losses and 

yielding small gains in total welfare. However, in scenarios where the South experiences net gains in total welfare, that region’s gains are about one-third to one-half 

the gains experienced in the North or West. 

In the Perez-Garcia et al. (2002) model, consumers in all U.S. regions experienced a gain in welfare regardless of climate scenario (table 1-1). Conversely, log 

producers in each U.S. region were projected to experience losses in producers’ 

surplus, relative to the baseline, because of declines in timber prices as a result of 

gains in yield. Wood product producers in the West were projected to experience 

In nearly all cases of 

positive change to 

forest productivity, 

total welfare in the 

United States is 

projected to slightly 

increase from the 

baseline because gains 

to consumer welfare 

are greater than losses 

to producer welfare.
23

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

slight gains in surplus relative to the baseline. In the other regions, wood product 

producers are projected to have surplus losses under nearly all scenarios. The only 

exception to that pattern is a projected slight gain in wood product producer surplus 

in the Southern United States under the highest CO2 scenario. 

Because, in part, consumers can change their purchasing behavior and choose 

substitute goods, the welfare of producers is about 10 times as sensitive to changes 

in growth and yield (such as in response to climate change) as consumer welfare 

(McCarl et al. 2000). If existing stands suffer mortality because of changes in 

climate conditions and increased disturbance, producers experience greater losses. 

Sohngen and Sedjo (2005) projected that producers’ surplus in North America 

could decline by $1.4 to $2.1 billion per year relative to the baseline in a scenario 

where existing stocks are subject to dieback. In a scenario without dieback, producer losses are about 30 percent less (Sohngen and Sedjo 2005).

Globally, Perez-Garcia et al. (2002) projected small total welfare changes of 

between 0.4 percent ($1.8 billion) and 0.44 percent ($15.8 billion) in response to 

climate change. Sohngen et al. (2001) found slightly larger changes in global total 

welfare, relative to baseline projections, of 3 percent ($113 billion) if dieback occurs 

to 6.7 percent ($251 billion) without dieback. In both cases, as found in the U.S.-

only models, global welfare gains result from the lower cost of wood products to 

consumers that overcome welfare losses to producers. Sohngen et al. (2001) projected the largest gains in consumer welfare will accrue to North America, Europe, 

Table 1-1—Projected net present welfare changes in U.S. regions 

under three climate emissions/temperature scenarios, 1985 to 2040 

Regions High Moderate Low 

Million dollars (1993)

North:

 Log producers -922.1 -741.6 -225.4

 Product producers -104.6 -125.3 -144.1

 Consumers 8,467.5 6,279.4 806.9

 Total 7,440.8 5,412.5 437.3

South:

 Log producers -5,062.5 -4,946.6 -4,234.4

 Product producers -136.9 -511.1 -1,285.1

 Consumers 9,605.8 7,219.1 1,238.0

 Total 4,406.4 1,761.3 -4,281.5

West:

 Log producers -1,524.5 -1,030.1 -267.0

 Product producers 8,261.0 6,141.3 829.6

 Consumers 241.8 154.8 340.6

 Total 6,978.4 5,266.0 903.3

Adapted from Perez-Garcia et al. 2002.
24

GENERAL TECHNICAL REPORT PNW-GTR-833

and the former Soviet Union (table 1-2). Across all the scenarios considered, producers in South America and China are projected to experience the greatest gains 

in welfare relative to the baseline. Producers in the United States are projected to 

experience the largest nominal losses relative to the baseline (however the authors 

do not report the percentage change). 

Timing of Welfare Changes

The welfare measures reported above are in net present value terms. That is, they 

are the sum of welfare changes from the baseline for all the future periods in the 

economic simulation, discounted to the present day. Through the discounting, 

changes that occur in earlier decades have more weight than changes in later 

decades. In any one period in the future, the welfare changes experienced by 

producers and consumers may differ from that projected for the entire simulation 

period. For example, although producers are projected to suffer losses when the 

whole simulation period is considered, they might experience gains in welfare in 

some decades. The expected temporal patterns of welfare changes are uncertain. 

Climate Change and Urban Forests

In addition to the possible effects of climate change on the U.S. forest products 

sector, climate change may have significant impacts on urban forests. Although 

the projected effects of climate change on rural forests have been discussed extensively elsewhere, fewer studies have summarized the potential impacts to urban 

forests from climate change. The potential impacts on urban forests are important 

because approximately 80 percent of the U.S. population lives in urban areas, and 

Table 1-2—Projected changes in the net present value of welfare for consumers and 

producers under climate scenarios with and without forest dieback, relative to a 

baseline, 1995 to 2145 

North Former South AsiaScenarios	 America	 Europe	 USSR	 China	 America	 India	 Pacific

Billion dollars (1990)

Without dieback: 

 Consumer welfare 80.3 44.5 37 17.2 17.5 4.2 26.2

 Producer welfare -24.7 5.6 -0.2 5.5 2.3 1.6 -7.5

 Total welfare 55.5 50.1 36.8 22.7 19.8 5.7 18.7

 

With dieback:

 Consumer welfare 35 19.5 16.2 7.7 7.8 1.9 11.8

 Producer welfare -39.3 25.8 -24.6 8.6 14.7 3.8 3.3

 Total welfare -4.3 45.3 -8.4 16.4 22.6 5.7 15.1

Adapted from Sohngen et al. 2001.

Potential impacts of 

climate change on 

urban forests are 

important because 

about 80 percent of the 

U.S. population lives 

in urban areas, and 

this proportion will 

increase.
25

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

this proportion will increase in the decades ahead. This section briefly reviews the 

extent and value of urban forests, documents threats to urban forests, and suggests 

how climate change may affect those threats. 

The urban forest (i.e., all trees and associated natural resources within urban 

areas) of the United States is an extensive and valuable natural resource. Nowak et 

al. (2001) estimated 3.8 billion trees grew in 281 000 km2 (108,500 mi2) of urban 

area in the coterminous United States in the 1990s. Urban and developed areas are 

projected to exceed 500 000 km2 (193,000 mi2) by the year 2030, with almost half 

of this urban growth taking place in forested areas (Alig et al. 2004b, Nowak and 

Walton 2005, Nowak et al. 2010). Urban forests provide a wide range of benefits, 

including protection against soil erosion, provision of habitat for wildlife, improvement in local air quality, reductions in the urban heat island effect, energy savings 

through building shading (Donovan and Butry 2009) and insulation, carbon sequestration, and reductions in stormwater runoff (e.g., Dwyer et al. 1992, McPherson 

et al. 2005). Urban tree cover also provides cultural benefits that lead to improved 

quality of urban life as trees may improve the scenic quality of a city neighborhood, 

provide privacy, reduce stress, and shelter residents from the negative effects of 

undesirable land uses (e.g., Dwyer et al. 1991, Westphal 2003).

It is difficult to put an economic value on the environmental and cultural 

benefits of urban forests because most of those services are not traded in markets. 

Nevertheless, some of the benefits of urban forests may be capitalized into the 

values of residential property, and hedonic property price models document those 

values based on property characteristics and home sale prices (Donovan and Butry 

2010). Summarizing studies of home sales in several U.S. cities, Sander et al. (in 

press) concluded that increasing proximity to forested areas and increasing tree 

cover are associated with increasing home sale price. For example, in Grand Rapids, Michigan, housing lots that directly bordered a forest preserve sold for 19 to 35 

percent higher prices than other lots (Thorsnes 2002). A North Carolina study found 

that increasing forest cover by 10 percent on a forest parcel increased home sale 

price by an average of $800 (Mansfield et al. 2005). A Minnesota study found that 

a 10 percent increase in tree cover within approximately 100 m of a home increased 

home sale price by $1,371 and within 250 m increased home sale price by $836 

(Sander et al., in press). The positive impact of trees on home sale price together 

with the size of the U.S. housing stock (115 million housing units in 2000) (Radeloff 

et al., in press) suggest that the total impact of trees on residential property value in 

the United States is very large. 

Invasive insects and pathogens are among the greatest threats to urban forests 

and can have substantial economic effects. In a comprehensive study of the economic 
26

GENERAL TECHNICAL REPORT PNW-GTR-833

impacts of biological invasions of forests in the continental United States, Aukema 

et al. (2010) concluded that local governments and homeowners are the sectors 

sustaining the greatest economic damage, which includes expenditures for treatment, removal, and replacement of infested trees and reductions in property value 

associated with tree mortality. These governmental and residential expenditures 

represent transfers of wealth between sectors (such as from homeowners to tree 

removal firms), and impacts on residential property values represent wealth that is 

lost from the economy. For example, emerald ash borer (EAB) (Agrilus planipennis

Fairmaire), a phloem-feeding beetle native to Asia and introduced in the United 

States in the 1990s, is projected to cause average annual expenditures of more 

than $1 billion for treatment and replacement of trees by local governments and 

homeowners in the Eastern United States from 2009 to 2018 (Kovacs et al. 2010a). 

Residential property value losses associated with EAB damage are projected to 

exceed $340 million annually (Aukema et al. 2010). Sudden oak death (Phytophthora ramorum), a nonindigenous forest pathogen that causes substantial mortality 

in coast live oak (Quercus agrifolia Née) and several other oak tree species on the 

Pacific Coast of the United States, is projected to cost $6 million per year in treatment, removal, and replacement costs and $105 million per year in property value 

losses to single-family homes (Kovacs et al. 2010b). 

Wildfire is another significant threat to urban forests with substantial economic 

effects. The wildland-urban interface (WUI) is the area where houses meet or intermingle with wildland vegetation, including trees, shrubs, and grass (Stewart et al. 

2007). According to recent estimates, the WUI encompassed 11 percent of the land 

area (715 100 km2 or 276,100 mi2) and 38 percent of the housing units (44.3 million) in the contiguous United States in 2000 (Radeloff et al. 2005). In Western and 

Southeastern States, where wildfires burn the most area, 45 percent of the housing 

units are in the WUI (11.1 and 4.1 million units, respectively) (Hammer et al. 2009). 

Although wildfire risk varies widely, the presence of homes in fire-prone vegetation 

increases the risk of loss of life and property and increases fire prevention and suppression costs. For example, wildfires in the WUI of southern California destroyed 

3,079 structures in 2007, and suppression costs to the state totaled nearly $300 

million (Hammer et al. 2009). 

Conclusions 

Although there remains uncertainty in the physiological and disturbance responses 

of U.S. forests to climate change, there is general agreement in results from currently available studies examining the impact of climate change on the forest 

sector. Broadly, the model results included here indicate that the forest sector (both 
27

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

globally and in the United States) is fairly resilient to changes in forest stocks and 

growing conditions resulting from the modeled climate change scenarios to date. 

Although there are projected to be impacts to forest production, forest sector prices, 

and consumer and producer welfare, changes are generally projected to be small. 

Currently the forest sector (globally and in the United States) is operating in a 

manner that reflects a diverse arrangement of resources, processing capacity, and 

consumer demand. Climate change would likely impact those arrangements and, 

over time, economic theory and the output of economic models suggest the forest 

sector would adapt accordingly. 

The Northern United States are generally projected to experience productivity 

increases with climate change. However, some of this increase may coincide with 

a displacement of some currently important northern species (northern hardwoods 

and spruce/fir forest types) north to Canada because of changing growing conditions. Concurrently, changing growing conditions may make way for some productive southern pine species to be planted in portions of the U.S. North. The Western 

United States is generally expected to see gains, particularly in the timber-important Pacific Coast States. However, the West is also generally the focus of concerns 

related to increased disturbance, in the form of increased wildfire or insect and 

disease outbreaks, because of climate change. Whether these disturbances will be 

mitigated by human intervention or depart significantly from the general long-term 

historical levels remains to be seen. Within the United States, the South is generally considered the region most likely to suffer growth losses because of changing 

climate conditions. Dieback and increased disturbance mortality may also impact 

existing forest stands in that region. 

The economic studies considering the impact to the forest sector from climate 

change are generally consistent in projecting, in model inputs, that climate change 

will lead to aggregate yield increases globally and for portions of the United States. 

These yield increases will lead to increased timber production, which will result in 

price declines. Timber harvest increases in the United States are most consistently 

projected for the northern and western regions. The U.S. South is projected to 

have increased harvest under some scenarios and decreased harvest in others. In 

one study, the South is projected to remain near baseline harvest levels only in a 

scenario when that region’s productivity remains stable and the North increases 

productivity. In another study, the South is projected to increase harvest under the 

hottest temperature/highest emission scenarios but reduce harvest under the lowest 

temperature/lowest emissions scenario. The global models indicate that much of the 

increased global timber productivity will come from producers in the low midlatitudes who are able to respond quickly to changing growing conditions and are 

expected to experience some of the largest growing condition improvements. An 

The South is generally 

considered the region 

most likely to suffer 

growth losses because 

of changing climate. . . 

Studies are generally 

consistent in projecting 

that climate change 

will lead to aggregate 

yield increases globally 

and for portions of the 

United States.
28

GENERAL TECHNICAL REPORT PNW-GTR-833

increase in timber harvest is projected to occur fairly quickly in the decades post 

growth change, followed by a small slowdown and then a long, sustained increase. 

Climate change is projected to result in welfare changes for consumers of 

wood products and producers of timber. The studies considered here are generally 

consistent in projecting that total welfare, net of forest product consumers and 

timber producers, will increase relative to the baseline. However, the South and 

West United States are projected to suffer total welfare losses under some scenarios, 

and timber producers are projected to experience welfare losses in most scenarios. 

Wood product consumers are projected to gain in nearly all the scenarios considered. The temporal pattern of welfare changes by decade, post climate change, is 

largely unknown. 

The current projections for the forest sector under climate change are based on 

existing studies that were completed using the information and models available at 

the time. One important uncertainty in considering the existing model results is the 

impact that unaccounted-for dieback or increased levels of disturbance may have 

on the expected responses of the forest sector to climate change. Historical levels 

of dieback and disturbance are represented in the growth and yield functions used 

in the models. Additional dieback (including that possibly from disturbance) was 

included in the Sohngen et al. (2001) study. In that analysis, increased dieback did 

change model output but did not change the general relationships between climate 

change and forest sector outcomes. For example, under the dieback scenarios, 

timber prices were still projected to decline with climate change, although this 

change was mitigated slightly by the modeled dieback. If the dieback or disturbance 

experienced under climate change is greater than that captured in the models, actual 

impacts to the forest sector may differ from model results. 

Although the total area of land in agriculture and forestry may remain relatively 

constant over time, climate change could alter the distribution of rural land uses 

and affect forest area if climate change affects yields and costs of production for 

different land-use alternatives. Given the potential human and social consequences 

of these impacts, it is important to extend and enhance modeling tools to assess 

the implications of climate change on the distribution of land uses in the United 

States. Another uncertainty is how climate change may affect human migration 

patterns and thereby areas of urban and rural land uses such as forest that may be 

converted to developed uses, including those of coastal areas. Another research 

area is the relationship between human settlement patterns and vulnerabilities to 

natural disasters. In terms of risks and hazards, natural disasters have many varied 

consequences, including damage to forest ecosystems and human communities. 

Recent trends in land use and housing growth not only create stresses on natural 

Recent trends in land 

use and housing 

growth not only create 

stresses on natural 

ecosystems, they also 

increase society’s 

vulnerability to natural 

hazards.
29

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

ecosystems, they also increase society’s vulnerability to natural hazards. Global 

climate change has also been indicted in recent catastrophic weather events, and 

although scientific opinion is mixed regarding its role in current patterns, scientists 

agree that there is potential for significant change in the future. In the short run, i.e., 

over the past 50 years, the likelihood of natural hazards has been relatively stable, 

but losses in the United States have increased because our vulnerability to these 

hazards has increased (Alig et al. 2010). More houses and more wealth concentrated 

in regions of the country facing significant hazard levels describe the trend in the 

United States over the past 50 years. 

Another uncertainty is how timber producers and private and public landowners will respond to changing forest growing conditions. Currently, the U.S. timber 

industry is experiencing a general reduction in capacity (e.g., milling infrastructure), a move away from vertically integrated companies (i.e., a forest product 

company owns the processing mill as well as the timberland) to a business model 

where timber is obtained from lands owned by other corporations and private 

entities and production is regionally concentrated. Combined, these factors may 

make it difficult for the timber industry to adapt to and mitigate climate change 

impacts on forests, particularly in the short term. Private landowners own forests 

for a variety of reasons, and those owners may not adopt adaptation and mitigation 

activities that promote continued or improved timber production. However, it is possible that expanded programs by land agencies (e.g., the State and Private Forestry 

branch of the USDA Forest Service) and conservation organizations could improve 

the implementation of adaptation and mitigation activities for timber production by 

private landowners. The results of current studies assume that producers will adopt 

forward-looking, optimal responses, and significant departures from this assumption may yield unanticipated impacts on the forest sector. 

Given the extent and value of urban forests, an area of research that deserves 

more attention is projecting the effects of climate change on threats to urban forests, 

including invasive forest insects and diseases and wildfires. Climate change will 

likely increase the frequency and intensity of these disturbances, and we need to 

quantify the associated costs and losses, including government and homeowner 

expenditures for prevention and mitigation activities and homeowner losses in 

property value. Documenting these potential costs and losses associated with 

disturbances to urban forests will add to our growing understanding of the overall 

effects of climate change on forests.

There are a number of opportunities for further research examining the impacts 

of climate change on the forest sector. First, because most of the existing studies 

were completed several years ago, it would be useful to update those analyses using 

Another uncertainty is 

how timber producers 

and private and public 

landowners will 

respond to changing 

forest growing 

conditions.
30

GENERAL TECHNICAL REPORT PNW-GTR-833

the most recent climate projection and economic models. Second, additional studies 

that quantify how increased disturbance and dieback and suboptimal responses by 

timber producers and landowners affect model projections would help to identify 

how these uncertainties might impact the forest sector under climate change. Third, 

the expectation is that global trade will increasingly be important and economic 

models that better account for the dynamics of global trade will be useful as climate 

change is projected to have diverse positive and negative effects on timber growth 

and yield in different portions of the globe. Finally, the existing studies have examined the forest sector impacts from climate change in isolation. In future studies, it 

will be important to examine how the forest sector responds to concurrent changes 

in climate conditions and comprehensive climate policies (e.g., a carbon cap-andtrade system, increased demand for woody biomass for biofuels). For example, 

the climate scenarios considered here suggest that timber harvest will increase in 

response to improved yields. However, it is not known how that relationship would 

be affected if forest carbon offsets are also valued. It is probable that the combination of improved forest yields and a carbon value would have an impact on timber 

harvest levels (and ultimately consumer prices) not represented in current modeling.

Acknowledgments

The final report benefited from the helpful review comments of Lloyd Irland, Greg 

Latta, John Perez-Garcia, Andrew Plantinga, and Brent Sohngen. 

English Equivalents

When you know: Multiply by: To get:

Degrees Celsius (C) 1.8C + 32 Degrees Fahrenheit

Meters (m) 3.28 Feet (ft)

Kilometers (km) 0.621 Miles (mi)

Square kilometers (km2) 0.386 Square miles (mi2)

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Thornton, P.E.; Doney, S.C.; Lindsay, K. [et al.]. 2009. Carbon-nitrogen 

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37

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

Chapter 2: The Forest Sector, Climate 

Change, and the Global Carbon 

Cycle—Environmental and Economic 

Implications

by Brent Sohngen, Ralph J. Alig, and Birger Solberg

Introduction

The forest sector (i.e., forestry and forest industry, including the use of forest land) 

plays an important role in the global climate change debate—partly because the 

sector influences the global carbon cycle, and partly because the sector is influenced by possible global climate change caused by increased concentrations of 

greenhouse gases, among which carbon dioxide (CO2) is the most important. This 

paper assesses literature examining the impacts of climate change on the forest 

sector, focusing on studies that have considered economic impacts and market 

adaptation. The report also considers how activities in the forest sector—such 

as mitigation through afforestation, reduced deforestation, and forest management—may affect the global carbon cycle. For the most part, researchers have not 

considered how mitigation efforts may be influenced by climate change (and vice 

versa), so we only briefly discuss the interaction between these two effects in the 

concluding sections of the paper. 

Studies of climate change impacts in the forest sector and studies of adaptation generally link estimates from ecological models to timber models. A number 

of different types of ecological and timber models have been developed over the 

years, ranging from local to regional and global. The ecological models provide 

insights into a host of potential effects that climate change may have on forests, 

including tree growth, carbon fertilization, disturbances and dieback, and other 

effects (Alig et al. 2004). We draw on this set of results to enhance our understanding of potential impacts on the forest sector in different regions. This paper focuses 

on a discussion of economic implications in markets. Other environmental issues 

such as effects on biodiversity, water catchments, wildlife, and recreation are not 

discussed here, as the uncertainty on these issues seems to be rather high (e.g., 

Gitay et al. 2001, Kauppi and Solberg 1999).

The paper addresses short-, medium-, and long-run implications, and it considers implications in separate geographical regions, including boreal, temperate, and 

tropical regions. Institutional factors are also important for forest sector responses 

(Solberg et al. 1996) but have not been widely addressed in the climate change 
38

GENERAL TECHNICAL REPORT PNW-GTR-833

impacts literature in forestry to date. Thus, it is difficult to make generalizations 

relating to how institutional factors may affect adaptation and economic responses.

The structure of this paper is as follows. We begin with a discussion about the 

baseline for future global timber market activity by describing results from several 

studies that have projected future market conditions. Second, we examine the 

potential ecological and market effects of climate change impacts in forests, including market-based adaptation to climate change. Finally, we examine the potential 

economic implications of mitigation activities in forests, including a discussion 

about the interactions between climate change impacts and mitigation. 

Baseline

To understand the potential impacts of climate change on the forest sector, it is 

important to have an understanding of the baseline, that is, projections of the forest 

sector without climate change. Many studies that assess economic impacts first 

estimate baseline conditions, and then compare climate conditions to these baseline 

conditions to assess potential adjustments and adaptations. Estimates of potential 

climate change impacts upon the forest sector are best understood in light of how 

they could alter future market conditions relative to “no climate change” baseline 

conditions. 

Current global timber harvests are approximately 1.6 billion m3 of industrial 

roundwood per year (UNFAO 2005). An assessment of timber market studies 

suggests that this could rise to 1.9 to 3.1 billion m3 by 2050, depending on timber 

demand growth and relative price changes (Solberg et al. 1996). These changes 

would represent an increase in annual timber harvests of 0.5 percent to nearly 2.0 

percent. Prices are predicted to increase from 0 to 0.5 percent per year in real terms. 

Under all of these scenarios, timber harvest intensities (m3/ha per year) in different 

forests increase, and global harvest intensity is predicted to increase 63 percent 

relative to the baseline (table 2-1).

An alternative set of scenarios based on the global timber market model 

described in Sohngen et al. (1999) and updated in Sohngen and Mendelsohn (2007) 

suggests similar results. The scenarios assume that worldwide population increases 

from 6.4 to 9.8 billion people over the next 100 years, and that global gross domestic product increases by 1.7 percent per year on average. In addition, the scenario 

assumes that technology improves by 1.5 percent per year in forest products production, and that plantation yields rise at 2.5 percent per decade. Under these assumptions, timber harvests are projected to increase to approximately 2.3 billion m3

 by 

2105. Prices are predicted to rise at 0.2 percent per year. Most of the new timber 

harvests from this model are predicted for subtropical plantation regions, where 

To understand the 

potential impacts of 

climate change on 

the forest sector, it is 

important to have an 

understanding of the 

baseline.
39

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

technology improvements are increasing the yield of forests substantially over long 

periods. In contrast, declining timber harvest intensities are projected for currently 

inaccessible forests in tropical and boreal regions.

For tropical and subtropical regions, the studies project increases in timber 

harvests from fast-growing plantations. Most differences between the studies 

discussed above relate to different predictions of timber harvests from plantations 

in subtropical regions. The results from the global timber model of Sohngen et 

al. (1999) project a potentially stronger movement toward subtropical plantation 

establishment and harvests. For temperate regions, both studies predict increases 

in timber harvests in the short term. Solberg et al. (1996) did not provide harvest 

projections beyond 2050. Sohngen et al. (1999) suggested that temperate regions 

will not increase timber harvests substantially in the long run. In boreal regions, 

the global timber model predicts a decline in harvests over time. One reason for 

this decline in harvesting activity in boreal regions is that prices are projected to 

stabilize over time. If prices remain constant, incentives to expand infrastructure 

for harvesting timber in the boreal region are smaller. Solberg et al. (1996) suggested an increase in harvests in boreal regions in the short term in part owing to 

price increases but also to the fairly large stocks and low costs of accessing stocks 

in many boreal regions. 

These two studies are broadly consistent by suggesting an increasing role for 

subtropical plantations in global timber supply. They differ on the extent to which 

this new wood supply will offer alternatives to harvesting natural forests in temperate and boreal regions. However, some of these differences can be explained by 

the relatively short outlook period for the Solberg et al. (1996) study relative to the 

longer term projections provided by Sohngen et al. (1999). Solberg et al. (1996) also 

offered important insights into institutional factors, such as ownership, rights of use 

Table 2-1—Actual timber harvest in 1995, base timber harvest intensity for different 

land ownership types, and assumed percentage change in timber harvest intensity by 

2020 under two alternative scenarios 

Temperate Tropical Temperate Temperate Rest of

Harvest categories industry plantations NIPF public world Global

1995 timber harvest

 (million m3/year) 196 65 419 307 592 1579a

1995 timber harvest 

 intensity (m3/ha per year) 4.56 2.83 1.93 1.41 0.25 0.54

Base scenario (percent) 21 112 30 42 40 50

Optimistic plantation

 scenario (percent) 32 112 55 60 40 63

NIPF = nonindustrial private forest. a Represents total global timber harvests, not average.

Adapted from Solberg et al. 1996.
40

GENERAL TECHNICAL REPORT PNW-GTR-833

of forest land, and international agreements that may affect future supply of wood 

from particular tropical countries.

Ecological and Timber Market Implications of Climate 

Change

It is widely recognized that climate change is likely to have strong influences on the 

structure and function of forests (IPCC 2007b, Watson et al. 2000). When considering how the ecological effects of climate change translate into economic effects (the 

interest of this paper), it is convenient to categorize the response into three general 

areas: forest productivity changes (e.g., Latta et al. 2010), ecosystem disturbances, 

and changes in forest species distribution. Productivity changes are adjustments in 

the productivity of forests that alter the growth rates of timber species (in either a 

positive or negative way). Changes in disturbance influence the standing stock of 

trees, and include pest infestations, forest fires, windthrow, and ice damage. Finally, 

changes in species distribution result from shifts in climate, which ultimately alter 

the optimal geographic location of different timber species. 

It has long been recognized that there is potential for additional carbon in the 

atmosphere to enhance the growth of trees (the so-called carbon fertilization effect). 

Timber harvest is a major disturbance on private forest lands.

Emily Jederlinich
41

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

Results from modeling studies suggest that carbon fertilization can, in turn, have 

a large impact upon the predicted effects of climate change on forest structure and 

growth (see Cramer et al. 2001, VEMAP 1995). Although earlier model results 

suggested that CO2 could enhance global growth rates in forests (e.g., Melillo et al. 

1993), more recent results suggest that inter-annual variation in temperature and 

precipitation could have positive or negative effects on annual growth, depending 

on the direction of change (Schimel et al. 2000, Tian et al. 1998). Thus, carbon 

fertilization effects may be limited by changes in annual weather or by other 

limiting nutrients (Melillo et al. 1993). The so-called carbon fertilization effect 

could reach a saturation point for particular species and for ecosystems (Gitay et al. 

2001). A recent comparison of CO2 experiments across a number of sites and timber 

ages, however, indicates that carbon has a relatively consistent, and positive, effect 

on net primary productivity (Norby et al. 2005). A recent study may illustrate this 

evidence. Boisvenue and Running (2006) reviewed historical trends in net primary 

productivity in forests and found that over the last 50 years, most studies have 

reported increasing growth trends in forests where water is not a limiting factor.

Although tree growth and productivity effects will have clear long-run implications for forests, one of the more important near-term effects could be dieback. 

Some authors have suggested that climate change could lead to dieback in existing 

(or future) forests because of water stress, insect infestations, or fires (Bachelet et 

al. 2003, 2004; King and Neilson 1992; Scholze et al. 2006; Shugart et al. 1986; 

Smith and Shugart 1993; Solomon and Kirilenko 1997). Two causes of dieback 

appear in the literature. The first is that changes in climate (drying or warming) 

could make forests more susceptible to insects, fire, and other disturbance agents. 

Current evidence suggests that climate change may already be causing more intense 

fires in some regions of the world (Westerling et al. 2006). Climate change could 

also shift the distribution of climatic variability and climatic extremes (Houghton 

et al. 1996, Watson et al. 2000). Predictions of the size and scope of changes in 

climate or extreme events depend heavily on climate predictions made by climate 

modelers. The distribution of the climate effects geographically (e.g., where changes 

in precipitation and temperature occur) and over time is one of the most uncertain 

aspects of climate modeling, suggesting high uncertainty surrounding the regional 

distribution of forest dieback effects.

Beyond the direct effects of climate on forests, a related issue is the influence 

of climate change on the productivity of competing land uses (Alig et al. 2002), 

such as agricultural crop and livestock production. Large changes in productivity of 

farmland could lead to an expansion, or contraction, of agricultural land. Given the 

historical interrelationship between forests and agriculture, shifts in productivity of 

The distribution of 

the climate effects 

geographically and 

over time is one of 

the most uncertain 

aspects of climate 

modeling, suggesting 

high uncertainty 

surrounding the 

regional distribution of 

forest dieback effects.
42

GENERAL TECHNICAL REPORT PNW-GTR-833

agricultural land in particular could have large effects on the ultimate distribution 

of forest land. Current research does not indicate that climate change will lead to 

large-scale increases in agricultural land at the expense of forests in most temperate regions in the short run (Alcamo et al. 1997, Alig et al. 2002, Gitay et al. 2001, 

Reilly et al. 2003, Watson et al. 1996). In recent times, most expansion of agricultural land has occurred in tropical forests (Houghton 2003, UNFAO 2005), and 

these trends are likely to continue over the next 20 years (Watson et al. 2000). 

