Source: UNIV OF WISCONSIN submitted to
FORESTRY RESEARCH
Sponsoring Institution
State Agricultural Experiment Station
Project Status
TERMINATED
Funding Source
Reporting Frequency
Annual
Accession No.
0205978
Grant No.
(N/A)
Project No.
WIS01009
Proposal No.
(N/A)
Multistate No.
(N/A)
Program Code
(N/A)
Project Start Date
Oct 1, 2004
Project End Date
Sep 30, 2011
Grant Year
(N/A)
Project Director
Buongiorno, J.
Recipient Organization
UNIV OF WISCONSIN
(N/A)
MADISON,WI 53706
Performing Department
FOREST AND WILDLIFE ECOLOGY
Non Technical Summary
Forest resources must be used in the best possible ways for multiple goals, both economic and environmental. This project aims at predicting how much and where forest products shall be needed in the future, and how forests should be managed to best meet those needs.
Animal Health Component
100%
Research Effort Categories
Basic
(N/A)
Applied
100%
Developmental
(N/A)
Classification

Knowledge Area (KA)Subject of Investigation (SOI)Field of Science (FOS)Percent
60306993010100%
Knowledge Area
603 - Market Economics;

Subject Of Investigation
0699 - Trees, forests, and forest products, general;

Field Of Science
3010 - Economics;
Goals / Objectives
This research has two main objectives. The first one is to understand forest product markets in an international context. This implies discovering the laws that govern the demand and supply of forest products (from roundwood to end products), and applying them to predict production, consumption, imports, exports, and prices of each product within the United States and abroad. The second objective is to improve forest management methods, especially for mixed-species, uneven aged forests. The work consists in discovering and applying operations research models to predict the effect of different management procedures on the economics and ecology of these forests. Ultimately, the research aims at finding the best method in each particular context.
Project Methods
The analysis of forest product markets is being carried out with econometric methods. Using regional, national, and international data, we measure each market parameter, such as the elasticities of demand with respect to price. We then integrate these parameters and the data in market models for a region, country, or for the world, to predict future demand and supply, and to determine the effect of different policies. In the management aspect of the research, we develop quantitative growth models for forest stands in the United States and other locations, with permanent plot data. We then use these models to simulate the effects on ecological and economic criteria of alternative management regimes. Mathematical programming methods such as linear programming, and Markov decision process models are then used to determine the best alternative for a particular set of objectives and a particular forest type.

Progress 10/01/04 to 09/30/11

Outputs
OUTPUTS: The Global Forest Products Model (GFPM) was modified to link the forest sector to two scenarios of the Intergovernmental Panel on Climate Change (IPCC), and to represent the utilization of fuelwood and industrial roundwood to produce biofuels. The scenarios examined were a subset of the "story lines" prepared by the IPCC. Each scenario has projections of population and gross domestic product. These projections were used as input in the GFPM simulations. The IPCC also makes projections of forest area, which were integrated in the timber supply sub model of the GFPM. The IPCC scenarios also predict bioenergy production. These projections were used in the GFPM to determine forest area, forest stock, and the demand, supply, prices, and trade of forest products up to 2060. The methods and results of this research were published in the Journal of Forest Policy and Economics. We also studied the effect of the US dollar value variation on US forest product exports. Variations of the dollar value bring uncertainty to international traders. As a result, the volatility in exchange rate movements influence the volume and the price of traded commodities. In this research,the volatility of exchange rates was measured by the variance of residuals in a GARCH model of the exchange rate. We estimated the effect of this exchange rate volatility on export quantity and price with autoregressive distributed lag models, based on monthly data of U.S. exports and prices to fourteen countries for eight commodity groups. The most general and statistically significant results described below were obtained by pooling the time series data across destination countries and products.The methods and results of this research have been published in the Canadian Journal of Forest Research. PARTICIPANTS: The research was carried by Dr. Joseph Buongiorno, Professor emeritus, with Dr. Shushuai Zhu, Assistant scientist, and Dr. Ronald Raunikar, Research Associate (until June 2010). Collaborators included Dr. David Wear and Dr. Jeff Prestemon, USDA Forest Service, Southern Forest Experiment Station, Dr. James Turner, New Zealand Forest Research, Rotorua, New Zealand, Dr. Torjus Bolkesjo and Dr. Birger Solberg, Norwegian University of Life Sciences at As, Dr. Mo Zhou, University of Alaska at Fairbanks, and Dr. Peter Ince at the USDA Forest Products Laboratory, Madison. The research was funded in part by the USDA Forest Service, Southern Forest Experiment Station. TARGET AUDIENCES: Presentations of this research were made at the IUFRO world congress in Seoul, Rep. of Korea, at the Southern Forest Economics Workshop in Pinehurst, NC, at the French Academy of Agriculture in Paris, France, and at the International Workshop on Forest Sector Modeling in Nancy, France. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

