Economics of timber production and climate change mitigation

Timber and bioenergy production and forest carbon sequestration are intrinsically interrelated with one another. Consisting of four papers, this thesis addresses their interactions from different perspectives in Sweden. The motivation for the thesis is triggered by two of the national environmental quality objectives, Reduced Climate Impact and Sustainable Forests. The overall goal of the thesis is to increase understanding of the potential trade-offs and synergies between timber production, bioenergy, and forest carbon sequestration.To achieve the goal of the study, a partial equilibrium (PE) model of Swedish timber market is calibrated in paper I and developed in paper II to paper IV. Respectively, in paper I the model is extended to include non-timber benefits and then the model is calibrated by finding a proper level of the non-timber benefits. By examining the interaction between timber production and forest sequestration under alternative hypothetical carbon prices, paper II estimates the cost of enhancing forest carbon sequestration. Paper III focuses on the impacts of increasing fuelwood demand on the Swedish forest sector. The interactions between three major timber products and forest resources are examined. Besides fuelwood, paper IV encompasses a wider range of biomass feedstock for bioenergy. The complex interdependence between bioenergy, timber production, and forest carbon are addressed explicitly. In addition, carbon balance associated with bioenergy expansion is projected over time to reveal the complex dynamics involved in forest-based carbon mitigation.The results of these papers show that the inclusion of non-timber benefits in the forest sector modeling framework can more accurately reflect the objectives of forest owners. Promoting forest carbon sequestration in Sweden to mitigate climate change can be a relatively low-cost option, and it is more effective in the short term. The potential expansion of bioenergy will change the optimal mix of timber and non-timber products and services, causing competition between timber markets and affecting forest carbon. It is worth noting that the climate benefits of using bioenergy compared to fossil fuels are time dependent. The findings of this thesis will contribute to informing policymakers of the potential impacts of the different policy instruments, assisting them in handling trade- offs between sometimes conflicting policy goals.