Abstract
This chapter introduces the economic framework of, but also challenges to, modern financial theory when applied in environmental and particularly forest science studies. It demonstrates the characteristics of financial models to capture the effects of mixing tree species. In addition, the chapter demonstrates how a portfolio-based approach for deriving the long-term forest structure as applied to the example of species composition and timber quality could form a new tool for forest management planning at the company level. Furthermore, it is shown how transitioning to the stand level through the consideration of interactions between tree species will alter the results compared to forest-level studies. The chapter concludes with advances in modelling the economics of near-natural forestry, where mixing of tree species is a key issue. This is done by means of optimising the distribution of timber harvests over time simultaneously with the composition of tree species.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Similar content being viewed by others
Notes
- 1.
- 2.
Assmann (1970, p. 469) concluded from his comparison of the increment in rotation forests (called high forests) and selection forests (as an important representative of continuous cover forests): ‘The high forest stand, …, is not only superior in current increment over the last 16 years, and that by as much as 19%, but assuredly also in m.a.i. [mean annual increment] for the same harvesting age. Contrary to current widely prevailing views, the pronounced vertical layering of selection forests has an efficiency-reducing effect …’.
References
Abson DJ, Fraser EDG, Benton TG (2013) Landscape diversity and the resilience of agricultural returns: a portfolio analysis of land-use patterns and economic returns from lowland agriculture. Agric Food Secur 2:2
Aerts JCJH, Botzen W, van der Veen A, Krywkow J, Werners S (2008) Dealing with uncertainty in flood management through diversification. Ecol Soc 13:41
Andreassen K, Øyen BH (2002) Economic consequences of three silvicultural methods in uneven-aged mature coastal spruce forests of central Norway. Forestry 75:483–488
Assmann E (1970) The principles of forest yield study. Studies in the organic production, structure, increment and yield of forest stands. Oxford University Press, Oxford
Baader G (1945) Forsteinrichtung als nachhaltige Betriebsführung und Betriebsplanung. Sauerländer’s, Frankfurt a.M.
Beimgraben T (2002) Auftreten von Wachstumsspannungen im Stammholz der Buche (Fagus sylvatica L.) und Möglichkeiten zu deren Verminderung. PhD-thesis at the Albert-Ludwigs-University, Freiburg im Breisgau
Beinhofer B (2009) Zur Anwendung der Portfoliotheorie in der Forstwissenschaft – Finanzielle Optimierungsansätze zur Bewertung von Diversifikationseffekten. PhD-thesis at the Technische Universität München
Beinhofer B, Knoke T (2010) Finanziell vorteilhafte Douglasienanteile im Baumartenportfolio. Forstarchiv 81:255–265
Ben-Tal A, El Ghaoui L, Nemirovski A (2009) Robust optimization. Princeton University Press, Princeton
Biber P, Knoke T, Pretzsch H (2013) Eine waldwachstumskundlich-ökonomische Simulationsstudie zu Effekten der Baumartenmischung Fichte-Buche: Konzept und erste ertragskundliche Ergebnisse. DVFFA, Sektion Ertragskunde: Beiträge zur Jahrestagung 2013
Bleile K (2006) Vorkommen und Analyse von Zugholz bei Buche (Fagus sylvatica L.) als Ursache von Spannungen im Rundholz und Verwerfungen des Schnittholzes. PhD-thesis at the Albert-Ludwigs-University, Freiburg im Breisgau
Brandl H (1989) Ergänzende Untersuchungen zur Ertragslage der Baumarten Fichte, Kiefer, Buche und Eiche in Baden-Württemberg. Allgemeine Forst- und Jagd-Zeitung 160:91–98
Bristow M, Nichols JD, Vanclay JK (2006) Improving productivity in mixed-species plantations. For Ecol Manag 233:193–194
Castro LM, Calvas B, Hildebrandt P, Knoke T (2013) Avoiding the loss of shade coffee plantations: how to derive conservation payments for risk-averse land-users. Agrofor Syst 87:331–347