Impacts
The main finding of the GFPM projections concerns the important impact of the high demand for biofuels implied in some of the IPCC scenarios. In particular, scenario A1B would induce a nearly 6-fold increase in the world demand for fuelwood by 2060. As a result, the real price of fuelwood would rise and converge towards the price of industrial roundwood by about 2025. At that point, industrial roundwood, which was used in the past to manufacture sawnwood, panels, and pulp, would begin to be used for energy production. The price of all wood would then continue to rise steadily up to 2060, and the price of manufactured product would increase in concert. The high fuelwood harvest would imply ecologically stressed forests in several countries, even under scenario A2 with a nearly 3-fold increase in fuelwood production by 2060. The results of the study on the effect of exchange rate variability of US exports of forest products suggested that an increase in exchange rate variability of 1 percent led to a short-run decrease in export quantity of 0.3 to 0.4 percent, and to a short-run decrease in export price of 0.1 percent. Both the quantity and the price effect faded away over time. The effects were less systematic and statistically significant for specific export destinations or individual products. Thus, in contrast with exchange rate level, exchange rate volatility may not be a major policy issue for U.S. forest product exports.

Publications

  • Raunikar, R., J. Buongiorno, J.A. Turner, and S. Zhu. 2010. Global outlook for wood and forests with the bioenergy demand implied by scenarios of the Intergovernmental Panel on Climate Change. Forest Policy and Economics 12:48-56.
  • Bolkesjo, T.F., J. Buongiorno, and B. Solberg. 2010. Joint production and substitution in timber supply: a panel data analysis. Applied Economics 42:671-680.
  • Zhang, S., and J. Buongiorno. 2010. Effects of exchange rate volatility on export volume and prices of forest products. Canadian Journal of Forest Research 40:2069-2081.
  • Buongiorno, J., and H. Kando. 2010. International efficiency of wood and fiber utilization. Proceedings of the 2010 Southern Forest Economics Workshop, Pinehurst, NC, March 17, 2010, p. 71-79. http://sofew.cfr.msstate.edu/papers/2010_proceedings.pdf
  • Zhu, S., J. Buongiorno, J. Turner, R. Raunikar. 2010. Using the Global Forest Products Model (GFPM version 2009). Staff Paper Series #66, Department of Forest and Wildlife Ecology, University of Wisconsin-Madison. 34p.(The GFPM software and documentation are available at http://fwe.wisc.edu/facstaff/Buongiorno/book/GFPM.htm)
  • Zhu, S., J. Buongiorno, J. Turner. 2010. Calibrating and updating the Global Forest Products Model (GFPM version 2009). Staff paper Series #67, Department of Forest and Wildlife Ecology, University of Wisconsin-Madison. 33p.
  • Zhu, S., J. Turner, and J. Buongiorno. 2010. Global Forest Products Model software design & implementation (GFPM version 2009). Staff paper Series #68, Department of Forest and Wildlife Ecology, University of Wisconsin-Madison. 45p.
  • Segerson, K., B. Babcock, J. Buongiorno, S. Malcolm, and A. Plantinga. 2010. Peer review of the forestry and agricultural sector optimization model with greenhouse gases (FASOM-GHG) for climate change analysis. Work performed under contract from the U.S. Environmental Protection Agency, through Industrial Economics, Inc. 35p.


