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Economics of species change subject to risk of climate change and increasing information: a (quasi-)option value analysis

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Abstract

Context

In the context of climate change, several forest adaptation options have to be advocated such as a shift to more resistant species.

Aims

We provide an economic analysis of timber species change as a tool for adapting forests to climate change.

Methods

We use the framework of cost–benefit analysis, taking uncertainty into account both exogenously (sensitivity analysis) and endogenously [(quasi-)option value calculations]. We apply the method to assess the economic rationale for converting Norway spruce stands to Douglas-fir in the French Black Mountain.

Results

We find that the Douglas-fir conversion is land expectation value (LEV) maximizing under a wide range of a priori (subjective) probabilities attached to high mortality of Norway spruce under climate change (for probabilities higher than 0.25–0.31). If information about the impacts of climate change is expected to increase over time, and given the large sunk costs attached to conversion, a delay strategy may be preferable to transition and to status quo when the impacts of climate change on Norway spruce mortality are sufficiently ambiguous. In such cases, getting information earlier increases the LEV by €5–60/ha.

Conclusion

Beyond the specifics of the case study, this paper suggests that quasi-option value is a relevant tool to provide insights to forest owners dealing with adaptation decisions in the context of climate change.

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Acknowledgments

The authors acknowledge the help of Eric Lacombe and four AgroParisTech students, Martin Deltombe, Jean-Baptiste Reboul, Nicolas Toquard and Emmanuel Bonaimé, for their contribution to the case study. We also thank Bo Jellesmark Thorsen and participants in the international conference “Tackling climate change: the contribution of forest scientific knowledge” held in Tours in May 2012 for helpful suggestions. Finally, we are grateful to two anonymous referees for their comments.

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Authors and Affiliations

  1. INRA, UMR 356 Economie Forestière, 14 rue Girardet, 54000, Nancy, France

    Marielle Brunette

  2. INRA, UMR 1110 MOISA, 34000, Montpellier, France

    Sandrine Costa

  3. CIRED, UMR 8568 CNRS, ENPC, CIRAD, EHESS, AgroParisTech, 94736, Nogent/Marne, France

    Franck Lecocq

Authors
  1. Marielle Brunette
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  2. Sandrine Costa
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  3. Franck Lecocq
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Corresponding author

Correspondence to Marielle Brunette.

Additional information

Handling Editor: Marc Hanewinkel

Contribution of the co-authors

Marielle Brunette: analysis in case of risk aversion, management of writing process and revision of the manuscript.

Sandrine Costa: case study development, analysis in case of risk neutrality and revision of the manuscript.

Franck Lecocq: implications for project analysis plus in-depth paper revision.

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Brunette, M., Costa, S. & Lecocq, F. Economics of species change subject to risk of climate change and increasing information: a (quasi-)option value analysis. Annals of Forest Science 71, 279–290 (2014). https://doi.org/10.1007/s13595-013-0281-0

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  • DOI: https://doi.org/10.1007/s13595-013-0281-0

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