In the next three subsections of this paper, we examine the implications of 

these broad effects for timber markets. We consider both geographic and temporal factors, e.g., where and when the impacts may occur. Although considerable 

uncertainty still exists with respect to projections associated with climate change, 

a number of the economic results are fairly robust across the models, and therefore 

provide some reasonable assurances about the capacity of markets to adapt to 

change. Our general findings for different regions and time periods are summarized 

in table 2-2.

Short-Term Climate Impacts (2005–2025)

The recent study by Scholze et al. (2006) is perhaps the most comprehensive global 

assessment to date. The researchers examined potential climate impacts on ecosystems across 16 climate models and 52 climate scenarios, providing information on 

the average potential effect of climate change as well as uncertainty. Uncertainty 

is inferred by assessing results across the range of climate models and scenarios 

analyzed. They do not incorporate humans, so their predictions are based on what 

could happen to forests if humans were not already affecting forests. Their results 

show that in the short term (next 25 years), forests will likely be a net sink for 

carbon globally. The risk of forests becoming a source for carbon in the next 25 

years, however, is inversely related to global temperature change over the century. 

For example, in the short term under a number of the climate scenarios analyzed in 

the Scholze et al. (2006) paper, the size of the carbon sink in the biosphere becomes 

larger on average across the climate scenarios if the global average temperature 

change over the century is >2 °C. An increasing sink implies that forests either are 

expanding in area, or otherwise increasing their stock of carbon. For global average 

temperature changes <2 °C over the century, the biosphere becomes a net source of 

carbon under some of the climate scenarios. If forests become a source for carbon, 

then emissions of carbon to the atmosphere from dieback and decay processes are 

larger on net than forest growth. The short-term results in the paper by Scholze et 

al. (2006) contrast with their longer run results that suggest there is greater probability that forests become a carbon source under larger temperature changes (see 

below). 
43

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

Table 2-2—Ecological and economic implications of climate change on the forest sector Area Short term (2005–2025) Medium term (2025–2065) Long term (2065–2105)Boreal • ↑ Productivity • ↕ Productivity • ↕ Productivity

• ↑ Risk of fire/natural disturbance • ↑↑ Risk of fire/natural disturbance • ↑↑ Risk of fire/natural disturbance• ↑ Salvage; ↑ Timber supply • ↑ Expansion of species northward • ↑↑ Expansion of species northward

• ↑ Southern range displaced by more • ↑↑ Southern range displaced by more

 southerly forest types southerly forest types

• ↑ Salvage; ↑ Timber supply • ↑ Salvage; ↑ Timber supply

Temperate • ↕ Productivity • ↕ Productivity • ↕ Productivity

• ↕ Timber supply; ↓ Timber prices • ↑ Risk of fire/natural disturbance • ↑↑ Risk of fire/natural disturbance

• ↑ Movement of species northward • ↑ Movement of species northward• ↑ Salvage; ↑ Timber supply • ↑ Salvage; ↑ Timber supply

Tropical • ↕ Productivity • ↕ Productivity • ↕ Productivity

• ↑ Plantation establishment • ↑ Risk of fire/natural disturbance • ↑↑ Risk of fire/natural disturbance• ↑ Timber supply to world market • ↑ Risks to plantations and natural • ↑ Risks to plantations and natural

 forests forests

• ↑ Salvage; ↑ Timber supply • ↑ Salvage; ↑ Timber supply

World • ↑ Supply from rising productivity • ↑ Supply from rising productivity • ↑ Supply from rising productivitymarket and the possibility of salvage and the possibility of salvage and the possibility of salvageeffect • ↓ World timber prices • ↓ World timber prices • ↓ World timber prices

• ↕ Producer welfare • ↕ Producer welfare • ↕ Producer welfare• ↑ Consumer welfare • ↑ Consumer welfare • ↑ Consumer welfare

↑ = increases in indicator; ↓ = decreases in indicator; ↕ = both increases and decreases in indicator likely; double arrows indicate stronger effects likely.
44

GENERAL TECHNICAL REPORT PNW-GTR-833

Evidence suggests that climate change could have relatively larger near-term 

effects in boreal regions (Kirschbaum and Fischlin 1996, Watson et al. 2000). 

Boreal forests are already characterized by long-term, historical shifts in natural 

fire frequency that have large effects on forest and carbon stocks (Kurz and Apps 

1999). If climate change alters the natural fire frequency (e.g., Bachelet et al. 2004, 

Westerling et al. 2006), then there could be fairly substantial impacts on boreal 

forests in the near term. In addition to potential changes in fire or other disturbance 

frequency, many ecological models also project a movement of species north with a 

warmer climate (Solomon and Kirilenko 1997, Watson et al. 2000). Because boreal 

regions, except for the Nordic countries and Western Russia, tend to be unmanaged, 

humans are less likely to be part of the adaptation process, thus slowing the movement of species. Where humans influence regeneration processes, they can speed 

the movement of tree species across the landscape, and where humans have smaller 

impacts, forest adjustment processes will be slower (e.g., Sohngen et al. 1998). 

Slower adaptation could have negative implications for carbon stocks (Nilsson and 

Shvidenko 2000, Solomon and Kirilenko 1997). 

Many of the near-term effects of climate change in boreal forests are likely to 

occur mostly beyond the accessible margin, so that global markets experience few 

significant impacts. One reason for this is that native forests in boreal regions are 

expected to play a smaller proportional role in wood supply over the next 20 years 

(see Solberg et al. 1996, Sohngen et al. 2000). Sohngen and Sedjo (2000) suggested 

that over the period 2005–2025, timber harvest levels are not projected to change 

substantially in boreal forests of North America, Europe, or Russia. Despite the 

likely small timber market impacts globally, there could be locally important 

implications for boreal communities that are dependent on forest resources.

The dynamics of timber markets in temperate regions have been examined 

more thoroughly than for other regions, particularly in the United States (Sohngen 

and Alig 2000). A range of ecological scenarios has been explored for these forests, 

including changes in annual timber growth, potential dieback, and changes in species distribution. The results indicate that timber supplies from temperate regions 

would not be dramatically affected in the short run if the primary effects of climate 

change are changes in the rate of growth of timber. It takes a long time for changes 

in timber growth rates to have a marked effect on timber inventories and timber 

supply (Alig et al. 2002; Joyce et al. 1995, 2001; Mills and Haynes 1995; PerezGarcia et al. 1997). 

Similar results have been found in studies conducted in Europe. Trømborg 

et al. (2000) used a regional partial equilibrium forest sector model to analyze 

the market impacts (in a 15 to 20 year perspective) of possible accelerating forest 

Where humans 

influence regeneration 

processes, they can 

speed the movement 

of tree species across 

the landscape, and 

where humans have 

smaller impacts, forest 

adjustment processes 

will be slower.

It takes a long time 

for changes in timber 

growth rates to have 

a marked effect on 

timber inventories and 

timber supply.
45

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

growth in Europe. Three scenarios were studied: a base scenario that assumed a 1.4 

percent per year increase in standing stock (this reflects the actual average situation 

in Europe in 1994), a medium scenario assuming 2.0 percent per year increase in 

growth (i.e., about 43 percent higher growth than the base scenario), and a high 

scenario of 2.7 percent per year increase in standing stock (i.e., 93 percent higher 

growth than the base). The projected impacts of accelerating growth in timber 

production were found to be fairly small over the next 10 to 20 years for saw log 

and sawn wood markets, whereas pulpwood prices were found to decrease substantially. Solberg et al. (2003) showed similar results, applying a more detailed partial 

equilibrium model with respect to forestry, international trade, and forest industry 

technologies.

More dramatic scenarios have been examined where climate changes substantially over the next 20 years, causing dieback and changes in the distribution of 

important commercial tree species. Under these fairly dramatic scenarios, climate 

change could have substantial effects on timber supply in the short term. Specifically, widespread dieback, when combined with salvage logging, is projected to 

increase short-term timber supplies and reduce prices (Sohngen and Mendelsohn 

1998). One important uncertainty regarding the effects of dieback in boreal regions 

relates to global trade. Sohngen et al. (2000) found that timber production in boreal 

and temperate regions could decline in the near term if climate change causes 

dieback in boreal and temperate zones, but could be enhanced in subtropical and 

tropical regions. Both studies suggest that producers’ economic welfare would be 

reduced by potential dieback, but that they can actively participate in mitigating 

Most forests after timber harvest regenerate back to forest status either naturally or through 

tree planting.

Emily Jederlinich
46

GENERAL TECHNICAL REPORT PNW-GTR-833

those effects through salvage, and by changing the tree species they regenerate to 

those that are better suited to a new climate. Adaptation through regeneration can 

have important implications for the economic viability of particular forest stands 

(Lindner 1999, 2000). The importance of trade was also shown by Kallio et al. 

(2006), who studied the market impacts of a relatively large decrease in European 

timber supply caused by increased biodiversity protection. The impacts are rather 

modest because increased imports from Russia offset to a large degree the decline 

in domestic roundwood supply. 

Tropical regions are not expected to experience large immediate impacts from 

climate change. Currently, natural tropical forests contribute only a small portion 

of the world's timber harvest, and climate change over the next 20 years is not 

expected to change this. Many of these same countries, however, are providing 

increasingly large shares of the world's timber from their plantations. Short-rotation 

plantation species are expected to be particularly suitable for adaptation during 

climate change, so that tropical and subtropical countries could potentially benefit 

from climate change. Sohngen et al. (2000) found that if climate change increases 

forest productivity in plantations, South American timber harvests could increase 

by more than 20 percent over the next 20 years (relative to the baseline) with climate change. The effects in subtropical and tropical plantations are directly linked 

to the size of the change in net growth implied by climate change.

Ecological models do not suggest large near-term additional disturbances in 

natural tropical forests, and the largest impacts in the near term on these forests 

are likely to result from deforestation rather than from climate change (Gitay et al. 

2001). Deforestation, although slowing in recent years (Houghton 2003; UNFAO 

1999, 2005), is predicted to continue to cause conversion of tropical forests to 

agriculture (Palo et al. 2000). For example, annual net deforestation rates in tropical areas of Africa and South America are (annual percentage loss in parentheses) 

4.0 million ha/yr (0.7 percent per year) and 4.2 million ha/yr (0.7 percent per year), 

respectively (UNFAO 2005). 

Medium-Term Climate Impacts (2025–2065)

Left unabated, climate change is expected to intensify during the middle of this 

century (IPCC 2007b). The most important impacts on forests and timber markets 

are likely to occur in the medium to long term. The Intergovernmental Panel on 

Climate Change suggests that approximately 1/7 to 2/3 of all temperate and boreal 

forests are likely to undergo some type of ecological change over the century (Gitay 

et al. 2001, Watson et al. 1998). Those changes could include dieback of existing 

species (Bachelet et al. 2004, King and Neilson 1992, Scholze et al. 2006, Smith 

Short-rotation 

plantation species 

are expected to be 

particularly suitable 

for adaptation during 

climate change, so 

that tropical and 

subtropical countries 

could potentially 

benefit from climate 

change.
47

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

and Shugart 1993, Solomon and Kirilenko 1997, for example), movement of tree 

species from one region to another region, and accelerating impacts of climate 

change and CO2 concentrations on forest growth.

In boreal regions, climate change is generally expected to cause an increase in 

forest growth and an increase in forest area over the coming century (Cramer et al. 

2001, Scholze et al. 2006). Most of the expansion of forests, however, is far to the 

north, in regions that currently are tundra, and generally considered to be inaccessible. Scholze et al. (2006) suggested that if the average global temperature change 

is expected to rise above 3 °C over the century, then boreal forests will be at a risk 

of losses owing to dieback and disturbance, among other factors. Losses at higher 

temperatures appear to be driven largely by increases in forest fire activity associated with larger temperature changes (Scholze et al. 2006).

Perez-Garcia et al. (1997) relied on ecological studies that suggested rising 

growth rates in boreal forests. Not surprisingly, their economic model showed an 

increasing supply of timber from boreal regions over the next 40 years. Heavier 

timber harvests in boreal forests in turn were found to reduce timber prices, and 

negatively affect producers’ economic welfare in temperate regions. More recent 

results by Perez-Garcia et al. (2002) also assumed that biomass of boreal forests 

increases, but they found the opposite result for the timber harvest in boreal 

regions. For example, their study suggests that lower worldwide prices for timber 

cause a reduction in timber harvests in Canadian boreal forests. Thus, their results 

show that economic impacts of lower prices outweigh the benefits of rising forest 

productivity in boreal regions. The results in Perez-Garcia et al. (2002) are qualitatively similar to those in Sohngen et al. (2000), who suggested that boreal regions 

become less important over time both in the baseline and during climate change, as 

global timber harvests shift toward subtropical plantation regions. In combination, 

these results suggest that, regarding timber harvests, boreal forests will continue to 

become relatively less important globally over the medium term, and that climate 

change is likely to exacerbate the situation. 

Ecological studies suggest a wide range of potential impacts in temperate 

forests in the medium term. Bachelet et al. (2004) examined impacts in the coterminous United States with a single ecological model and two climate scenarios. Their 

results suggested that total forest biomass could expand under a wetter climate 

and could contract in scenarios with less moisture. Cramer et al. (2001) considered 

only a single climate scenario, but a range of ecological models. Their results imply 

increases in net ecosystem productivity over the century projected by most of the 

ecological models. The results by Scholze et al. (2006) suggested both increases 

and decreases in forest area, depending on the climate scenario and the region, with 
48

GENERAL TECHNICAL REPORT PNW-GTR-833

higher temperature changes in the temperate regions. As temperatures increase 

above 3 °C, their results suggest an expansion in forest area, and an expansion in 

wildfire activity in temperate zones. More wildfires occur partly because there are 

more forests to burn.

It takes some time for forest inventories to reflect the influence of climate 

change on timber growth; thus economic studies that focus only on changes in 

productivity of forests, and not on stock effects, show that climate change has larger 

implications for supply in the medium term than in the short term (Joyce et al. 1995, 

Perez-Garcia et al. 1997). McCarl et al. (2000) also showed losses accelerating over 

time if growth effects are negative. Sohngen and Mendelsohn (1998) combined 

changes in timber growth, dieback from disturbance, and shifts in species range 

based on Vegetation/Ecosystem Modeling and Analysis Project (VEMAP 1995). 

For all of the ecological and climate scenarios examined, the average effects imply 

that dieback would occur on an additional 0.7 million ha per year (in the United 

States only) over a 70-year period, forest growth would increase by 5 percent by 

2070, and forest area would increase by 14 percent by 2150. If forest fires occurred 

on all areas where dieback occurred, the scenarios suggested a 41 percent increase 

in fire activity on average over the current situation. Despite the fairly substantial 

losses of timber projected during this century owing to dieback, salvage was found 

to reduce the economic losses, and timber supply was found to increase during the 

medium term. 

One critical question for timber markets in the medium term lies with regeneration, e.g., which species should be replanted to thrive under new climate conditions. 

If climate conditions change substantially, landowners in temperate regions will be 

looking for signals to alter the tree species they replant. Whether the signal is strong 

enough to perceive will have only small effects during the medium term, but will 

have notable effects on timber supply in the long run. If the more dramatic ecological scenarios involving dieback and tree species change are accurate, getting the 

answer to this question right will determine the long-run outlook for timber supply 

from temperate regions.

Scholze et al. (2006) suggested relatively smaller effects in tropical forests 

than for boreal and temperate regions in the medium and long run, but their results 

suggest that risks of biome shifts and wildfire disturbance in natural tropical forests 

are nonetheless substantial. Any changes that do occur in native tropical forests will 

have relatively small effects on timber markets because these regions do not provide 

a large supply of industrial timber for markets, and they are not projected to become 

large suppliers in the future (e.g., Daigneault et al. 2008). 

Studies that focus 

only on changes in 

productivity of forests, 

and not on stock 

effects, show that 

climate change has 

larger implications for 

supply in the medium 

term than in the short 

term.
49

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

Plantations in subtropical regions—Chile, Argentina, Brazil, South Africa, 

Australia, and New Zealand—are projected to provide more than 30 percent of 

market share in the middle of the century (Daigneault et al. 2008). If climate change 

drastically alters productivity in these plantations, there could be large timber 

market impacts. Most of the ecological models consider impacts only in native 

forests, whereas subtropical plantations tend to be cultivated with nonindigenous 

tree species. Thus, it is difficult to know exactly how climate change will influence 

their potential growth under the new climates in which they have been introduced. 

However, most subtropical plantations focus on very-short-rotation species (rotation lengths are often less than 20 years, and frequently less than 10 years), so that 

timberland managers can adjust and adapt rapidly if climate change has dramatic 

effects. For example, if losses of forests in traditional industrial supply regions 

of the temperate zone (e.g., United States, Canada, Europe) become substantial, 

subtropical plantation species may benefit (see Sohngen et al. 2000). 

Long-Term Climate Impacts (Beyond 2065)

The long-run effect of climate change on ecosystems will be heavily influenced by 

the amount of climate change. Scholze et al. (2006) found that for global average 

temperature changes above 3 °C, the natural sink potential in forests declines over 

the century, with a substantial probability of forests becoming a large source of 

carbon beyond 2065. One reason for this is the increase in wildfire activity they 

model, and another reason is the potential shift in biome type. For example, under 

38 percent of the climate scenarios investigated, they predict biome shifts in 10 

percent of existing forests in tropical areas when global average temperature change 

exceeds 3 °C over the century. Under 88 percent of the climate scenarios, they 

predict biome shifts in 10 percent of existing boreal forests when global average 

temperature change exceeds 3 °C over the century. For climate change of less than 

2 °C, 19 percent and 44 percent of climate change scenarios were found to cause 

biome shifts in 10 percent of existing tropical and boreal forests, respectively. Even 

for the smaller changes in temperature, potentially substantial shifts could occur in 

tropical and boreal regions.

The results in Bachelet et al. (2004) illustrate the uncertainty in long-term 

analysis. They examined only two climate scenarios, one was warmer and wetter 

over time, and the other was warmer and drier. In the warmer and wetter scenario, 

forests were found to become a stronger sink over the century, whereas in the 

warmer and drier scenario, forests were found to become a strong source by the end 

of the century. There were strong regional differences within the country in both 

scenarios. For example, under the more pessimistic climate scenario, the Northeast 
50

GENERAL TECHNICAL REPORT PNW-GTR-833

and Southeast and West are projected to become strong sources of carbon emissions toward the end of the century. For the more optimistic climate scenario, most 

regions become strong sinks for carbon over the century, although the Northwest 

becomes a source.

At an aggregate level, different ecological models agree on the overall response 

in forests (e.g., Cramer et al. 2001). Warming with plenty of additional precipitation 

will enhance forest productivity, whereas drying of forests leads to potential losses. 

These potential losses become more pronounced when global average temperatures 

exceed increases of 2.5 to 3.0 °C. Models do find specific differences in specific 

regions, and this limits our understanding of where impacts are likely to occur. 

For timber markets, the long-term story is one of adaptation. Specifically, 

one question is whether landowners and land managers will be able to respond to 

climate, ecological, and market signals adequately during this century. According 

to the ecological studies, landowners and managers will face a host of hurdles, 

including changes in forest fire activity, changes in the potential for land to sustain 

forests, and changes in the rates of growth of tree species. Beyond adaptation on the 

landscape, the entire forest products industry will need to adapt, for example, by 

learning to use new tree species in forest production processes. The extent to which 

the industry responds to climate change will drive signals during the century and 

will influence the extent of market effects at the end of the century. 

One important aspect that has been ignored in most of the literature to date is 

that the market response will likely influence the ultimate effects that ecosystems 

experience. Nearly all ecological studies are built on potential vegetation, and none 

Reduction in deforestation is a significant mitigation option.

One important aspect 

that has been ignored 

in most of the literature 

to date is that the 

market response 

will likely influence 

the ultimate effects 

that ecosystems 

experience. 

Ralph Alig
51

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

of the models incorporate human management of forests (e.g., Bachelet et al. 2004, 

Scholze et al. 2006). Forest ecosystems, however, already are heavily influenced 

by human management. It has long been recognized that foresters respond to 

changes in disturbance by altering forest management. For example, Reed (1984) 

and Haight et al. (1995) showed how timber rotation ages are adjusted in response 

to disturbances. Recent economic studies show that there are many opportunities to 

efficiently manage (not eliminate) forest fires by adjusting timberland management 

(Amacher et al. 2005) and by adjusting fire suppression activities (Calkin et al. 

2005). In the last 30 to 50 years, foresters have substantially altered the landscape 

by shifting forest species types toward more favored market species. For example, 

in the U.S. South, they have expanded the area of southern pine through planting efforts (Alig and Butler 2004, USDA FS 1988), and globally, foresters have 

expanded nonindigenous plantations by around 2.8 million ha per year (ABAREJaako Poyry 1999, UNFAO 2005). To develop a better understanding of both 

ecological and economic effects, it would seem prudent to build modeling systems 

that capture both systems and their interactions. 

The area of forest land in all regions (boreal, temperate, and tropical) will ultimately depend not only on climate impacts in forests, but also on climate impacts 

on agricultural productivity. If agricultural productivity declines (increases) as a 

result of climate change, the area of land devoted to agriculture is likely to increase 

(decrease) in the long run, inducing additional (fewer) pressures on forests. One 

global study that includes agricultural and forest impacts predicts that climate 

change will reduce net deforestation rates over the next century (Alcamo et al. 

1997). For example, Alcamo et al. predicted that the net rates of global deforestation 

will decline from 17 million ha per year between 2000 and 2050 without climate 

change to 14 million ha per year with climate change. They predicted that beyond 

2050, climate change could cause net afforestation of 6 million ha per year compared to net deforestation of 0.2 million ha per year without climate change during 

the same period. Their projection of a gain in forest area arises mainly because 

agriculture demands less land during climate change. 

The Role of Mitigation

A different way that climate change could have large effects on forests is through 

the policies that stimulate mitigation, such as afforestation, reduced deforestation, 

and forest management. There has been considerable research on the potential for 

mitigation to help reduce the costs of climate impacts. Metz et al. (2001) suggested 

that 60 to 87 Pg C (1 Pg C = 1 billion metric tonnes carbon, or 1 x 1015 g C) could 

be sequestered in forests over the coming century, and Sohngen and Mendelsohn 

The area of forest 

land in all regions will 

ultimately depend 

not only on climate 

impacts on forests, 

but also on climate 

impacts on agricultural 

productivity. 
52

GENERAL TECHNICAL REPORT PNW-GTR-833

(2003) suggested that this amount of carbon could cost up to $187/t C. Such large 

levels of sequestration would have large effects on land use, potentially increasing 

the area of forests at the end of the century by 1 billion ha. Large-scale changes in 

forest management are also possible. 

Studies that examine climate change impacts on the forest and agricultural 

sectors have not considered the influence of mitigation, and mitigation studies have 

typically not considered climate change impacts. However, many interactions are 

likely between mitigation activities and climate change. First, many integrated 

assessment models of the climate and economic systems suggest that mitigation 

efforts in forestry can increase the benefits and reduce the costs of climate policy 

(e.g., Manne and Richels 2006, Sohngen and Mendelsohn 2003). To the extent that 

forestry mitigation reduces the overall costs of mitigating climate change, policies 

may be adopted that limit total warming. As shown in Scholze et al. (2006), less 

warming suggests that the impacts in forests will be reduced in the long run. 

Second, if mitigation in forestry becomes an important component of overall 

climate change policy, future land uses will change substantially. Within the range 

of carbon prices of $60 to more than $200/t C, Sohngen and Mendelsohn (2003), 

Sathaye et al. (2006), and Sohngen and Sedjo (2006) suggested that there could 

be as many as 1 billion more hectares of land in forests by 2100 (or an increase of 

around 30 percent). These carbon prices are well within the range of current estimates of the costs of stabilizing future climate (Weyant et al. 2006), suggesting that 

if forestry is ultimately included as a creditable opportunity, then large land-use 

changes could take place.

The implications of these types of land-use changes for existing ecological 

models are interesting to consider. For the most part, current ecological models 

are built on potential forest areas or maps of current land uses (e.g., Bachelet et al. 

2004, Cramer et al. 2001, Scholze et al. 2006). For tropical regions, the mitigation 

efforts described above largely imply reductions in deforestation, thus preservation 

of existing forest areas in tropical regions. Thus, if reductions in deforestation were 

included as an option for climate change action, the results of the ecological models 

for tropical regions would likely be robust because the ecological models already 

implicitly assume no future deforestation. The limiting factor, of course, is that 

climate change could alter the relative productivity of farmland in tropical regions, 

thus altering the relative costs of reducing deforestation. For temperate regions, the 

mitigation results imply an expansion of forest land. Ecological models that rely on 

potential vegetation likely already overestimate climate change impacts, and those 

that rely on current distributions of forests likely underestimate climate change 

impacts.

Studies that examine 

climate change 

impacts on the forest 

and agricultural 

sectors have not 

considered the 

influence of mitigation, 

and mitigation studies 

have typically not 

considered climate 

change impacts.
53

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

Third, results from ecological models examining climate change should influence estimates of the costs of mitigation. Economic modelers thus far have not 

accounted for climate change impacts when generating marginal abatement cost 

curves for sequestration. In the face of this limitation, several possibilities exist 

for whether accounting for climate change impacts would lead to higher or lower 

estimated costs of mitigation. In the short term, it was noted above that climate 

change would have its largest implications in boreal regions, and through growth 

effects on trees. In regions with positive tree growth effects, climate change would 

reduce sequestration costs as long as the relative value of agricultural land does not 

rise too much. In regions with negative tree growth effects, climate change would 

increase sequestration costs.

In the medium and long term, forested ecosystems are likely to be influenced 

by additional factors, including mortality from forest fires and other disturbances, 

and changes in the distribution of important tree species. Forest management 

activities to reduce fire frequency and intensity in forests, so as to conserve carbon 

in the landscape, could increase mitigation costs. Furthermore, an expansion of 

forest area owing to mitigation suggests more overall hectares burned, which potentially increases the costs of fighting fires. If the geographical distribution of specific 

tree species changes, or if the geographical distribution of optimal agricultural land 

changes, as is possible during the medium term, then costs of carbon sequestration 

could rise owing to rising opportunity cost of holding land in forests or cost of 

search processes associated with finding the right tree species to plant. 

In summary, in the short term, climate change appears to improve the efficiency of mitigation efforts. In the medium to longer run, climate change impacts 

Ecological models 

that rely on potential 

vegetation likely 

already overestimate 

climate change 

impacts, and those 

that rely on current 

distributions of forests 

likely underestimate 

climate change 

impacts.

Changes in agricultural productivity can affect a Nation's forest area.

Ralph Alig
54

GENERAL TECHNICAL REPORT PNW-GTR-833

appear to raise the risks associated with mitigation, and consequently raise the costs 

of avoiding climate change. 

Aside from the interaction between mitigation and climate change, if mitigation 

efforts are undertaken, they are likely to have substantial impacts on timber markets 

by affecting prices. Over the long run, most economic studies show that mitigation 

expands timber supply and reduces timber prices (Murray et al. 2005, Sohngen and 

Mendelsohn 2003). However, in the short term, mitigation could actually increase 

timber prices if options such as increasing rotation ages are used. In fact, if largescale mitigation efforts are undertaken inefficiently, they could have relatively rapid 

impacts in timber markets by altering the relative value of forestry and agriculture 

(Alig et al. 1997, Murray et al. 2004, Sohngen and Brown 2004). 

Thus, although it is possible to increase carbon sequestration in forests through 

afforestation, the net effects on overall carbon sequestration from large-scale and 

quick startup programs may not be as large as anticipated because land markets 

respond by moving some unprotected forests back into agriculture (i.e., deforestation). Alig et al. (1997), for example, found an approximate 1-to-1 correspondence 

between hectares that are moved to forests from agriculture and hectares that move 

the opposite direction, suggesting that large-scale and quick startup afforestation 

in the U.S. situation may not be the most efficient method for carbon sequestration. Murray et al. (2004) found similarly large "leakage" effects for some regions 

of the United States, and Sohngen and Brown (2004) found smaller, although still 

potentially substantial, "leakage" effects for tropical regions. More recent efforts 

suggest that efficient policies with flux constraints or carbon pricing could provide 

net sequestration, and that these would increase timber supply both in the short run 

and long run (Adams et al. 1999; Hoen and Solberg 1994, 1997, 1999; Murray et al. 

2005; Sohngen and Mendelsohn 2003).

A related issue that has not been widely examined is the question of substitution between wood and other energy-intensive products like steel, concrete, and 

aluminum. Energy-intensive constraints on carbon (e.g., high carbon prices) would 

increase the production costs of energy-intensive products and thus increase the 

demand for wood products that substitute for them. Such substitution has a permanent effect on the concentration of atmospheric CO2. The existing empirical studies 

indicate that the potential here is rather high (e.g., Buchanan and Bry Levine 1999; 

Burschel et al. 1993; Petersen and Solberg 2002, 2003, 2004, 2005; Raymer 2006). 

However, higher prices for traditional energy products would also spur the demand 

for bioenergy products, which as noted above, could have substantial impacts upon 

land use globally. In particular, large areas of land could be converted from existing forests to support growing needs for bioenergy products based on agricultural 

The development of 

the so-called secondgeneration biofuel 

technology will be of 

special interest here, 

as it may cause a large 

shift in demand for 

forest fiber.
55

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

crops (Clarke et al. 2007). The development of the so-called second-generation 

biofuel technology (using hemi-cellulose for producing biofuels) will be of special 

interest here, as it may cause a large shift in demand for forest fiber. The fiber 

for this purpose does not have to be of high quality and could easily use salvage 

harvest biomass, thus counterbalancing the impacts to industrial forestry of damages caused by climate change. The development of technology is closely linked 

to policy instruments—for example, the new European Union regulations that 20 

percent of the transport fuels in the European Union should, by 2020, be based on 

renewable resources is one main driver for developing the second-generation biofuel 

technology. 