Progress 01/01/09 to 12/31/09

Outputs
OUTPUTS: This project deals with forest management and forest markets. In management, we investigated Markov decision process (MDP) models to generalize the Faustmann formula by recognizing that future stand states, prices, and other variables, including the interest rate, are known only as probabilistic distributions. The objective function was the expected discounted value of returns, over an infinite horizon, in a stochastic environment. It gave, like the Faustmann formula, the land or the forest value (land and initial stock). In MDP models, the laws of motion between states, including the changes in interest rates, are Markov chains. The Faustmann formula is a special case where the probability of movement from one state to another is unity, and where the interest rate is constant. MDP models apply whether the stand state is bare land, or any state with trees, be it even- or uneven-aged and single or multi-species. Decisions that maximize the land or forest value depend only on the current system state, and to each state corresponds one single best decision. Numerical solutions were obtained by linear programming in primal or dual form. An example showed the potential effects of recognizing variations in interest rate on the planned land expectation value, and the cost of ignoring them in management. We continued the study of matrix model to predict the growth of trees of mixed species and size in Norway, to optimize forest management for economic and ecological objectives with linear programming methods. For markets, three studies were carried. One investigated the global outlook for wood and forests with bioenergy demand implied by scenarios of the Intergovernmental Panel on Climate Change. The Global Forest Products Model (GFPM) was modified to link the forest sector to two scenarios of the Intergovernmental Panel on Climate Change (IPCC), and to represent the utilization of fuelwood and industrial roundwood to produce biofuels. The scenarios examined were a subset of the story lines prepared by the IPCC. Each scenario has projections of population and gross domestic product. These projections were used as input in the GFPM simulations. The IPCC also makes projections of forest area, which were integrated in the timber supply sub model of the GFPM. The IPCC scenarios also predict bioenergy production. These projections were used in the GFPM to determine forest area, forest stock, and the demand, supply, prices, and trade of forest products up to 2060. Another studied the efficiency in wood and fiber utilization in OECD countries. The third addressed international trends in forest products consumption, to determine to what extent consumption is becoming more similar, or dissimilar across countries. The results of the project were disseminated by peer-reviewed publications, presentations at national and international meetings. The software and data of the current version of the Global Forest Products Model were made available on the web site of the principal investigator at: http://fwe.wisc.edu/facstaff/Buongiorno/ PARTICIPANTS: The work was done by Dr. Joseph Buongiorno, Professor, Dr. R. Raunikar (Research Associate), Dr. S. Zhang (Research Associate), Dr. S. Zhu (Assistant Scientist), and Mr. A. Kramp (Research Specialist). Collaboration was with Dr. Jingjing Liang, Assistant Professor at the University of Alaska, Dr. Jeff Prestemon, USDA Forest Service, Southern Research Station, Dr. James Turner, Scion Research, New-Zealand, Dr. Peter Ince, USDA Forest Products Laboratory, Madison, Dr. Birger Solberg, Dr. Terje Gobakken, Dr. Ole Bollandsas, and Mr. Espen Halvorsen (Ph.D. candidate), University of Biological Sciences, Norway, Mr. Kaisone Phengsopha, Ph.D. candidate, University of Melbourne. The project served in the training and professional development of Dr. Ron Raunikar, Dr. S. Zhang, Mr. Kaisone Phengsopha, and Mr. Espen Halvorsen. TARGET AUDIENCES: The research on forest management is meant to improve the knowledge of managers of uneven-aged, mixed-species forests. The research aims at developing optimal strategies to obtain positive economic and ecological outcomes in conditions of uncertainty. Particular attention is given to catastrophic events and changes in economic conditions. In the past year of the project, special attention has been given to the effects of variations in interest rates, and to the optimization of management for economic and ecological objectives. The research on forest markets is designed to help decision makers at regional, national, and international levels to cope with major issues of forest policy. The work during the past year focused on the implications of IPCC long-term scenarios for climate and economic change on forest resources and the demand, supply, and prices of forest products. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

Impacts
The results of the study of effects of interest rate changes in forest management have shown that ignoring these variations may substantially underestimate the expected value of land used in forestry, although the optimal management decisions do not seem to vary much from those obtained with constant interest rates. The main finding of the study of the effects of the IPCC scenarios on global forestry concerns the important impact of the high demand for biofuels implied in some of the IPCC scenarios. In particular, scenario A1B would induce a nearly 6-fold increase in the world demand for fuelwood by 2060. As a result, the real price of fuelwood would rise and converge towards the price of industrial roundwood by about 2025. At that point, industrial roundwood, which was used in the past to manufacture sawnwood, panels, and pulp, would begin to be used for energy production. The price of all wood would then continue to rise steadily up to 2060, and the price of manufactured product would increase in concert. The high fuelwood harvest would imply ecologically stressed forests in several countries, even under scenario A2 with a nearly 3-fold increase in fuelwood production by 2060.

Publications

  • Buongiorno, J. 2009. International trends in forest products consumption: Is there convergence International Forestry Review 11(4):36-46.
  • Raunikar, R., J. Buongiorno, J.A. Turner, S. Zhu. 2010. Global outlook for wood and forests with bioenergy demand implied by scenarios of the Intergovernmental Panel on Climate Change. Forest Policy and Economics 12:48-56.
  • Kando, H., and J. Buongiorno. 2009. Efficiency in wood and fiber utilization in OECD countries. Jounal of Forest Research 14(6):321-327.
  • Liang, J.J., J. Buongiorno, and R.A. Monserud. 2009. Optimizing wood quality and stand diversity in uneven-aged forest management. In D.P. Dykstra and R.A. Monserud, Eds. Forest growth and timber quality : Crown models and simulation methods for sustainable fores management. Proceedings of an international conference. USDA Forest Service, Pacific Northwest Forest Research Station, General Tech. Report PNW-GTR-791.
  • Buongiorno, J., R. Li, J.A. Turner, S. Zhu, and J.P. Prestemon. 2009. Consequences de l elimination de l exploitation illegale sur les volumes de bois sur pied, les industries, et le commerce du bois. Comptes Rendus de l Academie d Agriculture de France 94(4) :85-91.
  • Zhu, S., J. Buongiorno, J. Turner, R. Raunikar. 2009. Using the Global Forest Products Model (GFPM version 2008). Staff Paper Series #63, Department of Forest and Wildlife Ecology, University of Wisconsin-Madison. 33p.
  • Zhu, S., J. Buongiorno, and J. Turner. 2009. Calibrating and updating the Global Forest Products Model (GFPM version 2008). Staff paper Series #64, Department of Forest and Wildlife Ecology, University of Wisconsin-Madison. 31p.
  • Zhu, S., J. Turner, and J. Buongiorno. 2009. Global Forest Products Model software design & implementation (GFPM version 2008). Staff paper Series #65, Department of Forest and Wildlife Ecology, University of Wisconsin-Madison. 45p.
  • Buongiorno, J., and M. Zhou. 2009. Further generalization of Faustmann formula for stochastic interest rates. Third International Faustmann Symposium, Darmstadt. Abstract at: http://www.faustmann-conference.de/fileadmin/Dokumente/Abstracts/Buon giornoabstract_01.pdf


