2014 980894

Journal of Sustainable Forestry
ISSN: 1054-9811 (Print) 1540-756X (Online) Journal homepage: http://www.tandfonline.com/loi/wjsf20
Economic and Life-Cycle Analysis of Forest Carbon

Sequestration and Wood-Based Bioenergy Offsets
in the Central Hardwood Forest Region of United
States
Prativa Shrestha, G. Andrew Stainback, Puneet Dwivedi & John M. Lhotka
To cite this article: Prativa Shrestha, G. Andrew Stainback, Puneet Dwivedi & John M. Lhotka
(2015) Economic and Life-Cycle Analysis of Forest Carbon Sequestration and Wood-Based
Bioenergy Offsets in the Central Hardwood Forest Region of United States, Journal of
Sustainable Forestry, 34:3, 214-232, DOI: 10.1080/10549811.2014.980894
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Journal of Sustainable Forestry, 34:214–232, 2015
Copyright © Taylor & Francis Group, LLC
ISSN: 1054-9811 print/1540-756X online
DOI: 10.1080/10549811.2014.980894
Economic and Life-Cycle Analysis of Forest

Carbon Sequestration and Wood-Based
Bioenergy Offsets in the Central Hardwood
Forest Region of United States
PRATIVA SHRESTHA1, G. ANDREW STAINBACK2,

PUNEET DWIVEDI3, and JOHN M. LHOTKA2
Downloaded by [180.247.130.68] at 18:44 08 December 2015
1
College of Forest Resources, Mississippi State University, Starkville, Mississippi, USA
2
Department of Forestry, University of Kentucky, Lexington, Kentucky, USA
3
School of Forestry and Natural Resources, University of Georgia, Athens, Georgia, USA
This study investigates the combined impact of carbon and bioen-

ergy markets on upland oak dominated mixed hardwood forests in
the Central Hardwood Forest Region (CHFR) of the United States.
A modification of the Hartman model was used for the economic
analysis of carbon sequestration and using wood-based biomass
for bioenergy. A life-cycle assessment was used to determine the
amount of carbon sequestered due to stand growth and emitted
during harvesting and decay of wood products. Two scenarios were
taken, one where additionality of carbon is considered and the
other where it is not. Sensitivity analysis was done with the range
of carbon and bioenergy prices. The results show that net car-
bon payments have more impact on land expectation value (LEV)
when additionality is not considered; in contrast, bioenergy pay-
ments have more impact on LEV when additionality is considered.
Carbon and bioenergy prices also influenced the amount of stand
level supply of forest products and carbon in both scenarios. In
general, sawtimber, wood bioenergy, and carbon supply increased
with an increase in carbon prices, whereas, pulpwood supply
decreased. With few exceptions at higher carbon prices, bioenergy
supply decreased with the increase in wood bioenergy prices,
showing a backward bending supply curve in both scenarios.
Address correspondence to G. Andrew Stainback, Department of Forestry, University of

Kentucky, 214 T. P. Cooper Building, Lexington, KY 40546, USA. E-mail: gdrewst02@uky.edu
214
Carbon and Bioenergy Market Impacts in CHFR 215
KEYWORDS climate change, additionality, greenhouse gas,

