Evaluating the Effect of Bio-Energy Use on Optimal Thinning Regimes through a Dynamic Programming Model

Abstract

We develop a stand-level dynamic programming (DP) model for joint production of timber and biomass as a source of bio-energy, and evaluate the effect of bio-energy use on optimal thinning regimes. We add a forest biomass component to a forest stand growth simulator and evaluate two types of carbon emission reduction effects - the direct effect of carbon sequestration from producing and using timber, and the indirect effect of fuel substitution. We compute benefits from producing timber based on the price of logs, while we use the price of Grade A crude oil to compute benefits from biomass production for bio-energy. We examine the relationship between utility ratio of log and benefits from joint production of timber and biomass by introducing a new decision variable for this ratio. Our results show that forest landowners focus on producing timber for the price of Grade A crude oil less than 80 Yen/l, while they shift entirely to biomass production for bio-energy in the other case of the price more than 80 Yen/l. As for carbon emission reduction effects, our results point out that biomass production leads to greater carbon emission reduction effects than timber production when thinned timber products are ignored as a source of carbon sequestration.