Progress 01/01/08 to 12/31/08

Outputs
OUTPUTS: This project deals with forest management and forest markets. In management we investigated economic and ecological effects of not harvesting trees of 41 cm diameter at breast height or larger. The opportunity cost of this policy was measured by the difference in maximum expected net present value (NPV) with or without diameter caps. For the two policies, Markov decision models were used to determine the best decision rules and their effects on the NPV, the forest area with late-seral structure, and the forest area with spotted-owl nesting habitat. The opportunity cost of diameter caps was computed for 64 initial stand states defined by basal area of small, medium, or large trees of shade-intolerant species or shade-tolerant species. We also compared fixed and adaptive policies. A fixed harvesting policy tries to convert stands to a chosen state at fixed intervals, regardless of the stand state and of the market. In an adaptive policy, the post-harvest state and the timing of the harvest depend on the stand and market states at decision time. We determined the practical gain from the theoretically superior adaptive policies. Another study investigated ecological integrity as an economic variable, with an application to forested landscapes in the southern United States. Ecological integrity is as important to policy analysis as any other economic variable. A standard calculation procedure is needed to integrate many sources of ecological data into an index that describes landscape scale regions. A matrix model was also developed to predict the growth of trees of mixed species and size in Norway. The stand state was defined by the number of spruce, pine, birch, and other broadleaf trees by ha in fifteen diameter classes. The change in stand state was predicted with matrices based on equations for recruitment, growth, and mortality. The data came from plots of the national forest inventory of Norway. For markets, three studies were carried out during the last year. One study assessed the impact on the world forest sector of a progressive elimination of illegal logging. The impact was calculated with an updated version of the Global Forest Products Model, which this project helped develop. The analysis compared predictions from 2007 to 2020, with and without a gradual reduction of illegally logged industrial roundwood from 2007 to 2011. A second study considered the Russian government recent announcement to increase its export tax on softwood roundwood from the present 6.5 % of export product value to 80 % by January 2009. The effects of this policy on the world forest sector to 2020 were simulated with the Global Forest Products Model. A third study investigated the long-term economic impact of countervailing duties on coated free sheet paper imported by the United States from China, the Republic of Korea, and Indonesia. The international effects, up to the year 2020 were predicted with another adaptation of the Global Forest Products Model. The results of the project were disseminated by peer-reviewed publications, theses, and presentations at national and international meetings. PARTICIPANTS: The work was done by Dr. Joseph Buongiorno, Professor, his Research Associates, Dr. Ron Raunikar, and Dr. Shushuai Zhu, and his Graduate Assistants, Sijia Zhang, and Hiroko Kando. Collaboration was with Dr. Jingjing Liang, Assistant Professor at the University of Alaska, Dr. Jeff Prestemon, USDA Forest Service, Southern Research Station, Dr. James Turner, Scion Research, New-Zealand, Dr. Peter Ince, USDA Forest Products Laboratory, Madison, Dr. Birger Solberg, Dr. Terje Gobakken, and Mr. Ole Bollandsas, University of Biological Sciences, Norway. The project served in the training and professional development of Dr. Ron Raunikar, and Dr. Shushuai Zhu, and gave theses topics and guidance to Graduate Students Sijia Zhang, and Hiroko Kando. TARGET AUDIENCES: The research on forest management is meant to improve the knowledge of managers of uneven-aged, mixed-species forests. The research aims at developing optimal strategies to obtain positive economic and ecological outcomes in conditions of uncertainty. Particular attention is given to catastrophic events and changes in economic conditions. In the past year of the project, special attention has been given to the effects of diameter caps policies, to comparisons of fixed and adaptive management strategies, to the development of regional indices of ecological diversity, and to the development of matrix growth models. The research on forest markets is designed to help decision makers at regional, national, and international levels to cope with major issues of forest policy. The work during the past year focused on the role of illegal logging on the economies of forestry in the United States and other countries, on the effects of the heavy Russian tax on roundwood exports, and on the effects of the U.S. countervailing duties on imports of paper from China, Korea, and Indonesia. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