carbon offset payments, land expectation value, Hartman model,
bioenergy
INTRODUCTION
Increasing carbon storage in standing forest biomass and using wood for
energy production are important strategies to use forests to reduce green-
house gas (GHG) emissions that have garnered the attention of policy
makers, scientists, and society. By adopting different forestry-related activities
(reforestation, afforestation, reduction of deforestation, and improved forest
management), more atmospheric carbon can be stored in forest biomass.
Sohngen (2009) has shown that around 5 to 11 tons of CO2 per hectare per
year can be removed from the atmosphere by forest growth. Similarly, due
to improved forest management practices and reforestation in the United
States, there has been an increase in net carbon uptake of 31% during
the period from 1990 to 2010 (Environmental Protection Agency, 2012).
And, studies on the economics of forest carbon sequestration have shown
that forestry activities can be cost effective in reducing atmospheric car-
bon (Nepal, Grala, & Grebner, 2009; Richards, 2004; Sedjo, 2001; Newell
& Stavins, 2000). Substitution of wood bioenergy for fossil fuels is another
way to reduce GHGs. Wood biomass can be used to produce electricity
and biodiesel. For electricity production, it can be burned alone or cofired
with fossil fuels. Wood-based bioenergy can have fewer GHG emissions
than fossil fuels because the CO2 produced during biomass combustion is
again absorbed by the growing tress in forests forming a closed loop carbon
cycle (Forest Products Association of Canada, 2009). In contrast, using fossil
fuel for energy production is a one-way process through which the carbon
stored in the fossil fuel is released into the atmosphere. Previous studies
have demonstrated that the use of forest biomass instead of fossil fuels can
contribute to a long-term solution for the fixation of CO2 . For example,
Zhang et al. (2009) compared the amount of emissions produced by the
burning of coal, natural gas, and wood pellets for electricity production and
the results showed that 100% wood pellet firing provided the greatest GHG
benefit on a kilowatt-hour basis. Nienow, McNamara, and Gillespie (2000)
assessed wood biomass for cofiring with coal in northern Indiana and the
results indicated that cofiring wood biomass at the power plant is a viable
method to reduce the amount of air pollution. Similarly, Ringe, Graves, and
Reeb (1998) found that cofiring with up to 5% wood biomass decreased the
emissions of marginally unacceptable coal supplies to an acceptable level
within the selected potential emissions standard (0.6 to 1.2%) in Kentucky.
Hence, the use of forest biomass for energy production can be an effective
way to reduce GHG emissions relative to fossil fuels. As a result, there has
216 P. Shrestha et al.
been a growing interest to promote the use of wood-based bioenergy in the

United States along with sequestering more carbon in standing biomass and
harvested products.
Various studies have been conducted to analyze the economic impli-
cations of sequestering carbon in standing biomass, producing wood-based
bioenergy, and storing carbon in harvested wood products (Stainback &
Alavalapati 2002, 2005; Nesbit, Alavalapati, Dwivedi, & Marinescu, 2011;
Nepal et al., 2012; Dwivedi, Bailis, Stainback, & Carter, 2012; Catron,
Stainback, Lhotka, Stringer, & Hu, 2013). Results have shown that the land
expectation value (LEV) generally increases and the optimal rotation age
increases due to carbon payments and decreases with bioenergy payments.
However, only a few studies have assessed the combined effect of carbon
offsets from carbon sequestered by forests and carbon offset from using
bioenergy in place of fossil fuels on forest management and LEV. In addi-
tion, only a few studies have incorporated a penalty associated with carbon
emissions through silvicultural practices, harvesting, and the decay of for-
est products and carbon payments due to avoided carbon emissions from
using wood chips for electricity production (Dwivedi, Alavalapati, Susaeta,
& Stainback, 2009; Dwivedi et al., 2012). Most of these studies found that
carbon and bioenergy payments had substantial impacts on LEV but modest
impacts on the optimal rotation. For example Dwivedi et al. (2009) found that
no significant change in optimal rotation occurred with bioenergy payments
in slash pine (Pinus elliottii Engelm) plantations. However, these studies for
the most part investigated Southern pine forests. Different forests in differ-
ent regions may produce different results. For example, Catron et al. (2013)
found that even modest bioenergy prices ($5 per metric ton) could substan-
tially reduce the optimal rotation age in oak-dominated mixed hardwood
forest in Kentucky. This in turn led to very substantial decreases in the
amount of sawtimber produced at harvest. This result could have impor-
tant policy ramifications. The forest and wood products industry supported
by this hardwood resource contributes substantially to the economy of the
region (Stringer, Thomas, Ammerman, & Davis, 2013).
The current study aims to assess the impact of carbon sequestration and
wood bioenergy production on the optimal rotation age and LEV of oak-
dominated mixed hardwood forests in the Central Hardwood Forest Region
(CHFR) considering emissions from harvesting operations, the decay of forest
products, and carbon offsets from using wood chips for electricity gener-
ation. This study fills an important gap in the literature. First, additional
streams of revenue from bioenergy and carbon payments could substantially
increase LEV and thus the financial attractiveness of owning and manag-
ing mixed-hardwood forests in the region—an important supply region for
high quality hardwood timber. Second, if carbon and/or bioenenergy mar-
kets change the optimal rotation age, other markets such as sawtimber and
pulpwood could be substantially impacted. Finally, using Life-Cycle Analysis

