Economic Analysis of IFM - 140-105

Description: Better risk management is one option to consider when looking at ways to enhance forest productivity. Ever changing global markets determine forest product prices, and therefore communities and firms that depend on harvesting timber are faced with significant uncertainties. In order to promote greater security for forestry firms, their employees and communities, there is a need to find better ways to manage the risks inherent in dealing with global markets, as well as environmental uncertainties.

This project investigates the value of the forest resource given the reality of price and environmental uncertainties and examines how more efficient risk management can improve forest productivity. Returns to forestry under various harvesting policies, ranging from complete flexibility to strictly applied allowable cut requirements, will be examined in great detail. This project will also consider how forestry firms and communities can benefit from explicit recognition in forest management plans of uncertainty due to price and other risks.

The results of this analysis will provide better estimates of the value of our forest resources, and will point to ways in which existing provincial regulations might hinder or enhance a firm’s ability to respond to risk, and thus set the stage for future regulatory improvements that might be considered. The real options approach will be able to assist forestry firms to better manager their investments in the face of risk, and thereby generate more stable income for themselves and for forestry-based communities.

The Project Team: Margaret Insley, University of Waterloo, Kimberly Rollins, University of Nevada, Glenn Fox, University of Guelph



Insley, M., Fox, G. and K. Rollins. 2002. The Economics of Intensive Forest Management: A Stand Level Analysis for the Romeo Malette Forest in Ontario. Report Prepared for Tembec Inc., the Ontario Ministry of Natural Resources, and ULERN. 42pp.

Insley, M.C. and K. Rollins. 2003. Real options in harvesting decisions on publicly owned forest lands (Revised)

Freeman, S., Insley, M., and L. Swidersky. 2004. Summary The Economics of Intensive Forest Management:  A Stand Level Analysis for the Romeo Malette Forest in Ontario, Update of the November 2002 Report

Summary Report for FRP (2005): Economic Research Efforts of the Forestry Research Partnership


Tree Tips:

Tree Tip for Project 140-105, February 2006


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