Impacts
The opportunity cost of diameter cap policies fell in four quartiles. The 16 stand states with high basal area in large shade-intolerant and large shade-tolerant trees had the highest opportunity cost, while the 16 stand states with low basal area in large shade-intolerant and large shade-tolerant trees had the lowest. The diameter caps policy increased the expected area of forest with late-seral structure, and the expected area with spotted-owl habitat. Adaptive policies increased revenues by 17 percent compared to fixed policies. The adaptive policy was even more superior with non-economic objectives, such as the area of spotted owl habitat, or the area of late-seral forest. The theory of a naturalness index was applied using the FIA database of the USDA Forest Service. This index was based on the diversity of native tree species and sizes for ecological subregions in a seral condition. We applied the calculation procedure to the 70 survey units of the southern U.S. between 1961 and 2005. The index exhibited a significant increasing trend with time, per capita personal income and population. The forest growth model for Norway was used to predict the long-term growth of stands with different initial species composition and diameter distribution. The study on the elimination of illegal logging found that most of the shortfall would be compensated by increased legal production. Without illegal logging the world annual production of industrial roundwood would decrease by no more than 1. World prices would rise by up to 3.5 %. World consumer expenditures for wood products and producer revenues would rise by 2 %. World value added in forest industries would remain the same. Value added in forest industries would decrease most in countries with illegal logging, and it would increase most in Canada, and the United States. Without illegal logging, the world forest inventory would increase slightly. The study of the impact of the Russian export tax predicted lower lower global wood supply, and higher world roundwood prices. In response the United States, Germany, and New Zealand would increase production and export of roundwood. Major consumers of Russian roundwood would reduce production and export of wood products. Growth in processed exports would fail to offset reduced roundwood export revenue. Value added in manufacturing sectors would be US$225 million higher in Russia, while it would be US$1.3 billion lower in Finland and US$728 million lower in China. The results of the study on U.S. duties on paper imports indicate that the production of printing and writing paper in China, Indonesia, and the Republic of Korea would be lower. The trade balance would worsen in Korea and Indonesia. China, a net exporter, would become a net importer. Production and prices of pulp would decrease substantially in China. While the United States' imports of printing and writing paper from Korea, Indonesia, and China would decrease, the imports from other sources would increase. The United States would see some increases in producer revenues, consumer expenditures, and value-added, but they would be small compared to the increases in Canada.

Publications

  • Zhou, M., J. Buongiorno, and J.J. Liang. 2008. Economic and Ecological Effects of Diameter Caps: A Markov decision model for Douglas-fir/western hemlock forests. Forest Science 54(4):397-407.
  • Li, R., J. Buongiorno, J.A. Turner, S. Zhu, and J. Prestemon. 2008. Long-term effects of eliminating illegal logging on the world forest industries, trade, and inventory. Forest Policy and Economics 10:480-490.
  • Turner, J., J. Buongiorno, A. Katz, S. Zhu, and R. Li. 2008. Economic incentives exist to support measures to reduce illegal logging. International Forestry Review 10(1):74-80.
  • Turner, J., J. Buongiorno, A. Katz, and S. Zhu. 2008. Implications of the Russian softwood log export tax for the Russian and global wood products sectors. Scandinavian Journal of Forest Research 23:154-166.
  • Bollandsas, O., J. Buongiorno, and T. Gobakken. 2008. Predicting the growth of stands of trees of mixed species and size: A matrix model for Norway. Scandinavian Journal of Forest Research 23:167-178.
  • Raunikar, R., and J. Buongiorno. 2008. Ecological integrity as an economic variable: An application to forested landscapes in the Southern United States. Journal of Forest Economics 14:29-45.
  • Zhou, M., J.J. Liang, and J. Buongiorno. 2008. Adaptive vs. fixed policies in multiple-objective forest management. Forest Ecology and Management 254:178-187.
  • Turner, J.A., A. Katz, and J. Buongiorno. 2008. The Economic Implications of Illegal Logging for the New Zealand Forest Sector. New Zealand Journal of Forestry. Forestry 53(2): 20-25.
  • Zhu, S., J.A. Turner, and J. Buongiorno. 2008. Long-term economic impact of countervailing duties on coated free sheet paper imported by the United States from China, the Republic of Korea, and Indonesia. Forest Products Journal 58(10):71-77.
  • Bolkesjo, T., J. Buongiorno, and B. Solberg. 2008. Joint production and substitution in timber supply: A panel data analysis. Applied Economics. Electronic publication in iFirst (http://dx.doi.org/10.1080/00036840701721216).
  • Turner, J.A., A. Katz and J. Buongiorno. 2008. The economic implications of illegal logging for the New Zealand forest sector. Pp. 1-17, In Forestry and Agriculture - Collaborating for Sustainability. NZIF Conference 2008, Palmerston North Conference Centre - 15-18 May 2008. New Zealand Institute of Forestry, Christchurch, New Zealand.
  • Zhang, S. 2008. Trade, production, and exchange rate volatility: Three essays on the international trade of forest products. Ph.D. Dissertation, University of Wisconsin-Madison. 143p.
  • Kando, H. 2008. Changes in wood and fiber utilization for the production of forest products. M.S. thesis, University of Wisconsin-Madison. 61p.


