Economics of risk and tipping points: approaches to valuing forest resilience

ARMILLARIA MELLEA . Browning of foliage on an attacked Serbian spruce tree standing out against the healthy green of the surrounding trees . The previous crop on this site was oak coppice . Location: Alice Holt , Hampshire , England .Summary

The report provides a review of economic approaches to risk and uncertainty, tipping points and resilience. The review is motivated by increasing risk and uncertainty in forestry related to climate change and other factors, and the need to take them into account in making forest planning and management decisions. Ignoring risk and uncertainty could be expected to result in suboptimal choices, inefficient use of resources and poor investments decisions.

An overarching aim of the study is to consider how the tools reviewed could help in valuing resilience in forestry.

Research objectives

Specific objectives for this study are:

  1. To review major sources of risks and their associated magnitudes for provision of forest ecosystem services (ES) (e.g. timber provision, carbon sequestration, biodiversity and recreation) and resilience. Risks may include economic sources (e.g.: changes in timber prices, interest rates, ect), and ecological sources (e.g. tree growth rates and mortality affected by climate change, pests and diseases, wind and fire risks, etc.)
  2. To identify the most probable scenarios (including minimum and maximum boundaries) for various risks over the next 50 or 100 years.
  3. To identify and review the most useful existing economic methods, tools and models that could be used for valuing forest resilience and ES in the presence of risk.

Results so far

The review found that there are currently no universally accepted definitions for risk, uncertainty and resilience, although there is more agreement on defining tipping points or critical thresholds. For the purposes of this study, risk is defined as a measure encompassing the probability and expected impact of uncertain events in the future, with uncertainty conceptualised as a set of probabilities of different potential future states.

Resilience is a comparatively new concept that can be especially difficult to define as it is multidimensional, with potentially rich social content and context. From an ecological perspective, resilience can be defined as the amount of disturbance that an ecosystem can withstand without changing self-organized processes and structures before flipping into a different equilibrium. Tipping points are defined as critical points or zone where relatively rapid change occurs from one stable state to another with a small change in conditions. However, there generally appears insufficient evidence at present to identify tipping points in forest ecosystems, and how they will be affected by climate change. Some very preliminary work is reported but much more basic field work and data collection are required.

The review of economic approaches to risk and uncertainty found that a variety of tools are available for modelling, including some novel developments (e.g. robust optimisation). However, there have been relatively few applications in forestry economics to date.

A qualified recommendation is given on what tools may be most appropriate for use in applied forestry models. Obstacles to a wider use of these tools are discussed. An overview of tools presented should aid decision makers with a choice of an appropriate tool and encourage them to include a fuller consideration of risk and uncertainty.

A conceptual framework for the resilience valuation is proposed, while acknowledging the complexity of defining and measuring resilience which are not yet fully resolved. Future work will benefit from linkages with other ongoing research on resilience within Forest Research.

Status

Project started in 2017. Publication of the final report is expected in 2018.

Contact

Vadim Saraev

Funders and partners

Funded by Forestry Commission. Research Programme 4: Valuing and governing forest ecosystem services

Forestry Commission policy

The Forestry Commission wants to understand links between trees, woodlands and society to enable them to increase the benefits people receive from trees and woodlands, in both rural and urban environments. It seeks to deliver these benefits through Sustainable Forest Management policies and practices. This study contributes to realising the full potential of our woodlands as economic, environmental and social resources.