Conclusions

This paper provides a general overview of potential climate change impacts on 

the forest sector in the short, medium, and long run. The results of our review of 

the literature suggest that climate change is likely to have small impacts in the 

near term out to 2025. Short-term impacts could become large, however, if climate 

change involves significant changes in regional weather patterns or dieback effects 

that cause timber stock losses. Existing ecological evidence implies that the earliest signs of climate change will be observed in boreal regions. Changes in boreal 

regions, however, are likely to have limited effects on global markets, although they 

could have large consequences for communities located near the impacts.

Climate change impacts are likely to accelerate in the medium and long term 

if mitigation and abatement efforts are not undertaken. Ecological studies suggest 

that precipitation can offset the effects of warming to some extent, but that there are 

substantial risks to forests in virtually all regions with global average temperature 

changes of more than 2.5 °C. These risks include additional disturbances (e.g., fires, 

insect infestations), changes in distribution of species, and conversion of forests to 

grasslands or other nonforested vegetation types. Because climate models cannot 

precisely predict how temperature and precipitation will change geographically, it is 

difficult to know with certainty where the impacts will occur.

Economic studies have shown that if forest productivity increases (decreases), 

timber prices will likely fall (increase). Large disturbances caused by climate 

change can have large influences on timber prices. In particular, large salvage 

efforts following dieback from forest fires would reduce timber prices, with the 

lower prices benefiting consumers and reducing producers’ economic welfare 

for landowners. The largest effects during climate change may actually result 

from market adaptation, with temperate and boreal regions losing market share 

to subtropical and tropical regions. These trends already appear to be occurring, 

Climate change 

impacts are likely 

to accelerate in the 

medium and long 

term if mitigation and 

abatement efforts are 

not undertaken.
56

GENERAL TECHNICAL REPORT PNW-GTR-833

so climate change would likely only enhance the movement of industrial timber 

production from developed temperate regions to developing tropical and subtropical 

regions. 

One important influence on forests and timber markets that has not been widely 

examined is the potential effect of changes in agricultural productivity and agricultural policies. Agriculture and forestry compete for the same land globally, and 

if climate change alters the productivity of agricultural land or global (European 

Union, U.S., World Trade Organization) agricultural policies change, then one 

would expect a change in the demand for agricultural land. Few models have examined the combined effects of climate change on agriculture and forestry, although 

the studies that have been conducted do not suggest substantial changes in overall 

land uses relative to the baseline (Alcamo et al. 1997, Alig et al. 2002). Using four 

climate change scenarios from a national climate change assessment in the late 

1990s, Alig et al. (2002) found that climate change leads to less projected forest 

area than no climate change. Less cropland is projected to be converted to forests 

owing to increases caused by climate change in overall agricultural crop production and exports. Projected changes for livestock production and prices depend on 

the specific climate change scenario (and climate model, e.g., Hadley model), with 

some variation over regions and time. 

Mitigation efforts could have substantial impacts on timber markets, timber 

prices, and land use during the entire century. Evidence is emerging that forestry 

can play an important role in overall climate change abatement efforts, and if this 

role emerges, it will entail large changes in how society uses land (Alig et al. 2010). 

These effects include not only changes in the margin between agricultural and forest land, but also increases in the intensity of forest management. Less attention has 

been given to how mitigation efforts would be affected by the impacts of climate 

change on forests; however, because climate change is likely to have small, but positive effects on forest productivity in the near term, climate change could reduce the 

costs of mitigation efforts. Over the longer term, mitigation efforts could be more 

costly to sustain owing to climate impacts, particularly if society is not successful 

in reducing greenhouse gas emissions. 

One of the most important implications of this synthesis of the literature is 

that there is little evidence that ecologists and economists have worked seriously 

together to assess climate impacts in ecosystems. A number of studies have used 

ecological model results in economic models, but there has been little use of economic models in ecological studies. This is problematic because the scale of human 

influence on ecosystems is large (e.g., see the Millennium Ecosystem Assessment 

http://ma.caudillweb.com//en/Products.Global.Overview.aspx). One would expect 

Evidence is emerging 

that forestry can play 

an important role in 

overall climate change 

abatement efforts, and

if this role emerges, it 

will entail large changes 

in how society uses 

land.

A number of studies 

have used ecological 

model results in 

economic models, 

but there has been 

little use of economic 

models in ecological 

studies. 
57

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

the ecological effects to somehow be moderated or influenced by adaptation in 

markets, with timber producers and consumers behaving in ways that act to limit 

economic effects. Further, economists and ecologists working together on feedbacks could help advance the analysis of resiliency associated with climate change, 

both from ecological and socioeconomic viewpoints. Given that climate change 

can potentially affect many parts of the global ecosystem and economy, indicators 

of resiliency would aid in ranking policy responses to climate change. As part of 

the resiliency analysis, feedback loops would need to be considered. An example 

is macroeconomic factors that affect forest products markets, such that changing 

timber values from forest land can affect land use and the other ecosystem goods 

and services on that forest land, and those production relationships can be affected 

by climate change and any adaptation or mitigation responses. Interdisciplinary 

research could advance resiliency rankings while recognizing that economists and 

ecologists often work at quite different scales. For example, many ecologists work 

at finer scales than economists and focus on functions and processes viewed by 

some economists as being at a scale that is data poor and very detailed. Economists 

can provide analyses that help set the context regarding relative importance of 

giving more attention to certain feedback loops and ecosystem function resiliency 

indicators in our global system. Thus, future research is needed to fully integrate 

ecological and economic models to better understand how forest ecosystems and 

markets may be affected by climate change.

Another area that needs additional attention from the research community 

is the impact of climate change on nonwood forest products and services, such 

as biodiversity, recreation, edible fruits, and other nonwood products. These are 

more difficult to assess because our understanding of the demand for these products is incomplete globally, although knowledge is growing, and also because 

the uncertainty is rather high regarding the ecological effects from climate change 

(Kauppi and Solberg 1999). Most likely, however, impacts on nonwood forest products will differ dramatically from place to place, depending on the nature of climate 

change (Irland et al. 2001, Loomis and Crespi 1999, Mendelsohn and Markowski 

1999, Wall 1998). In particular, industrial wood products are less susceptible to 

climate change because global market systems allow wood trade from region to 

region. With fewer such established links for nonwood forest products and services, 

they are likely to exhibit more vulnerability to climate change, at least locally. 

Impacts on some nonwood products and services, however, would be global regardless of whether or not they are traded across regions (e.g., biodiversity is a global 

public good, with potentially high public value in all regions).

Changing timber 

values from forest land 

can affect land use and 

the other ecosystem 

goods and services 

on that forest land, 

and those production 

relationships can 

be affected by 

climate change and 

any adaptation or 

mitigation responses.
58

GENERAL TECHNICAL REPORT PNW-GTR-833

Acknowledgments

The authors acknowledge financial support through a joint venture agreement from 

the U.S. Department of Agriculture, Forest Service, Pacific Northwest Research 

Station. 

English Equivalents

When you know: Multiply by: To get:

Hectares (ha) 2.47 Acres 

Cubic meters (m3) 35.3 Cubic feet

Cubic meters 0.00811 Acre-feet

Cubic meters per hectare (m3

/ha) 14.29 Cubic feet per acre

Grams (g) 0.0352 Ounces

Degrees Celius (C) 1.8C + 32 Degrees Fahrenheit

Metric tonnes (t) 1.102 Tons

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Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

Chapter 3: Modeling Land-Use Changes 

as Mitigation Options Involving the 

Forestry and Agricultural Sectors

by Ralph J. Alig

United States Land Resources

The United States has a wealth of land, 931.5 million ha in total, with about onethird of that in forest. Of the 304 million ha of forest land, about two-thirds (208 

million ha) is classified as timberland that meets productivity standards and is available for timber management and harvests (Smith et al. 2009) (also see glossary). 

Despite major historical transfers of land to agriculture, the United States still has 

a very large forested area, roughly two-thirds of the land that was forested in 1600. 

Over the 20th century, U.S. forest land area declined about 4 million ha in net, with 

the largest recent losses to developed uses (Alig et al. 2010b). 

One source of information on forest resource and utilization trends are the 

periodic Resources Planning Act assessments, which document current resource 

conditions and trends, and project future changes (e.g., USDA FS 2001). This 

information helps to establish benchmarks and future milestones for long-term performance indicators, and the timber assessment (e.g., Adams and Haynes 2007), for 

example, utilizes 50 years of historical data, and makes projections 50 years into the 

future. The assessment draws upon more than 70,000 permanent data plots across 

the United States. The assessment considers the broad workings of the economy, 

such as continuing increase in recycling and efficiency in paper production. The 

most recent land base assessment projects a 6-percent reduction in forest-land cover 

by 2062, as projected increases in urban and developed uses will likely intensify 

competition for remaining land between the agricultural and forestry sectors (Alig 

et al. 2010b). These projections are based on assumptions of no significant carbon 

payments or availability of other significant climate change policies, as this base 

case is a reference point representing policies frozen in place from the past decade. 

In the next section, we will review studies using alternative projections under different policies (e.g., carbon payments to landowners). 

The extent of the U.S. timberland base and its many forest types provide 

multiple options for responding to climate-induced changes. Many biological and 

economic opportunities exist to increase forest growth on the sizable U.S. timberland base, many of which would increase carbon stores (e.g., Birdsey et al. 2000, 

Hair et al. 1996, Vasievich and Alig 1996). Tree planting on marginal agricultural 

land has been suggested numerous times as one strategy for increasing terrestrial 

The extent of the 

U.S. timberland base 

and its many forest 

types provide multiple 

options for responding 

to climate-induced 

changes.
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GENERAL TECHNICAL REPORT PNW-GTR-833

carbon stores (e.g., Adams et al. 1999, Moulton and Richards 1990). Currently, less 

than 10 percent of U.S. timberland is planted. The majority of the planting is in the 

South, predominantly on private lands and conifer species (e.g., loblolly pine [Pinus 

taeda L.]). 

Although the planting of trees to create forest plantations has emerged as a 

major activity in recent decades, about 90 percent of U.S. forest land area has naturally regenerated stands. Major U.S. forest regions have widely different potentials 

to attract private investments in tree planting and in forest production more generally (Alig et al. 2001). Rapid tree growth generally translates into higher potential 

economic returns to investors; tree growth is fastest in the South and high-rainfall 

areas of the Pacific Northwest. 

The South, comprising 13 states, has accounted for about 80 percent of U.S. 

tree planting. The region has large areas of marginal agricultural land that could 

be planted to trees, and is near major wood-processing facilities that are relatively 

close to the large concentration of population in the East. In 1998, 10 states in the 

South each planted more than 40 000 ha (100,000 acres), collectively more than 

810 000 ha (2 million acres), 77 percent of the U.S. total (Moulton 1999). In the 

remainder of the United States in 1998, the West had 16 percent of the Nation’s tree 

planting while the North had 4 percent. Spikes in tree planting on nonindustrial 

private lands are associated with major government programs, such as the Soil 

Bank Program in the late 1950s and the Conservation Reserve Program of the latter 

half of the 1980s (fig. 3-1). 

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

1950

1952

1954

1956

1958

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

Trees planted (million hectares)

Year

Other public

National Forest Service

ForestIndustry

Nonindustrial private forest

Figure 3-1—Tree planting by ownership in the United States, 1950–1998 (adapted from Moulton 1999).
69

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

The South has been the leading tree planting area in the United States for a 

number of reasons, including a favorable climate (long growing season and generally abundant precipitation), excellent markets for wood owing to the heavy concentration of forest industry in the region, and comparatively less competition for land 

from agriculture. The South does have an important and diversified agricultural 

sector, based largely on fruits and vegetables (citrus, onions, peaches, and other 

truck crops), rice, tobacco, cotton, poultry, hogs, and other meats. The South is not 

a significant producer of major field crops such as corn and wheat, which in some 

other regions require large areas.

The South enjoys a cost advantage in that southern pine seedlings (e.g., loblolly 

and slash pine [Pinus elliottii Engelm.]) need only be grown in nurseries for 1 

year before they are ready for field planting. Currently, high-quality, genetically 

improved southern pines are available in the South at a lower cost than conifer seedlings in the North (white pine, red pine [Pinus L. sp.], and spruces [Picea A. Dietr. 

sp.]) and West (Douglas-fir [Pseudotsuga menziesii (Mirb.) Franco] and ponderosa 

pine [Pinus ponderosa C. Lawson]). Those outside the South are typically grown 

for 2 to 3 years, and may have to be transplanted within the nursery. 

The U.S. South also typically has lower opportunity costs regarding potential 

net returns from competing land uses such as agriculture. The South is a key 

supplier of fiber for papermaking and contains about two-thirds of the fast-growing 

coniferous plantations in the world, equal in 1997 to about 12 million ha (30 million 

acres) of southern pine plantations (Adams and Haynes 2007, Alig and Butler 2004). 

Planted pine area in the South increased more than 10-fold since 1952, evidence 

of how quickly some changes in the forest resource can occur. The area of planted 

pine in the South is projected to increase by more than 40 percent over the next 50 

years (Alig and Butler 2004), in a base case without any carbon-related payments to 

landowners. 

Potential for further expansion of tree planting will depend in part on changes 

in incentives to landowners, discussed in more detail in chapter 5 in this volume. If 

substantial carbon-related payments are made available, this could markedly affect 

the attractiveness of forest plantings relative to other land uses (Alig et al. 2010a). 

Moulton and Richards (1990) identified more than 107 million ha (265 million 

acres) of environmentally sensitive (e.g., erodible or wet soils) or lower productivity agricultural land that was suitable for tree planting in the United States. Their 

estimates include substantial amounts of afforestable land outside the South. The 

large majority is currently in cropland. Such afforestation opportunities are on 

private land and concentrated in the East. Afforestation of even a portion of such 

agricultural land could economically and substantially increase forest growth and 

Potential for further 

expansion of tree 

planting will depend 

in part on changes 

in incentives to 

landowners.
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GENERAL TECHNICAL REPORT PNW-GTR-833

carbon sequestration (e.g., Alig et al. 1997, 2010a; Birdsey et al. 2000; Vasievich 

and Alig 1996). Planting of short-rotation woody crops on marginal agricultural 

lands (e.g., Alig et al. 1999b) for use in generating biomass energy could also affect 

interactions between the forestry and agricultural sectors, including increased use 

of woody biomass in co-firing wood processing facilities (White 2010). 

An earlier range of estimates of how much carbon could be stored is provided 

for a hypothetical program to afforest 9.3 to 18.2 million ha (23 to 45 million acres) 

of marginal cropland and pastureland (Birdsey et al. 2000: table 8.3). That program 

would be phased in over a 10-year period and could effect a change in carbon storage of 50 teragrams (Tg) carbon/yr, at an annual cost of $350 to 770 million, with 

20 to 30 years to achieve the program’s carbon sequestration target. 

A key question regarding afforestation is how many financially attractive 

afforestation opportunities will be implemented by landowners. For example, 

the Conservation Reserve Program was the Nation’s largest 5-year tree planting 

program in the 1980s and 1990s. Original estimates were that about twice as many 

acres would be planted to trees if owners responded to financially attractive opportunities. However, ultimately only about half of the potential financially attractive 

acres were planted to trees (Alig 2003). Estimating the likelihood of tree planting 

by different owners can involve a complex of factors (Alig et al. 1990a), including 

financial feasibility, constraints, and environmental and esthetic considerations. 

Option values may be important to owners, and cultural tendencies also influence 

receptivity to tree planting by some owners (Fairweather 1996). Consideration 

of nonmarket benefits and the consequences of potential irreversibility of land 

conversion may significantly affect a landowner's willingness to agree to a major 

land-use change that will result in carbon being sequestered. When these factors are 

considered, the costs of carbon sequestration can be affected (Alig 2003, also see 

chapter 4 in this volume). In addition, many owners face capital constraints when 

faced with large upfront planting costs. Alig et al. (1999a) showed that afforestation 

amounts could be reduced markedly below economically optimal levels if such 

constraints are effective.

A key question 

regarding afforestation 

is how many financially 

attractive afforestation 

opportunities will 

be implemented by 

landowners.

The South and Midwest 

have relatively large 

amounts of land suitable 

for afforestation as a 

mitigation option.

USDA Forest Service
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Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

Several studies have noted that when owners did afforest former agricultural 

land under past programs, there was a relatively high retention rate of such plantations 10 to 15 years after establishment (Alig et al. 1980; Kurtz et al. 1980, 1994) 

and well beyond the program date. This ran counter to expectations by some that 

farmers would quickly convert back to agriculture use after the incentive program 

ended. Owners recognized potential timber value of young plantations after establishment. A number of stands were in need of silvicultural treatment according 

to timber prescriptions, often having overstocked conditions as owners applied 

relatively little management after establishment. Further, many such stands are 

often regenerated back to forest after harvest. 

Ownership changes in the forest land base may result in different land management objectives or new private owners with different available resources to invest 

in forest management. Changes in forest ownership have been substantial in recent 

decades (Best and Wayburn 2001). Although a national set of associated data is not 

yet available, some broad outlines of the changes are becoming evident. The South, 

in particular, has seen tens of millions of hectares change hands in recent decades 

(Clutter et al. 2005). Traditional industrial ownership of forest land has shrunk 

considerably, as land divested by industry in the South is now owned by timber 

management investment organizations (TIMOs) and Real Estate Investment Trusts 

(REITs) and is classified as nonindustrial private forest (NIPF) land. Such owners 

do not have processing facilities (e.g., mills) that would require a steady supply of 

timber, and so they have more flexibility to move into or out of a specific forest 

type or region to meet financial goals. Most owners also do not have the same level 

of investment in forestry research or firefighting materials as traditional industrial 

owners. 

At the same time, on average, owners of NIPF forest land are getting older, and 

nonheirs may take ownership of some land during transitions in families. This can 

also lead to smaller average forest parcel sizes (Butler and Leatherberry 2004), as 

part of the parcelization process. Among forest ownerships, the NIPF ownership is 

generally the most affected by land-use conversions and changes in land-use policy 

affecting private land. Change in total forest area is the net result of the conversion 

of forest land to nonforest and the shifting of nonforest to forest land by natural 

reversion or afforestation. 

Given prospects of land-use changes, avoided deforestation as a mitigation 

option has been examined in a number of studies (e.g., Malmsheimer et al. 2008). 

Land-use changes from forest to nonforest use releases forest-stored greenhouse 

gases (GHGs) into the atmosphere. In the United States between 1982 and 1997, 

more than 8 million ha were deforested. The destination of about half of the 

When owners did 

afforest former 

agricultural land 

under past programs, 

there was a relatively 

high retention rate 

of such plantations 

10 to 15 years after 

establishment.

Among forest 

ownerships, the NIPF 

ownership is generally 

the most affected by 

land-use conversions 

and changes in landuse policy affecting 

private land.
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GENERAL TECHNICAL REPORT PNW-GTR-833

converted forest area was to urban and developed uses, with more than 4 million 

ha of U.S. nonfederal forests converted to developed uses according to National 

Resources Inventory (NRI) estimates. That is an area larger than the combined 

current forest area of five Northeastern States (Connecticut, Delaware, Maryland, 

New Jersey, and Rhode Island). Between 1992 and 1997, the rate of deforestation 

increased and the proportion of urban and developed uses as a destination for 

deforested acres increased to 55 percent of the total deforestation (USDA NRCS 

2007), with more than 400 000 ha converted to developed uses per year.

The largest increases in U.S. developed area in recent decades have been in 

the Southeastern region of the country (13 states from Virginia to Texas). Aside 

from the United States as a whole, this region provides more timber harvest than 

any country in the world (Wear and Greis 2002). Between 1982 and 1997, the U.S. 

South had 7 of the 10 states with the largest average annual additions of developed 

area according to the USDA Natural Resource Conservation Service (2007). The 

top three—Texas, Florida, and North Carolina—each added more developed area 

than did the country’s most populous state, California. A contributing factor to 

expansion of developed area there and in other regions is the decreasing number of 

people per household (Alig et al. 2004b), owing to decreasing family size, popularity of second homes, divorce rate, and growing number of older adults living alone. 

Land-use changes can be prompted by actions in different sectors, with significant drivers of land-use change being changes in population and personal incomes. 

Afforestation on erodible or other environmentally sensitive agricultural land can have 

substantial other co-benefits, such as reduction of water pollution, in addition to contributing 

to climate change mitigation.

USDA Forest Service
73

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

Adding another 125 million people in the United States over the next half century 

will lead to more urban and developed area and affect costs of land conversion. 

Expanded developed area may lead to a net reduction in the area of private timberland available for carbon sequestration and increase forest carbon sequestration 

costs, with conversions to urban and developed uses outweighing timberland area 

additions from agriculture in the business-as-usual case. Projections are that loss 

of forest land to other uses will be substantial (e.g., Alig et al. 2010b), causing net 

release of net GHGs currently stored in those forests and also precluding future 

sequestration opportunities for such forests to take carbon dioxide (CO2) out of the 

air and store it as they grow. Conversion of forests can also reduce open space and 

threaten the ability of diverse forest-land-based ecosystems to provide a variety of 

habitats for wildlife; help to cleanse the air and water; supply timber, fuelwood, and 

other harvested products; serve as places for recreation; and provide other goods 

and environmental services such as mitigation of global climate change (Alig 2007). 

Estimates of costs for carbon programs differ notably across some studies (see 

chapter 4 this volume for more details), in part because of differences in scope and 

underlying assumptions built into the analyses. This includes whether opportunity 

costs of the land and market effects on land and resource prices are incorporated, 

causing estimates of carbon sequestration to rise. For example, Birdsey et al. (2000) 

indicated a broad range of U.S. cost estimates. Plantinga and Mauldin (2001) also 

pointed out that climatic change could have a potentially large effect on the costs 

of afforestation. Their analysis suggests that regions that are now cost-effective for 

afforestation may not be so in the future, and vice versa. 

Mitigation Options Involving the Forestry and 

Agricultural Sectors

Forests currently play an important role among major land uses, offsetting approximately 13 percent of U.S. GHG emissions in 2007 (US EPA 2009). United States 

forestry can play a substantial role in climate change mitigation through carbon 

sequestration—tree, litter, soil, understory, and harvested wood products—and 

bioenergy feedstocks (see White 2010 for information on forest bioenergy aspects). 

Mitigation activities in the forest sector generally can be competitive compared to 

opportunities in agriculture (e.g., reduced soil tillage, manure management), including afforestation of agricultural land. Estimates are affected by regional differences, 

dynamics of forest growth and carbon sequestration, forest ownership differences, 

and interactions with other sectors of the economy. 

Given the large portion of the U.S. land base in forest and agricultural uses, a 

linked model of the two sectors facilitates investigating impacts of climate change 
74

GENERAL TECHNICAL REPORT PNW-GTR-833

on those uses (e.g., Alig et al. 2002), land-based strategies that could contribute to 

mitigation (Adams et al. 1999, Alig et al. 1997), and adaptation options resulting 

from market-based actions (e.g., Alig et al. 2002, 2004a). In the 1990s, the lines 

of modeling from the forest and agricultural sectors were merged in developing 

the FASOM model (Adams et al. 1996), which linked the two sectors for climate 

change analyses. Unique features of the FASOM-GHG modeling system include 

linkage of forestry and agricultural commodity markets, with a connection of those 

markets to private land-use decisions for forest, crop, and grassland. The model 

uses a 5-year time step and has full carbon accounting in the forest and agricultural 

sectors, including from forest through final products and disposal.

Research supporting the FASOM-GHG model started decades ago, with Adams 

and Haynes (2007) on the forestry side introducing the Timber Assessment Market 

Model (TAMM) in the USDA Forest Service’s Forest and Rangeland Renewable 

Resources Planning Act (RPA) assessments. The basic structure of the forest sector 

modeling grew to include a family of models applied in decennial RPA Timber 

Assessments: TAMM (Adams and Haynes 1996), NAPAP (North American Pulp 

and Paper model; e.g., Ince 1994), ATLAS (Aggregate Timberland Assessment 

System; Mills and Kincaid 1992), and AREACHANGE (Alig et al. 1990b, 2003; 

Alig and Butler 2004). Timber inventory data and estimates of current and future 

timber yields were taken in large part from the ATLAS input used for the 2000 

RPA Timber Assessment and 2005 Update (Adams and Haynes 2007, Alig and 

Bair 2006). The AREACHANGE models provide timberland area and forest type 

allocations to the ATLAS model. TAMM and NAPAP are market projection models 

of the solid wood and fiber products sectors in the United States and Canada. In 

ATLAS, harvested lands are regenerated (grown) according to exogenous assumptions regarding the intensity of management and associated yield volume changes. 

The timberland base is adjusted for gains and losses projected over time by the 

AREACHANGE models, including afforestation of the area moving from agriculture into forestry.

On the agricultural side, the Agricultural Sector Model (ASM) is a spatially 

disaggregated agricultural sector model representing the United States in terms 

of 63 production regions and 10 market regions depicting trade with a number of 

foreign countries. The ASM depicts production in an equilibrium year and is thus 

an intermediate-run model giving implications for policy after it has been fully 

worked into the sector. The ASM model has been in use for more than 20 years. 

The model has been used to study effects of climate change, greenhouse gas mitigation, El Niño forecasting, conservation tillage, new cropping technology, pesticide 

bans, and farm program revisions, among numerous other applications (McCarl et 

al. 1998). Because large areas of land can move between forestry and agricultural 

A linked model of the 

forest and agriculture 

sectors facilitates 

investigating impacts 

of climate change on 

those uses.
75

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

uses, responses from (and options in) the agricultural sector must be considered for 

effective GHG policy analysis. Increased demands for land will affect forestry’s 

potential contributions to addressing climate change—particularly demands related 

to biofuels production this decade. 

The FASOM-GHG model is dynamic in that it solves jointly for the multimarket, multiperiod equilibrium in the linked agricultural and forestry sectors. The 

nonlinear programming model depicts the allocation of land over time for competing activities in the two sectors. A solution reflects price and quantity equilibria 

established in each sector in each period, where producers and consumers have 

perfect knowledge of market conditions in all periods. To our knowledge, the 

FASOM-GHG model is unique in its modeling of multiple forest-related markets, 

including both logs and mill-processed products. A key capability of the model 

involving the forest sector is to be able to examine deforestation, reforestation, and 

afforestation, based on maximizing net returns to different land uses (Alig et al. 

2001), and linkage of land-use changes and land management (e.g., forest thinning). 

This platform aids in evaluating welfare and market impacts of alternative policies 

for sequestering carbon in forest ecosystems and agricultural practices. The model 

has 9 forestry regions and 11 agricultural regions (Adams et al. 1996). The FASOM 

model includes full carbon accounting of the U.S. forest sector from forest through 

final products and disposal. 

The FASOM model was expanded and enhanced in the 2000s on both the 

forestry and agricultural sides. Products (e.g., softwood lumber) were added on 

Improved land-use data regarding recent trends would aid in climate change analyses.

A key capability of 

the model involving 

the forest sector is 

to be able to examine 

deforestation, 

reforestation, and 

afforestation, based on 

maximizing net returns 

to different land uses.

Emily Jederlinich
76

GENERAL TECHNICAL REPORT PNW-GTR-833

the forestry side as well as log markets, along with an increased number of forest 

types (e.g., for the South, seven planted-pine management intensity classes), limits 

on periodic shifts between land uses, updated exogenous projections of conversion 

of agricultural and forest land to urban and developed uses, and expanded forest 

bioenergy modeling. Extensive modifications were made on the agricultural side as 

well, including improvement of agricultural carbon sequestration dynamics, expansion of the scope of agricultural-sector GHG emission source and mitigation strategy coverage, and addition of carbon accounting related to use of fossil fuels. After 

exiting the forest or agricultural land base for conversion to urban and developed 

uses, carbon is tracked on the developed land, a capability added in recent years. 

Preventing GHG emissions from deforestation is increasingly being promoted, 

both internationally and domestically (e.g., Malmsheimer et al. 2008). The capability of forests to remove GHGs from the atmosphere over time in the United States 

has been affected by land-use changes such as deforestation. In the earliest part of 

the 20th century, most deforestation was due to conversion to agriculture, but in 

recent decades the largest losses of forest area have been to developed uses (Alig et 

al. 2010b). It is important to be able to model jointly afforestation, reforestation, and 

deforestation to capture the different effects on GHG storage and release, as well as 

to account for the total area changes involving forests. 

An early application of the FASOM model by Alig et al. (1997) demonstrated 

the leakage possibilities of afforesting substantial amounts of land to sequester 

GHG, especially increasing carbon sequestration. They estimated that the response 

of land markets to afforesting more than 4 million ha in the South in one decade 

would be to essentially have no net gain in forest area—due to countervailing 

transfers of other forest land to agricultural use as the price of forest land dropped 

and agricultural land value rose because of the afforestation amount. 

In general, leakage as an unintended consequence of policies can occur via 

unintended (and unregulated) adjustments in land use between forest and agricultural sectors in response to a sequestration policy. Policy design can affect the 

amount of leakage. Other issues involving policy design include consideration of 

permanence and whether current sequestration is followed by future GHG releases. 

Additionality is another issue (Maness 2009) and is discussed in chapter 5 in this 

volume. 

Several analyses using the FASOM-GHG model indicate that GHG emission mitigation actions in the forestry and agriculture sectors can be less costly 

than comparable actions in other sectors (most notably transportation and power 

generation). One earlier national analysis using FASOM model runs estimated that 

between 10 and 25 percent of current U.S. GHG emissions could be offset through a 

Greenhouse gas 

emission mitigation 

actions in the forestry 

and agriculture sectors 

can be less costly than 

comparable actions in 

other sectors.
77

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

combination of actions in forestry and agriculture, including reduced tillage, afforestation, improved forest management, improved nutrient management, manure 

management, and bioenergy production (Murray et al. 2005). The study estimated 

that costs of these actions would range from $16.50 to $27.50/tonne ($15 to $25/ton) 

of CO2 mitigated. For the sectors involved, the costs for these actions multiplied 

by offset production could translate into an additional $9 to $42 billion per year in 

increased gross revenue for the agricultural and forestry sectors.