Progress 01/01/07 to 12/31/07

Outputs
OUTPUTS: Research was pursued in forest management and forest markets. In management, the objective of one study was to determine the relationship, or lack thereof, between growth and diversity of tree species and size in conifer stands of western North America. Growth was measured by net basal area growth and its components: survivor growth, recruitment, and mortality. The analysis used inventory data from permanent plots in the Douglas-fir/western hemlock forest type in Oregon and Washington, and in the mixed-conifer forest type in California. The methods consisted of generalized least square regression with spatial autocorrelation, controlling for the effect of other stand characteristics. Another study compared fixed and adaptive forest management policies. A fixed harvesting policy consists in trying to convert stands of trees to a chosen state at fixed intervals, regardless of the stand state and of the state of the market. In an adaptive policy, instead, the post-harvest state and the timing of the harvest depend on the stand and market states at the time of the decision. The objective of this study was to determine the practical gain from the theoretically superior adaptive policies. To this end, we compared optimal fixed and adaptive policies obtained with identical models and assumptions, and with data from the Douglas-fir/western-hemlock forests in the Pacific Northwest of the United States. In a study of international forest markets we assessed the impact on the world forest sector of reducing the risk of exotic pest spread by curtailing the roundwood trade. The analysis compared predictions from 2006 to 2015, with and without a gradual ban of roundwood exports. Another study addressed the phenomenon of intra-industry trade in forest products. Intra-industry trade occurs when countries import and export the same product. The explanation of intra-industry trade by Helpman-Krugman's theory of monopolistic competition implies a unit elasticity of exports with respect to production. We studied the existence of such a relationship for eleven forest industries that produce and export roundwood, sawnwood, wood-based panels, wood pulp, and paper and paperboard. The hypothesis was tested with cross-section and time-series data from 43 countries. We formulated static and dynamic versions of the relationship between exports and production, and estimated them with panel data methods. The best econometric results, were obtained with the static and the dynamic models estimated by ordinary least squares after differencing the time series. In another study the possible impact of Nectria fuckeliana on New Zealand forests and forest industries, a significant exporter of industrial roundwood, was estimated for different scenarios of the spread of the pest and trade measure responses in export markets. An economic model was used to assess the effect of the pest and the potential impact of trade bans and phytosanitary regulations to prevent pest arrival in China, Japan and South Korea. The results were disseminated through publications, participation at meetings, and posting on the web site: http://forest.wisc.edu/facstaff/buongiorno/ PARTICIPANTS: The work was done by Dr. Joseph Buongiorno, Professor, his Research Associates, Dr. Mo Zho, Dr. Ron Raunikar, and Dr. Shushuai Zhu, and his Graduate Assistants, Sijia Zhang, Ruhong Li, and Hiroko Kando. Collaboration was with Dr. Jingjing Liang, Assistant Professor at the University of Alaska, Dr. Robert A. Monserud, USDA Forest Service, PNW Research Station, Dr. Jeff Prestemon, USDA Forest Service, Southern Research Station, Dr. Erik Kruger, University of Wisconsin-Madison, Dr. James Turner, and Dr. Frances Maplesden, Scion Research, New-Zealand, Dr. Peter Ince, USDA Forest Products Laboratory, Madison, Dr. Torjus Bolkesjo, Dr. Birger Solberg, Dr. Terje Gobakken, and Mr. Ole Bollandsas, University of Biological Sciences, Norway. The project served in the training and professional development of Dr. Mo Zhou, Dr. Ron Raunikar, and Dr. Shushuai Zhu, and gave theses topics and guidance to Graduate Students Sijia Zhang, Ruhong Li, and Hiroko Kando. TARGET AUDIENCES: The research on forest management is meant to improve the knowledge of managers of uneven-aged, mixed-species forests. The research aims at developing optimal strategies to obtain positive economic and ecological outcomes in conditions of uncertainty. Particular attention is given to catastrophic events and changes in economic conditions. The research on forest markets is designed to help decision makers at regional, national, and international levels to cope with major issues of forest policy. The work during the past year focused on the role of invasive species and illegal logging on the economies of forestry in the United States and other countries.