Castro LM, Calvas B, Knoke T (2015) Ecuadorian banana farms should consider organic banana with low price risks in their land-use portfolios. PLoS One 10(3):e0120384. doi:10.1371/journal.pone.0120384
Chang SJ (1998) A generalized Faustmann model for the determination of the optimal harvest age. Can J For Res 48:652–659
Chang SJ, von Gadow K (2010) Application of the generalized Faustmann model to uneven-aged forest management. J For Econ 16:313–325
Clasen C, Griess VC, Knoke T (2011) Financial consequences of losing admixed tree species: a new approach to value increased financial risks by ungulate browsing. Forest Policy Econ 13(6):503–511. doi:10.1016/j.forpol.2011.05.005
Cubbage F, Mac Donagh P, Sawinski Junior J, Rubilar R, Donoso P, Ferreira A, Hoeflich V, Morales Olmos V, Ferreira G, Balmelli G, Siry J, Noemi Baez M, Alvarez J (2007) Timber investment returns for selected plantations and native forests in South America and the Southern United States. New For 33:237–255
Deegen P, Hung BC, Mixdorf U (1997) Ökonomische Modellierung der Baumartenwahl bei Unsicherheit der zukünftigen Temperaturentwicklung. Forstarchiv 68:194–205
Dieter M (2001) Land expectation values for spruce and beech calculated with Monte Carlo modelling techniques. For Policy Econ 2:157–166
Dieter M, Moog M, Borchert H (2001) Considering serious hazards in forest management decision-making. In: Gadow KV (ed) Risk analysis in forest management. Kluwer, Dordrecht, pp 201–232. doi:10.1007/978-94-017-2905-5_8
Dixit AK, Pindyck RS (1995) The options approach to capital investment. Havard Bus Rev 73:105–115
Djanibekov U, Khamzina A (2016) Stochastic economic assessment of afforestation on marginal land in irrigated farming system. Environ Resour Econ 63:95–117
Dragicevic A, Lobianco A, Leblois A (2016) Forest planning and productivity-risk trade-off through the Markowitz mean-variance model. For Policy Econ 64:25–34
Edwards SF, Link JS, Rountree BP (2004) Portfolio management of wild fish stocks. Ecol Econ 49:317–329
Fama EF, French KR (1993) Common risk factors in the returns on stocks and bonds. J Financ Econ 33:3–56
Franklin JF, Norris LA, Berg DR, Smith GA (1999) The history of DEMO: an experiment in regeneration harvest of Northwestern forest ecosystems. Northwest Sci 73:3–11
Gayer K (1886) Der gemischte Wald. Parey, Berlin
Goldfarb D, Iyengar G (2003) Robust portfolio selection problems. Math Oper Res 28:1–38
Griess VC, Knoke T (2011) Growth performance, wind-throw, and insects: meta-analyses of parameters influencing performance of mixed-species stands in boreal and northern temperate biomes. Can J For Res 41:1141–1159
Griess VC, Knoke T (2013) Bioeconomic modelling of mixed Norway spruce – European beech stands: economic consequences of considering ecological effects. Eur J For Res 132:511–522
Griess VC, Acevedo R, Härtl F, Staupendahl K, Knoke T (2012) Does mixing tree species enhance stand resistance against natural hazards? A case study for spruce. For Ecol Manag 267:284–296
Hahn WA, Härtl F, Irland LC, Kohler C, Moshammer R, Knoke T (2014) Financially optimized management planning under risk aversion results in even-flow sustained timber yield. For Policy Econ 42:30–41
Halpern CB, Evans SA, Nelson CR, McKenzie D, Liguori DA (1999) Response of forest vegetation to varying levels and patterns of green-tree retention: an overview of a long-term experiment. Northwest Sci 73:27–44
Halpern BS, White C, Lester SE, Costello C, Gaines SD (2011) Using portfolio theory to assess tradeoffs between return from natural capital and social equity across space. Biol Conserv 144:1499–1507
Hanewinkel M (2004) Spatial patterns in mixed coniferous even-aged, uneven-aged and conversion stands. Eur J For Res 123:139–155
Havlik P, Enjolras G, Boisson J-M, Jacquet F, Lherm M, Veysset P (2008) Environmental good production in the optimum activities portfolio of a risk-averse farmer. Rev Agric Environ Stud 86:9–33
