1. Land Allocation and Multiple Use FRST 318, March 12, 2013 Harry Nelson 2010

2. Economic Issues Determining:  Land Allocation:  Identifying the use that will generate the greatest value  Selecting among alternative forest management approaches:  Choosing the use or combination of uses that will maximize return  Management Intensity:  Given forest management objective most efficient use of inputs

3. Allocation Between Alternative Uses  We are often forced to decide between alternative uses like agriculture, forestry, recreation, etc.  In order to decide which option to pursue, we must determine the rents generated under different land use scenarios and compare them.  A number of factors will affect how much rent is ultimately generated.

4. Example of a Land Use Decision  Distance from market (or urban centre) can be an important factor when it comes to land use decisions. Land Rent ($) Distance from Urban Centre (km) Commercial Residential Farming Forestry abcde So not just productivity, climate, etc…

5. Identifying Optimal Use  The rule is to maximize differential rent  Differential rent is the rent generated in excess of the opportunity cost.  But keep in mind markets are imperfect when it comes to allocating land among alternative uses as markets often fail to capture externalities.  (reasons why we provide preferential tax treatment for agricultural land, forest land) Harry Nelson 2010

6. Detroit…  http://www.hantzfarmsdetroit.com http://www.hantzfarmsdetroit.com

7. The Extensive Margin  Top panel shows market for timber  The bottom panel illustrates how much land can be used profitably for timber production  While more productive land earns rent  But the last hectare-the least productive-earns no rent  This last hectare-limit of rent-is the extensive margin price $/m3 P q Annual harvest Productive timberland (hectares) supply demand

8. Intensity of Forest Management  Choosing the optimal combination of labour and capital to generate maximum land rent  General rule is to keep applying the input up to the point the benefit (marginal revenue gained from employing it) equals the cost  The point where marginal revenue product (MRP) equals the marginal cost of labour (wage) defines the intensive margin of land use. Payment to labour Land Rent Value of forest crop $/ha Marginal revenue product of labour $ P wage q Quantity of Labour Efficient quantity of labour

9. Example: Pruning Managing trees in a radiata pine woodlot  Pruning and thinning are carried out to improve tree growth and timber quality. Timing depends on how well trees are growing, on the site selected.  A shelter-belt or timber-belt has a lot of outside edge, with potential to grow extra volume of timber, being exposed to extra light and fertility from adjacent pasture. A good regime is:  Prune all possible stems annually  Prune as high as possible, leaving a green crown of one half to one third of the tree height at all times.

10. Annual average volume and net revenue, maximizing either net revenues or volume Scenario 1 (no volume constraints) Scenario 2 (even flow -2.8- 3.3) Scenario 3 (even flow - 3.0-3.5) Scenario 4 (even flow -3.5- 4.0) Scenario 5 (volume maximization) Annual average volume (m3) 288,230293,215306,216383,064823,745 Annual average net revenue $3,515,727$1,191,596$685,918($536,244)($2,473,528)

11. Annual Average Harvest Levels under Core Scenarios

12. Allocation among Multiple Uses  Three key questions:  Is the proposed use technically feasible?  Is the proposed use socially and economically desirable?  How much of the land do we allocate to this particular use?

13. Production Possibilities  The key idea is that a trade-off must be made (most of the time) when choosing between alternatives: Timber Recreation Example: Timber harvesting and recreation Could have OT timber, no recreation… Or OR recreation, no timber…or some combination on the curve R T O

14. Mutually Exclusive Uses Ex:Timber harvest vs. Preservation for scientific research Timber Harvest Preservation

15. Highly Conflicting Uses Example: Timber harvest has a major initial impact on amenity values, but only incremental impacts afterwards Timber Harvest Recreation