Mitigation strategies involving forest ecosystems will be affected by climate 

change. Potential effects of global climate change on the U.S. forest sector, including impacts on forest carbon inventories, may include modifications of growth 

and geographic distribution of forests. Alig et al. (2002) examined global change 

scenarios from the National Climate Change Assessment, based on a combination of global circulation (Canadian and Hadley) and ecological process (Century, 

Terrestrial Ecosystem Model) models. The analyses used an equilibrium climate 

scenario based on transient Canadian and transient Hadley scenarios, with a 

baseline scenario using average climate for the 1961–1990 period. The climate 

change scenario was the average of the projected climate for 2070 to 2100. Results 

at that time indicated the likelihood of an overall increase in forest productivity in 

the United States, leading to an increase in long-term timber inventory (Irland et al. 

2001). 

With more forest inventory, timber harvests in most scenarios rise over the next 

100 years, lowering timber prices, and reducing costs of wood and paper products. 

Private landowners control the most forest area in the United States and have the most opportunities 

for forest-based mitigation opportunities.

Eric White
78

GENERAL TECHNICAL REPORT PNW-GTR-833

Total economic welfare is higher than in the base case for all climate change scenarios, owing to overall higher forest productivity. Adjustments related to marketbased incentives include interregional migration of timber production, substitution 

in timber consumption, altered forest stand management (e.g., change in timber 

rotation length), salvage of dead or dying trees, shifts in planting stock, and changes 

in fertilization and thinning regimes. Aggregate welfare effects of climate change 

for the forest sector are relatively small, consistent with the McCarl et al. (2000) 

findings that they are relatively limited even under extreme scenarios. 

Recent scenario analysis involving possible markets for carbon under hypothetical cap-and-trade policies has shown that future forest area could differ markedly 

under different price assumptions for CO2 (Alig et al. 2010a). In comparison to a 

baseline projection of a reduction in timberland area under business as usual, Alig 

et al. (2010a) indicated that a price of more than $25 per metric tonne of CO2 could 

be needed to eliminate the projected loss in timberland area (fig. 3-2). Higher CO2

prices could induce enough afforestation to offset timberland area losses to other 

uses such as developed uses and agriculture. This national analysis projected that 

about 10 million ha could be afforested at prices of $25 CO2 per metric tonne over 

the next 50 years and more than double that area with $50 CO2 prices. The majority 

would be in the South Central, Corn Belt, and Southeast regions. 

The analysis by Alig et al. (2010a) with an optimization model using mathematical programming involved a perfect foresight assumption, and the importance 

of such assumptions will be reviewed in chapter 4. An econometric approach (e.g., 

Lubowski et al. 2006, Plantinga and Mauldin 2001, Plantinga et al. 1999) produces 

0

5000

10 000

15 000

20 000

25 000

30 000

35 000

0 5 10 15 20 25 30 35 40 45 50

Area (thousand hectares)

CO equivalent price (dollars/metric tonne)

Afforestation

Deforestation to Ag

Deforestation to Dev

Deforestation to All

2

Figure 3-2—Projected changes in U.S. timberland area (contiguous 48 states) owing to baseline 

projection of deforestation to developed uses and hypothetical carbon dioxide (CO2) prices per metric 

tonne (adapted from Alig et al. (2010a). 

Future forest area 

could differ markedly 

under different price 

assumptions for CO2
79

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

higher cost estimates than engineering and optimization methods (see chapter 4), 

reflecting a number of factors that affect land-use decisions in practice but that are 

difficult to measure explicitly and include in engineering and optimization models. 

These include landowner uncertainty in the face of irreversible investments, nonmonetary returns to landowners from forest and agricultural uses of land, liquidity 

constraints, and other private or market costs or benefits.

Besides climate change mitigation, any policies to encourage the conversion 

of agricultural land to forest use may generate additional environmental benefits 

or co-benefits associated with afforestation. For example, Plantinga and Wu (2003) 

estimated the reductions in agricultural externalities, such as soil erosion and nitrogen and atrazine pollution, for a hypothetical afforestation program. They quantified the values of reduced soil erosion and benefits from enhanced wildlife habitat. 

Such values were the same order of magnitude as the costs of carbon sequestration 

policy, indicating that the co-benefits of forest carbon sinks are important factors to 

consider in designing a portfolio of climate mitigation strategies. 

Summary 

Potential actions for reducing net GHG emissions involve a wide variety of sinks 

and sources in the forestry and agricultural sectors. Afforestation is a key activity 

involving the two sectors. Afforestation opportunities are concentrated in the East 

on private lands. Availability of carbon-related payments could markedly influence 

the financial attractiveness of such opportunities to landowners. Co-benefits of forest sinks are an important factor to consider in designing a portfolio of climate mitigation strategies. Planting of short-rotation woody crops on marginal agricultural 

lands (e.g., Alig et al. 1999b) for use in generating biomass energy could also affect 

interactions between the forestry and agricultural sectors, including increased use 

of woody biomass in co-firing wood processing facilities (White 2010). 

The studies reviewed contain a wide range of assumptions or approaches in 

the climate change effects, mitigation, and adaptation area pertaining to (a) simultaneous consideration of the agricultural (crops, livestock) and forestry sectors; 

(b) discount rate; (c) inclusion of carbon prices or values; (d) dynamic modeling 

of forest stands; (e) inclusion of non-CO2 gases in GHG accounting; (f) GHG 

accounting overall; (g) modeling of forest and agricultural lands to developed uses 

(e.g., urban); (h) examination of bioelectricity as part of bioenergy analyses; and 

(i) consideration of indirect land-use changes, among other differences. This is not 

totally unexpected as the literature moves forward, especially in a topic area that is 

growing rapidly. An example of one research gap involving adaptation and mitigation activities is the potential interplay between the two over time and how that may 

Besides climate 

change mitigation, any 

policies to encourage 

the conversion of 

agricultural land 

to forest use may 

generate additional 

environmental 

benefits or co-benefits 

associated with 

afforestation. 

Co-benefits of forest 

sinks are an important 

factor to consider in 

designing a portfolio 

of climate mitigation 

strategies. 
80

GENERAL TECHNICAL REPORT PNW-GTR-833

affect costs of both adaptation and mitigation. Another is extended investigation of 

external benefits from increased afforestation, such as water quality improvements, 

reduced forest fragmentation, enhanced biodiversity, and other benefits. Public 

timberlands also contain many young stands that can sequester large amounts of 

forest carbon (Depro et al. 2008), and potential interactions with private timberland 

opportunities warrants more investigation. 

Data needed to enhance land-use analyses in climate change studies include 

updated estimates of afforestation yields on former cropland and pastureland by 

region. Such data are needed that would allow examination of different forest management regimes (e.g., low, medium, and high levels of forest plantation management) following afforestation. These types of data would be useful in essentially all 

regions if carbon markets emerge to a degree where forest investments associated 

with forest carbon payments can compete with agricultural enterprises. For example, the Corn Belt may be a region with relatively good forest production potential 

but where forest use has traditionally been quite limited because of land-use competition from agriculture. Forward-looking studies in such regions would benefit from 

current estimates of afforestation costs and yields. In addition, data from landowner 

surveys (e.g., Butler and Leatherberry 2004, Kline et al. 2000) about willingness to 

undertake mitigation activities would usefully augment forest survey data.

Additional work is needed to enhance design of efficient portfolios of landrelated activities across sectors, such as afforestation, modified agricultural tillage, 

avoided deforestation, and other activities, including consideration of how they 

may vary over space and time. Such global questions involving forestry’s and 

agriculture’s potential contributions to climate change mitigation are framed within 

a national context of increased demands for cropland, forage, and wood products to 

help feed and house an additional 3 billion people globally by 2050, increased land 

demand for bioenergy production, and tens of millions of hectares of land needed to 

house another 125 million U.S. residents by midcentury. 

English Equivalents

When you know: Multiply by: To get:

Hectares (ha) 2.47 Acres

Grams (g) 0.0352 Pounds

Tonnes or metric tons 1.102 Tons

Dollars per tonne ($/t) 0.907 Dollars per ton

Teragrams (Tg) 1,102,311 Tons

The potential 

contributions of 

U.S. forestry and 

agriculture to climate 

change mitigation 

are framed within the 

need to help feed and 

house an additional 3 

billion people globally, 

increased land 

demand for bioenergy 

production, and land 

needed to house 

another 125 million U.S. 

residents by 2050.
81

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

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DC: U.S. Environmental Protection Agency, Office of Atmospheric Programs. 

144 p.
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Plantinga, A.J.; Mauldin, T. 2001. A method for estimating the cost of CO2

mitigation through afforestation. Climatic Change. 49: 21–40. 

Plantinga, A.J.; Mauldin, T.; Miller, D. 1999. An econometric analysis of 

the costs of sequestering carbon in forests. American Journal of Agricultural 

Economics. 81: 812–824. 

Plantinga, A.J.; Wu, J. 2003. Co-benefits from carbon sequestration in forests: 

evaluating reductions in agricultural externalities from an afforestation policy in 

Wisconsin. Land Economics. 79(1): 74–85. 

Smith, W.B.; Miles, P.D.; Perry, C.H.; Pugh, S.A. 2009. Forest resources of the 

United States, 2007. Gen. Tech. Rep. WO-78. Washington, DC: U.S. Department 

of Agriculture, Forest Service, Washington Office. 336 p.

U.S. Department of Agriculture, Forest Service [USDA FS]. 2001. 2000 RPA 

assessment of forest and range lands. FS-687. Washington, DC. http://fia.fs.fed.

us/pl/rpa/. (November 2008).

U.S. Department of Agriculture, Natural Resources Conservation Service 

[USDA NRCS]. 2007. National Resources Inventory—2003 Annual NRI. 

Washington, DC. http://www.nrcs.usda.gov/technical/NRI/2003/nri03landusemrb.html. (January 2010).

U.S. Environmental Protection Agency [US EPA]. 2009. Inventory of U.S. 

greenhouse gas emissions and sinks: 1990–2007. EPA Report. Washington, DC. 

(April 2009).

Vasievich, M.; Alig, R. 1996. Opportunities to increase timber growth and carbon 

storage on timberlands in the contiguous United States. In: Sampson, R.N.; 

Hair, D., eds. Forests and global change, forest management opportunities. 

Washington, DC: American Forests: 91–104. Vol. 2.

Wear, D.; Greis, J. 2002. Southern forest resource assessment: summary of 

findings. Journal of Forestry. 100(7): 6–14. 

White, E.M. 2010. Woody biomass for bioenergy in the United States—a briefing 

paper. Gen. Tech. Rep. PNW-GTR-825. Portland, OR: U.S. Department of 

Agriculture, Forest Service, Pacific Northwest Research Station. 45 p. 
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Chapter 4: What Explains Differences 

in the Costs of Carbon Sequestration in 

Forests? A Review of Alternative Cost 

Estimation Methodologies

 by Judith Dempsey, Andrew J. Plantinga, and Ralph J. Alig 

Introduction

For the past two decades, starting with Sedjo and Solomon (1989), there has been 

ongoing research focused on estimating the cost of forest-based carbon sequestration. On balance, the results of this research indicate that the costs of carbon 

sequestration in forests are similar or lower in comparison to energy-based mitigation approaches.1

 However, there are still questions raised by differences in carbon 

sequestration cost estimates across studies. Some of the difference may be due to 

regional variations in land rental rates and rates of carbon uptake. But part of the 

difference appears to arise from different methodologies used to compute costs. 

Three main approaches have been taken in the literature: “bottom-up” engineering models, sectoral optimization studies, and econometric models (Richards and 

Stokes 2004). A review of the literature reveals that these different cost estimation 

methods do not provide consistent cost estimates of forest-based carbon sequestration. It is important to understand the effects of the calculation method on the 

final results before accepting the cost estimates provided by any study. Thus, this 

literature review will focus on examining differences in cost estimates obtained 

by different cost estimation methodologies. Our review will focus on studies of 

afforestation—the conversion of nonforest land to forest—and will not consider 

forest management strategies to sequester carbon; earlier studies found that afforestation offers larger opportunities to sequester carbon in forests (e.g., Moulton and 

Richards 1990). We also restrict our attention to the United States.

Each of the three cost estimation approaches are concerned with measuring 

opportunity costs—what the landowner gives up when he or she converts land from 

a nonforest use such as agriculture to forest. Bottom-up and sectoral optimization 

studies measure these costs as the lost value from the land plus costs of establishing 

and maintaining trees. A key assumption in these studies is that all relevant costs 

can be estimated explicitly by, for example, the average cropland rent or sale price 

1 For example, Lubowski et al. (2006) found carbon sequestration costs in the same range 

as those found for energy-based studies below 500 million tons per year and lower costs 

above that point.

Each of the three cost 

estimation approaches 

are concerned with 

measuring opportunity 

costs—what the 

landowner gives 

up when he or she 

converts land from a 

nonforest use such as 

agriculture to forest.`
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GENERAL TECHNICAL REPORT PNW-GTR-833

in an area plus estimates of tree planting costs based on historical patterns. Econometric studies, on the other hand, are based on how landowners actually respond 

to incentives they face in the marketplace. Historical data are used to model and 

predict future landowner behavior. This approach has the potential to measure 

many unobservable factors implicitly in the parameters of the model and thus lead 

to more realistic and nuanced predictions of how landowners will behave. These 

unobservable factors may include nonmonetary benefits that the landowner obtains 

from the land in a particular use. Because of its potential to measure unobservable 

factors, the econometric method tends to produce cost estimates that are higher 

than those from engineering and optimization studies.

Another important difference between the studies is the modeling of price 

effects. As a carbon sequestration incentive attracts more agricultural land into 

forest, one should expect prices for agricultural commodities to rise and prices for 

forest commodities to fall (assuming the new forests can be harvested). This endogenous price effect should raise the costs of converting more land into forest. Only 

some of the engineering cost and econometric studies account for price effects. In 

contrast, the chief advantage of the sectoral optimization studies is their ability to 

model forest and agricultural commodity markets and the linkages between them. 

There is evidence that optimization studies produce higher cost estimates than engineering studies (Adams et al. 1993), though these estimates tend to remain lower 

than estimates from econometric studies, as we will discuss below.

There are many assumptions that must be made in the calculation of carbon 

sequestration costs. Because of the range of assumptions, the results of different 

studies, even studies using similar calculation methods, cannot be directly compared. To isolate the effects of the calculation method, this review will consider 

several papers that have normalized groups of carbon sequestration studies. These 

papers each have slightly different criteria for normalization, but all provide comparable estimates of carbon sequestration costs for the group of studies evaluated. The 

main finding in these studies is that the econometric method produces higher cost 

estimates than the engineering and optimization approaches. 

Overview of Methodologies for Estimating Carbon 

Sequestration Cost

Modeling Choices

Gorte (2009) discussed many factors that can influence carbon sequestration cost 

estimates. Ultimately, analysts are faced with a number of choices, and must be 

aware of how these choices affect their results. As emphasized by Gorte (2009), 

there is significant variability in the volume of carbon that is stored in a forest. 
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Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

These differences can appear by region of the country, the variety of tree species, 

and forestry practices. Many of the available carbon sequestration studies focus 

on specific regions, which makes direct comparisons difficult. The history of land 

use at a site can affect the estimated volume of carbon. For example, agricultural 

land and previously forested lands will typically have different initial levels of soil 

carbon and this will affect the volume of carbon sequestered subsequently. Newell 

and Stavins (2000) examined differences in carbon sequestration costs between tree 

plantations and naturally regenerated stands. The costs per ton of carbon are found 

to be similar because the higher rates of carbon uptake by plantations are offset by 

their higher upfront establishment costs.

Gorte (2009) also discussed the effects that harvesting practices can have on 

total sequestered carbon. Trees may be continually harvested, or a stand may be 

allowed to grow indefinitely. Some portions of harvested trees may be assumed 

to remain onsite, or all may be removed for processing into wood products or 

for energy generation. Depending on the assumptions made in the study, carbon 

sequestration rates and related costs can differ significantly. Newell and Stavins 

(2000) discussed the possibility that periodic harvesting could actually increase 

carbon sequestration in the long run if harvested wood is put into long-lived wood 

products and new forests are grown in their place. However, these authors, in addition to Lubowski et al. (2006), found that periodic harvesting decreases total carbon 

sequestration, thereby increasing the price per ton of carbon sequestered. This 

result is likely to be sensitive to assumptions regarding the length of time carbon is 

stored in wood products and other factors.

The forest sector can contribute to atmospheric greenhouse gas reduction, while also providing other environmental, economic, and social benefits.

Ralph Alig
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The discount rate adds an additional possible variant between studies. Discounting is used in carbon sequestration cost studies so that monetary and carbon 

flows occurring at different points in time are comparable. Boscolo et al. (1998) 

pointed out that the discount rate can be uncertain and even controversial. As the 

chosen discount rate rises, estimated future costs will have a smaller and smaller 

effect on the present value of costs. Newell and Pizer (2001) stated that the results 

of a study will be sensitive to the choice of discount rate. Newell and Stavins (2000) 

examined the effect of varying discount rates on sequestration costs and the amount 

of forest conversion induced by a specific tax or subsidy. They found that marginal 

sequestration costs (the cost of sequestering an additional ton of carbon) rise with 

the discount rate. This is because higher discount rates diminish the importance of 

future carbon flows relative to the upfront costs of establishing forests. On the other 

hand, more land is converted to forest because the upfront payments for carbon 

sequestration are large relative to the future losses in agricultural revenues, which 

decrease with a higher discount rate.

Related to the choice of discount rate is the method used to summarize carbon 

flows that occur through time. Stavins and Richards (2005) pointed out that carbon 

sequestration does not occur at one discrete moment, but instead throughout the life 

cycle of a forest. Within the literature, three methods have been used to develop a 

summary measure of a ton of sequestered carbon: the flow summation approach, 

the average storage approach, and the levelization/discounting approach (we refer 

readers to Richards and Stokes (2004) for technical details of these approaches). 

Richards and Stokes (2004) noted that the method used in a particular study can 

affect the results by up to an order of magnitude. However, we found that the 

levelization/discounting method is increasingly accepted as the appropriate way to 

treat carbon flows through time. It involves discounting flows in the same manner 

(and at the same rate) as costs.

Finally, Richards (2004) discussed the importance of choosing an appropriate 

baseline scenario of original land use. Each study needs to be able to compare the 

baseline case of what would have happened without the sequestration program to 

what would be accomplished with the sequestration policy. Newell and Stavins 

(2000) reported large differences in carbon sequestration when they considered 

different baselines defined in terms of agricultural price growth.

Econometric, Engineering, and Optimization Studies

As described by Stavins and Richards (2005), econometric carbon sequestration 

cost studies analyze data from actual land-use changes with the goal of identifying 

Three methods 

have been used to 

develop a summary 

measure of a ton of 

sequestered carbon: 

the flow summation 

approach, the average 

storage approach, 

and the levelization/

discounting approach.
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Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

the relationship between land-use choices and relative returns in the forestry, agricultural, and urban land sectors. To illustrate the econometric method, it is helpful 

to provide a quick overview of the approach taken by Lubowski et al. (2006). This 

study used National Resources Inventory (NRI) data that provide observations of 

plot-level land-use changes. Additionally, using a variety of sources, the authors 

constructed estimates of annual net returns for each county and major land types 

represented in the NRI data. An econometric model was developed to estimate the 

relationship between land-use changes over a specific period and annual net returns 

to each use. The methodology allows unobservable factors affecting actual land-use 

decisions to be measured implicitly. 

As stated earlier, the econometric calculation method removes a level of 

uncertainty that is found in many engineering models, leading in principle to more 

realistic predictions of how landowners will behave. Because they are based on 

actual historical data, these models can implicitly capture such factors as landowner uncertainty in the face of irreversible investments, nonmonetary returns 

to landowners from forest and agricultural uses of land, liquidity constraints, and 

other private or market costs or benefits (Lubowski et al. 2006). Some examples of 

econometric models are those by Newell and Stavins (2000), Plantinga et al. (1999), 

and Stavins (1999). 

The survey-based study by van Kooten et al. (2002) demonstrates why the 

unobservable incentives that are captured in the econometric method are so 

important. Van Kooten et al. evaluated survey results from 182 Canadian farmers 

Private timberland management costs and land conversion costs are important factors in decisions 

about forest production and use of forests to contribute to climate change mitigation.

Eric White
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GENERAL TECHNICAL REPORT PNW-GTR-833

and found that they were not solely motivated by potential profit from their lands. 

For example, the farmers indicated that they placed significant value on retaining 

control over their lands. Although these farmers placed some value on carbon 

sequestration, they preferred methods that allowed their land to still be used for 

agriculture. 

As discussed by Richards (2004), bottom-up engineering models (examples 

include Dudek and Le Blanc 1990, Moulton and Richards 1990, New York State 

1991, Richards 1997, Richards et al. 1993, Sedjo and Solomon 1989, van Kooten 

et al. 1992) generally use regional average land prices or land rents to estimate the 

opportunity cost of converting land from one use or practice to another. These 

values measure the foregone profits from agricultural production. The calculated 

opportunity cost is combined with the conversion costs for moving land from 

agricultural to forest use, and this becomes the total opportunity cost of the land. 

In the simplest approach, total annualized costs for each region are divided by 

an annualized measure of carbon sequestration for each region to obtain the cost 

per unit of carbon sequestered (or the average cost of carbon sequestration). An 

alternative approach, more useful because it facilitates comparisons across studies, 

is to construct a schedule of marginal costs. This gives the cost of an additional 

ton of carbon at each level of annual carbon sequestration (see, for example, fig. 

4-1). The engineering method has advantages of using observable information and 

transparency of the calculations. However, a downside of the engineering method, 

and a likely source of the differences in cost estimates provided by the engineering method compared to the econometric approach, is the inability to account for 

unobservable factors affecting landowner decisions. 

The third approach makes use of sectoral optimization models (examples 

include Adams et al. 1993, 1996, 1999; Alig et al. 1997, 2002; Sohngen and Mendelsohn 2003). These studies typically combine market models of agriculture and 

forestry and account for the interaction between the two sectors. Similar to engineering models, optimization models are not able to account for unobservable cost 

and benefits to landowners; however, they do account for the increasing scarcity 

of agricultural land as more of it is converted to forestry.2

 This scarcity increases 

agricultural commodity prices and corresponding returns to agriculture, which feed 

back into the carbon sequestration policy in two ways. First, as agricultural land 

becomes more valuable, it increases the cost of converting additional agricultural 

land into forest. Second, the increase in agricultural returns causes some forest land 

to be converted back to agriculture, reducing carbon sequestration and driving up 

2 Although engineering and optimization models do not explicitly account for unobservables, parameters can be varied to reflect uncertainty about their true values. 

A downside of the 

engineering method is 

the inability to account 

for unobservable 

factors affecting 

landowner decisions.
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Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

costs of sequestration. Therefore, cost estimates tend to be higher than bottom-up 

engineering studies that ignore such price effects. Adams et al. (1993) found that 

including these price effects raised marginal cost estimates at the highest carbon 

sequestration level by an amount between 57 and 470 percent. 

Review of Representative Studies

Engineering Study

Moulton and Richards (1990) is a representative bottom-up engineering study. For 

this study, data were collected for each farm production region in the United States 

(e.g., Corn Belt, Lake States, Northeast). For each region, areas of land in crop, 

pasture, and forest were identified and classified in terms of characteristics (dry, 

wet, soil quality, etc.) and potential for sequestering additional carbon. For example, 

the areas of dry and wet crop and pasture land with potential for afforestation were 

estimated for each region. Each land type was then matched with different treatments (e.g., tree planting for agricultural lands, active management for forest lands) 

yielding seven land type/treatments for each farm production region.

Opportunity cost is calculated by determining the likely rental cost per acre 

(i.e., the amount a landowner would charge somebody else to use their land). Rental 

rates are typically highest for cropland, second highest for pasture, and lowest for 

forest land. These rates also differ by region of the country. As an example, the 

rental rates (in 1990 dollars) for the Cornbelt are $200/ha ($81/acre) for cropland, 

Figure 4-1—Example of marginal cost curve of forest carbon sequestration from a bottom-up 

engineering approach, adapted from figure 3 in Moulton and Richards (1990).

0

5

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35

40

45

50

0 100 200 300 400 500 600 700 800 900

Marginal cost of carbon (dollars/ton)

Carbon sequestered (million tons)
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GENERAL TECHNICAL REPORT PNW-GTR-833

$61.06/ha ($24.72/acre) for pasture, and $21.37/ha ($8.65/acre) for forest land. 

Contrast this with the Appalachian rental rates of $150.67/ha ($61/acre) for cropland, $68.69/ha ($27.81/acre) for pasture, and $24.03/ha ($9.73/acre) for forest land. 

Note that these rates were fixed in the study and so there was no mechanism for 

the opportunity cost to change as land is converted into forest and agricultural land 

becomes more scarce. The authors also included the annualized cost of a specified 

forestry treatment (e.g., tree planting). Finally, the average annual rate of carbon 

sequestration over a 40-year time horizon was estimated. The total annual costs 

divided by average annual sequestration gives the average cost per ton of carbon for 

each region and land type/treatment.

Moulton and Richards constructed a marginal cost schedule by arraying these 

average cost per ton estimates against the cumulative amount of carbon sequestered 

(fig. 4-1). Each point on the graph corresponds to a region/land type/treatment combination, and marginal costs are seen to range from about $5.50/tonne ($5/ton) to 

about $50/tonne ($45/ton) (in 1990 dollars) at 726 million tonnes (800 million tons) 

sequestered. The Moulton and Richards study was one of the first careful analyses 

of carbon sequestration costs. The authors pointed out several limitations of the 

study that have been addressed (to varying degrees) in later studies. These include 

the lack of attention to indirect costs or benefits to society (such as environmental 

effects); no consideration of the effects of timber harvesting on the carbon budget; 

and lack of precision in estimates of opportunity costs.

Econometrics Study

The Plantinga et al. (1999) study is an early example of an econometric study that 

was motivated by potential shortcomings of previous engineering cost studies. The 

authors discussed a number of factors that can potentially affect land-use decisions, 

but which are difficult to account for explicitly: the irreversibility of conversion to 

forests, which may discourage landowners from making an otherwise profitable 

decision; the cost of knowledge, which might keep farmers from switching their 

land from agriculture to forest; and nonmarket benefits that might affect land-use 

decisions. The authors reviewed the findings of the previous econometric analyses 

by Plantinga (1997) and Stavins (1999) and reported that higher costs are found in 

econometric anlayses than in previous engineering studies. These higher costs are 

attributed to the unobservable factors discussed above.

Plantinga et al. (1999) extended the study by Plantinga (1997). The goal of 

the study was to compare carbon sequestration costs among regions of the United 

States, to model the effects of population increases, and to examine alternative 

program designs. An econometric model of aggregate land-use shares was estimated using county-level data from Maine, South Carolina, and Wisconsin. As 

A number of factors 

can potentially affect 

land-use decisions 

that are difficult to 

account for explicitly: 

the irreversibility of 

conversion to forests, 

the cost of knowledge, 

and nonmarket 

benefits.
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Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

stated before, these data will potentially reflect costs and benefits of different land 

uses that could not be explicitly measured with the engineering calculation method. 

Once the relationship between land-use shares and net returns to alternative uses 

was estimated, a simulation of afforestation subsidies was performed to estimate 

the response to carbon sequestration incentives. Following a procedure similar to 

that described above, a marginal cost curve for carbon sequestration was derived.

This econometric analysis provided cost estimates that are higher than those 

found in most earlier engineering or optimization analyses including Moulton 

and Richards (1990), Adams et al. (1993), Parks and Hardie (1995), and Alig et al. 

(1997). Direct comparisons are possible with the results in Moulton and Richards 

(1990). It was found that the Plantinga et al. cost estimates were approximately four 

times the cost for carbon sequestration in Maine and Wisconsin, and 1.1 times that 

in South Carolina. The results indicate the importance of deriving cost estimates 

from observed landowner behavior.

Sectoral Optimization Study

Alig et al. (1997) stated that in past analyses of carbon sequestration in forests, 

land market interactions, timber harvest, and forest investment have received far 

less attention than the biophysical relationships between forest biomass and carbon 

sequestration. To address this issue, the authors applied a linked model of the U.S. 

forest and agricultural sectors to investigate the effect of different carbon sequestration programs. Specifically, they investigated whether the effects of forest carbon 

sequestration programs differ significantly from those found in previous studies, 

with particular attention paid to the costs and mixture of land-based adjustments 

that occur when a specific carbon sequestration target is met. The authors used the 

Forest and Agricultural Sector Optimization Model (FASOM). In this model, the 

objective function is defined in terms of the welfare of producers and consumers 

in the U.S. agriculture and forest sectors over a finite time horizon. Under certain 

conditions, maximization of this objective function yields the solution that would be 

achieved in an competitive market equilibrium. 

Alig et al. focused on five scenarios: the base case, a simulated fixed-afforestation program assuming a specific land transfer, and three specific carbon-flux 

target scenarios assuming specific carbon sequestration targets. The base case was 

calculated, and all other projections were measured relative to this scenario. Using 

this method, it was found that the fixed-increment specific carbon sequestration 

target (carbon target 1) was more efficient than any other scenario. It was significantly more efficient than the scenario with the specific land-use target. According 

to the authors, this suggests that land-use changes do not have to be permanent, 
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GENERAL TECHNICAL REPORT PNW-GTR-833

and that minimum social cost strategies may involve more complex land transitions 

than previously stated. Carbon sequestration costs are not listed in this study, which 

instead looked at overall social welfare. However, Richards and Stokes (2004) 

derived the average cost of carbon (dollars/metric ton) using data from this paper 

and employing the levelization discounting method. They found that the fixedafforestation scenario had an average cost of $81/t, whereas the fixed increment 

scenario had an average cost of $24/t. 

Comparison of Normalized Cost Estimates

As discussed in the “Overview of Methodologies for Estimating Carbon Sequestration Cost” section, analysts must make many choices when estimating carbon 

sequestration costs. Because of this, it is often impossible to directly compare cost 

estimates from different studies. The difference in the estimates may be due to the 

cost estimation method, but also to the many other assumptions that the analyst 

must make. Fortunately, there have been a number of reviews of the literature that 

develop comparable cost estimates from groups of studies. Each of these reviews 

normalized the data using different criteria, but because the normalization was 

consistently applied to each set of studies one can draw conclusions about how cost 

estimates differ among engineering, econometric, and optimization approaches. 