Hildebrandt P, Knoke T (2009) Optimizing the shares of native tree species in forest plantations with biased financial parameters. Ecol Econ 68:2825–2833
Hildebrandt P, Knoke T (2011) Investment decisions under uncertainty-a methodological review on forest science studies. For Policy Econ 13:1–15
Hildebrandt P, Kirchlechner P, Hahn A, Knoke T, Mujica HR (2010) Mixed species plantations in Southern Chile and the risk of timber price fluctuation. Eur J For Res 129:935–946
Hirshleifer J, Riley JG (2002) The analytics of uncertainty and information. University Press, Cambridge. 6th reprint, first published 1992
Hyytiäinen K, Haight RG (2010) Evaluation of forest management systems under risk of wildfire. Eur J For Res 129:909–919
Hyytiäinen K, Penttinen M (2008) Applying portfolio optimisation to the harvesting decisions of non-industrial private forest owners. For Policy Econ 10:151–160
Jacobsen JB, Thorsen BJ (2003) A Danish example of optimal thinning strategies in mixed-species forest under changing growth conditions caused by climate change. For Ecol Manag 180:375–388
Jactel H, Brockerhoff E, Duelli P (2005) A test of the biodiversity-stability theory: meta-analysis of tree species diversity effects on insect pest infestation, and re-examination of responsible factors. In: Scherer-Lorenzen M et al (eds) Forest diversity and function: temperate and boreal systems. Springer, Berlin, pp 235–262
Kant S (1999) Sustainable management of uneven-aged private forests: a case study from Ontario, Canada. Ecol Econ 30:131–146
Kaplan HM (1985) Farmland as a portfolio investment. J Portf Manag 11:73–78
Knoke T (2008) Mixed forests and finance – methodological approaches. Ecol Econ 65:590–601
Knoke T (2012) The economics of continuous cover forestry. In: Pukkala T, von Gadow K (eds) Continuous cover forestry, Managing forest ecosystems, vol 23, pp 167–193. doi:10.1007/978-94-007-2202-6_5
Knoke T, Moog M (2005) Timber harvesting versus forest reserves – producer prices for open-use areas in German beech forests (Fagus sylvatica L.) Ecol Econ 52:97–110
Knoke T, Seifert T (2008) Integrating selected ecological effects of mixed European beech-Norway spruce stands in bioeconomic modelling. Ecol Model 210:487–498
Knoke T, Wurm J (2006) Mixed forests and a flexible harvest strategy: a problem for conventional risk analysis? Eur J For Res 125:303–315
Knoke T, Moog M, Plusczyk N (2001) On the effect of volatile stumpage prices on the economic attractiveness of a silvicultural transformation strategy. For Policy Econ 2:229–240
Knoke T, Stimm B, Ammer C, Moog M (2005) Mixed forests reconsidered: a forest economics contribution to the discussion on natural diversity. For Ecol Manag 213:102–116
Knoke T, Ammer C, Stimm B, Mosandl R (2008) Admixing broadleaved to coniferous tree species: a review on yield, ecological stability and economics. Eur J For Res 127:89–101
Knoke T, Calvas B, Aguirre N, Román-Cuesta RM, Günter S, Stimm B, Weber M, Mosandl R (2009) Can tropical farmers reconcile subsistence demands with forest conservation? Front Ecol Environ 7:548–554
Knoke T, Steinbeis OE, Bösch M, Román-Cuesta RM, Burkhardt T (2011) Cost-effective compensation to avoid carbon emissions from forest loss: an approach to consider price–quantity effects and risk-aversion. Ecol Econ 70:1139–1153
Knoke T, Roman Cuesta RM, Weber M, Haber W (2012a) How can climate policy benefit from comprehensive land-use concepts? Front Ecol Environ 10:438–445
Knoke T, Schneider T, Hahn A, Grieß V, Rößiger J (2012b) Forstbetriebsplanung als Entscheidungshilfe. Ulmer, Stuttgart
Knoke T, Paul C, Härtl F, Castro LM, Calvas B, Hildebrandt P (2015) Optimizing agricultural land-use portfolios with scarce data – a non-stochastic model. Ecol Econ 120:250–259
Koellner T, Schmitz OJ (2006) Biodiversity, ecosystem function, and investment risk. Bioscience 56:977–985
König A (1995) Sturmgefährdung von Beständen im Altersklassenwald: Ein Erklärungs- und Prognosemodell. Sauerländer’s, Frankfurt a.M.