(LCA) to incorporate carbon emissions from silvicultural practices, harvesting,
decay of forest products, as well as the carbon offsets due to avoided car-
bon emissions from using wood-based bioenergy for electricity allows for
the investigation of more realistic carbon markets.
Forest carbon LCA involves a more through accounting of emissions of
GHG at all stages of forest product production from cradle (forest estab-
lishment) to grave (final fate) (Gower, 2003). Thus, emissions are taken into
account from the entire life-cycle of the product (Lindfors et al., 1995; Consoli
et al., 1993). Forest carbon LCA provides a more realistic way to find poten-
tial management opportunities to increase carbon sequestration and assess
the optimal disposal practices of end products (Gower, 2003).
In the current study, two baseline scenarios were considered—Baseline
1 and Baseline 2. In the former, carbon sequestered from the beginning of
the rotation (Year 0) was considered and in the latter carbon sequestration
was considered only after the stand reaches the age that would be the opti-
mal rotation age when only considering sawtimber and pulpwood (without
carbon or bioenergy payments). The Baseline 2 scenario represents the typ-
ical case where forests are already established and the market only pays for
carbon sequestered in addition to what would have been sequestered with-
out payments. The Baseline 1 scenario represents the less common situation
where forests are being established from a prior land-use (i.e., pasture). This
scenario is also useful to compare the results of this study to other similar
studies looking at other regions and species, as most of these studies assume
payments start at the beginning of the rotation (Stainback & Alavalapati,
2002; Dwivedi et al., 2012; van Kooten, Binkley, & Delcourt, 1995; Köthke &
Dieter, 2010). However, because of concerns of additionality, carbon markets
may pay for only carbon sequestration and emissions avoidance in addition
to what would have occurred without the payments (Nepal et al., 2012).
Thus, which baseline scenario would be used in actuality would depend on
prior land use and the requirements of the carbon offset market. Besides
additionality, leakage and permanence are two important concepts in forest
carbon sequestration. Leakage in this context refers to changes in forest man-
agement to offset carbon emissions in one place leading to changes in forest
management elsewhere that may increase carbon emissions or reduce carbon
sequestration. Permanence refers to carbon that is sequestered being rere-
leased back to the atmosphere prematurely either intentionally (e.g., land-use
change) or unintentionally (e.g., fire). Due to the limits of the model used
and the scope of this study neither leakage nor permanence were modeled.
However these issues are addressed elsewhere in the literature (Nepal, Grala,
Grebner, & Abt, 2013; Stainback & Alavalapati, 2004; Susaeta, Alavalapati, &
Carter, 2009).
Oak-dominated mixed hardwood forests in the CHFR are usually
naturally regenerated and the application of intermediate silvicultural
treatments (e.g., thinning) within a rotation is infrequent. Therefore, pas-

sive even-aged management was assumed. Sawtimber, pulpwood, and
wood-based bioenergy were the three products considered in the model.
Emissions from the decay of sawtimber and pulpwood after harvest were
considered in both scenarios. Bioenergy was assumed to be sold for
electricity production.
MODEL SPECIFICATION
Mixed hardwood forests in this region are usually naturally regenerated

and passively managed, thus no management or establishment costs were
included in the model. Three forest products were modeled; sawtimber,
pulpwood, and wood-based bioenergy. Bioenergy was assumed to be sold
for electricity production and sawtimber and pulpwood were assumed to

decay and emit carbon based on their half-lives. There are several types and
models of machine that are used in harvesting operations, depending on the
products to be extracted and terrain. Four types of machines were assumed
to be used in harvesting the stand (feller buncher, skidder, knuckle boom
loader, and chipper) based upon records from the Certified Master Logger
Program Rainforest Alliance Smart Logging RA-SL-003285 documentation (Dr.
Jeffrey Stringer, University of Kentucky, personal communication, May 11,
2012). Data for fuel consumed by machines during harvest was obtained
from the Wood Supply Research Institute: Auburn Stump to Mill Cost Program
model (Dr. Mathew Smidt, Auburn University, personal communication, May
16, 2012). All computations in the model used a real discount rate of 5% over
time, similar to other economic studies (Catron et al., 2013; Dwivedi et al.,
2012; Nesbit et al., 2011).
Growth and Yield Model