Van Kooten et al. (2004) conducted a meta-analysis of a large set of carbon 

sequestration cost studies. Meta-analysis is a technique that attempts to determine 

how features of a study affect the results. Commonly applied in the medical field, 

it uses regression analysis to quantify how the design of studies affects the results 

obtained. Van Kooten et al. examined 981 estimates from 55 studies of the costs of 

creating carbon offsets using forestry, and then estimated an econometric model 

that analyzes how the different assumptions of each study affect the associated 

carbon sequestration cost estimates. This analysis controlled for many of the possible inconsistencies across studies, mentioned earlier, and found that many of them 

cause significant differences in cost estimates.

Van Kooten and Sohngen (2007) provided an update to van Kooten et al. (2004) 

that is more useful for our purposes. The 2007 analysis includes information on 

costs of carbon uptake and storage in forest ecosystems from 68 studies. More than 

three-quarters of the studies used a bottom-up approach, 18 percent used an optimization approach, and only 6 percent used an econometric approach. There were 

also many other differences in the assumptions of the different studies. The authors 

found, not surprisingly, that studies accounting for the opportunity cost of land 

produce higher cost estimates. A dummy variable for the opportunity cost of land 

is statistically significant and adds about $27.55/t ($25/ton) of carbon dioxide (CO2) 

to costs. A dummy variable for studies using an econometric approach was also 
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Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

included in one model specification. The coefficient had a positive and significant 

coefficient, which indicates that cost per ton estimates in econometric studies are 

about 16 percent higher than those from engineering studies. In another regression, 

the authors found that optimization studies produce estimates that are higher by 

$46/tonne ($42/ton) CO2, which represents about a 50-percent increase over the 

mean value of cost estimates in the studies considered. 

Richards and Stokes (2004) compared results from 36 studies, the majority of 

which used engineering calculation methods. Their review focused on studies with 

significance for global, national, and regional policies and did not include analyses 

of individual projects. Among the conclusions of this paper was that “although 

full carbon sequestration studies all contain essentially the same components, they 

are not comparable on their face due to the inconsistent use of terms, geographic 

scope, assumptions, and methods.” The paper contains a detailed discussion of the 

different calculation methods described above. The authors noted that bottom-up 

engineering studies do not generally account for market adjustments resulting 

from forest conversion, but they have the benefits of transparency and being easy 

to interpret. Several engineering studies that do account for the feedback effects on 

the marginal cost of land are those by Richards et al. (1993) and Richards (1997). 

Richards and Stokes (2004) mentioned several optimization models (Adams et al. 

1999, Alig et al. 1997) that allow for the possibility that forest may be converted 

back to agriculture as agricultural land becomes scarcer. This is the so-called 

Feasibility of joint production in forest ecosystems is influenced by costs of forest management 

activities, including opportunity costs of extending timber rotations to sequester additional carbon 

in woody biomass.

Bottom-up engineering 

studies do not 

generally account for 

market adjustments 

resulting from forest 

conversion, but they 

have the benefits of 

transparency and being 

easy to interpret.

Emily Jederlinich
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GENERAL TECHNICAL REPORT PNW-GTR-833

carbon “leakage” effect, which could potentially offset the accomplishments of a 

carbon sequestration policy. The discussion of econometric studies emphasizes that 

these studies analyze historical data to determine how landowners have behaved in 

the past and use this to predict how they would behave in the future in response to 

incentives created by a carbon sequestration policy. Therefore, econometric studies 

use a revealed-preference approach based on actual practices rather than assuming 

a specific model of landowner behavior.

Richards and Stokes (2004) compared the results of studies using several 

criteria, but the most important one for this literature review is a comparison of 

studies based in the United States, differentiated according to cost estimation 

method. Three studies were chosen for direct comparison based on the similarity 

of their basic assumptions: the econometric approaches applied by Stavins (1999) 

and Plantinga et al. (1999) and the bottom-up approach used by Richards (1997). All 

three studies developed marginal cost curves, which allows the comparison of costs 

across varying levels of carbon sequestration. At low levels of sequestration, the 

bottom-up method estimated higher sequestration costs (figs. 4-2 and 4-3). However, 

the marginal cost curves for the econometric studies are much steeper, and as total 

tons of carbon sequestered per year increases, the costs increase much more rapidly. 

At approximately 7.0 million tonnes per year, the cost estimates by Stavins are 

higher than those by Richards (we refer here to the modified Stavins curve, which 

was scaled up to include the same total area as in the study by Richards) (fig. 4-2). 

0

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50

60

70

0 10 20 30 40 50

Cost of carbon (dollars/metric ton)

Carbon sequestration (million metric tons per year)

Richards Stavins Modified Stavins

Figure 4-2—Comparison of marginal cost curves from two econometric (Richards and 

Stavins) and one bottom-up engineering study (modified Stavins), adapted from figure 3 

in Richards and Stokes (2004).
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Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

0

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Marginal cost ($/P

T

E)

Carbon (million PTEs per year)

a

Richards Plantinga et al.

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Figure 4-3—Comparison of marginal cost curves of forest carbon sequestration for (a) Maine, (b) South 

Carolina, and (c) Wisconsin, comparing Plantinga et. al (1999) and Richards (1997); adapted from figure 4 in 

Richards and Stokes (2004). PTE = present tons equivalent.
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GENERAL TECHNICAL REPORT PNW-GTR-833

Figure 4-4—Comparison of marginal cost curves for forest carbon sequestration by Lubowski et 

al. (2006) with optimization models (Adams et al. 1993, Callaway and McCarl 1996) and bottom-up 

engineering cost methods (Richards et al. 1993); adapted from figure 5 in Lubowski et al. (2006).

0

20

40

60

80

100

120

140

160

200

0

D

ollars/ton

Carbon (million tons per year)

This study

Stavins (1999)

Richards et al. (1993)

Adams et al. (1993)

Callaway and

McCarl (1996)

180

150 300 450 600 750 900

At 20 million t of carbon per year, marginal costs according to the modified Stavins 

curve are double those of Richards. For the comparison with Plantinga et al. (1999), 

data for Maine, South Carolina, and Wisconsin were drawn from Richards (fig. 

4-3). The same pattern emerges, with the econometric marginal cost curve being 

much steeper than the marginal cost curve calculated by the bottom-up engineering 

approach. At low levels of carbon sequestration, marginal costs in Plantinga et al. 

are double those in Richards.

Lubowski et al. (2006) performed an econometric evaluation of carbon sequestration costs. The marginal cost estimates from this study are higher at most carbon 

sequestration levels than previous estimates. This study differentiates itself from 

previous studies by three principal features. First, six major land uses are modeled. Second, micro data are used that are comprehensive of the contiguous United 

States. Third, key commodity prices are treated as endogenous in the simulations of 

the carbon sequestration supply function. Because this is one of the few econometric studies that allows for price feedbacks from the policy, it allows us to identify 

the cost differences between the econometric and optimization approaches. 

Lubowski et al. (2006) compared their results to those from other studies 

(fig. 4-4). They found that over the range of carbon prices considered in previous 

studies, their cost estimates were higher than those obtained using optimization 

models (Adams et al. 1993, Callaway and McCarl 1996) and bottom-up engineering 

cost methods (Richards et al. 1993). Compared to an earlier econometric analysis 

by Stavins (1999), they found similar costs at low carbon sequestration levels, 
101

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

but lower costs at higher carbon sequestration levels. The difference between this 

study and the study by Stavins was attributed to the different land use categories 

and scope (Stavins’s national results were extrapolated from a model estimated 

for a group of counties). Consistent with the other papers presented in this review, 

Lubowski et al. (2006) found that econometric estimates are higher in the range 

of forested acres that would be needed to sequester significant amounts of carbon. 

Although the econometrically estimated marginal costs begin at zero dollars per 

ton, they surpass those from the engineering and optimization studies after 100 

million tons of annual carbon sequestered. 

Stavins and Richards (2005) identified 11 previous analyses that they considered to be good candidates for comparison and synthesis (table 4-1). Results from 

these studies were normalized by adjusting for constant-year dollars, discount 

rates, geographic scope, and reporting in equivalent annual costs. Compared to the 

other studies discussed above, the normalization in Stavins and Richards is more 

thorough and, thus, this study provides the best basis for comparing cost estimates 

across studies. After the normalization, there were still significant differences 

in carbon sequestration costs, which the authors attributed to different underlying biological and economic assumptions as well as different analytical methods 

employed. Among the national studies, the reported range, after normalization 

to 1997 dollars, was $28 to $83/tonne ($25 to $75/ton) for a program size of 272 

million tonnes (300 million tons) of annual carbon sequestration, and $33 to $99/

Table 4-1—Carbon (C) sequestration cost studies included in normalization 

Potential Potential Range of

quantity Range of costs normalized normalized

Authors Scope reported reported quantity costs

Short tons $/short tons C Short tons $/short tons C

C/year C/year

Moulton and Richards (1990) National 809 x 106 5–43 809 x 106 5–57

Dudek and Leblanc (1990) National NAa 23.9–38.4 37.9 x 106 60

New York State (1991) New York 1.2 x 106 14–54 75 x 106 8–53

Adams et al. (1993) National 700 x 106 18–55 700 x 106 24–71

Richards et al. (1993) National NAb 8–60 448 x 106 11–81

Parks and Hardie (1995) National 120 x 106 4–82 120 x 106 2–37

Alig et al. (1997) National 44 x 106 22 44 x 106 27

Richards (1997) National 495 x 106 9–125 495 x 106 10–143

Stavins (1999) Delta States 13.9 x 106 0–664 722 x 106 0–816

Plantinga et al. (1999) Maine, South NAc 0–250 77 x 106 0–263

 Carolina, and

 Wisconsin

Lubowski et al. (2003) National 1700 x 106 7–275 1700 x 106 7–275

a The total quantity was not reported.

b Potential yield was reported as the cumulative amount of carbon over 160 years.

c Quantities were reported in “present ton equivalents” rather than tons per year.

Table 8 in Stavins and Richards (2005).

Econometric estimates 

are higher in the range 

of forested acres that 

would be needed to 

sequester significant 

amounts of carbon. 
102

GENERAL TECHNICAL REPORT PNW-GTR-833

0

25

50

75

100

125

150

175

200

225

250

275

300

0 500 1000 1500 2000

Unit cost ($/ton)

Carbonsequestration (million tons per year)

Lubowski et al. 2003, without harvest Dudek and LeBlanc 1990

Richards et al.1993 Alig et al. 1997

Lubowski et al. 2003, with harvest Parks and Hardie 1995

Moulton and Richards 1990 Adams et al. 1993

Richards 1997

Figure 4-5—Comparison of normalized marginal cost curves (or supply function) for forest carbon 

sequestration for national studies based on engineering, econometric, and optimization studies; adapted 

from figure 5 in Stavins and Richards (2005).

3 Note that the curves from Lubowski et al. 2003 are the same as those from Lubowski et 

al. 2006.

tonne ($30 to $90/ton) for a program size of 454 million tonnes (500 million tons) of 

annual carbon sequestration. The authors noted that a sequestration program of 454 

million tonnes (500 million tons) per year would offset approximately one-third of 

annual U.S. carbon emissions. 

Stavins and Richards constructed a marginal cost curve (or supply function) for 

carbon sequestration using the normalized results for the national studies (fig. 4-5). 

Curves are shown for engineering (Dudek and LeBlanc 1990, Moulton and Richards 1990, Parks and Hardie 1995, Richards 1997, Richards et al. 1993), econometric (Lubowski et al. 20033

), and optimization studies (Adams et al. 1993). Stavins 

and Richards found that normalization narrows the spread of the different cost 

estimation methods. For example, compare the position of the Adams et al. (1993) 

curve in figure 4-4 to its position in figure 4-5. There is still evidence that econometric methods produce higher costs. The marginal cost curves from Lubowski et 

al. (2003) are the highest over the range of 227 to 454 million tonnes (250 to 500 

million tons) per year, but lie below those of Dudek and LeBlanc (1990), Parks and 
103

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

Hardie (1995), and Alig et al. (1997) at lower levels of carbon sequestration. As 

well, the cost curve from Richards (1997)—an engineering study—is the highest 

after 454 million tonnes (500 million tons).

Finally, tables 4-1 and 4-2 report normalized cost estimates from Stavins and 

Richards (2005) and Stavins (1999) for groups of studies that include regional 

analyses. Again, there is evidence that the highest cost estimates are produced by 

econometric analyses.

Table 4-2—Comparison with results from other studies 

Total quantity Average cost Marginal cost

Study Land Carbon Land Carbon Land Carbon

Million Million $/acre $/ton $/acre $/ton

acres tons/yr per yr per yr

This studya

 United States normalization 342 518 106 70 ≤ 200 ≤ 136

 Delta states 5 7 58 38 ≤ 100 ≤ 66

Moulton and Richards (1990)

 United Statesb 269 690 — 27 ≤ 81 ≤ 37

 Delta states cropland 25 67 50 22 — —

Richards et al. (1993)

 United Statesc 244 416 — — — ≤ 41

 Delta states croplandd 11 29 42 18 ≤ 52 ≤ 22

Adams et al. (1993)e 274 700 — — — ≤ 27

Nordhaus (1991)f 248 44 81 64 — —

Parks and Hardie (1995)g 9 22 49 21 — ≤ 24

Rubin et al. (1992)h 71 73 — 23 — —

Dudek and LeBlanc (1990)i 14 — — 38 — —

Plantinga (1995)j 0.65 1.5 — — — 6-13

Callaway and McCarl (1996)k 187 280 — — — ≤ 25

a Pine plantation, periodically harvested, at a 5-percent discount rate.

b Permanent stands on cropland and pastureland only, i.e., not forest land.

c Figure for total U.S. carbon sequestration is an annuity calculated at 5 percent over 160 years.

d These figures were used, but not reported, in Richards et al. (1993). Reference is to a permanent pine stand, 

based on data provided in a personal communication from Richards (1994). Carbon costs and tonnages were 

annualized over 160 years at a 5-percent discount rate.

e Nationwide results for a scenario with harvesting and sale of timber (Stavins 1999: table 1 p. 79 and table 4 p. 

83), recalculated at a 5-percent discount rate.

f Permanent forestation of “marginal U.S. land” (Stavins 1999: table 8 p. 60). For this and other studies, we have 

converted to acres at a rate of 1 hectare = 2.477 acres and to short tons at a rate of one metric ton = 1.102 short 

tons.

g Figures are for U.S. cropland-only scenario (Stavins 1999: table 1 p. 127). Marginal costs were computed from 

marginal cost formula for figure 4 (Stavins 1999: p. 131) using 22 million tons per year and annualized using a 

4-percent discount rate over 10 years.

h Nationwide results converted from original study (Stavins 1999: table 3 p. 261) at a rate of 3.67 tons of carbon 

dioxide (CO2) equals one ton of carbon, and into short tons from metric tons. i An average permanent stand of U.S. tree species, from Stavins 1999: table 3 p. 36; CO2 converted to carbon.

j Figures are for a 14-county region of Wisconsin for the scenario assuming a least-cost program at a 4-percent 

discount rate and a constant annual sequestration rate of 2.25 tons of carbon per acre (Stavins 1999: table II). 

Hectares converted to acres.

k Calculations use a 5-percent discount rate, employ carbon yield functions from Birdsey (1992), and do not 

allow for farm programs.

Source: Table 3 from Stavins (1999).
104

GENERAL TECHNICAL REPORT PNW-GTR-833

Results and Conclusions

Two decades of research supports the conclusion that afforestation can be used 

to offset CO2 emissions at costs that are comparable to or lower than those with 

energy-based approaches such as energy efficiency and fuel switching. Nevertheless, differences in carbon sequestration cost estimates among studies are deserving 

of further investigation. Part of the explanation is that researchers analyze different 

regions with different forest species and opportunity costs of land. In this review, 

we have tried to identify differences that arise from the methodology used to 

compute costs, focusing on the three dominant modeling approaches—bottom-up 

engineering, sectoral optimization, and econometric models. Our main finding is 

that the optimization approach produces higher cost estimates than the engineering 

approach because it accounts for price feedbacks from the policy that are typically 

ignored in engineering studies. As more land is converted from agriculture to forest, agricultural commodity prices should rise and forest commodity prices should 

fall, depressing incentives to move more land into forest. In addition, we found that 

the econometric approach produces higher cost estimates than both the engineering 

and optimization methods. The most likely reason is that the econometric approach 

can account for a number of factors that affect land use decisions in practice but 

that are difficult to measure explicitly for engineering and optimization models. 

These include landowner uncertainty in the face of irreversible investments, nonmonetary returns to landowners from forest and agricultural uses of land, liquidity 

constraints, and other private or market costs or benefits.

For policymakers interested in knowing how much U.S. forest carbon sequestration can contribute to an emissions reduction target, a conservative estimate 

based on the evidence from many studies is that 454 million tonnes (500 million 

tons) could be sequestered annually at a price of $110/tonne ($100/ton) of carbon. 

This is the estimate found by Stavins (1999) and Lubowski et al. (2006), two 

econometric studies, and Richards et al. (1993) and Richards (1997), two engineering studies that account for price feedbacks. It should be emphasized, again, that 

the cost estimates in this literature are the opportunity costs, or the social costs, of 

offsetting carbon emissions through afforestation. The costs to the government of 

achieving emissions reduction targets are likely to be considerably higher. Indeed, 

if one considers that raising public funds to pay for a carbon sequestration policy 

can have welfare implications, then the social costs of carbon sequestration may be 

underestimated. This discussion points to the need for further research on a number 

of implementation issues that still must be carefully addressed before a large-scale 

carbon sequestration program can be put into effect. For instance, to reduce the 

budgetary impacts of a carbon sequestration program, the government would need 

The optimization 

approach produces 

higher cost estimates 

than the engineering 

approach because 

it accounts for price 

feedbacks from the 

policy that are typically 

ignored in engineering 

studies.
105

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

to address the issue that landowners will have more information about their opportunity costs than the government does. A number of contracting schemes can be 

employed in this context to reduce government costs. 

Acknowledgments

Funding from the U.S. Department of Agriculture, Forest Service, Pacific Northwest Research Station is gratefully acknowledged. The authors thank Ken Richards 

and Ned Stone for helpful comments.

English Equivalents

When you know: Multiply by: To get:

Hectares (ha) 2.47 Acres

Grams (g) 0.352 Pounds

Metric tonnes 1.102 Tons

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Adams, D.M.; Alig, R.J.; McCarl, B.A.; Callaway, J.M.; Winnett, S.M. 1999.

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Birdsey, R.A. 1992. Carbon storage and accumulation in United States forest 

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Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

Chapter 5: Literature Review: An 

Economic Analysis of Incentives for 

Carbon Sequestration on Nonindustrial 

Private Forests (NIPFs)

by Christian Langpap and Taeyoung Kim

Introduction

There is widespread recognition of the potential role forests can play in contributing 

to greenhouse gas (GHG) reductions through carbon sequestration (Brand 1998, 

Lubowski et al. 2006, Metz et al. 2001). Nonindustrial private forests (NIPF) make 

up a significant portion of U.S. forests (approximately 40 percent). Thus, it is crucial 

to assess the role that NIPF landowners can play in broader carbon sequestration 

efforts. 

Management actions by NIPF owners that could increase carbon sequestration 

on their lands include afforestation of land used for agriculture, increasing rotation 

length, intensive management (e.g., juvenile spacing, fire control, fertilization), 

changing stocking density, or choosing alternative tree species (Shaikh et al. 2007, 

Sohngen and Mendelsohn 2003, Stainback and Alavalapati 2002). Because the 

resulting carbon sequestration benefits are to a large extent external to individual 

landowners, incentives may be necessary to induce them to adopt these management options (Stainback and Alavalapati 2002). Specific incentives could include 

carbon sequestration subsidies and carbon release taxes, carbon rental fees, costsharing agreements, and agglomeration bonuses.1

 A key question is how effective 

these different policies can be in eliciting the desired management choices by NIPF 

owners. This includes assessing and understanding (1) baseline behavior, i.e., NIPF 

landowner management choices and implications for carbon sequestration in the 

absence of any incentives and (2) whether and how management choices could be 

modified by incentive-based policies, i.e., how landowners would respond to different types of incentives and the implications for carbon sequestration and incentive 

policy design. 

Other factors to consider in assessing the potential of NIPFs for carbon sequestration include forest fragmentation and other spatial considerations, including the 

possibility of economies of scale for carbon sequestration (e.g., aggregators) and 

1 The emergence of markets for ecosystem services in general, and carbon markets in 

particular, could also create an important incentive for carbon sequestration. However, 

reviewing the existing research on carbon markets lies outside the scope of this literature 

review.

Because the resulting 

carbon sequestration 

benefits are to a large 

extent external to 

individual landowners, 

incentives may be 

necessary to induce 

them to adopt these 

management options.
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GENERAL TECHNICAL REPORT PNW-GTR-833

the potential role of agglomeration incentives; the impact of carbon markets on the 

value of forest land and the implications for transitions between forest and agriculture through increased afforestation or reduced deforestation; and other forest 

management objectives that may prevent landowners from undertaking carbon 

sequestration activities or reduce the extent to which they do so. In this report we 

lay the foundation for research that will begin to address these questions. 

Carbon Sequestration in Forests

A large and growing literature addresses the general topic of carbon sequestration 

in forests. Most of the attention to date has focused on issues related to the afforestation of agricultural land. A smaller body of work addresses carbon sequestration 

in existing forests, but does not necessarily focus on NIPFs. Only a relatively small 

number of studies deal specifically with the issue of carbon sequestration in NIPFs.

Afforestation of Agricultural Land

Much of the literature that examines afforestation of agricultural land has focused 

on estimating the costs of carbon sequestration. Parks and Hardie (1995) simulated 

the impacts of subsidies for sequestering carbon in new forests established on 

agricultural land. They derived a supply schedule for carbon sequestered in marginal agricultural land converted to forest and used this supply schedule to develop 

criteria for enrolling lands in a national carbon sequestration program. Plantinga et 

al. (1999), Stavins (1999), Newell and Stavins (2000), and Lubowski et al. (2006) 

used econometric models of land use to simulate the effects of a payment (subsidy) 

for forested agricultural land and a tax on deforested land. They found that sequestration increases with a subsidy or a combined subsidy/tax policy, but their main 

emphasis was on estimating marginal costs of sequestration. 

Plantinga et al. (1999) suggested that afforestation is a relatively low-cost way 

of reducing carbon concentrations. Stavins (1999) stressed that marginal costs of 

sequestration are not trivial, and that land heterogeneity leads to sharply increasing marginal costs as higher quality agricultural lands are converted to forest. 

Newell and Stavins (2000) found that costs of sequestration can be higher if trees 

are harvested periodically rather than permanently established, that marginal costs 

increase with discount rates, that higher agricultural prices lead to higher costs 

or less sequestration, and that delayed deforestation can sequester carbon at lower 

cost than increased forestation. Lubowski et al. (2006) estimated marginal costs of 

carbon sequestration greater than those from previous engineering cost analyses 

and sectoral optimization models. They found that the estimated sequestration supply function is similar to the carbon abatement supply function from energy-based 

Land heterogeneity 

leads to sharply 

increasing marginal 

costs of sequestration 

as higher quality 

agricultural lands are 

converted to forest. 
111

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

analyses, suggesting that forest-based carbon sequestration merits inclusion in a 

cost-effective portfolio of domestic U.S. climate change strategies. 

Plantinga and Wu (2003) simulated the response by private landowners to subsidies for converting agricultural land (cropland and pasture) to forest in Wisconsin. 

They examined the environmental impacts of afforestation that go beyond carbon 

sequestration, such as modification of wildlife habitat and reductions in agricultural 

pollution, and found that the additional environmental benefits would be substantial, on the same order of magnitude as the costs of the subsidy program. Gillig et 

al. (2004) examined the effects of carbon payments in the form of a sequestration 

subsidy or an emission tax. They estimated response functions that depict the 

effects of carbon prices, energy prices, domestic agricultural demand, and foreign 

agricultural demand on GHG emission reductions and sequestration. Their results 

suggest that restricting carbon payments only to afforestation or deforestation or 

only to agricultural sequestration substantially reduces potential mitigation. Policies 

that include both sectors consistently yield the largest quantity of GHG offsets in 

their simulations. 

Other papers have explicitly modeled the links between agricultural land, forest 

land, and timber markets, and examined the potential for offsetting changes in 

land use (from forest to agriculture) resulting from price feedbacks. Adams et al. 

(1993) addressed the link between forest and agricultural sectors to capture price 

feedbacks between forest, agricultural, and land markets. They found empirical 

evidence of a rise in agricultural prices, a fall in timber prices, and changes in 

stakeholder welfare that could result from large-scale afforestation programs. They 

Landowner behavior is a major determinant of land use and land cover changes, an important 

consideration for policy analyses concerned with climate change adaptation and mitigation.

Emily Jederlinich
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GENERAL TECHNICAL REPORT PNW-GTR-833

argued that private landowners might need to be compensated to keep their land in 

forests. Otherwise, the price changes resulting from afforestation could provide an 

incentive for offsetting land-use changes from forest to agriculture, creating carbon 

leakage. Alig et al. (1997) used a model of the U.S. forest and agriculture sectors 

in which land-use choices and forest management decisions are endogenous. They 

examined the costs and land base adjustments from meeting a carbon sequestration 

target to minimize net social welfare costs. Their results suggest that policy-induced 

land-use changes to forestry may induce compensating land-use changes through 

their impact on markets. They argued that land-use shifts to meet policy targets 

may not be permanent, and found that the main forms of adjustment to meet policy 

targets are to shift land use from agriculture to forest and to manage forests more 

intensively. 

Finally, some papers have reported similar studies in other countries. For 

example, De Jong et al. (2000) examined the response of small (subsistence) farmers and communities in southern Mexico to incentives to switch from their current 

land use to forestry or adopt management measures to increase sequestration, such 

as agroforestry or improved forest management. They calculated the expected 

response to financial incentives in the form of carbon sequestration rents ranging 

from $0 to $40 per megagram of carbon (MgC) sequestered. They found that the 

amount of carbon sequestered would rise rapidly from 1 million MgC to 38 million 

MgC when the incentive level increases from $5 to $15 per MgC, owing mainly to 

natural forest management and fallow improvement. 

Van Kooten et al. (2002) examined the institutions and incentives needed to 

encourage landowners in Canada to adopt tree planting on a large scale. They used 

data from a survey of farmers in western Canada's grain belt region to provide 

insights concerning transaction costs and the design of appropriate institutions 

and economic incentives for creating additional terrestrial carbon sinks at least 

cost. Their results suggest that transaction costs of getting landowners to convert 

their land from agriculture to plantation forests appear to be a significant obstacle, 

possibly increasing the costs of afforestation projects beyond what conventional 

economic analysis suggests. Over one-quarter of their survey respondents indicated 

that they would be unwilling to enter into an afforestation program voluntarily, 

even if they are fully compensated for lost agricultural revenues and tree planting 

costs. The authors argued that a possible reason is that later improving land for any 

subsequent agricultural use by removing trees is considered costly, both financially 

and in terms of utility. 

Zelek and Shively (2003) measured the costs of carbon sequestration on tropical farms in the Philippines. They empirically estimated the value of agricultural 

Transaction costs of 

getting landowners 

to convert their land 

from agriculture to 

plantation forests 

appear to be a 

significant obstacle, 

possibly increasing the 

costs of afforestation 

projects beyond what 

conventional economic 

analysis suggests.
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Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

land and the opportunity cost of converting fallow and agricultural land to forest 

and agroforest. They also derived the rates of carbon sequestration for timber and 

agroforestry systems and computed incentive-compatible compensating payment 

schedules for farmers who sequester carbon. To compute agricultural opportunity 

costs, they used a combination of data from household surveys conducted in the 

watershed and results from farm-level simulations. They found that agroforestry 

systems are a lower cost alternative to pure forest conversion, providing carbon 

storage at a marginal cost that is up to 23 percent lower than the marginal cost of 

carbon storage through conversion to a pure tree stand. 

Shaikh et al. (2007) examined the costs of planting trees on marginal agricultural land in western Canada and the compensation landowners would require for 

converting pasture and cropland to forestry. They conducted a contingent valuation survey of landowners to incorporate nonmarket values, risk attitudes, and 

unobservable transaction costs. They found that farmers are unwilling to plant trees 

on agricultural land without financial incentives, but that the necessary incentives 

could be less than net returns to agricultural activities on marginal agricultural 

land due to nonmarket benefits from trees perceived by farmers. Nevertheless, they 

found that average costs of carbon sequestration generated this way would exceed 

the projected value of the corresponding carbon credits under a carbon emissions 

trading program. 

Landowners have retained subsidized afforested stands at high rates and well beyond government 

program life.

USDA Forest Service
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GENERAL TECHNICAL REPORT PNW-GTR-833

Ahn (2008) used an econometric land-use share model with province-level data 

to calculate the costs of carbon programs through afforestation in Korea. Estimation 

results show that an increase in forest returns causes landowners to convert agricultural land to forest, and suggested that carbon sequestration can be a cost-effective 

mitigation policy in Korea, although it is not necessarily the least-cost option. Ahn 

argued that enhancing the management of timberland to increase carbon stored 

per unit area is just as important as expanding afforestation. Rodríguez-Vicente 

and Marey-Pérez (2009) analyzed NIPF owners’ management choices to transition between farming and forestry in northern Spain. They used a survey of NIPF 

owners and focused on past conversion of forest to meadow and marginal meadow 

to woodland. They examined the structural attributes of the forest holding and past 

changes and future land-use intentions of NIPFs in the region for the 1999–2003 

period. They found that the greatest forest management activity was associated 

with larger (productive) forest holdings, less divided forest land, and more time 

available to dedicate to forestry activities. Conversion of forest land into meadow 

responded to increasing demand for agricultural land and landowner’s occupation 

as a farmer. Past transformation of marginal meadow to forest and future intentions 

to increase forest area depended on past experience with forestry and whether it 

had been profitable, and on the occupation of the landowner (retired farmers and 

nonagricultural professionals). Intention to change forest species also depended on 

forest profitability.