Kruschwitz L (2005) Investitionsrechnung. 10, überarbeitete und erweiterte Auflage. Oldenbourg, Munich
Kuuluvainen T, Tahvonen O, Aakala T (2012) Even-aged and uneven-aged forest management in boreal fennoscandia: a review. Ambio 41:720–737
Lambin EF, Turner BL, Geist HJ, Agbola SD, Angelsen A, Bruce JW, Coomes OT, Dirzo R, Fischer G, Folke C, George PS, Homewood K, Imbernon J, Leemans R, Li X, Moran EF, Mortimore M, Ramakrishnan PS, Richards JF, Skanes H, Steffen W, Stone GD, Svedin U, Veldkamp TA, Vogel C, Xuet J (2001) The causes of land-use and land-cover change: moving beyond the myths. Glob Environ Chang 11:261–269
Lohmander P (1993) Economic two stage multi species management in a stochastic environment: the value of selective thinning options and stochastic growth parameters. Syst Anal Model Simul 11:287–302
Lönnstedt L, Svensson J (2000) Return and risk in timberland and other investment alternatives for NIPF owners. Scand J For Res 15:661–669
Macmillan WD (1992) Risk and agricultural land use: a reformulation of the portfolio-theoretic approach to the analysis of a von Thünen economy. Geogr Anal 24:142–158
Mandelbrot BB, Hudson RL (2005) Fraktale und Finanzen: Märkte zwischen Risiko, Rendite und Ruin. Piper, München
Marioni O, Adkins P, Hajkowicz S (2011) Water planning in a changing climate: joint applications of cost utility analysis and modern portfolio theory. Environ Model Softw 26:18–29
Markowitz H (1952) Portfolio selection. J Financ 7:77–91
Markowitz H (1990) Foundations of portfolio theory. http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/1990/markowitz-lecture.pdf
Markowitz H (2010) Portfolio theory: as I still see it. Annu Rev Financ Econ 2:1–23
Markowitz H (2014) Mean–variance approximations to expected utility. Eur J Oper Res 234:346–355
Matthies BD, Kalliokoski T, Ekholm T, Hoen HF, Valsta LT (2015) Risk, reward, and payments for ecosystem services: a portfolio approach to ecosystem services and forestland investment. Ecosyst Serv 16:1–12
Mayer P, Brang P, Dobbertin M, Hallenbarter D, Renaud J-P, Walthert L, Zimmermann S (2005) Forest storm damage is more frequent on acidic soils. Ann For Sci 62:303–311
Mills WL, Hoover WL (1982) Investment in forest land: aspects of risk and diversification. Land Econ 58:33–51
Möhring B (2004) Betriebswirtschaftliche Analyse des Waldumbaus. Forst Holz 59:523–530
Moog M, Knoke T (2003) Zur betriebswirtschaftlichen Bewertung von Einschränkungen der Waldbewirtschaftung. Forstwissenschaftliches Centralblatt vereinigt mit Tharandter forstliches Jahrbuch 122(1):59–77
Mosandl R, Knoke T (2002) Holzpreisschwankungen als Problem der Forstwirtschaft. Allg Forst Z Waldwirtsch Umweltvorsorge 57:118–119
Neuner S, Beinhofer B, Knoke T (2013) The optimal tree species composition for a private forest enterprise – applying the theory of portfolio selection. Scand J For Res 28:38–48
Neuner S, Albrecht A, Cullmann D, Engels F, Griess VC, Hahn A, Hanewinkel M, Härtl F, Kölling C, Staupendahl K, Knoke T (2015) Survival of Norway spruce remains higher in mixed stands under a dryer and warmer climate. Glob Chang Biol 21:935–946