The growth and yield data for upland oak-dominated stands on interme-
diate quality sites was obtained from Gingrich (1971). According to Roach
and Gingrich (1968), the predominant site class for upland hardwoods in
the region is 55–74 ft (17–23 m; at base age 50). Thus, for this study a site
index of 65 ft (20 m) was used to model an average site quality. Gingrich
(1971) presents yield data for stand ages 20 to 80 yr at 10-yr intervals.
Sawtimber and pulpwood volumes were derived from this yield data by
assuming that volume up to a 21.6 cm diameter top would be sold as saw-
timber and volume up to a 10.2 cm top (minus sawtimber volume) would
be sold as pulpwood. The derived yields for sawtimber and pulpwood were
then fitted to Equation 1 so that yields could be predicted on an annual
basis:
TABLE 1 Parameters Estimated for Predicting Sawtimber and Pulpwood Yield
Sawtimber Pulpwood
Parameters (International 1/4 inch bdft) (ft3 )
A 5.14E − 18 0.0076
B 14.49376 3.856281
C 0.1837198 0.0508014
Sawtimber Pulpwood Energywood

350
Biomass availability (metric tons/ha)
300
250
200
150
100
50
0
0 20 40 60 80
Age (years)
FIGURE 1 Availability of sawtimber, pulpwood, and bioenergy (metric tons per hectare) with
respect to stand age (years) for passively managed mixed hardwood stands in the Central
Hardwood Forest Region (CHFR)—site index 65 ft (20 m).
V (t) = at b e−ct , (1)
where V(t) refers to the volume of sawtimber or pulpwood (unit per acre),
t is the stand age (years), and a, b, and c are parameters estimated through
nonlinear regression in STATA 11.0 (StataCorp LP, College Station, TX, USA;
Table 1). Equation 1 was used to predict the volume of each product from
stand age 0 to 80 yr at 1-yr intervals. The volume of sawtimber and pulpwood
was determined on a per hectare basis.1
The total aboveground tree biomass was calculated by multiplying the
total merchantable volume (volume of sawtimber plus pulpwood) by an
aboveground ratio of 2.12 which was obtained by taking the average of
aboveground ratios from South Central, Mid-Atlantic, and Central regions
of the United States where the CHFR is situated (Birdsey, 1996). Finally,
the volume of wood-based bioenergy was determined by subtracting the
total merchantable volume from the total aboveground tree biomass. The
availability of different wood products (sawtimber, pulpwood, and wood-
based bioenergy) is presented in Figure 1.
Amount of Carbon Sequestered: C(t)

The amount of carbon (pounds) sequestered in the growing stand was cal-
culated by multiplying the total aboveground tree biomass (cubic feet) by
a factor β (19.74; Birdsey, 1996). Like the aboveground ratio, β is also the
average values from the South Central, Mid-Altantic, and Central regions of
the United States where the CHFR is situated. The carbon in pounds was
converted into carbon dioxide equivalent (CO2 e) in metric tons using appro-
priate conversion factors as the carbon in markets is usually traded in the
form of CO2 e.
Amount of Carbon Emissions Associated With Harvesting Operation

Carbon released into the atmosphere as a result of fuel consumption during
harvesting was determined using Equation 2:

H (t) = Q (t) F (t) (10.5) , (2)
where H(t) is the amount of carbon emissions during harvesting (kg); Q(t)
is the vector of volume for sawtimber, pulpwood, and energywood (metric
tons); F(t) is the fuel consumed by each harvesting machine type (gal/ton);
and 10.5 (kg/gal) is the CO2 e emitted per gallon of fuel consumed by
each machine. H(t) in kg was converted into metric tons using appropriate
conversion factors.
Amount of Carbon Released From the Decay of Each Wood Product

The amount of carbon emitted from the decay of wood products, C(n), at
each year after harvest through 100 years was determined using Equation 3:
C (n) = Nn − N(n−1) , (3)
where Nn is the amount of CO2 e left after n years of harvest and N(n–1) is
the amount of carbon left after (n–1) years of harvest in metric tons, n is
the years after harvest ranging from 0 to 100 yr. Nn was determined using an
exponential decay function as shown in Equation 4:

− n
N n = N0 2 half life , (4)
where N0 is the amount of CO2 e left at the time of harvest. The half-life
for sawtimber and pulpwood were taken to be 100 and 2.6 yr, respectively,
based on the intended application of these wood products (Dwivedi et al.,
2012). The sawtimber was assumed to be used for construction purposes
and the pulpwood was assumed to be used in making paper.
Amount of Carbon Emission Saved From Substituting Bioenergy for

