Effects of climate change and uncertainty on timber benefits and optimal harvest decisions using risk-programming models

This study incorporates the combined effects of climate change and yield uncertainty into estimates of the expected value and variance of future stand yields and net benefits for six management prescription options. These estimations provide the input data for three distinct mathematical programming based risk models that are in turn used to assess the effects of climate change and yield uncertainty on total economic returns and optimal harvest patterns for a stylized, 1000 hectare aspen forest located in central Alberta. The risk model formulations include a Markowitz minimum variance model, an expected value/variance - chance constraint hybrid model, and a discrete stochastic programming (recourse) model. All other factors equal, the impacts of climate change are positive for aspen timber management in central Alberta up to the year 2070. This result holds even when increased costs associated with climate risk are accounted for. A notable result is that climate risk accounts for only 25 % of the standard deviation in timber returns from the hypothetical forest. The remainder is due to variance in yield parameters. When compared to a baseline of normal climate and no uncertainty, objective function values are lower when both climate effects and yield parameter variances are included. However, if the decision maker is able to eliminate yield uncertainty in the first period, certainty equivalent values are higher than the baseline---meaning that the effects of climate change may be positive conditional on certain management response. The analysis also shows that if recourse is not permitted, solutions that permit harvesting to occur are not feasible under current sustained yield policy regimes. Thus, AAC should not be viewed as a single target harvest volume that ensures sustained yield into the future. Rather AAC could be viewed as a decision tree representing a range of future possible harvests that are contingent on the realization of particular states of nature through the planning horizon. Flexibility in long term planning will be increasingly important for successful adaptation to not only climate but other factors that contribute to risk and uncertainty in timber management.