Optimizing rotation periods of forest plantations: The effects of carbon accounting regimes

Forests have a huge potential to produce timber and sequester carbon in a joint process. Thus, afforestation projects have been widely undertaken across countries to achieve poverty alleviation and environment protection goals, specifically in reducing atmospheric carbon dioxide. Our study determines the optimal rotation periods of afforestation projects with three different tree species (Chinese fir, Eucalyptus, and Poplar) in various Chinese regions. Applying a modified Hartman rotation model, our results show that the optimal rotation period increases for all examined species, when considering the joint production of timber and carbon sequestration. However, they also indicate that carbon accounting regimes have a significant impact on the optimum rotation as well as on the revenue calculations. We distinguish between temporary (tCER) and long-term (lCER) Certified Emission Reductions. The present value of lCER revenues is three to four times higher than those generated by tCER for the same plantation in the initial 5 to 10 years. In contrast, when the project period extends to 30 years, the present value of lCER revenues is at least two times lower than the present value of tCERs. Therefore, forest managers have an incentive to apply tCER accounting to finance slow-growing plantations, and lCER for fast-growing ones. We conduct a sensitivity analysis with respect to changes in discount rates and carbon prices. While the optimal decision for Chinese fir is highly sensitive to changes in both variables under tCER accounting, the results concerning Eucalyptus are most sensitive under the lCER accounting regime. In contrast, carbon revenues have a minimal impact on the optimal rotation of Poplar plantations, no matter which regime is applied. Our findings can contribute to the efficient and sustainable management of carbon sequestration projects, while the methodology can also be applied to other regions in the developing world.