Coal
To determine the total amount of carbon emission saved W(t) we followed
(Dwivedi et al., 2012). First, the total electricity generated from wood chips
(EC) in KWh/acre was determined using Equation 5:
EC = WC ∗ CV ∗ CE ∗ (100 − TRAN ) ∗ 1000/3.6, (5)
where WC is total availability of wood chips (metric tons), CV is the calorific

value of wood chips (10 MJ kg−1 ), CE is the conversion efficiency of a 100
megawatt (MW) power plant (31.70%; Bridgwater, Toft, & Brammer, 2002),
and TRAN is the electricity transmission losses (7%; U.S. Energy Information
Administration, 2012). The GHG intensity of electricity generated from coal
was taken as 0.001236 metric ton CO2 e kWh−1 (1.236 kg CO2 e kWh−1 ;
Lemoine et al., 2010). Hence, the total amount of carbon emissions saved
W(t) due to use of wood-based bioenergy for electricity generation was
calculated by multiplying the electricity generated by the factor 0.001236.
ECONOMIC ANALYSIS
Net Carbon Benefits
The carbon sequestration benefits over one rotation were obtained using
Equation 6:
t 100
pvc (t) = Pc C (t) e−rt dt + W (t)Pc e−rt dt − C (n) Pc e−r(n+t)
0
0
(6)
− Pc H (t) e−rt ,
where pvc(t) is the present value of carbon benefits over one rotation ($/ha),
Pc is the price of carbon ($/metric ton of CO2 e), C(t) is amount of carbon
sequestered with respect to stand age (metric tons), W(t) is the amount of
carbon emissions avoided using wood chips for electricity production, C(n)
is the amount of carbon released from decay of sawtimber and pulpwood
at year n (metric tons); and H(t) is the amount of carbon emissions during
harvesting (metric tons), t is the rotation age (years), and r is the real discount
rate.
Net Timber Benefits

The net present value of timber benefits over one rotation per hectare of
forestland was obtained using Equation 7:
pvt (t) = PQ (t) e−rt , (7)
where pvt(t) is the present value of wood products over one rotation ($/ha);
P is the vector of prices for sawtimber, pulpwood, and bioenergy ($/unit);
Q(t) is the vector of volume for sawtimber, pulpwood, and bioenergy (unit).
The stumpage prices for sawtimber and pulpwood were taken to be $244
per MBF and $5 per ton for sawtimber and pulpwood, respectively (Catron
et al. 2013).2 Two stumpage bioenergy prices were modeled, $0/metric ton
and $5/metric ton.
Optimal Rotation Age and Land Expectation Value

A modification of the Hartman model (Hartman, 1976) was used to find
the rotation age that maximizes the land expectation value (LEV). Thus, if
the benefits from forestry are assumed to be perpetual then, profitability of

forestland at a time (t) in terms of LEV can be expressed as in Equation 8:
pvc (t) + pvt (t)

LEV (t) = , (8)
1 − e−rt
where, LEV(t) is the land expectation value ($/ha), pvc(t) is the net present
value of carbon benefits over one rotation ($/ha), pvt(t) is the net present
value of timber benefits over one rotation ($/ha), r is the real discount rate,
and t is the rotation age (years) that maximizes LEV.
Stand Level Supply of Forest Products

The stand level supplies of sawtimber, pulpwood, and wood-based bioen-
ergy (per ha per year) and carbon (per ha) as a function of carbon price
were estimated. The amount of sawtimber (or pulpwood or bioenergy) at
the optimal rotation age that maximizes LEV was divided by that age to get
the supply of sawtimber (or pulpwood or bioenergy) over the length of the
rotation as shown in Equation 9. For carbon supply, the overall sum of car-
bon stored on the stump up to the optimal rotation age was divided by the
rotation age as shown in Equation 10:
Afp (t)
Sfp = , (9)
t
t
Ac
Sc = 0 , (10)
t
where Sfp is the supply of sawtimber (or pulpwood or bioenergy) as car-
bon prices (unit per ha per year) vary holding sawtimber, pulpwood, and
bioenergy prices constant; Afp is the amount of sawtimber (or pulpwood
or bioenergy) at the optimal rotation age (t); Sc is the supply of carbon as

