%0 Report
%9 Working Paper
%A Couture, Stéphane
%A Reynaud, Arnaud
%B TSE Working Paper
%D 2009
%F publications:3189
%I Universite Toulouse 1 Capitole
%T Forest Management under Fire Risk when Forest Carbon Sequestration Has Value
%U https://publications.ut-capitole.fr/id/eprint/3189/
%V 09-005
%X In this paper, we develop a multiple forest use model to determine the optimal harvest date for a forest stand producing both timber and carbon benefits under a risk of fire. The preferences of the representative non-industrial private forest (NIPF) owner are modeled though an expected utility specification. We introduce saving as a decision of the forest owner at any time. The problems of forest management and saving decisions are solved simultaneously using  a stochastic dynamic programming method. A numerical programming method is used to characterize the optimal forest and saving policies. We apply this framework to model the behavior of a representative NIPF owner located in the Southwest of France. The empirical application indicates that a higher risk of fire will decrease the optimal rotation period, while higher carbon prices will increase the optimal harvesting age. We show that increasing the risk of fire leads to a reduction in rotation duration. On the contrary, a higher carbon price makes carbon sequestration more profitable, thereby leading to increasing the rotation duration. We then show how the carbon price/risk of fire frontier is affected by risk aversion.