This literature does not focus specifically on NIPFs or on studying the effectiveness of providing incentives for carbon sequestration. However, these studies 

rely on financial incentives, mostly tax/subsidy combinations, to measure the costs 

of afforestation programs. They strongly suggest that financial incentives and 

changes in relative returns to land use affect landowner behavior and can be used to 

increase carbon sequestration in private forests. 

Carbon Sequestration in Existing Forests

A number of papers focused more specifically on increasing carbon sequestration 

in existing forests. Van Kooten and Sohngen (2007) provided a useful summary of 

this literature. 

Plantinga and Birdsey (1993) developed a carbon budget model to examine the 

effects of forest management practices on carbon storage in private U.S. forests. 

The U.S. Forest Sector Model was used to project changes in forest resources under 

the assumption of market equilibrium for wood products. Changes in the forest 

carbon inventory result from tree growth and management activities, in particular 

harvesting. A base-run scenario projects increases in carbon storage in private 
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Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

timberlands by 2040; however, this increase is offset by carbon emissions resulting 

from harvesting. The study concluded that, if current trends in private timberland 

management continue, the effectiveness of these lands as a carbon sink may be 

limited. Although carbon budget surpluses are expected in near decades, increasing 

deficits are projected in the future as harvests increase to meet higher demand for 

wood products.

Englin and Callaway (1993) investigated the impact of carbon payments on the 

optimal rotation age of Douglas-fir (Pseudotsuga menziesii (Mirb.) Franco). Using 

a range of carbon values from $10 to $200 per metric ton, they found that with 

carbon payments, the rotation age is longer than the traditional Faustmann rotation 

age and is positively correlated with the price of carbon. Plantinga and Birdsey 

(1994) conducted a theoretical study to incorporate carbon payments into the 

forest rotation problem. They concluded that, in most cases, the optimal rotation is 

infinite when only carbon benefits are included in the analysis, whereas when both 

carbon and timber are included, the optimal rotation would be between the optimal 

carbon-only rotation and the optimal timber-only rotation. Huang and Krongrad 

(2001) estimated the annual financial compensation that utility companies would 

have to pay private forest landowners to encourage sequestering additional carbon 

and calculated the average cost to sequester a ton of carbon. They calculated the 

amounts needed to compensate forest landowners who apply economically suboptimal rotations to sequester maximum carbon or to motivate private landowners 

to convert unstocked lands into productive forest lands to sequester carbon. They 

found that the annual compensation values tend to increase as real interest rates 

increase: the minimum annual compensation is $0.84 per ha using an interest rate 

of 2.5 percent, whereas the maximum annual compensation is $72.79 per ha using 

an interest rate of 12.5 percent.

Murray (2003) used an analytical model of timber and carbon rotation and 

data from different forest settings to examine the effects of carbon sequestration 

incentives on the optimal management of an individual forest stand. He found that 

the incentive modifies the optimal timing of harvest and the return to forest land 

use. Sohngen and Mendelsohn (2003) added carbon sequestration to an optimal 

control model of GHGs, and modeled an incentive for sequestration that takes the 

form of a carbon rental fee for each additional ton of carbon stored. They found that 

carbon rental payments increase the value of land used for forests, causing more 

land conversion to forest and increasing rotation lengths and management intensity 

(increasing stock density). However, they argued that changing management intensity 

is more costly and less effective at carbon storage than is afforestation. Sohngen 

and Brown (2006) used a land-use share model to examine the mix of upland 
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GENERAL TECHNICAL REPORT PNW-GTR-833

hardwoods and softwoods in a three-state region of the South Central Untied States 

(Arkansas, Louisiana, and Mississippi). The land-use share model was combined 

with a simulation model to examine the types of subsidies that could be used to 

maintain the stock of hardwoods in this region. The results suggest that subsidies 

of approximately $12 to $27 per ha per year would maintain the area of hardwood 

forests and reduce carbon emissions over the next 30 years. 

Guthrie and Kumareswaran (2009) used a theoretical model to examine the 

effectiveness of carbon credit payments in providing incentives for private forest 

owners to increase forest land and lengthen rotations. They focused on alternative 

payment systems that could be used to allocate carbon credits to forest owners, 

including allocation of credits depending on the amount of carbon actually sequestered at a point in time, and allocation according to the long-run carbon sequestration potential of land, where landowners receive payment as long as the land is 

planted with trees. They found that allocating carbon credits can significantly alter 

harvesting decisions by making forestry more profitable, lowering the timber price 

at which the landowner abandons forestry (i.e., switches land use) as well as the 

price at which it is optimal to harvest and replant. Their results suggest that payments based on actual carbon stock lead to longer rotation periods, whereas payments for long-run potential sequestration induce shorter rotation periods. Payments 

based on actual sequestration leads to greater benefits from sequestration at a lower 

cost. 

Unintended consequences of policies can lead to significantly different outcomes than 

envisioned, including leakage associated with market responses to changes in supply and 

demand.

Emily Jederlinich
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Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

In research focused on other countries, van Kooten et al. (1995) examined 

the implications of carbon subsidies and taxes for economically optimal harvest 

decisions and for carbon sequestration in forests in western Canada. Subsidies 

are intended to encourage planting and management activities that promote tree 

growth, and taxes discourage harvest and the subsequent release of carbon. They 

found that (for the most likely range of parameters) rotation ages would increase by 

roughly 20 percent over the level where no carbon costs or benefits are considered.

These papers examine carbon sequestration in forests, but do not focus specifically on NIPFs. Nevertheless, their results broadly agree with those from the 

literature that examines afforestation. In particular, they suggest that incentive 

programs including taxes or carbon payments or other types of subsidies can impact 

the management decisions of forest owners in ways that can lead to increased 

carbon sequestration.

Carbon Sequestration in NIPFs 

There is a small literature that discusses carbon sequestration in the specific context 

of NIPFs. Stainback and Alavalapati (2002) suggested that forests being managed 

for commodity production could sequester additional carbon by lengthening the 

rotation and producing more products with a long product life, such as sawtimber, 

and fewer products with a shorter product life, such as pulpwood. They argued that, 

for private forests, incentives may be necessary to induce landowners to consider 

carbon sequestration benefits in their production decisions. They examined how 

internalizing carbon benefits onto private pine plantations in the Southeast United 

States would impact forest management, specifically the optimal rotation age, the 

product mix produced, and the amount of carbon supplied in slash pine forests. 

They set up a model in which landowners are compensated for carbon sequestered 

as trees grow and carbon is stored in timber products (sawtimber and pulpwood) 

and are taxed for carbon emissions at harvest. They found that a carbon subsidy 

and tax policy would increase the amount of carbon sequestered in a forest stand 

in two ways: by lengthening the rotation age and increasing the amount of biomass 

produced in the stand, and by increasing the proportion of the biomass put into 

long-lived end products such as sawtimber. This incentive system would have a 

significant impact on the management decisions of private forest-land owners. 

Positive values for carbon significantly increase forest-land rents. This increase in 

private forest-land rents induces landowners to use a larger portion of their land 

for timber production, thereby increasing timber supply at the extensive margin. 

The increase in forest-land rents could also reduce forest conversion to other uses 

such as urban development. They also argued that the increase in land values has 

For private forests, 

incentives may be 

necessary to induce 

landowners to consider 

carbon sequestration 

benefits in their 

production decisions. 
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GENERAL TECHNICAL REPORT PNW-GTR-833

implications for the implementation of a carbon subsidy and tax policy, as the fact 

that landowners would gain substantially from such a policy indicates that it could 

be implemented on a voluntary basis similar to the way the Conservation Reserve 

Program is implemented. 

Alig (2003) summarized land-use and land cover changes; identified the drivers 

of deforestation, afforestation, reforestation, and timber harvest; and highlighted the 

implications for carbon sequestration in forests, including NIPFs. He argued that 

U.S. landowners have responded significantly to past government programs for tree 

planting (afforestation), such as subsidized tree planting for environmental goals, 

and that projections indicate that U.S. private timberlands have considerable potential for additional wood production and more carbon sequestration under intensified 

management. However, he noted that NIPF owners' responses to incentives that try 

to affect harvest decisions, such as delaying harvest, are complicated by the fact 

that many owners do not have timber production as a primary goal and that some 

owners have multiple land management objectives. 

Im et al. (2007) examined the welfare impacts and costs of a carbon tax and 

subsidy program for enhancing the sequestration of carbon on the existing private 

forest land base. Forest owners are subsidized for the carbon they accumulate and 

taxed for the carbon released by harvesting. They developed a theoretical model of 

a forest owner's response to the carbon tax and demonstrated how the forest owner 

would adjust harvest in various circumstances. They employed a model of the log 

market in Oregon to develop specific estimates of the impacts of the carbon tax on 

harvest and management actions and to examine the cost-effectiveness of the carbon tax as a mitigation option in the forestry sector. The simulated carbon tax leads 

to reduced harvest and increased carbon stock in standing trees and understory 

biomass. Changes in the level of silvicultural investments differ by owner, depending on the nature of their initial inventory. Average rotation age increases, varying 

in extent across ownerships and site qualities. Their estimates of the marginal cost 

of sequestering carbon in Oregon private forests are shown to be within the range 

of costs for projects considering afforestation alone in some eastern regions of the 

United States. 

Fletcher et al. (2009) examined the willingness of NIPFs in Massachusetts to 

sell carbon credits in several hypothetical carbon sequestration programs. They 

used a pilot survey of 17 NIPFs in western Massachusetts that contained a choice 

experiment for six alternative carbon credit programs with different eligibility 

requirements, time commitment, expected payment, and penalty for early withdrawal. They used regression models to examine the relationship between program 

ratings and attributes and socioeconomic characteristics of NIPFs, as well as 

Nonindustrial 

private forest 

owners' responses 

to incentives that 

try to affect harvest 

decisions are 

complicated by the 

fact that owners 

have multiple 

land management 

objectives. 
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Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

their willingness to sell credits at various prices. They found that program rating 

increases with the expected payment and the length of commitment and decreases 

with the early withdrawal penalty. They also found that at current carbon credit 

prices, very few participants (less than 7 percent) would be willing to sell. However, 

the small sample size of this study suggests that these results should be interpreted 

with caution. 

Our review of the literature on carbon sequestration in forests reveals that little 

attention has been paid to the potential effects of incentives for carbon sequestration in NIPFs. The broader literature on afforestation of agricultural land and 

carbon sequestration in forests suggests that incentives can be effective in changing 

land-use and forest management decisions in ways that could increase the amount 

of carbon sequestered in forests. The extent to which these general results apply 

specifically to NIPFs, however, remains an open question given that, as Alig (2003) 

pointed out, their motivations for owning and managing forest land may differ 

from those of other forest owners and landowners. To gain additional insight into 

the behavior of NIPFs, next we review the broader literature on how they respond 

to incentive programs with alternative environmental goals, such as sustainable 

forestry practices or biodiversity conservation. 

Incentives and NIPF Landowner Behavior 

A large literature explores NIPF landowner characteristics, objectives, and forest 

management decisions. This literature identifies a variety of policy tools that may 

Future developments in other sectors are likely to continue to impact the forest sector and its relative 

advantage in sequestering greenhouse gases.

Ralph Alig
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influence the management decisions of NIPF owners, including education, technical assistance, regulation, and financial incentives. The most common financial 

incentives include cost sharing or grants for developing forest management plans or 

implementing forest management practices, including planting and stand improvement, and tax incentives through the federal income tax and state property tax 

systems (Jacobson et al. 2009a, 2009b). Summaries of this literature include Alig et 

al. (1990), Amacher et al. (2003), Greene et al. (2005, 2006), Kilgore et al. (2007), 

and Joshi and Arano (2009).

Many of these papers focus on how landowner attributes and incentives shape 

forest management decisions or sustainable forestry practices. Several authors have 

reviewed the literature and concluded that NIPF owners are largely unaware of the 

existence of incentives or do not understand how they apply to them and that often 

they would carry out the supported practice even in the absence of incentives. They 

found that NIPF owners are largely unresponsive to property tax and capital gains 

provisions, and that forest property tax programs are only modestly successful 

in achieving their goals (Greene et al. 2005, 2006; Jacobson et al. 2009a, 2009b; 

Kilgore et al. 2007). They also identified approaches that have consistently been 

found to provide adequate incentives for NIPFs to practice sustainable forestry: 

technical and management planning assistance, cost sharing, and direct contact 

with a forester or natural resource specialist. When tree planting on agricultural 

land is induced, a relatively large percentage is retained over a long period (e.g., 

Alig et al. 1980).

Jacobson et al. (2009a, 2009b) additionally used a survey of forestry agency 

officials who administer public incentive programs to examine whether, given 

changing forest ownership patterns and program emphases, financial incentives in 

the northern and southern regions are effective in promoting sustainable forestry 

practices, whether some programs are more effective than others, and the characteristics of effective programs. They evaluated eight federal incentive programs and 

three nonfederal programs. They found that forestry officials rated federal incentive 

programs as only adequate for NIPF owner awareness and appeal. They argued 

that one possible reason for the low appeal is a general wariness of participating 

in government programs for fear of loss of independence and fear of government 

control over management choices. Overall, forestry officials think that financial 

incentives are effective in promoting sustainable management practices. The results 

suggest that, in general, programs targeted specifically to forest owners are rated 

higher than programs targeted to ranchers and farmers in addition to forest owners. 

Joshi and Arano (2009) also found that NIPF owners are largely unaware of 

incentive programs available to them, and thus argued that much remains to be 

When tree planting 

on agricultural land is 

induced, a relatively 

large percentage is 

retained over a long 

period.
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Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

done to encourage NIPF landowner investment in forestry activities. They suggested that existing programs have had limited success because they emphasize 

timber production, whereas landowners usually own forests for a variety of reasons, 

including recreation and wildlife or as a site for their home, and timber production 

may not be their main priority. They used data from a mail survey of 2,100 NIPF 

owners in West Virginia to evaluate the factors affecting their decisions to engage 

in timber harvest, silvicultural activities (e.g., planting, fertilization), property management (e.g., road maintenance, access control), and wildlife habitat management 

and recreation improvement. They found that age, education, profession, income, 

ownership size, length of ownership, distance to residence, objective of ownership, 

and development of a management plan were significant determinants of at least 

one of the categories of management activities. 

Hardie and Parks (1996) examined how the level of cost-sharing might have 

affected the number and size of forest tracts enrolled in the reforestation cost component of the Forestry Incentive Program (FIP) in the southern pine region of the 

United States. They reported acreage enrollment predictions for government cost 

shares ranging from 0 to 100 percent. They also developed predictions that offer 

some insight into the potential effects of an education program aimed at informing 

NIPF landowners about the reforestation component of the FIP. The data used in the 

analysis are from an area-frame survey conducted by the National Agricultural Statistics Service. The results suggest that few acres would be replanted after harvest 

if the cost-sharing programs did not exist. The results also show that total acreage 

predictions decrease much more rapidly with decreases in the rate of cost-sharing 

when size of tracts installed by landowners is predicted to respond to the level of 

The NIPF ownership is the one most impacted in the forest sector by land-use changes, affecting the 

ownership's potential for greenhouse gas sequestration.

Ralph Alig
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program support. The results also reveal that informing more NIPF owners about 

existing cost-sharing programs is as effective as increasing the amount offered in 

the cost-share. 

Nagubadi et al. (1996) examined factors influencing Indiana NIPF landowner 

participation in forestry assistance programs based on actual participation decisions. They used data collected by mail survey from NIPF landowners (789 

respondents) in Indiana during the winter of 1994. They found that information 

and management factors are the most influential in predicting the probability of 

participation in forestry assistance programs. Landowners who are motivated by 

commercial interests and are involved in commercial forestry activities have a 

higher probability of participation in forestry programs. The results also suggest 

that the size of landholding is an important determinant of participation in forestry 

assistance programs in general, and classified forestry programs in particular. 

Conway et al. (2003) argued that bequest motives, debt (or the propensity to 

save), and nontimber activities such as hunting, hiking, or wildlife observation 

could be important in determining NIPF landowners’ harvest decisions. They used 

a survey of NIPF owners in the Southeastern United States to obtain data for a 

model addressing these motives. Their results suggest that there are significant differences between landowners holding large versus small forest properties, between 

absentee and resident owners, high versus low debt loads, and those that have and 

do not have bequest intentions. They found that absentee owners are less likely to 

harvest and engage in nontimber uses of their forest, hold higher debt relative to 

income, and are more likely to bequeath standing timber. They showed that larger 

tracts are more likely to be harvested and used for nontimber activities and less 

likely to be bequeathed as standing timber. Finally, they concluded that landowners 

with high debt are more likely to engage in nonmarket activities on their land but 

also more likely to harvest and less likely to bequeath standing timber. 

Nagubadi and Zhang (2005) developed a modified multinomial logit framework 

to model and predict land-use changes by forest ownerships and forest types and 

apply it to forests in Alabama and Georgia. They found that land quality, federal 

incentive programs that promote tree planting, and better returns for forestry than 

for agriculture are the main factors driving the increase in timberland in the two 

states. Higher income levels and a higher proportion of good-quality land, on the 

other hand, decrease forestry land use. They found that higher forestry returns 

increase the amount of industrial private forests, and nontimber values increase 

acreage of NIPF ownership. Higher population density increases NIPF ownership, 

whereas a higher proportion of better quality land decreases NIPF ownership. They 

argued that pooling all types of timberland use into a single category can hide 
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Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

differences among heterogeneous ownerships and forest types and lead to incorrect 

predictions of land-use change. 

Ross-Davis et al. (2005) examined ownership characteristics and values of 

landowners in Indiana who had planted trees between 1997 and 2001 and their 

motivations for planting trees, and related these ownership characteristics, values, 

and motivations to seedling survival during the critical establishment phase. They 

gathered data through interviews of 151 individuals and field data collection from 

87 sites. They found that landowners value their land for the privacy it provides, as 

a place of residence, and as a legacy for future generations. Landowners afforested 

primarily to provide for future generations, to supply food and habitat for wildlife, 

and to conserve the natural environment. Seedling survival was lowest on sites 

owned by individuals who did not value their land as a legacy for future generations. Raunikar and Buongiorno (2006) analyzed the revealed willingness to pay of 

NIPF owners in the south-central United States for the amenities of mixed-age and 

mixed-species forests (i.e., uneven-aged loblolly pine [Pinus taeda L.] plantations). 

They estimated nontimber value (NTV) by the income that owners are willing to 

forego to maintain natural stands instead of converting them to more profitable 

plantations. The results show that there are significant differences in the NTV 

of natural plots by ownership. The average NTV of natural plots was highest on 

public lands, second on NIPF lands, and least on industry lands. Specifically, they 

estimated that the average NIPF owner is willing to forgo 60 percent of the timber 

profit for the NTV of their more natural stands compared to a less diverse industrially managed even-aged plantation.

Other papers focused on the effects of incentive programs to promote conservation of biodiversity and preservation of endangered species habitat on NIPFs. Kline 

et al. (2000) examined the reasons that NIPF owners own forest land and their 

willingness to adopt management actions, such as restricting harvest to restore or 

protect riparian salmon habitat, in exchange for a financial incentive in the form 

of a federal income tax reduction. They use data from a survey of NIPF owners in 

western Oregon and Washington. They classified forest owners according to their 

timber and nontimber objectives and developed an empirical model of landowners’ willingness to forgo harvest in riparian areas for 10 years as a function of the 

tax reduction, their socioeconomic characteristics, and forest ownership objectives. They found that a significant proportion of forest owners are motivated by 

objectives other than timber production and that, for many, habitat protection is 

consistent with their forest ownership objectives. They suggested that participation 

of some NIPFs could be enlisted through low-cost programs that include technical assistance and education regarding management practices that benefit riparian 

A significant 

proportion of forest 

owners are motivated 

by objectives other 

than timber production 

. . . Participation of 

some NIPFs could 

be enlisted through 

low-cost programs 

that include technical 

assistance and 

education regarding 

management practices 

that benefit riparian 

species. 
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GENERAL TECHNICAL REPORT PNW-GTR-833

species. They found that NIPF owners who have mainly timber objectives tend to 

own larger forests and a larger proportion of NIPF land, making their participation 

desirable. Financial incentives such as tax relief or cost sharing may be necessary 

to elicit their participation. They found that mean incentive payments necessary to 

induce participation differ by ownership objectives. Required payments to forgo 

harvest are higher for owners who have primarily timber objectives than for owners 

with both timber and nontimber objectives or mainly recreation objectives. 

Zhang and Flick (2001) examined the impact of financial incentives (costsharing and a tax incentive) and of potential regulatory land-use restrictions 

imposed by the Endangered Species Act on NIPF landowner investment behavior. 

They conducted an econometric analysis of recorded reforestation activities under 

the incentives program and the regulatory threat, using data obtained through a 

survey of NIPF owners in North Carolina and South Carolina. The results show that 

incentives and regulatory threat influence NIPF reforestation behavior in opposite 

directions: incentives increase reforestation investment, whereas the threat of landuse restrictions decreases it. The results imply that government financial assistance 

programs can be used to alleviate the disincentive provided by the Endangered 

Species Act in reforestation investment. 

Langpap (2004, 2006) used a survey to examine participation in incentive programs for endangered species conservation by NIPF owners in western Oregon and 

Washington and analyzed the likely effects of assurances, cost sharing, and compensation incentives on their forest management decisions. He identified landowner 

and property characteristics that affect participation decisions for an incentive program designed to provide habitat for endangered species, and examined how these 

characteristics differ from those that determine participation in more general incentive programs. His results suggest that landowners who are younger, have acquired 

property more recently, own more woodland, and are interested in conservation and 

providing habitat are more likely to participate. He found that compensation and 

assurances could have a significant effect on landowners’ management decisions, 

but cost sharing may not. His results also suggest that more effective incentive programs would combine financial incentives with assurances about future regulation. 

Mayer and Tikka (2006) evaluated six voluntary economic incentive programs for 

biodiversity conservation in Europe and North America. They found that important 

factors contributing to program success include an allowance for some economic 

productivity in enrolled forests, a long period since the inception of the program, 

and little interference from other incentive programs. 

Nelson et al. (2008) developed an integrated model that predicts private land 

use decisions as a function of existing market conditions and incentive-based 
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Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

conservation payments and predicted the impact of land-use changes on ecosystem 

services and biodiversity conservation. They used data from Oregon to compare the 

provision of carbon sequestration and species conservation under five policies that 

offer payments for conservation. They compared the performance of targeted and 

untargeted land-use conservation payment schemes relative to baseline land-use 

patterns with no land-use conservation policy as well as relative to the efficiency 

frontier for various levels of land-use conservation program budgets. Their results 

suggest that incentives to restore land to natural cover increase both carbon sequestration and biodiversity conservation, but that there are tradeoffs between these 

two policy objectives. They showed that policies aimed at increasing the provision 

of carbon sequestration do not necessarily increase species conservation and that 

highly targeted policies do not necessarily do as well as more general policies. 

Furthermore, they show that none of the conservation payment policies considered 

produce increases in carbon sequestration and species conservation that approach 

the maximum potential gains on the landscape. 

Matta et al. (2009) examined the willingness of forest owners to adopt management practices designed to enhance biodiversity. They used data from a 2005 

survey of NIPF owners in Florida to analyze how land, landowner, and program 

characteristics influence NIPF landowner participation in incentive programs 

designed to provide habitat beyond existing Best Management Practices. Their 

results indicate that mean willingness to accept for adoption of practices at their 

highest level of restriction would range between $37 and $151/ha per year, suggesting that financial incentives would promote habitat conservation on NIPFs. 

The results also suggest that younger forest owners, and those with higher income, 

education, and more years of ownership are more willing to adopt the suggested 

practices. Distance from urban centers, residence on the property, and membership 

in forest or conservation organizations also increase the probability of participation.

Some papers have examined incentives for biodiversity conservation in other 

countries. For example, Siikamaki and Layton (2007) programs compared the 

cost and conservation outcomes of an incentive payment program and a top-down 

program applied to the protection of small-scale biodiversity hotspots in Finland. 

They estimated the opportunity cost of conservation from a survey of forest owners 

in Finland that asked them about enrolling land for species protection in return for 

a payment. They combined landowners’ assessments of their forests with data on 

species habitat to derive estimates of the biological benefits and costs of enrolling 

a site through a payment program or through a top-down mechanism. They found 

that a fairly simple program that allows owners to enroll land can achieve conservation targets in a cost-effective manner. They also found that the incentive payment 

Incentives to restore 

land to natural 

cover increase both 

carbon sequestration 

and biodiversity 

conservation, but there 

are tradeoffs between 

these two policy 

objectives.
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GENERAL TECHNICAL REPORT PNW-GTR-833

program performed better than a species-only site selection approach, and was 

nearly as cost-effective as the hypothetical solution to the conservation program 

they used as a benchmark.

To summarize, a review of the literature on the effects of incentives on NIPF 

landowner behavior leads to sometimes conflicting conclusions. Most of the 

literature agrees that the response of NIPF owners to various incentives depends 

critically on the ownership motives of the landowner, as well as other landowner 

and property characteristics. However, there is much less agreement on the effectiveness of different types of incentives. If the goal is to promote forest management 

or sustainable forestry, then the consensus seems to be that financial incentives 

alone are largely ineffective in promoting the desired behavior. The noteworthy 

exception seems to be cost-sharing incentives. In addition, given landowners’ lack 

of knowledge about incentives, information and technical assistance may be effective as well. An additional noteworthy aspect of this literature is that surveys reveal 

that landowners may often carry out the desired management activities even in the 

absence of incentives. This highlights the issue of whether there is additionality in 

incentives programs, which will be discussed later. 

If the goal is to promote biodiversity and habitat conservation, the existing 

evidence seems to suggest that financial incentives can be effective in promoting 

desirable management choices by NIPF owners. Furthermore, there is evidence 

that in this case, cost sharing may again be the exception, with at least one study 

(Langpap 2006) finding that it may not be effective. There is also some evidence 

The potential for the NIPF ownership to expand carbon storage in forests is large 

relative to some other ownerships.

USDA Forest Service
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Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

in this literature that landowners whose main ownership objective is not timber 

production may be willing to carry out some of the desired management activities 

at lower cost, which again raises the issue of additionality.

This divergence in results suggests that it is difficult to make generalizations 

about the impacts of incentives on NIPF owner behavior. Incentive effectiveness 

may depend on the specific policy goal and may differ across regions and over time, 

as well as with the characteristics of landowners. Thus, it might not be adequate to 

extrapolate from the existing literature to infer how NIPF owners may respond to 

incentives in the specific context of carbon sequestration.

Incentives for Carbon Sequestration in Agriculture

To complement our review of the literature on carbon sequestration in forests, we 

provide a review of the recent economic literature on incentives for carbon sequestration in agriculture. Many of these papers examine how incentives affect agricultural landowners’ decisions to adopt agricultural practices that increase carbon 

sequestration in agricultural soils.

Pautsch et al. (2001) examined different government and market-based instruments to increase soil carbon sequestration through increased adoption of conservation tillage. They used a model of the farmer’s adoption decision and discussed 

the design of subsidy and market-based instruments, focusing on the institutions 

and practices surrounding agricultural policy. Then they used Natural Resources 

Inventory data (USDA Natural Resources Conservation Service) to estimate the 

probability that farmers adopt conservation tillage and combined the estimates with 

physical models of carbon sequestration to estimate and compare the costs of implementing a variety of subsidy and market-based schemes. They found that the lowest 

payment cost can be achieved using a price-discriminating subsidy (which varies 

for different private landowners as determined by market processes), although such 

an approach would not be politically viable. They found that a single subsidy is 

less efficient, but would have lower political and administrative costs. Their results 

indicate that payments associated with a price-discriminating subsidy would be 

as little as one-fourth the cost of a single-price subsidy. They also found that costs 

would be much higher when payments have to be made to all farmers employing 

conservation tillage rather than just those adopting in response to the subsidy. 

Feng et al. (2000) used a dynamic model that includes both emission reductions 

and sequestration as sources of GHG reductions to investigate the value of carbon 

sequestration in agriculture, and demonstrated that this value is only a fraction of 

the value of emission abatement unless the sequestration is permanent. They also 

showed that to optimally reduce carbon emissions, sinks should be used as early as 

It is difficult to make 

generalizations 

about the impacts of 

incentives on NIPF 

owner behavior. 

Incentive effectiveness 

may depend on the 

specific policy goal 

and may differ across 

regions and over 

time, as well as with 

the characteristics of 

landowners. 
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GENERAL TECHNICAL REPORT PNW-GTR-833

possible. They proposed three instruments to efficiently implement sinks: a pay-asyou-go system, a variable-length-contract system, and a carbon annuity account. 

In a pay-as-you-go system, landowners sell and purchase emissions based on the 

permanent reduction of carbon. In a variable-length-contract system, independent 

brokers would buy permits from sequestration sources and sell them to carbon 

emitters, thus providing the service of generating “permanent” carbon reductions 

from a series of independent temporary reductions. In a carbon annuity account, 

a landowner who sequesters carbon is paid the full value of the permanent reduction in GHGs achieved, but the payment is put directly into an annuity account. 

The earnings, but not the principal, of the account can be accessed as long as the 

carbon remains sequestered. The principal is removed if the carbon is released. If 

the carbon is sequestered permanently, the landowner eventually earns all of the 

interest payments.

Antle et al. (2003) developed a method to investigate the efficiency of alternative types of policies or contracts for carbon sequestration in cropland soils, taking 

into account the spatial heterogeneity of agricultural production systems and the 

costs of implementing efficient contracts. They described contracts being proposed 

for implementation in the United States and other countries that would pay farmers for adoption of specified practices (per-hectare contracts), as well as more 

efficient contracts that would pay farmers per tonne of soil carbon sequestered, 

and show how to estimate the costs of implementing the more efficient contracts. 