Impacts
The study on the effects of forest stand diversity on growth found that in both forest types there was a strong positive relationship between net basal area growth and tree-species diversity. This effect was associated with higher recruitment in stands of higher tree-species diversity. Mortality and growth of survivors were unrelated to tree-species diversity. The relationship between growth and tree-size diversity was less clear. For Douglas-fir/western hemlock, net basal area growth was negatively correlated with tree-size diversity, because recruitment was lower on plots of high tree-size diversity. For mixed conifers, net basal area growth tended also to be lower in plots of high tree-size diversity, but mostly because mortality was higher in plots of higher tree-size diversity. The study comparing fixed and adaptive management found that in maximizing financial returns, the net present value was 17 percent higher with an adaptive than with a fixed policy. It was 22 percent higher when the objective was to maximize harvest. The adaptive policy was even more superior with non-economic objectives, such as the spotted owl habitat (+37 percent gain), or the late-seral forest (+51 percent), but less so in maximizing high quality logs (+6 percent). The study on the effect of banning log trade for phytosanitary reasons found that with a ban on log trade, world consumer expenditures for wood products and producer revenues would rise by 2.2 percent and 1.9 percent respectively. World value added not change. Producer revenues would decrease for the main log exporters (16 percent for the Russian Federation, and 10 percent for New Zealand). Value added would decrease most for the main log importers (13 percent in Japan, 7 percent in Korea, and 4 percent in China). Although the global cost of banning roundwood trade seems modest compared to the cost of catastrophic pest invasions, its varying effects on countries must be taken into account in forging equitable policies. In the study of intra-industry trade we found, based on Grubel-Llyod indices, that there is substantial intra-industry trade of forest products. The strongest evidence of monopolistic competition was for the pulp and paper industries: newsprint, printing and writing paper, other paper and paperboard, chemical and semichemical woodpulp. For other forest products, although there was a statistically significant relationship between production and exports, the elasticity was significantly less than unity. The study of the impact of N. fuckeliana on New-Zealand's forests showed that, depending on the assumed area affected the net present value of the country forest sector gross revenue was US$34 million to US$612 million lower, due to reduced log exports, even without foreign trade measures. Requiring the debarking of log exports, would reduce the present value of growers' revenues by US$1,200 million, even if N. fuckeliana were confined to the already affected area. If China, Japan and South Korea banned imports of the logs altogether, and the pest continued to spread at historical rates, the present value of the growers' revenues would decrease by US$8,200 million.

Publications

  • Li, R. 2007. Predicting the effects of policies to control the spread of forest insects and diseases, and to eliminate illegal logging: Two applications of the Global Forest Products Model. M.S. Thesis, Department of Forest and Wildlife Ecology, University of Wisconsin-Madison. 66p.
  • Turner, J., A. Katz, and J. Buongiorno. 2007. Implications for the New Zealand wood products sector of trade distortions due to illegal logging. Report to the Ministry of Agriculture and Forestry. Scion, Rotorua. 182p.
  • Zhu, S., J. Buongiorno, and J. Turner. 2007. Using the Global Forest Products Model (GFPM version 2007). Staff Paper Series #60, Department of Forest and Wildlife Ecology, University of Wisconsin-Madison. 32p.
  • Zhu, S., J. Buongiorno, and J. Turner. 2007. Calibrating and updating the Global Forest Products Model (GFPM version 2007). Staff Paper Series #61, Department of Forest and Wildlife Ecology, University of Wisconsin-Madison. 31p.
  • Zhu, S., J. Buongiorno, and J. Turner. 2007. Global Forest Products Model software design and implementation (GFPM version 2007). Staff Paper Series #62, Department of Forest and Wildlife Ecology, University of Wisconsin-Madison. 47p.
  • Liang, J.J., J. Buongiorno, R.A. Monserud, E.L. Kruger, and M. Zhou. 2007. Effects of diversity of tree species and size on forest basal area growth, recruitment, and mortality. Forest Ecology and Management 243:116-127.
  • Li, R., J. Buongiorno, S. Zhu, J. Turner, and J. Prestemon. 2007. Potential economic impact of limiting the international trade of timber as a phytosanitary measure. International Forestry Review 9(1):514-525.
  • Zhang, S., and J. Buongiorno. 2007. Does monopolistic competition explain intra-industry trade in forest products? Forest Science 53(4):519-528.
  • Turner, J.A, Buongiorno, J; Zhu, S; Li, R; and Prestemon, J.P. 2007. Impact of exotic forest pests on the forest sector: Nectria in New Zealand. New Zealand Journal of Forestry Science 37(3): 383-411.
  • Buongiorno, J. 2007. Amenagement forestier: d une approche figee a un processus adaptatif. Revue Forestiere Francaise 59(3):272-275.
  • Ince, P., and J. Buongiorno. 2007. North American Pulp and Paper Model (NAPAP). Pp. 99-169 in: Resource and market projections for forest policy development: Twenty five years of experience with the US RPA Timber Assessment. D. Adams and R. Haynes, Eds. Springer, Dordrecht. 589p.
  • Ince, P., and J. Buongiorno. 2007. Globalization and world trade. Pp. 419-443 in: Resource and market projections for forest policy development: Twenty five years of experience with the US RPA Timber Assessment. D. Adams and R. Haynes, Eds. Springer, Dordrecht. 589p.
  • Scarpa, R., W.G. Hutchinson, S.M. Chilton, and J. Buongiorno. 2007. Reliability of benefit value transfers from contingent valuation. Pp. 179-206 In S. Navrud and R. Ready, Eds. Environmental value transfer: Issues and methods, Springer, Dordrecht. 291 p.
  • Raunikar, R., and J. Buongiorno. 2007. Forestry economics: Historical background and current issues. Pp. 449-472 In A. Weintraub, T. Bjorndal, R. Epstein, and C. Romero, with collaboration of J. Miranda, Eds. Handbook of operations research in natural resources. Kluwer Academic Publishers, New-York. 614p.