a function of carbon prices (metric tons per ha); Ac is the amount of car-
bon over the length of the rotation age and t is the rotation age (years). In
Equation 10, the carbon supply is considered for the standing tree biomass
until the stand is harvested. Thus, in contrast to sawtimber, pulpwood, and
bioenergy carbon supply was not estimated on a per year basis.
Scenarios
Two scenarios were considered—the Baseline 1 scenario and the Baseline 2
scenario—depending on whether the net carbon benefits are obtained from
Year 0 (Baseline 1) or the net carbon benefits are considered only from the
additional amount of the carbon sequestered in an existing stand (Baseline
2). Thus, in the Baseline 1 scenario, carbon payments from sequestering car-
bon in tree biomass and offsets from wood chips were calculated from Year
0 and the penalty associated with carbon emissions associated with decay of
forest products and harvesting were also considered from Year 0. Whereas,
in the Baseline 2 scenario first the optimal rotation age that maximizes the
LEV when only considering sawtimber and pulpwood production was cal-
culated. This age was considered as the baseline rotation age. Next, only the
additional carbon sequestered annually in tree biomass after this baseline
optimal rotation age was considered and payments were made accordingly.
Similarly, penalties due to carbon emissions from the decay of products and
machinery fuel consumed during harvest were considered for volume grown
after the baseline optimal rotation age. For example, if the LEV is maximized
by selling traditional forest products at the rotation age of 56 yr, then in
the Baseline 2 scenario, 56 yr would be the baseline optimal rotation age
and carbon payments are made only for additional carbon sequestered after
this age. This means that the landowner would have to extend the rotation
age beyond 56 yr to receive any carbon payments. Since, in this scenario,
carbon payments are made only after the baseline optimal rotation age, we
assume that the penalty associated with carbon emissions are only paid from
the decay of products and harvesting of wood material grown after this
age.
Sensitivity Analysis
A sensitivity analysis was conducted based on different carbon and bieoen-
ergy prices in the existing markets in the United States, obtained from
literature review and personal communication. For example, the Regional
Greenhouse Gas Initiative (RGGI) has a clearing price of $3.08 per metric
ton (Potomac Economics, 2013); the California cap and trade program auc-
tioned carbon permits at a price of $14.85 per metric ton CO2 equivalent
(Reuters Point Carbon, 2013); and the voluntary market run by the Mountain
Association for Community Economic Development (MACED) sells carbon

offsets at prices 5.57 and $16.53 per metric ton CO2 equivalent depending
on the amount being sold (Scott Shouse, MACED, personal communication,
February 12, 2013). Hence, based on these different carbon prices in the
market, prices of 0, 2, 5, 15, and $25 per metric ton CO2 equivalent were
considered.
There is little information regarding stumpage prices for hardwood
wood-based bioenergy. Thus we used bioenergy prices based on the avail-
able data for pine residues. For example, in previous published studies,
bioenergy prices were $1.5 per ton (equivalent to $1.36 per metric ton;
Dwivedi et al., 2012) and $5 per ton (equivalent to $5.51 per metric ton;
Nesbit et al., 2011). The stumpage bioenergy price for hardwood species
in the CHFR in the current context is often $0 per ton (Dr. Jeffrey Stringer,
personal communication, March 28, 2013). Hence, the prices considered for
this study were 0 and $5 per metric ton.
RESULTS AND DISCUSSION

Land Expectation Value
The results for the LEV in the Baseline 1 and 2 scenarios at a range of carbon
and bioenergy prices are presented in Figure 2. As expected, in both sce-
narios, carbon payments and bioenergy production increased LEV. Similar
results were seen in other studies with regard to the impact of carbon pay-
ments and/or bioenergy production on LEV and optimal rotation age. Van
Kooten and colleagues (1995) found an increase in LEV and optimal rotation
age because of carbon payments in the northwest region of Canada. Nepal
et al. (2009) found that LEV was higher when carbon payments were made
in loblolly pine stands in the southeastern United States.
Comparing Baseline 1 and 2 scenarios, LEV is greater in the former
scenario. The results for Baseline 1 scenario show that carbon payments have
more impact on LEV than bioenergy production. For example, LEV increased
by approximately $196 per ha when the carbon price was increased from 0
to $2 per metric ton, considering a bioenergy price of $0 per metric ton.
The maximum increase in the LEV is only around $81 when the bioenergy
price is increased from $0 to $5 per metric ton at the carbon price of $0
per metric ton. In contrast, bioenergy production has more impact on LEV
in the Baseline 2 scenario. Except at the higher carbon prices, the influence
of carbon payments on LEV is negligible in the Baseline 2 scenario. This is
because an increase in bioenergy price from 0 to $5 per metric ton resulted
in a sharp decrease in the optimal rotation age when the carbon price was
low. In the Baseline 2 scenario, net carbon benefits are considered only after
the baseline optimal rotation age, so net carbon payments did not have as
much influence on LEV as the increase in bioenergy prices.
Land Expectation Value

