State-space approach to capital return in nonlinear growth processes

2020

Preprint

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The expense of carbon sequestration in terms of capital return deficiency is investigated at estate level, in the case of a fertile boreal estate dominated by spruce forest. Thinnings from below result as a high expense of increased rotation age, thinnings from above as a small expense. The expense of increased timber stock is greater than any proportional carbon rent based on present carbon prices. Application of non-proportional carbon rent is proposed.

Section: Methodsmentioning

confidence: 99%

“…(2) was introduced in 1860 [24]; an expected value was mentioned in 1967 [25,26], however applications have been introduced only recently [19,20,13,14].…”

Section: Methodsmentioning

confidence: 99%

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Carbon forestry compensation on estate level

2020

Preprint

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“…Besides, the constancy of the expected value of capital return rate in time requires that prices and expenses do not evolve in real terms. Then, the expected value of the capital return rate becomes It has been recently shown that Equation (7) corresponds to the ratio of the partition functions of the change rate of capitalization and capitalization itself [29]. It also has been recently shown that the maximization of the net present value of future revenues may result in financially devastating consequences [30].…”

Section: Financial Considerationsmentioning

confidence: 99%

“…The feasibility of harvesting is investigated in five-year intervals, always considering two options: thinning or clearcut. Clearcutting expenses are lower than thinning harvesting costs, according to Parkatti et al [33], stated to be based on a productivity study of Nurminen et al In addition to high thinnings intended to maximize capital return rate [21,22,29,30,23], the consequences of following semi-official silvicultural guidance commonly applied in the area [35] are discussed. Thinnings are predominantly applied from below, and any rotation is It has been recently shown that policies based on carbon rent are equivalent to policies based on carbon sequestration subsidies and taxies [18].…”

Section: Financial Considerationsmentioning

confidence: 99%

The Effect of Empirical Log Yield Observations on Carbon Storage Economics

2020

Preprint

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An empirical model for log yield from trees is established and applied in microeconomics of carbon storage in a boreal spruce estate. The transition from pulpwood to sawlogs is a smoother function of stem diameter in the empirical data, in comparison to literature values. Correspondingly, the value transition of trees along with increasing size is gentler. Due to price premium of sawlogs from clearcuttings, all economically feasible treatment schedules terminate in clearcutting. Best capital return rates are gained with two heavy thinnings from above before clearcutting. Present carbon emission prices allow moderate carbon storage increment if the increment is compensated by proportional carbon rent. Doubling the present carbon prices would allow strong carbon storage increments if compensated by carbon rent. Application of nonproportional carbon rent is proposed.

The effect of capitalization on financial return in periodic growth

2019

Heliyon

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A capital return rate function for growth processes is introduced and applied to financial considerations in periodically growing multiannual plants. The capital return rate function is composed of a momentary capital return function, a probability density function in the time domain, and their integration over time or age. It is shown that the expected value of capital return rate within a single stand equals momentary capital return rate within an estate, integrated over an even distribution of stand ages. We distribute the capitalization to operative and non-operative capitalization. In the case of a low non-operative capitalization, financially sound operations favor relatively small amount of operative capital. In the case of a high, but constant non-operative capitalization, optimal practices correspond to those resulting in maximum sustainable yield. Appreciating non-operative capitalization favors small operative capitalization. Optimal rotation and operative capitalization are weak functions of increasing level of non-operative capitalization, even if they are strong functions of its increment rate. It is argued that large but non-appreciating non-operative capitalization, favoring practices corresponding to maximum sustainable yield, would not appear frequently. In summary, it is found that appreciation of nonoperative capitalization dominates financially sustainable management practices.