Nordström E-M, Holmström H, Öhman K (2013) Evaluating continuous cover forestry based on the forest owner’s objectives by combining scenario analysis and multiple criteria decision analysis. Silva Fennica 47:1046. doi:10.14214/sf.1046
Pausch R (2005) Ein System-Ansatz zur Darstellung des Zusammenhangs zwischen Waldstruktur, Arbeitsvolumen und Kosten in naturnahen Wäldern Bayerns. Forstliche Forschungsberichte München 199
Paydar Z, Qureshi ME (2012) Irrigation water management in uncertain conditions – application of modern portfolio theory. Agric Water Manag 115:47–54
Pearce D, Putz FE, Vanclay JK (2003) Sustainable forestry in the tropics: panacea or folly? For Ecol Manag 172:229–247
Pichón FJ (1996) The forest conversion process: a discussion of the sustainability of predominant land uses associated with frontier expansion in the Amazon. Agric Hum Values 13:32–51
Pindyck RS, Rubinfeld DL (2009) Mikroökonomie. Pearson Education, München
Pommerening A, Murphy ST (2004) A review of the history, definitions and methods of continuous cover forestry with special attention to afforestation and restocking. Forestry 77:27–44
Puettmann KJ, Wilson SMG, Baker SC, Donoso PJ, Drössler L, Amente G, Harvey BD, Knoke T, Lu Y, Nocentini S, Putz FE, Yoshida T, Bauhus J (2015) Silvicultural alternatives to conventional even-aged forest management – what limits global adoption? For Ecosyst 2(8)
Raes L, D’Haese M, Aguirre N, Knoke T (2016) A portfolio analysis of incentive programmes for conservation, restoration and timber plantations in Southern Ecuador. Land Use Policy 51:244–259
Richards AE, Forrester DI, Bauhus J, Scherer-Lorenzen M (2010) The influence of mixed tree plantations on the nutrition of individual species: a review. Tree Physiol 30:1192–1208
Rinehart J (2010) U.S. Timberland post-recession – is it the same asset? R&A Investment Forestry. www.investmentforestry.com
Ripken H, Spellmann H (1980) Modell-Berechnungen der Reinerträge der wichtigsten Baumarten sowie der gesamten Holzproduktion in den Niedersächsischen Landesforsten. Der Forst- und Holzwirt 35:153–165
Roche MJ, McQuinn K (2004) Riskier product portfolios under decoupled payment. Eur Rev Agric Econ 31:111–123
Roessiger J, Griess VC, Knoke T (2011) May risk aversion lead to near-natural forestry? A simulation study. Forestry 84:527–537
Roessiger J, Griess VC, Härtl F, Clasen C, Knoke T (2013) How economic performance of a stand increases due to decreased failure risk associated with the admixing of species. Ecol Model 255:58–69
Röhrig E, Bartsch N, von Lüpke B (2006) Waldbau auf ökologischer Grundlage, 7. Auflage edn. Ulmer, Stuttgart
Rothe A (2005) Tree species management and nitrate contamination of groundwater: a central Europe perspective. In: Binkley D, Menyailo O (eds) Tree species effects on soils: implications for global change. Kluwer, Dordrecht, pp 71–83
Rothe A, Binkley D (2001) Nutritional interactions in mixed species forests: a synthesis. Can J For Res 31:1855–1870
Samuelson PA (1969) Lifetime portfolio selection by dynamic stochastic programming. Rev Econ Stat 51:239–246
Schmid-Haas P, Bachofen H (1991) Die Sturmgefährdung von Einzelbäumen und Beständen. Schweizerische Zeitschrift für das Forstwesen 142:477–504