LEV (Baseline 1 scenario) LEV (Baseline 2 scenario)
2647 2714
2800
2400
2000 1730
LEV ($/ha) 1661
1600
1200
676 750
800
381 459
400 185 185 187 292 266266 266 266 296 343
196 216
0
carbon price ($/mt CO2e) 0 2 5 15 25 0 2 5 15 25
energywood price ($/mt) 0 5
FIGURE 2 Land expectation value (LEV; $ per ha) as a function of carbon and bioenergy
prices in Baseline 1 and 2 scenarios for passively managed mixed hardwood stands in the
Central Hardwood Forest Region (CHFR)—site index 65 ft (20 m). The y-axis represents the
LEV in $ per ha. The upper x-axis represents the carbon price in $ per metric ton of CO2 e
and the lower x-axis represents the bioenergy price in $ per metric ton. In Baseline 1 carbon
payments start from 0 and in Baseline 2 carbon payments start from what would be the
optimal rotation without carbon and bioenergy payments.
Optimal Rotation Age

For the Baseline 2 scenario, the baseline optimal rotation age that maxi-
mizes LEV from sawtimber and pulpwood production was found to be 56 yr.
Because net carbon benefits (payments for avoided emissions resulting from
use of electricity produced from wood chips in place of coal) are considered
only after this baseline optimal rotation age in the model studied, the stand
must be grown longer than the above mentioned rotation to get any carbon
benefits.
As expected, the carbon and bioenergy prices also impact the opti-
mal harvest length of the stand in both scenarios as shown in Figure 3.
The increase in the net carbon payments tend to increase the optimal
harvest age whereas, bioenergy production tend to decrease the optimal
harvest age. Both of these results are similar with those of other studies
(Stainback & Alavalapati, 2002; Catron et al., 2013; Schaberg et al., 2005).
Comparing the results of both scenarios, the optimal rotation is longer in
the Baseline 2 scenario than in the Baseline 1 scenario with higher carbon
prices. Thus, paying for only additional carbon (after the traditional rotation
age) results in a stronger influence of carbon payments on optimal rotation
age.
Optimal Rotation Age

Optimal RA (Baseline 1) Optimal RA (Baseline 2)
75 68
66 66
61 61 63
60
60 56 56 57 59 58 58 59
55
Optimal RA (years)
53
50 50 50 50
45
30
15
0
carbon price ($/mt CO2e) 0 2 5 15 25 0 2 5 15 25
energywood price ($/mt)
0 5
FIGURE 3 Optimal rotation age (years) as a function of carbon and bioenergy prices in
Baseline 1 and 2 scenarios for passively managed mixed hardwood stands in the Central
Hardwood Forest Region (CHFR)—site index 65 ft (20 m). The y-axis represents the rotation
age in years. The upper x-axis represents the carbon price in $ per metric ton of CO2 e and the
lower x-axis represents the bioenergy price in $ per metric ton. In Baseline 1 carbon payments
start from 0 and in Baseline 2 carbon payments start from what would be the optimal rotation
without carbon and bioenergy payments.
Sawtimber, Pulpwood, and Energywood Supply

Table 2 shows the results for sawtimber, pulpwood, and bioenergy supply as
carbon price varies under bioenergy prices 0 and $5 per metric ton for the
Baseline 1 and 2 scenarios. In both baseline scenarios, the sawtimber supply
tends to increase with the increase of carbon prices at a constant bioenergy
price of either 0 or $5 per metric ton, with a few exceptions in the Baseline
2 scenario. Comparing Baseline 1 and 2 scenarios, the sawtimber supply is
greater in the latter scenario due to the longer rotation age increasing the
amount of sawtimber-sized biomass. With the increase of energywood price
from 0 to $5 per metric ton, the supply of sawtimber decreased in both the
scenarios. The decrease in the sawtimber supply is more prominent when
the carbon prices are low indicating that at lower carbon prices, the increase
in the bioenergy price tends to decrease the optimal rotation age by a greater
amount.
In contrast, in both the scenarios, the pulpwood supply tends to react
in the opposite direction to that of sawtimber supply when bioenergy price
increases. With few exceptions, the results show that the supply of pulpwood
decreases with an increase of carbon price. Unlike sawtimber results in both
the Baseline 1 and 2 scenarios, the supply of pulpwood increases (with some
exceptions at low carbon prices) with an increase in bioenergy price. This
again can be explained by the decrease in the optimal rotation age.
TABLE 2 Stand-Level Supply of Wood Products as a Function of Carbon Prices and Bioenergy
Prices in Baseline 1 and 2 Scenarios for Passively Managed Mixed Hardwood Stands in the
Central Hardwood Forest Region (CHFR)—Site Index 65 ft (20 m)
Baseline 1 scenario
Energywood Rotation
price CO2 e price age Sawtimber Pulpwood Energywood
($/metric ton) ($/metric ton) (years) (m3 /ha/yr) (metric ton/ha/yr) (metric ton/ha/yr)
0 0 56 0.123 1.431 1.691