They conducted a case study of a major agricultural region in the United States (the 

Northern Plains) that confirms that the relative inefficiency of per-hectare contracts 

varies spatially and increases with the degree of spatial heterogeneity. The results 

also show that per-hectare contracts are as much as five times as costly as per-tonne 

contracts. Measurement costs to implement the per-tonne contracts are found to be 

positively related to spatial heterogeneity but are estimated to be at least an order of 

magnitude smaller than the efficiency losses of the per-hectare contract for reasonable error levels. This finding implies that contracting parties could afford to bear a 

significant cost to implement per-tonne contracts and still achieve a lower total cost 

than would be possible with the less efficient per-hectare contracts. 

Hartell (2004) asked what payments must be received by agricultural producers 

to induce them to supply certain quantities of beneficial nonfood outputs. In the 

empirical application, this study valued carbon sequestration in agricultural soil 

through the adoption of no-till cultivation using mathematical programming to derive representative price schedules. The shadow price (or marginal cost) schedule 

for various levels of yearly carbon sequestration is derived by iteratively imposing 

minimum quantity constraints. The results and derived supply schedules show that 

The relative 

inefficiency of perhectare contracts 

varies spatially and 

increases with the 

degree of spatial 

heterogeneity. 
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Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

the level of monetary incentive and total budgetary outlays required to induce multifunctional carbon sequestration might be lower than anticipated, but this depends 

importantly on assumptions about the level of producer risk aversion. 

Pendell et al. (2007) studied the carbon credit incentives needed to motivate 

adoption of no-tillage and manure applications to enhance soil carbon sequestration 

in corn production in Kansas. They examined the net returns from continuous corn 

production using conventional and no-tillage practices with nitrogen fertilization 

from either ammonium nitrate or beef cattle manure for sequestering carbon with 

and without incentives. The results indicate that no-tillage and manure fertilization 

increase carbon sequestration. Carbon credits or government program incentives 

are not required to entice risk-averse managers to use no-tillage, as no-till systems 

have the highest net returns and greatest sequestration rates, but are required to 

encourage manure use as a means of sequestering additional carbon even at historically high nitrogen prices. 

Graff-Zivin and Lipper (2008) developed a farm-level model of the decision 

to adopt a technology that generates soil carbon sequestration co-benefits. They 

explored incentives of poor farmers to adopt production systems that increase soil 

carbon sequestration, focusing on the increased agricultural yield risk associated 

with the transition to a new farming system. They used a household dynamic 

optimization model of the decision to adopt conservation agriculture and supply soil carbon sequestration, where farmers optimize expected utility of profits 

Forest carbon sequestration is a relatively new objective for some NIPF owners, and carbon 

markets are just emerging.

Emily Jederlinich
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GENERAL TECHNICAL REPORT PNW-GTR-833

from agriculture and carbon sequestration. They considered two distinct impacts 

on agricultural productivity: the technological effects of the new system and the 

productivity effects of changes in soil carbon on agricultural output. Comparative 

static results indicate that increases in the soil carbon sequestration price and the 

discount rate have unambiguous impacts on equilibrium soil carbon levels, the former leading to higher and the latter to lower carbon sequestration levels. Increases 

in the price of agricultural output and risk aversion have ambiguous impacts, 

depending on the relative strength of the productivity and technology effects. The 

paper concludes with a discussion of designing soil carbon payment mechanisms to 

benefit low-income farmers. The results suggest that pooling soil carbon sequestration payments and devising other group schemes to help farmers share risk offer the 

potential of providing an effective way of stimulating agricultural development and 

poverty reduction through climate change mitigation initiatives. 

Finally, some papers report similar research in other countries. Antle and 

Diagana (2003) argued that incentive mechanisms for carbon sequestration in agricultural soils could contribute to alleviating rural poverty, enhancing agricultural 

sustainability, and mitigating GHG emissions. They assessed the role that soil carbon sequestration could play in addressing soil degradation problems in developing 

countries. They concluded that emerging policies to mitigate GHG emissions, such 

as global carbon markets or the Kyoto Protocol’s Clean Development Mechanism, 

and other international and national policies, could be used to create incentives for 

farmers in developing countries to adopt practices that benefit them and simultaneously help reduce GHG emissions. However, they cautioned that several significant 

challenges, such as lack of well-functioning legal and financial institutions or poorly 

defined property rights, would have to be overcome before poor farmers in developing countries would be able to take advantage of these opportunities. They cited a 

carbon loan that provides financing for conservation investments to be paid back 

by generating carbon credits as an example of an institutional innovation that could 

help farmers overcome adoption barriers caused by imperfect capital markets. 

Weersink et al. (2005) assessed the extent to which agriculture can be part of 

meeting Canada’s Kyoto commitments through direct means induced by a carbon 

market or indirectly through the voluntary adoption of GHG-reducing practices, 

such as reduced tillage. They considered three policy mechanisms that could affect 

the extent to which net GHG emissions are reduced: moral suasion, an offset market, and an inventory accounting system. They presented a conceptual model of a 

supply curve for carbon credits and reviewed the empirical evidence on the factors 

influencing this supply curve, including the potential price of carbon, the costs of a 

contract, and the opportunity cost of sequestration and emission reduction activities 
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Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

relative to their emission reduction potential. Based on the data, they argued that 

involvement by farmers in the offset market will be limited, but that there will be 

net GHG emission reductions from agriculture through voluntary adoption partially 

prompted by government extension efforts. They found that voluntary adoption 

of beneficial management practices will be the main way by which Canadian 

farmers will cut GHG emissions. Participation in the carbon-offset market will be 

limited owing to relatively low prices offered by large emitters for carbon credits, 

discounts applied to those prices for temporary sequestration, transaction costs and 

risk premiums associated with carbon contracts, and the low elasticity of supply 

of carbon dioxide abatement. Nevertheless, they argued that Canadian agriculture 

is likely to contribute significantly to reducing emissions through adoption of zero 

tillage and reduced fertilizer use, but that this contribution will respond mainly to 

personal economic objectives of farmers rather than to direct incentives through the 

offset program. 

Antle and Stoorvogel (2008) explored the impacts of payments for agricultural 

soil carbon sequestration on poverty of farm households and the sustainability of 

agricultural systems. They used a theoretical model combined with case studies in 

Kenya, Peru, and Senegal. They found that carbon contracts are likely to increase 

rural incomes and reduce the rate of soil carbon loss. This suggests that carbon payments could have a positive impact on sustainability while also reducing poverty. 

To summarize, these papers suggest that, as in the case of forest owners, 

incentives can be effective in eliciting management decisions that increase carbon 

sequestration from agricultural landowners. Some of these papers suggest that the 

issue of additionality may be relevant when implementing incentive programs in 

agriculture as well. We turn to a discussion of this issue in the next section. 

Additionality

Within the framework of incentive programs for provision of ecosystem services, 

additionality generally refers to whether agents supplying ecosystem services in 

exchange for an incentive are being compensated for services they would not have 

provided in the absence of the incentive. The concern is whether the incentive actually elicits additional provision of the ecosystem service. 

For instance, Murray et al. (2007) addressed how credits generated by agricultural soil carbon sequestration (ASCS) activities can be adjusted to account for the 

phenomena of permanence, leakage, and additionality (PLA). The underlying objective is to understand and quantify what the net carbon benefits of an ASCS project 

are once we account for the fact that (1) the sequestered carbon may be stored 

impermanently, (2) the project may displace emissions outside the project boundaries, 

Canadian agriculture 

is likely to contribute 

significantly to 

reducing emissions 

through adoption 

of zero tillage and 

reduced fertilizer use, 

but this contribution 

will respond mainly 

to personal economic 

objectives of farmers 

rather than to direct 

incentives through the 

offset program. 
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GENERAL TECHNICAL REPORT PNW-GTR-833

and (3) the project’s carbon sequestration may not be entirely additional to what 

would have occurred anyway under business-as-usual conditions. Murray et al. 

examined the conceptual and policy rationale for adjusting ASCS credits for PLA, 

described methods for making these adjustments, and presented some evidence of 

the magnitude these effects could have on the economic returns. For the additionality of carbon sequestration, the authors introduced baseline estimation approaches 

and discussed data that could be used to develop baselines for the two main ASCS 

activities of interest and presented an example of a calculation of additionality. 

Ferraro (2008) discussed contract design issues in the context of payments 

for environmental services and argued that reducing informational rents (costs 

generated by private information) is important in this context in order to maximize 

the amount of services obtained from limited budgets. He added that reducing 

informational rents also mitigates concerns about additionality. Wünscher et al. 

(2008) suggested a strategy to increase the additionality achieved by payments 

for environmental services (PES) by targeting benefit-cost ratios, incorporating 

multiple objectives, and explicitly considering the risk of environmental service loss 

as a spatial variable. They used data from Costa Rica to test the potential of the suggested targeting tool to boost the efficiency of that country’s PES program in terms 

of additional environmental services per dollar spent. Their results suggest that the 

efficiency (benefit-to-cost ratio) of Costa Rica’s PES program could be increased by 

using a targeting process that integrates spatial data rather than a targeting system 

based solely on priority areas. 

More generally, the issue of additionality can be framed in the context of 

asymmetric information and contract design (see Salanié 2005 or Bolton and 

Dewatripont 2005 for comprehensive modern treatments). There are a number of 

recent applications in the context of provision of ecosystem services. Gren (2004) 

examined efficient contracts for converting arable land into pollution sinks. Crépin 

(2005) examined the use of incentives to create wetlands in an asymmetric information context. She used a theoretical principal-agent model to show that contract 

choice can create welfare gains, and that the choice of contract depends on the distribution of the unobserved landowner type, on the elasticity of costs and benefits 

to wetland size changes, and on the costs of acquiring information. Sheriff (2009) 

developed an empirical methodology to use available data to develop beliefs regarding the technology and distribution of types in a regulated sector characterized by 

hidden information. He used the results to calibrate a second-best land conservation 

mechanism and evaluated its cost relative to simpler alternatives. 

In the specific context of carbon sequestration in forests, the issue of additionality is mostly mentioned when discussing carbon offsets and the Clean Development 

The issue of 

additionality can 

be framed in the 

context of asymmetric 

information and 

contract design.
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Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

Mechanism (CDM) of the Kyoto Protocol in which developing countries can trade 

certified emission reductions to noncompliant countries in exchange for clean 

technologies and finance. Asuka and Takeuchi (2004) argued that poorly defined 

or relaxed additionality criteria may allow the over-generation of GHG reduction 

credits in excess of actual reductions. Beyond a certain threshold, these nonadditional (business-as-usual) certified emissions can lead to economic losses for 

developing countries. Trexler et al. (2006) reviewed a variety of suggested additionality tests based, for instance, on whether GHG emissions are reduced below 

regulatory requirements, on whether a project uses technology it otherwise would 

not, or on whether the rate of return on a project would be too low without sequestration incentives, among other criteria. They then discussed the potential for false 

positives and negatives in these tests, and how they can be implemented as part of 

an additionality policy that seeks to reduce type I and type II errors. 

Van Kooten and Sohngen (2007) defined additionality as getting credit only 

for carbon uptake above and beyond what occurs in the absence of carbon-uptake 

incentives. The additionality condition is satisfied if it can be demonstrated that a 

forest would be harvested and converted to another use in the absence of incentives. 

Carbon sequestered by incremental forest management actions, such as juvenile 

spacing, thinning, fire control, or fertilization would be eligible for carbon credits 

only if these activities would not otherwise have been undertaken. Afforestation 

projects satisfy additionality if they provide environmental benefits not captured 

A key challenge in providing carbon offset credits will be determining a clear method for establishing a baseline of forest carbon sequestration.

Ralph Alig
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by the landowner (e.g., water quality, wildlife habitat) and that would not be undertaken in the absence of economic incentives. 

Schneider (2009) examined how the additionality of CDM projects has been 

assessed in practice by systematically evaluating 93 projects. He concluded that 

current tools used for evaluating additionality need improvement, as they can be 

subjective and difficult to validate, based on undocumented assumptions, and lacking credibility. Maness (2009) argued that any climate agreement will require clear 

and mutually acceptable methods for determining baseline levels of carbon sequestration, so that carbon offset credits for projects are given only for the additional 

carbon sequestered beyond what would have been sequestered in the absence of the 

project.

Data Availability

In this section we briefly outline the data available on carbon sequestration in 

forests and NIPFs to assess the viability of conducting empirical studies on the 

effectiveness of incentives for carbon sequestration in NIPFs.

The USDA Forest Service, as directed by the Resources Planning Act, conducts 

a comprehensive national assessment of renewable resources, including forests. The 

Forest Resources of the United States 2007 report includes, for example, data on 

forest-land area, net volume of timber, annual growth, mortality, and removals, and 

average area planted and harvested by region, subregion, state, productivity class, 

ownership group, and various other categories (Smith et al. 2009). It also includes 

estimated regional carbon storage and gross annual sequestration for the year 2000 

and mean carbon per hectare by size-class and Environmental Protection Agency 

Level II Ecological Region for the years 2001–2006. These data, however, are highly 

aggregated, and do not provide information at the individual forest owner level.

The Forest Inventory and Analysis National Woodland Owner Survey, conducted by the USDA Forest Service (2009), asks forest owners about characteristics 

of their woodland, ownership motives, woodland use and management, intended 

future uses, and concerns, and obtains demographic information as well. This database provides considerable information at the individual landowner level, including 

age, gender, education level, and income of the forest owner; year, method, source 

of acquisition, and size of their holdings; harvesting and management activities conducted; conservation easements on the property; and participation in cost-sharing 

programs. However, it currently does not include any information on carbon or 

carbon management and sequestration.

The National Resources Inventory is a statistical survey of natural resource 

conditions and trends on nonfederal land in the United States, including privately 

Any climate agreement 

will require clear and 

mutually acceptable 

methods for determining baseline levels of 

carbon sequestration.
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Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

owned lands, tribal and trust lands, and lands controlled by state and local governments, conducted by the USDA Natural Resources Conservation Service (2007). It 

provides nationally consistent statistical data on how these lands are used and on 

changes in land-use patterns for the period 1982–2003. Land-use categories analyzed include agriculture and forests.

In terms of data on incentives, Greene et al. (2009) collected a database of 

all federal, state, and private incentives available to NIPF owners. However, this 

database only provides a listing of available programs, not actual data on their 

implementation or effectiveness.

Summary and Concluding Comments

In this report, we have summarized the economics literature on incentives for 

carbon sequestration in forests, including afforestation of agricultural land and 

sequestration in existing forests and NIPFs, as well as the broader literature on 

effectiveness of incentives for forest management and biodiversity conservation 

on NIPFs and on carbon sequestration on agricultural land. We have also touched 

on the issue of additionality in the context of incentives for provision of ecosystem 

services and briefly reviewed relevant data sources. 

There are large literatures on afforestation, carbon sequestration in forests, and 

incentives for NIPFs in general, but a very small literature on incentives for carbon 

sequestration on NIPFs. The broader literature on carbon sequestration and incentives suggest that various types of incentives can effectively be used to promote 

afforestation and forest management practices to increase carbon sequestration. 

However, the literature on NIPFs suggests that the effectiveness of incentives 

programs depends on a variety of factors, including the objective of the policy and 

landowner and property characteristics. Therefore, results from existing studies 

cannot necessarily be extrapolated to draw conclusions on the potential effectiveness of incentives for carbon sequestration on NIPFs. A separate study that focuses 

specifically on this topic would provide more reliable insights. Finally, our review 

suggests that the issue of additionality is relevant in this context, and that the design 

of any incentive scheme to elicit increased carbon sequestration needs to carefully 

consider how to minimize the costs caused by asymmetric information about 

landowner’s baseline behavior. 

Acknowledgments

Prepared as part of a Joint Venture Agreement with the USDA Forest Service 

Pacific Northwest Research Station.

Various types of 

incentives can 

effectively be used to 

promote afforestation 

and forest management 

practices to increase 

carbon sequestration. 
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GENERAL TECHNICAL REPORT PNW-GTR-833

English Equivalents

When you know: Multiply by: To get:

Hectares (ha) 2.47 Acres

Metric tonnes 1.102 Tons

Megagrams (Mg) 1.102 Tons

Teragrams (Tg) 1,102,311 Tons

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Chapter 6: Public and Private Forest 

Ownership in the Context of Carbon 

Sequestration and Bioenergy Feedstock 

Production—Existing Research and 

Research Needs

by Eric M. White and Ralph J. Alig 

Introduction

Forests continue to be recognized as having important roles in comprehensive 

policies and legislation to address climate change and increase renewable energy 

use. Much of the discussion around forests in the context of those topics has related 

to better understanding key physiological processes, developing projections of 

future markets for carbon or bioenergy, and examining the physical and economic 

outcomes of alternate policies. An important layer of complexity in considering 

the use of forests to address climate change and renewable energy development 

is forest-land ownership. In the United States, at the highest aggregation, forest 

ownership is divided into (1) those lands owned by private individuals and entities 

and (2) public lands. This briefing paper examines some of the existing literature to 

highlight considerations on how public and private forest ownership may influence 

the use of forests to address climate change and renewable energy development. 

Forests constitute about 33 percent of the U.S. landscape and are common 

on both public and private land (Smith et al. 2009). In many places, forested 

landscapes are a mix of both public and private ownerships, and forests in both 

ownerships provide society with a variety of goods and services, from recreation 

opportunities to timber for the production of wood products. Public and private 

forests in the United States are also connected through a shared history. The federal 

National Forest System of today, which comprises the greatest extent of public 

forest land, was initially developed from forest reserves removed from settlement 

lands. Later, many national forests in the East were formed from lands that reverted 

to public ownership because of private land tax delinquency. In other cases, such 

as the “Oregon and California” lands, publicly owned forest lands were given to 

private companies in efforts to spur infrastructure development. 

Just as forest landscapes can be made up of a diverse mix of forest owners, the 

conditions of forests in different ownership groups can differ widely. As shown 

later, public ownership forests tend to have a greater number of trees in older age 

classes relative to private forests. In general, public forests, relative to private 

An important layer 

of complexity in 

considering the use 

of forests to address 

climate change and 

renewable energy 

development is forestland ownership.
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GENERAL TECHNICAL REPORT PNW-GTR-833

forests, are more frequently managed for nonconsumptive uses such as recreation. 

However, public forests are managed by a variety of agencies at different levels of 

government with differing objectives, and the variety of conditions on public forests 

reflect those differences. Private forests are owned by individuals and families, 

traditional vertically integrated timber companies, and investment groups. Similar 

to public lands, private forests range from those intensively managed for timber 

production to forests where little if any active management occurs and objectives 

are primarily nonconsumptive uses of forest resources. 

Today, the interactions and linkages between public and private forests range 

from the administrative (e.g., land parcel trades) to ecological (e.g., management of 

invasive species) to economic (e.g., impacts to the forest products sector) to legal 

(e.g., reciprocal fire suppression agreements). With the consideration of climate 

change policies, there is interest in considering how public and private forest lands 

may differ and complement one another in response to policy. Unfortunately, few 

studies have examined the distinctions, linkages, and interactions between public 

and private forest land in the context of climate change and climate change policy. 

The objectives of this research are to briefly describe the current areas and spatial 

patterns of public and private forest land ownership, to use existing knowledge to 

describe the differences and commonalities of public and private forest lands within 

the context of climate change, and to identify future research needs. Differences 

and commonalities of public and private forest lands are considered for four areas: 

carbon sequestration, bioenergy feedstock provisioning, timber harvest relationships, and decisionmaking. 

Public and Private Forest-Land Ownership

The distribution and patterns of public and private forest land serve as a backdrop 

in considering the interaction of those ownerships in responding to climate change 

and energy policies. Forest land in the United States is 56 percent private and 44 

percent public ownership (Butler 2009). Just less than half of publicly owned forests 

are managed by the USDA Forest Service. Reflecting the settlement patterns of the 

United States, forest lands in the East are most commonly private, and public forest 

lands are most common in the West (fig. 6-1). The general perception, particularly 

for the West, is that high-elevation forests are more commonly publicly owned, 

whereas lowland forests are often privately owned. Similar elevation patterns can 

also occur in the East, particularly along the Appalachian Mountains. Relative to 

historical levels, forest lands in the East have suffered the greatest reductions in 

area, largely because of conversion to agriculture and development (Smith et al. 

Few studies have 

examined the 

distinctions, linkages, 

and interactions 

between public and 

private forest land in 

the context of climate 

change and climate 

change policy. 
145

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

2009). Eastern forests are also projected to experience the greatest amounts of 

future development (Stein et al. 2005, White et al. 2009). 

The physical connections, via shared boundaries, between public and private 

forests are highlighted by considering two common local spatial arrangements of 

public and private forests. In many locales, public and private forests are held in 

fairly large blocks with a fairly clear delineation between the ownerships (fig. 6-2a). 

Conversely, in other areas, public and private forests are more intermingled, with 

forested ownerships contained in smaller contiguous blocks (fig. 6-2b). Because 

of east to west settlement of the United States, the former pattern is likely more 

common in the Western United States, whereas the latter is likely more common 

in the East—although both patterns occur in each region. The large-block arrangement suggests how public and private lands might be influenced differently by 

climate-related conditions that vary over space (e.g., temperature impacts that differ 

by elevation). Such a pattern of climate change could lead to disparate impacts by 

ownership group. The latter spatial arrangement is not as susceptible to disparate 

impacts to public and private owners from conditions that vary over space because 

the ownerships are intermingled. However, this intermingled arrangement highlights the degree to which forest management actions on one ownership may impact 

the other ownership and the extent to which the landscape provision of goods and 

services may be dependent on joint provisioning. 

Figure 6-1—Public and private forest land in the United States.
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Figure 6-2—Two spatial patterns of U.S. public and private forest-land ownership, (a) Oregon and (b) 

Michigan. Data source: Theobald (2007). 

A

B
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Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

Carbon Sequestration

The sequestration of emitted carbon by forests has been discussed in the context of 

both reducing existing atmospheric carbon and, within a program (cap and trade), 

to offset future carbon emissions produced by industry. In 2007, trees, agriculture 

soils, and other carbon sinks offset about 15 percent of U.S. greenhouse gas emissions (US EPA 2009). In addition to the ability to use forests to sequester emitted 

carbon, there has also been interest in avoiding the release of carbon stored in forests (in plant matter and in forest soils) that may occur because of land-use change, 

timber harvest, or disturbances such as fire. The release of carbon from individual 

forest stands reduces the flux of carbon sequestered to forests collectively (the net 

amount of carbon sequestered in a forest over a period) and if a release is severe 

enough, it can turn forests from carbon sinks to carbon sources. Because of the 

interest in carbon sequestration, the carbon fluxes and amount of carbon currently 

sequestered (i.e., carbon stocks) in public and private forests have been of interest. 

Carbon Flux

Based on recent data, U.S. forests sequester an estimated 595 teragrams (Tg) 

carbon dioxide (CO2) equivalent of carbon (1 Tg = 2.2 billion pounds) annually. 

Carbon sequestration in forests offsets about 8 percent of total U.S. greenhouse gas 

emissions (7150 Tg CO2 equivalents) in 2007 (US EPA 2009). Since 1990, annual 

greenhouse gas emissions in the United States have been increasing. Over the same 

period, annual net carbon flux to forests has also increased, being about 17 percent 

greater than net carbon flux estimated for 1990. Most of this increase in flux can be 

attributed to increases in carbon sequestered in aboveground biomass, as a result 

of increased area of forest land and faster growing forests (USDA 2008). Currently, 

public forest lands have an aggregate carbon flux that is about 50 percent greater 

than the aggregate carbon flux on private forests (USDA 2008). Lower rates of flux 

on private forests likely result from greater land-use conversions and disturbance 

(including timber harvest) on private forests relative to public forests. 

Carbon Stocks

The forests of the United States account for an estimated 150 000 Tg CO2 equivalent of carbon stocks (USDA 2008). Slightly less than 40 percent of these stocks 

are associated with forest soils and the remainder is in live and dead plant material 

(USDA 2008). Forest-land carbon stocks in the East (94 500 Tg CO2 eq.) are about 

70 percent greater than those in the West (55 300 Tg CO2 eq.). The Northeastern 

States have slightly greater carbon stocks than the Southeastern States (USDA 

Currently, public 

forest lands have an 

aggregate carbon flux 

that is about 50 percent 

greater than the 

aggregate carbon flux 

on private forests.
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GENERAL TECHNICAL REPORT PNW-GTR-833

2008). At the state level, carbon stocks in the live and dead biomass are greatest in 

California, Oregon, and Washington (fig. 6-3). 

Currently, more forest-land carbon is stored in private forests (87 710 Tg CO2

equivalent) than in public forests (62 132 Tg CO2) (USDA 2008). Following the 

spatial pattern of forest ownership, private forest-land carbon stocks are greatest 

in the North and South regions (about 36 000 Tg CO2 equivalents in each region) 

(fig. 6-4). Public forest-land carbon stocks are greatest in the Rocky Mountain and 

Pacific Coast regions. In the West, carbon stocks are greatest in public forests, 

mostly distributed in the older age classes. In the East, private forests account for 

the majority of sequestered carbon with stocks primarily, especially in the Southeast, in the younger age classes. 

From some of the most recent data available, carbon stocks in forest industry 

and non-Forest Service public ownerships have been declining slightly; stocks 

in federal ownership have increased slightly; and stocks in nonindustrial private 

ownership have increased the most between 1987 and 1997 (table 6-1). These 

changes likely reflect both forest condition changes and changes in forest ownership 

(Birdsey and Lewis 2003). For forest industry lands, the greatest reductions were 

in the North. This likely reflects at least some divestiture of forest industry lands 

in that region in the early 1990s. The greatest gains for national forest land were in 

Figure 6-3—Estimated non-soil carbon stock on public and private forest land. Data source: USDA 2008. 
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Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

the North. Nonindustrial private forest lands in the North and South experienced 

changes similar to each other. 

Carbon is stored in the plant material of forests. When that plant material is 

harvested and converted to wood products (e.g., construction lumber), that carbon 

is then contained within the wood product (e.g., in newly constructed houses). 

This “fixed” carbon will remain in place until the wood products degrade, which 

often begins once they are discarded and subjected to decay or are burned. Carbon 

0

1,000

2,000

3,000

4,000

5,000

6,000

< 20

 20-40

40-6060-80

80-100

100-150

150-200

200+

< 20

20-4040-60

60-80

80-100

100-150

150-200

200+

< 20

20-40

40-6060-80

80-100

100-150

150-200

200+

< 20

20-40

40-6060-80

80-100

100-150

150-200

200+

North South Pacific Coast Rocky Mountain

Region and age class (years)

Plant matter carbon (Tg

C

O eq.) 2

Public

Private

2

Figure 6-4—Distribution of forest carbon by region, ownership, and forest age class (Tg CO2 is teragrams, equal to 

one million metric tons of carbon dioxide). Data source: USDA 2008. 

Table 6-1—Carbon stock changes by ownership 

category and region, 1987–1997 

Ownership North South West Total

Percent

National forest 5.9 4.7 4.5 4.6

Other public 7.4 19.2 -4.3 -1.0

Forest industry -11.6 3.6 -1.9 -2.4

Nonindustrial private 7.1 6.5 5.2 6.4

Data source: Birdsey and Lewis 2003. 
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in wood products is not newly sequestered carbon but should be included when 

accounting for forest carbon stocks and carbon flux. In 2005, carbon stocks in existing harvested wood products accounted for an estimated 8700 Tg CO2 equivalent 

of sequestered carbon. The net carbon pool in wood products increases by approximately 103 Tg CO2 equivalent of carbon per year, counting carbon stored in new 

wood products and carbon released from discarded wood products (USDA 2008). 

Little work has been completed to differentiate wood product carbon by public or 

private sector forest source. However, it can be assumed that most of the hardwood 

products created in recent years are from timber harvested from private forests. 

Projections of Private Carbon Stock

Carbon stocks in forested ecosystems on private lands are projected to decline over 

the next several decades under a business-as-usual case (fig. 6-5). Declines in the 

amount of sequestered carbon over time result primarily from projected deforestation. Forest lands in all private ownership types are subject to deforestation, but 

those lands owned by nonindustrial private forest owners have historically experienced the greatest amounts of deforestation for agriculture and urban development 

(Alig et al. 2003, 2010b). Because residential development typically includes some 

trees and perennial grasses in landscaping, deforestation for residential development 

30

35

40

45

50

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045

Year

Carbon dioxide eq. (billion

metric tons)

$0 $25 $50

CO price 2

Figure 6-5—Projected carbon stocks in private forests under different carbon price scenarios. 

Adapted from Alig et al. (2010b). 

Declines in the amount 

of sequestered 

carbon over time 

result primarily 

from projected 

deforestation.
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Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

has been assumed to have less negative consequences for carbon sequestration 

than agriculture land use (e.g., Cathcart et al. 2007). Under policies where carbon 

sequestered in trees is valued, forest ecosystem carbon stocks are projected to 

increase between the present and 2050. Carbon stocks are projected to increase 

through a combination of increased forest area (because of afforestation of agriculture land) and changes in forest management (e.g., lengthening harvest rotations 

and changing management intensities). 

Projections of Public Carbon Stock

Non-soil carbon stocks on public lands are projected to increase between 2000 and 

2050 (Smith and Heath 2004). Carbon stocks on national forest land are projected to 

be greatest in the Rocky Mountain and Pacific Northwest Regions. Aggregate carbon stocks on public lands not managed by the USDA Forest Service are projected 

to be highest in the North Central and Northeast regions. The amount of carbon 

sequestered annually on public lands is projected to slow slightly in the coming 

decades as public forests age and growth rates slow. 