Schou E (2012) Transformation to near-natural forest management, climate change and uncertainty. Department of Food and Resource Economics, University of Copenhagen
Schütz J-P, Götz M, Schmid W, Mandallaz D (2006) Vulnerability of spruce (Picea abies) and beech (Fagus sylvatica) forest stands and consequences for silviculture. Eur J For Res 125:291–302
Seifert T (2004) Einfluss der waldbaulichen Behandlung auf die Holzqualität von Fichte und Buche in Rein- und Mischbeständen. Report of the project X 33 – part II of the Bavarian Forest Service
Sharpe WF (1964) Capital asset prices: a theory of market equilibrium under conditions of risk. J Financ 14:425–442
Sharpe WF (1966) Mutual fund performance. J Bus 39:119–138
Siiskonen H (2007) The conflict between traditional and scientific forest management in 20th century Finland. For Ecol Manag 249:125–133
Sonnemann D (2008) Das ideale Plentergleichgewicht – Leitbild oder Luxus? (The ideal equilibrium state in a selection forest – vision or luxury?) (Essay). Schweizerische Zeitschrift für das Forstwesen 159: 1–7
Spellmann H (2005) Produziert der Waldbau am Markt vorbei? Allg Forstzeitschrift/Der Wald 60:454–459
Tahvonen O, Pukkala T, Laiho O, Lähde E, Niinimäki S (2010) Optimal management of uneven-aged Norway spruce stands. For Ecol Manag 260:106–115
Thomson TA (1991) Efficient combinations of timber and financial market investments in single-period and multiperiod portfolios. For Sci 37:461–480
Thorsen BJ (2010) Risk, returns and possible speculative bubbles in the price of Danish forest land? In: Helles F, Nielsen PS (eds) Scandinavian forest economics no. 43. Proceedings of the biennial meeting of the scandinavian society of forest economics Gilleleje, Denmark, May 2010
von Thünen JH (1842) Der isolierte Staat in Beziehung auf Landwirtschaft und National-ökonomie, 2nd edn. Leopold, Rostock
Wagner JE, Rideout DB (1991) Evaluating forest management investments: the capital asset pricing model and the income growth model. For Sci 37:1591–1604
Wagner JE, Rideout DB (1992) The stability of the capital asset pricing model’s parameters in analysing forest investments. Can J For Res 22:1639–1645
Weber M-W (2002) Portefeuille- und Optionspreis-Theorie und forstliche Entscheidungen, Schriften zur Forstökonomie Band, vol 23. Sauerländer’s, Frankfurt a.M.
Wikström P (2000) A solution method for uneven-aged management applied to Norway spruce. For Sci 46:452–463
Wippermann C, Möhring B (2001) Exemplarische Anwendung der Portefeuilletheorie zur Analyse eines forstlichen Investments. Forst Holz 56:267–272
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2017 Springer-Verlag GmbH Germany
About this chapter
Cite this chapter
Knoke, T. (2017). Economics of Mixed Forests. In: Pretzsch, H., Forrester, D., Bauhus, J. (eds) Mixed-Species Forests. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-54553-9_11
Download citation
DOI: https://doi.org/10.1007/978-3-662-54553-9_11
Published:
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-662-54551-5
Online ISBN: 978-3-662-54553-9
eBook Packages: Biomedical and Life SciencesBiomedical and Life Sciences (R0)