16. Constantly Substitutable Uses Ex:Harvesting for industrial timber vs. Harvesting for fuel Industrial Timber Fuel

17. Independent Uses Ex:Watershed management vs. Recreational values Watershed Management Recreation

18. Complementary Uses Example:Forest management vs. Wildlife habitat Timber harvest management Wildlife habitat

19. Production Possibilities  So returning to the traditional production possibility frontier  We will have multiple use when we face this kind of trade-off where Point O represents the optimal combination  What is important here is the tradeoff is determined by the relative value of the alter- natives; that is, the slope of the exchange line Harry Nelson 2010 Alternative A Alternative B b VbVb VaVa a O

20. Other Production Possibilities  Would also have multiple use where we have independent uses and complementary uses  But where land use is mutually exclusive or highly conflicting you should specialize  This is also the case where they are constantly substitutable (pick the one generating the highest rent) Harry Nelson 2010

21. Triad Approach

22. Economic Results

23. So What Do We Do in BC?

25. Land Use Planning  Land and Resource Management Plans (LRMPs) started in 1996  “Multistakeholder” groups develop plans for government approval  Zoning approach  protected  sensitive  integrated uses  intensive forestry  Completed for 85% of the province

26. BC Liberals “New Direction”  ILMB Report: A New Direction for Strategic Land Use Planning in BC (December 2006)A New Direction for Strategic Land Use Planning in BC  Brings end to provincial scale, comprehensive strategic land use planning  New planning will be undertaken only where business drivers demonstrate a need  New policy and legislative changes  FNs’ interests and values  Major environmental changes such as Mountain Pine Beetle infestation

27. Forest Conservation Policy Approaches  Coarse Filter  Land use – protected areas and zoning  Fine filter  Species at Risk Legislation (Federal)  Identified Wildlife Management Strategy (Provincial) 27

28. Conservation and Protected Areas in BC  As of March 2011, 14.27%, or 13.5 million hectares of land, is the overall size of the protected areas system in the whole of the province of British Columbia (this includes national parks and national park reserves, as well as provincial parks and protected areas).  Class A, B, and C Parks  Conservancies  Recreation Areas  Ecological Reserves http://atlas.nrcan.gc.ca/site/ english/maps/environment /protectedarea/protected areasthroughtime

29. A number of recent Forest Practices Board reports highlight: The lack of an integrated, landscape level, strategic planning process. Managing Forest Land Courtesy: Ken Zielke

30. Rules and constraints in a typical BC Management Unit Site plans Sustainable Forest Management Plans for Certification Forest Stewardship Plans TFL Management Plans Timber Supply Reviews Silviculture Strategies Forest Operations Schedules Habitat Supply modelling & Plans Community Wildfire Protection Plans IFPA Forestry Plans Forest Health Strategies LRMPs and LU plans GAR orders Land use orders Ecosystem Restoration Plans Climate Change Strategies IWAPCWAP Courtesy: Ken Zielke

31. BC’s forest management is: Leading to declines in forest diversity. Creating a growing understocked area. Not adequately addressing future timber supply problems. Harvesting high value species and reforesting with lower value species. Not dealing adequately with climate change. We need to define and commit to: Clear timber objectives Stewardship principles Performance measures Courtesy: Ken Zielke

33. Bill 8: Converting Volume-based to area-based VICTORIA - Forest Act amendments introduced today will help improve forest stewardship and support community resiliency in mountain pine beetle impacted areas. The legislation fulfils recommendations made by the Special Committee on Timber Supply in their August 2012 report, which was based on public hearings and written submissions from First Nations, local communities, industry stakeholders and the public. The legislation proposes a new section 34.1 be added to the Forest Act that will create the ability to convert volume-based forest licences to area-based tree farm licences at the minister's invitation. Invitations will be publicly advertised, and applicants must make their application for an area-based licence available for public review and comment for at least 60 days and indicate how they have incorporated public feedback before submitting to the minister. The minister may reject an application if the best interests of the public are not met. This summer, the ministry will consult with the public on the evaluation criteria and use the results to refine policy before the first application for a conversion to an area-based tenure occurs. http://www.newsroom.gov.bc.ca/2013/02/new-legislation-supports-mid-term-timber- supply.html (BILL 8)