Forest Valuation under Carbon Pricing

Emissions trading schemes are increasingly being
adopted to combat climate change. New Zealand created
the world s first all sectors all gases such scheme
in 2008, awarding tradable credits for carbon
sequestration and imposing liabilities for emissions
(i.e. harvest or deforestation) from forestry. Adding
carbon pricing as a decision variable complicates
forest and forest land valuation, highlighting the
real options available to foresters (i.e. to defer
harvest or to change land use). Standard forest
valuation methodologies do not properly capture the
value impacts of carbon pricing on forestry. This
book was commissioned by the New Zealand Ministry of
Agriculture and Forestry, and develops a new approach bootstrapping real options analysis (BROA) to
address this shortcoming. The BROA approach is rich
enough to capture the complexities of forest
valuation under carbon pricing, while remaining
tractable enough to find practical application. It
should be useful to academics interested in valuing
complex real options, as well as to academics,
practitioners and policymakers interested in
evaluating the impact of carbon pricing on forestry
and forest land use.

Autorentext

The authors are associated with the New Zealand Institute for theStudy of Competition and Regulation. Richard lectures in financeat Victoria University of Wellington, where Gabriel and Andreaare undertaking PhD and Masters studies respectively, and Lew isprofessor of economics. Glenn is now the University ofCanterbury's BNZ chair of finance.

Klappentext

Emissions trading schemes are increasingly beingadopted to combat climate change. New Zealand createdthe world's first "all sectors all gases" such schemein 2008, awarding tradable credits for carbonsequestration and imposing liabilities for emissions(i.e. harvest or deforestation) from forestry. Addingcarbon pricing as a decision variable complicatesforest and forest land valuation, highlighting thereal options available to foresters (i.e. to deferharvest or to change land use). Standard forestvaluation methodologies do not properly capture thevalue impacts of carbon pricing on forestry. Thisbook was commissioned by the New Zealand Ministry ofAgriculture and Forestry, and develops a new approach- bootstrapping real options analysis (BROA) - toaddress this shortcoming. The BROA approach is richenough to capture the complexities of forestvaluation under carbon pricing, while remainingtractable enough to find practical application. Itshould be useful to academics interested in valuingcomplex real options, as well as to academics,practitioners and policymakers interested inevaluating the impact of carbon pricing on forestryand forest land use.