Depro et al. (2008) examined how public timber carbon sequestration might 

respond to changing timber harvest rates. Under business as usual, public forest 

lands in the Depro et al. study were projected to sequester, on average, 50 Tg of 

carbon annually between 2010 and 2050. National forests accounted for more than 

60 percent of the projected sequestration. Because of projected aging of public 

forests, rates of carbon sequestration were projected to decrease over time under 

all harvest scenarios considered. Reducing public land timber harvest hypothetically from approximately 425 million m3

 (15 billion ft3) per decade to near zero 

increased carbon stored in public forests by 40 to 50 percent. Conversely, increasing 

annual public forest harvest levels by approximately 566 million m3 (20 billion ft3) 

per decade, to the harvest levels projected in the 1989 national timber assessment 

(Haynes 1990), decreased the amount of carbon sequestered in public forests by 50 

to 80 percent per decade. Even accounting for carbon sequestered in wood products, 

under a high timber harvest scenario, public forests were projected to become 

carbon sources rather than carbon sinks. It should be noted that the Depro et al. 

(2008) analysis included baseline levels of public forest disturbance (e.g., wildfire, 

insects, and disease) in the growth and yield estimates. As a first-generation study, 

the analysis of Depro et al. (2008) did not incorporate a private sector response to 

changes in public land timber harvest. Increased private harvesting could offset 

some of the additional carbon sequestered on public land under a no-public-harvest 

scenario. However, the vast majority of timber production in the United States is 

already associated with private lands (Adams et al. 2006). 
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Bioenergy Feedstock Provisioning

Increased use of biomass for the production of renewable and low-carbon electricity and liquid fuels may be an outcome of comprehensive climate legislation and 

may be an outcome of carbon emissions regulation. Woody biomass for bioenergy 

production can be obtained from a number of feedstocks from public and private 

forest lands (see White 2010 for a description). The current Renewable Fuels Standard in the Energy Independence and Security Act of 2007 and draft language in 

some proposed legislation is typically interpreted as not recognizing, for renewable 

electricity credit or carbon offsets, biomass from public lands and biomass from 

forests of certain characteristics. That topic is outside the scope of this paper and 

interested readers can refer to WFLC (2009). 

Woody biomass already composes a significant component of current U.S. 

renewable energy consumption. Residues from timber mills are currently responsible for much of the bioenergy produced from biomass (see White 2010 for a discussion). In the future, under increased demand for woody biomass, material from 

timber harvest residues and hazardous fuel reduction on both public and private 

forests may be important feedstocks. These two feedstock sources are discussed in 

the next sections. In addition to harvest residues and hazard fuel reduction material, use of biomass feedstocks from short-rotation woody crops and other residues 

and wastes (e.g., construction debris) will also likely increase; however, feedstocks 

from these sources are associated almost exclusively with private forests or private 

companies. 

Timber Harvest Residues

In 2006, approximately 130 million m3 (4.6 billion ft3) of residues were generated 

from timber harvesting activities (Smith et al. 2009). This woody material, left 

onsite, translates into approximately 58 million dry tonnes (64 million dry tons) 

of biomass material. Not all of this material would be technically or economically 

available for bioenergy production. In one study of harvest residue biomass, Gan 

and Smith (2006) estimated that about 32 million dry tonnes (36 million dry tons) 

of residues on public and private lands would actually be available under likely 

market conditions—enough material to generate 67.5 terawatt hours (TWh) of 

electricity—about 1.7 percent of the electricity available to the grid in 2007 (US 

DOE 2010). 

Based on current timber harvest patterns, private forest lands would likely supply a greater volume of harvest residues than public lands under increased bioenergy feedstock demand. In 2002, less than 10 percent of the timber harvested in the 

United States came from public lands (Adams et al. 2006). Aggregate public land 

timber harvests were greatest in the North Central region and areas in the states of 

Private forest lands 

would likely supply 

a greater volume of 

harvest residues than 

public lands under 

increased bioenergy 

feedstock demand.
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Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

Oregon and Washington west of the crest of the Cascade Mountains. Private timberland harvest was greatest in the South Central region (although private harvest was 

also high in the Southeast, Northeast, and Pacific Northwest). The use of timber 

harvest residues for bioenergy feedstock would offer private landowners another 

revenue stream from harvests. However, the costs of handling and transporting 

biomass is high and feedstock values low, so revenues from this additional product 

stream are likely to be modest and in many cases not a driving factor in private 

forest management activity. For example, in Minnesota, the additional value from 

using timber harvest residues for bioenergy in hybrid poplar stands harvested for 

pulp was estimated to be positive but minor (Schmidt 2006). 

Slightly more residues are generated from hardwood harvest than softwood 

harvest (Smith et al. 2009), but much of the private timber harvested currently is 

from southern softwoods. The disparity in residue production between forest types 

could push residue usage into northern regions where hardwoods are more common. In northern regions, public land owned by states and other public entities is 

common and is often used for timber production (e.g., in the northern Great Lakes 

Region). Thus, public forest lands in the North not managed by the USDA Forest 

Service may be well positioned for the provision of timber harvest residues. Hardwood harvest in the North has declined relative to the early 1990s but is still greater 

than that of the 1970s (Adams et al. 2006). 

There are some concerns about reduction in available site nutrients because of 

timber harvest residue removal, but the literature is not currently definitive (Carter 

Public timberlands represent about 20 percent of the U.S. timberland area and about 30 percent of 

the timber volume, with substantial opportunities to sequester additional carbon.

Ralph Alig
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GENERAL TECHNICAL REPORT PNW-GTR-833

et al. 2006, Walmsley et al. 2009). However, guidelines that are being developed 

in some states for removing harvesting residue from logging sites (e.g., Minnesota 

FRC 2007) may help to mitigate any potential site productivity declines. If removal 

of harvest residues resulted in widespread private forest productivity declines, 

private land managers would need to increase management intensity (e.g., fertilizing, use of improved planting stock) to maintain the same levels of productivity. 

Decreased productivity and increased management intensity on private forest 

lands could result in greater pressure on public forest lands and nonindustrial 

private forests for provision of forest goods (e.g., timber) and services (e.g., wildlife 

habitat, clean water). This greater reliance on public lands could be complicated by 

the patchwork of public and private ownership, with the potential for difficulty in 

providing some services because of fragmented ownership (e.g., fig. 6-1). 

Hazard-Fuel Reduction

Because of increased attention to large and costly wildland fires that cause damage 

to private property, there have been calls to implement widespread activities to 

reduce hazardous wildfire fuel loads on public and private lands. It is often suggested that small-diameter hazard-fuel material could be a key biomass feedstock 

for renewable energy production. Skog et al. (2006) quantified acres and volumes of 

material that could be removed from timberland in the Western United States under 

several hazard-fuel treatment scenarios. The amount of hazardous fuel volume 

on public lands far exceeds that on private lands. Under a representative scenario, 

the volume of biomass that could be removed from private lands was slightly less 

than half the volume that could be removed from public timberlands (table 6-2). In 

general, the Western States with the greatest forest areas have the greatest potential 

volumes of hazard material. 

A significant challenge to widespread implementation of hazard-fuel reduction 

is the cost of treatment. Skog et al. (2006) found that no treatment scenario was 

profitable if all of the removed material were sold only for bioenergy. If larger stems 

that were removed could be sold for pulpwood and sawtimber, some hazard-fuel 

treatment scenarios resulted in positive net revenues. Subsidies of $22/green tonnes 

($20/green ton) of chips in addition to the ability to sell larger stems for pulpwood 

and sawtimber allowed more treatments to become economically feasible. In addition to affecting economic feasibility, Skog et al. (2006) also found that allowing 

harvesting of larger stems as part of hazard-fuel reduction resulted in programs 

better able to meet targets for reducing the susceptibility of forest stands to wildfire 

crowning and torching. It is unclear whether hazardous-fuel removal programs on 

public lands would be required to cover costs. Where hazardous-fuel reduction could 

be completed on private forests (many lands that likely do not have management 
155

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

plans), it seems unlikely such treatments would be implemented if costs could not 

be covered either by revenue from selling the material or via subsidy. As such, it is 

likely that public forests would be the focus of a widespread hazardous-fuel reduction program and associated biomass for bioenergy. However, the ownership(s) on 

which hazard-fuel reduction occurs will likely be most influenced by the specific 

focus (public or private lands) of any potential future hazardous-fuel reduction 

program. 

Public and Private Timber Harvest Linkages

In general, changes in timber harvest levels on public lands lead to countervailing 

changes in harvest on private lands (Adams et al. 1996). However, because only 

some of the material harvested under a hazard-fuel reduction program would have 

value for traditional commercial timber production, the relationship between public 

land hazard-fuel reduction programs and private forest harvest is not entirely clear. 

Building on the work reported in Skog et al. (2006), Ince et al. (2008) projected that 

widespread hazardous-fuel treatment on western public lands would result in “significant displacement” of timber that would have been harvested from private and 

state-owned forest land (up to 30 percent less than baseline projections). Increased 

production of timber from a hazardous-fuel reduction program was also projected to 

reduce stumpage prices for western softwood timber by up to approximately 40 percent in 2015 relative to the baseline. Hazard reduction programs that removed stems 

of a variety of sizes yielded greater reductions in timber harvest and stumpage price 

than treatments that thinned only the smallest stems. Because public timber output 

increases and prices fall, a hazardous-fuel reduction program was projected to 

Table 6-2—Volume of material removed under a simulated uneven-age 

hazard fuel thinning regime by timberland ownership 

National Other State and

State Private forest federal local Total

Million oven dry tons

Arizona 2.0 6.9 0.0 0.0 8.9

California 50.0 65.1 0.6 1.7 117.4

Colorado 5.9 8.9 2.4 0.2 17.4

Idaho 13.2 35.7 3.5 5.3 57.7

Montana 14.8 38.2 3.2 2.6 58.9

Nevada 0.2 0.0 0.0 0.0 0.2

New Mexico 3.3 10.7 0.0 1.1 15.0

Oregon 16.3 28.3 8.4 2.1 55.1

South Dakota 0.0 1.1 0.0 0.0 1.1

Utah 1.6 3.9 0.3 1.1 6.9

Washington 12.8 18.4 1.1 6.4 38.8

Wyoming 2.3 3.1 1.8 0.1 7.3

 Total 122.3 220.2 21.3 20.8 384.6

Adapted from Skog et al. 2006. 

In general, changes in 

timber harvest levels 

on public lands lead to 

countervailing changes 

in harvest on private 

lands.
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decrease the welfare of timber producers but increase the welfare of wood product 

consumers. Research completed by others (Abt and Prestemon 2006, Keegan et al. 

2004) is consistent with the findings of Ince et al. (2008). 

Adams and Latta (2005) examined how a hypothetical federal forest-land 

restoration program would influence the private forest sector in a rural community. 

In their study, small material harvested during the restoration was left onsite and 

larger material was sold for timber production. Logging contractors completed the 

treatments and were provided a variety of subsidies. The setting for the Adams and 

Latta (2005) study was eastern Oregon, where timber milling capacity and timber 

harvest levels have been in decline. In this setting, a hazard-fuel reduction program 

increased the amount of timber harvested in the region with small reductions in 

timber prices, except in the most generous subsidy program. Implementation of a 

hazard-fuel reduction program slowed the projected reduction in timber mill capacity 

within the region, although over the long term, capacity was projected to be nearly 

as low, or lower, than in the base case with no restoration program. Adams and 

Latta (2005) found both reductions and increases in the values of various types of 

private timberland owing to changes in the output of the region’s industry. Timber 

producers (primarily private forest owners) suffered welfare losses under the 

subsidy program but consumers (timber mills) gained welfare, as expected. Based 

on model output, timber producers were also found to change their management 

Eric White

Public timberlands have been managed for multiple uses and ecosystem services including timber, 

range, wildlife habitat, watershed protection, recreation, and visual amenities, with increasing 

consideration given to carbon sequestration as another ecosystem service. 
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Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

regimes when the fuel reduction program was in place—slightly reducing the share 

of acres in uneven-age management and increasing the share of acres in even-age 

management. Impacts on local mills and the forest sector from the fuel reduction 

program were sensitive to the type of subsidy program (including no subsidy) 

offered to logging contractors. 

Goals and Decisionmaking

Differences in management goals and the process of decisionmaking and implementation is a factor in how public and private forest owners interact with one 

another and respond to climate change. Within the confines of regulations, private 

landowners can manage their lands for goals they identify. These goals may be 

narrow or broad and focused on production of goods (e.g., timber) or nonconsumptive uses (e.g., aesthetics). In theory, a sufficient number of private landowners are 

able to influence the activities on neighboring private land via the marketplace. 

In general, private landowners can influence public land policies only through the 

policy process. Looking forward, the general expectation is that private forest-land 

owners have the ability to respond rapidly and optimally to changes in environmental conditions and new climate change policies and opportunities. For example, 

in response to changing forest-growing conditions or changing policies, private 

landowners may adapt and choose to plant tree species better suited to the new 

conditions or to change management activities on existing forests (see chapter 1 for 

a discussion). 

Private lands would appear to be well positioned to respond quickly to climate 

change and climate change policies. However, private forest landowners are currently experiencing widespread changes in ownership away from traditional timber 

industry and toward investment group ownership and small parcels owned by 

numerous private individuals. Pressure on forests for urbanization and residential 

development has been high and is projected to continue in the coming decades (Alig 

et al. 2003, 2010b; Stein et al. 2005). The timber industry is also currently faced 

with decreased demand for wood and paper products. These factors may make it 

challenging for private forest owners to optimally respond to climate change and 

such things as carbon markets. For example, it may be very difficult to get private 

individual forest owners to increase carbon sequestration rates given that these 

owners have a diverse array of management goals and often have no management 

plan (Birch 1997). 

Public forests, particularly federal forests, are typically managed for a broad 

suite of goals that involve a number of consumptive and nonconsumptive uses. 

However, some public forests, such as those managed by local utilities, are managed 
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GENERAL TECHNICAL REPORT PNW-GTR-833

primarily for a specific set of goals, such as the provision of water (e.g., Seattle Public Utilities 2008). Regardless, the goals for public forest lands and the management 

actions to achieve those goals are generally developed through processes involving 

numerous stakeholders. Reflecting the diversity of goals as well as the policymaking process, public forest lands are perceived to be slow to respond to changing 

environmental and market conditions. Generally, public land agencies influence 

management actions on private lands by providing information and technical 

assistance (e.g., the State and Private Forestry branch of the USDA Forest Service). 

Federal public forests are less constrained than private forests by market conditions in adopting new management directions, although management decisions for 

many state-owned forest lands do explicitly incorporate market conditions. Some 

agencies, including many in the West, are responsible for providing revenue from 

forest resource uses such as timber harvest or grazing allotments to support state 

services. In addition to timber production, state and local forest agencies typically 

also provide a number of nonconsumptive resource opportunities. Federal forest 

agencies have recently exhibited, through significant increases in fire and fuels 

management capacity, that the government is able to make fairly rapid changes in 

response to perceived threats in at least some cases. However, in many other cases, 

changes to federal land policy continue to be slow to occur. 

Needed Research

The interactions between public and private forest lands in the context of climate 

change and climate change policies, as well as the provision of other ecosystem 

services, have not been well studied. However, these interactions are important 

in considering likely future conditions and the potential impacts of new policies. 

Several opportunities for additional lines of research are presented below. We 

focus on the United States here, but there are also opportunities to gain insights 

by comparing forest resource conditions, carbon sequestration, institutional 

arrangements, forest ownership, and social issues across regions of the world (e.g., 

Alig et al. 2006).

Research is needed to better understand how public and private forest lands are 

likely to interact in the provision of feedstocks for bioenergy. This might help to 

identify opportunities to increase the joint provision of feedstocks from landscapes 

that have a mixture of public and private forests. Currently, much effort is being 

expended discussing what feedstocks should be eligible for renewable energy credit. 

Even with limited eligibility standards in place, there is a need to better understand 

how increased demand for bioenergy feedstocks from private lands may influence 

the demands for goods and services obtained from public forest lands. Additionally, 

Research is needed 

to better understand 

how public and private 

forest lands are likely 

to interact in the 

provision of feedstocks 

for bioenergy. 
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Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

because the agriculture and forest sectors are linked and many of the feedstocks 

are substitutable, it is useful to consider both of those sectors in any analysis of 

bioenergy feedstocks (e.g., Alig et al. 2010a). It is possible that increased demand 

for biomass from private forest harvest residues would have little impact on the 

management of private forests. In one existing national-level study of the forest 

sector (McCarl et al. 2000), logging residues from harvest of traditional forest 

products were never utilized for bioenergy; however, the oil prices at the time were 

much lower than current ones. Research that quantifies how handling and transport 

costs differ between public and private forests would also be useful in identifying 

bioenergy feedstocks accessible at the lowest transportation cost. 

How the forest sector responds to changes in public land timber harvest volume 

has been studied. However, relatively little is known about the threshold relationships that might exist between public land harvest volumes and the maintenance 

of adequate logging and milling infrastructure in local communities to support 

continued forest sector commercial activity (e.g., in eastern Oregon). In addition to 

traditional timber production, threshold relationships between local infrastructure 

and the provision of resources from public forest lands may also exist for items such 

as bioenergy feedstocks or other forest products. Additional research addressing 

these thresholds would be useful to identify potential unintended consequences 

from significant changes in public land management (e.g., a hypothetical halt of 

harvesting on public lands as modeled in Depro et al. 2008).

Private landowners, particularly individual forest-land owners, are diverse. 

Numerous research projects have been undertaken to quantify the motivations 

and willingness of private individual landowners to participate in conservation 

programs. Research efforts to summarize this existing work as well as efforts to 

quantify revealed behavior in responding to conservation programs (e.g., afforestation of erodible agricultural land) would be useful to better gauge the expected 

response by private forest-land owners to new climate change programs and associated new markets. This would help public forest agencies identify tools and information that would be useful to the private sector. Afforestation is one of the most 

productive approaches to generating carbon offsets as part of any potential cap and 

trade program. One recent study estimates that forest area could increase by up to 

25 percent, mostly owing to afforestation, when carbon is valued (Alig et al. 2010a). 

Research that examines the willingness of agriculture landowners (including those 

who lease agriculture land to agriculture operators) to plant trees for climate change 

programs will help to place these forest and agriculture sector modeling results into 

perspective and identify opportunities for technological transfer from public land 

agencies. 
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GENERAL TECHNICAL REPORT PNW-GTR-833

Additionality, leakage, and permanence are three concerns commonly 

mentioned when considering climate change policies. Leakage is likely the most 

germane when considering the interaction between public and private forests in 

the context of climate change and climate change policy. The concept of leakage 

relates to how offset activities in one location or market may result in countervailing emissions in another location or market (see Kline et al. 2009 for a discussion 

of leakage). Some existing forest sector research is pertinent. For example, Adams 

et al. (1996) have shown that reductions in public harvest rates are followed by 

increases in private harvest. Within the context of climate change and associated 

policies, leakage is important when considering the overall efficacy of comprehensive climate legislation. Leakage between public and private forests is probably of 

greatest importance when considering policies implemented on publicly owned 

forests. However, leakage across regions is likely also of interest within the context 

of regional patterns of public and private land ownership. 

Impacts on land values from climate change policies warrant further investigation. The form and extent of land value changes can depend on the type and size 

of the policy as well as whether taxes, subsidies, or other types of incentives are 

employed. For example, subsidies to promote delays in timing of timber harvest 

can affect land values for some forest stands even without timber price reductions 

(Adams and Latta 2005). Given the relatively long-term nature of forest production, 

Eric White

Researchers are increasingly investigating linkages among carbon management, fire management, and bioenergy production on public timberlands, each of which can have a profound 

impact on the carbon balance, ecological integrity, and economic value of the forest.
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Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

it would be useful to consider changes in value over time. These types of investigations would be facilitated by expanded and consistent data coverage for land values, 

including for forest land, across the United States. 

Finally, partnerships in management of public and private forest lands could 

continue to increase in popularity in the coming decades (see National Association 

of State and Private Foresters 2009). Research that examines ways to maximize the 

joint provision of goods and services from public and private forests, in the context 

of climate change, will help inform ways to achieve more effective policy. Lessons learned from past efforts at joint public and private timberland management, 

such as sustained timber yield units in the West, could help inform current policy 

deliberations. Additionally, policy implementation can be improved by research that 

identifies effective public agency programs for private landowners and the most 

effective approaches to public-private partnerships. 

Conclusions

The public and private forests of the United States have a long history of connection and interaction. As climate change progresses and comprehensive policies are 

developed, consideration of public and private forest ownership will be important. 

Under baseline projections, carbon stocks are projected to decline on private forests 

but increase on public forests in the coming decades. When carbon is valued, 

private forest carbon is projected to increase because of afforestation and changes 

in forest management. Increases or reductions in public harvesting rates have been 

projected to lead to countervailing changes in public carbon stocks and flux relative 

to the baseline. Although research has confirmed that public and private forests are 

linked through the market by changes in timber harvest activity, additional research 

is needed to quantify projected responses in public and private forest management to alternate carbon market or policy formulations. Similar to the provision of 

bioenergy feedstocks, public lands could potentially participate in carbon markets, 

although public land participation is not certain. Whether carbon sequestered on 

public lands under a carbon market would be “additional” to carbon sequestered 

under “business as usual” needs to be considered, particularly on federal lands 

where current harvest rates are low. 

Both private and public forest ownership groups have advantages in the provision of some bioenergy feedstocks. Because private lands account for most U.S. 

timber harvest, those forests have the greatest capacity to provide harvest residues 

for biomass. Current expectations are that revenues from the sale of timber harvest 

residues would be minor and would probably not change private forest management. 

There is some concern about site productivity declines because of harvest residue 

The public and private 

forests of the United 

States have a long 

history of connection 

and interaction.
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removal. If harvest residue usage on private industry lands lead to widespread 

reduction in productivity, additional pressure could be placed on public lands to 

increase the provision of some forest goods and services. Public forests have the 

greatest volumes of material that could be treated as part of a hazard-fuel reduction 

program. Research has projected that hazard-fuel thinning programs would lead to 

a reduction in private timber harvest and stumpage values for softwoods. Research 

has consistently projected that logging contractors and timber mills benefit from 

hazard-fuel reduction programs, although this benefit is projected to be short lived 

in at least one study. There is currently much discussion over whether feedstocks 

from public forests would qualify for renewable energy credit under existing and 

proposed legislation. 

The general perception is that privately owned forests are better positioned than 

public forests to respond rapidly to climate change and new climate change policies. However, private forests have gone through a change in traditional industry 

forest ownership, and much of private forest land is owned by a diverse group of 

individual owners, many without management plans. Public forest agencies can 

help private forest owners respond optimally to climate change and new policies 

by providing information and technical assistance. Recent responses by the USDA 

Forest Service to increase wildland fire and fuels management capacity may 

indicate that public forests do in fact have the capacity to make rapid changes in 

management in response to climate change and new policies in some cases. Even if 

public forests are not the focus of new climate policies, public forest agencies will 

be integral in helping private forests respond by providing information and support 

as well as participating in public-private partnerships. 

The literature examining linkages and interactions between public and private 

forests within the context of climate change and climate change policies is limited. 

There are a number of research opportunities to quantify the connections between 

public and private forests. It is probable that both private and public ownerships will 

play important roles in the mitigation of and adaptation to climate change by the 

forest sector. Improved knowledge regarding the linkages between the two ownership groups should improve the effectiveness of climate change policies and help 

resource planners identify likely future conditions. 
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Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

English Equivalents

When you know: Multiply by: To get:

Cubic meters (m3) 35.3 Cubic feet (ft3)

Grams (g) 0.0352 Pounds

Metric tonnes 1.102 Tons

Megagrams (Mg) 1.102 Tons

Teragrams (Tg) 1,102,311 Tons

Terawatt hours (TWH) 3.6 x 109 Megajoules

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Glossary 

afforestation—The forestation, either by human or natural forces, of nonforest land.

Conservation Reserve Program (CRP) land—A land cover/use category that 

includes land under a CRP contract. The CRP is a federal program established 

under the Food Security Act of 1985 to assist private landowners to convert highly 

erodible cropland to vegetative cover for 10 years.

cropland—A land cover/use category that includes areas used for the production of 

adapted crops for harvest. Two subcategories of cropland are recognized: cultivated 

and noncultivated. Cultivated cropland comprises land in row crops or close-grown 

crops and also other cultivated cropland, for example, hay land or pastureland that 

is in a rotation with row or close-grown crops. Noncultivated cropland includes 

permanent hay land and horticultural cropland. 

developed land—In the National Resources Inventory (NRI), developed land 

consists of urban and built-up areas, as well as land devoted to rural transportation. 

This is a broader category than the “urban” land use considered in this study. This 

study has not attempted to model net returns to rural transportation use, so this 

report focuses only on the urban component of developed land.

forest land—Land at least 10-percent stocked by forest trees of any size, including land that formerly had such tree cover and that will be naturally or artificially 

regenerated. Forest land includes transition zones, such as areas between heavily 

forested and nonforested lands that are at least 10-percent stocked with forest trees 

and forest areas adjacent to urban and built-up areas. The minimum area for classification of forest land is 1 acre. Roadside, streamside, and shelterbelt strips of 

timber must have a crown width of at least 120 feet (36.6 m) to qualify as forest 

land. Unimproved roads and trails, streams, and clearings in forest areas are classified as forest if less than 120 feet wide.

Intergovernmental Panel on Climate Change (IPCC)—The IPCC was established to provide decisionmakers and others interested in climate change with an 

objective source of information about climate change. The IPCC does not conduct 

any research nor does it monitor climate-related data or parameters. Its role is 

to assess on a comprehensive, objective, open, and transparent basis the latest 

scientific, technical, and socioeconomic literature produced worldwide relevant to 

the understanding of the risk of human-induced climate change, its observed and 

projected impacts, and options for adaptation and mitigation. For more information, 

see http://www.ipcc.ch/.
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land area—The area of dry land and land temporarily or partly covered by water, 

such as marshes, swamps, and river flood plains; streams, sloughs, estuaries, and 

canals less than 200 feet (61 m) wide; and lakes, reservoirs, and ponds less than 4.5 

acres (1.8 ha).

land cover/use—A term that includes categories of land cover and categories of 

land use. Land cover is the vegetation or other kind of material that covers the land 

surface. Land use is the purpose of human activity on the land; it is usually, but 

not always, related to land cover. The NRI uses the term land cover/use to identify 

categories that account for all the surface area of the United States. The six major 

land-use categories considered in this study are (1) cropland, (2) pasture, (3) range, 

(4) Conservation Reserve Program (CRP), (5) forest, and (6) urban. These uses are 

described in this glossary.

large urban and built-up areas—These areas include developed tracts of 10 acres 

(4 ha) and more.

nonindustrial private forest (NIPF)—An ownership class of private lands where 

the owner does not operate commercial wood-using plants.

National Resources Inventory (NRI)—A statistical survey of land use and natural 

resource conditions and trends on U.S. nonfederal lands. The NRI is led by Natural 

Resources Conservation Service (NRCS), the Department of Agriculture’s lead 

conservation agency. For more information, see http://www.nrcs.usda.gov/technical/

NRI/.

other rural land—A land cover/use category that includes farmsteads and other 

farm structures, field windbreaks, barren land, and marshland. Some reports refer 

to this as NRI minor land cover/uses.

pastureland—A land cover/use category of land managed primarily for the production of introduced forage plants for livestock grazing. Pastureland cover may consist 

of a single species in a pure stand, a grass mixture, or a grass-legume mixture. 

Management usually consists of cultural treatments: fertilization, weed control, 

reseeding or renovation, and control of grazing. For the NRI, includes land that has 

a vegetative cover of grasses, legumes, or forbs, regardless of whether or not it is 

being grazed by livestock. 

public—An ownership class composed of land owned by federal, state, county, or 

municipal governments.

rangeland—A land cover/use category on which the climax or potential plant cover 

is composed principally of native grasses, grasslike plants, forbs or shrubs suitable 

for grazing and browsing, and introduced forage species that are managed like 

rangeland. This would include areas where introduced hardy and persistent grasses, 

such as crested wheatgrass (Agropyron cristatum (L.) Gaertn.), are planted and such 
169

Economic Modeling of Effects of Climate Change on the Forest Sector and Mitigation Options

practices as deferred grazing, burning, chaining, and rotational grazing are used, 

with little or no chemicals or fertilizer being applied. Grasslands, savannas, many 

wetlands, some deserts, and tundra are considered to be rangeland. Certain communities of low forbs and shrubs, such as mesquite, chaparral, mountain shrub, and 

pinyon-juniper, are also included as rangeland. 

residential area—The sum of area in lots used for housing units. Estimates of 

residential area, urban and rural, are based on data from the American Housing 

Surveys.

timberland—Forest land that is producing or is capable of producing crops of 

industrial wood and not withdrawn from timber utilization by statute or administrative regulation. (Note: Areas qualifying as timberland are capable of producing 

in excess of 20 ft3/acre [14 m3/ha] per year of industrial wood in natural stands. 

Currently inaccessible and inoperable areas are included.)

urban area—Nationally, there are two main sources of data on urban area. First, 

the U.S. Department of Commerce Bureau of the Census compiles urban area every 

10 years, coincident with the census of population. Second, the Natural Resources 

Conservation Service, U.S. Department of Agriculture, publishes developed land, 

including urban components, at 5-year intervals as part of the NRI. Although the 

U.S. Geological Survey, National Aeronautics and Space Agency, Housing and 

Urban Development Department, and several local, state, and federal agencies also 

collect data or conduct special-purpose studies on urban area, the census and the 

NRI provide the only nationally consistent historical series. Because of differences 

in data-collection techniques and definitions, the NRI estimates of “large urban and 

built-up areas” is usually higher than the census “urban area” estimates for nearly 

all states. The census urban area series runs from 1950, whereas the NRI started 

providing a consistent series in 1982. Historically, the Economic Research Service 

(ERS) major land-use time series (MLUS) has used census urban area numbers. 

Prior to 1982, census urban area was the only reliable national source of urban area 

data available. Since 1945, census urban area has been used in the MLUS time 

series to maintain a consistent series. For comparison purposes, census urban area 

is checked against the NRI to help project and interpolate census trends between 

decennial census years.

urban and built-up areas—These areas consist of residential, industrial, commercial, and institutional land; construction and public administrative sites; railroad 

yards; cemeteries; airports; golf courses; sanitary landfills; sewage plants; water 

control structures; small parks; and transportation facilities within urban areas. 
Pacific Northwest Research Station

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