Progress 01/01/06 to 12/31/06

Outputs
In this phase of the project, we have developed WestProPlus, an add-in program developed to work with Microsoft Excel to simulate the growth and management of all-aged Douglas-fir - western hemlock (Pseudotsuga menziesii (Mirb.) Franco - Tsuga heterophylla (Raf.) Sarg.) stands in Oregon and Washington. Its built-in growth model was calibrated from 2,706 permanent plots in the Douglas-fir - western hemlock forest type in Oregon and Washington. Stands are described by the number of trees per acre in each of nineteen 2-in diameter classes in four species groups: Douglas-fir, other shade-intolerant species, western hemlock, and other shade-tolerant species. WestProPlus allows managers to predict stand development by year and for many decades from a specific initial state. The simulations can be stochastic or deterministic. The stochastic simulations are based on bootstrapping of the observed errors in models of stand growth, timber prices, and interest rate. When used in stochastic simulations, this bootstrap technique simulates random variables by sampling randomly (with replacement) from actual observations of the variable, rather than from an assumed distribution. Users can choose cutting regimes by specifying the interval between harvests (cutting cycle) and a target distribution of trees remaining after harvest. A target distribution can be a reverse-J-shaped distribution or any other desired distribution. Diameter-limit cuts can also be simulated. Tabulated and graphic results show diameter distributions, basal area, volumes by log grade, income, net present value, and indices of stand diversity by species and size. The user manual documents the program installation and activation, provides suggestions for working with Excel, and gives background information on WestProPlus's models. It offers a comprehensive tutorial in the form of two practical examples that explain how to start the program, enter simulation data, execute a simulation, compare simulations, and plot summary statistics. Software and data are available at: http://www.forest.wisc.edu/facstaff/buongiorno/. We have also analyzed the willingness to pay for non-timber values (NTV) by non-industrial private forest (NIPF) landowners of uneven-age mixed species forest stands in the south central United States. The preferences of NIPF owners are revealed by the way they manage their timber. Many NIPF owners maintain a more diverse and natural stand structure than that of a more profitable even-aged industrial plantation. In so doing, the average NIPF owner was willing to forego 60% of the timber profit for the NTV of their more natural stands compared to a less diverse industrially managed even-aged plantation. Graduate Student Years: 1

Impacts
The WestProPlus is a program intended to help forest managers predict the effects of management, or lack thereof, on stand growth, productivity, income, wood quality, diversity of species, and diversity of tree size. The economic analysis of non timber shows that small forest owners are willing to pay substantial sums to preserve esthetics and other non-timber values.

Publications

  • Liang, J., J. Buongiorno, and R.A. Monserud. 2006. Bootstrap simulation and response surface optimization of management regimes for Douglas-fir/western hemlock stands. Forest Science 52(5):579-594.
  • Zhou, Mo, and J. Buongiorno. 2006. Forest landscape management in a stochastic environment, with an application to mixed loblolly pine-hardwood forests. Forest Ecology and Management 223:170-182.
  • Raunikar, R., and J. Buongiorno. 2006. Willingness to pay for forest amenities: The case of non-industrial owners in the south of the United States. Ecological Economics 56:132-143.
  • Liang, J., J. Buongiorno, and R.A. Monserud. 2006. WestProPlus: A stochastic spreadsheet program for the management of all-aged Douglas-fir/western hemlock forests in the Pacific Northwest. GTR-674, USDA Forest Service, PNW Station, Portland, 42p.
  • Buongiorno, J., and M. Zhou. 2006. Risque, diversite ecologique et rentabilite economique dans les forets du Sud des Etats-Unis. French Academy of Agriculture. http://www.academieagriculture.fr/publications/publications+html,note s_recherche+xml.html?rnd=1151414128
  • Raunikar, R. 2006. Valuation of non-market forest based amenities. Ph.D. dissertation, University of Wisconsin, Madison. 144p.