2 57 0.130 1.430 1.699
5 58 0.137 1.429 1.706
15 60 0.150 1.422 1.715
25 61 0.156 1.417 1.717
5 0 50 0.081 1.404 1.608
2 53 0.102 1.424 1.656
5 55 0.116 1.430 1.681

15 58 0.137 1.429 1.701
25 59 0.144 1.426 1.711
Baseline 2 scenario
Energywood Rotation
price CO2 e price age Sawtimber Pulpwood Energywood
($/metric ton) ($/metric ton) (years) (m /ha/yr) (metric ton/ha/yr) (metric ton/ha/yr)
3
0 0 56 0.123 1.431 1.691

2 59 0.144 1.426 1.711
5 61 0.156 1.417 1.717
15 66 0.180 1.376 1.703
25 68 0.187 1.354 1.688
5 0 50 0.081 1.404 1.608
2 50 0.081 1.404 1.608
5 50 0.081 1.404 1.608
15 63 0.167 1.403 1.716
25 66 0.181 1.377 1.703
Note. In Baseline 1 carbon payments start from 0 and in Baseline 2 carbon payments start from what
would be the optimal rotation without carbon and bioenergy payments.
In both the scenarios, the bioenergy supply increases with respect to

an increase in carbon prices at constant bioenergy prices (with some excep-
tions). At each carbon price when the bioenergy price is increased from
0 to $5 per metric ton, the supply of bioenergy actually decreases with
some exceptions in the Baseline 2 scenario. The intuitive meaning of this
result is that there is an advantage of harvesting bioenergy sooner (through
shorter rotation ages) because even if there is a smaller quantity, revenue is
generated sooner.
Carbon Supply
The results for carbon supply in metric tons per ha as carbon price varies
under bioenergy prices 0 and $5 per metric ton for the Baseline 1 and 2
TABLE 3 Stand-Level Supply of Carbon as a Function of Carbon Price and Bioenergy Price
in Baseline 1 and 2 Scenarios for Passively Managed Mixed Hardwood Stands in the Central
Hardwood Forest Region (CHFR)—Site Index 65 ft (20 m)
Carbon supply (CO2 e metric ton/ha/year)
Energywood price CO2 e price
($/metric ton) ($/metric ton) Baseline 1 Baseline 2
0 0 66.98 (56) 66.98 (56)

2 69.16 (57) 73.50 (59)
5 71.33 (58) 77.80 (61)
15 75.65 (60) 88.28 (66)
25 77.80 (61) 92.31 (68)
5 0 53.98 (50) 53.98 (50)
2 60.45 (53) 53.98 (50)
5 64.80 (55) 53.98 (50)
15 71.33 (58) 82.05 (63)

25 73.49 (59) 88.28 (66)
Note. In Baseline 1 carbon payments start from 0 and in Baseline 2 carbon payments start from what
would be the optimal rotation without carbon and bioenergy payments. Numbers in parentheses are
optimal rotation ages.
scenarios are presented in Table 3. As expected, the carbon supply increased

with an increase in the carbon price in both scenarios. Also, at each carbon
price, the increase in bioenergy price decreased the supply of carbon in
both scenarios. The results also show that the Baseline 2 scenario sequesters
more carbon per ha compared to the Baseline 1 scenario. The Baseline
2 scenario has higher rotation age at the modeled carbon and bioenergy
prices. As a result, the stand volume and hence amount of stored carbon is
similar and sometimes higher in the Baseline 2 scenario resulting in a higher
carbon supply per ha. Thus paying for only additional carbon (beyond the
traditional rotation age) can result in more carbon being sequestered overall.
DISCUSSION AND CONCLUSIONS
This study assessed the economic impact of a combination of net carbon

payments along with bioenergy production on forestland value in mixed
hardwood forests for two baseline scenarios, one where net carbon pay-
ments are made from Year 0 (Baseline 1 scenario) and the other where net
carbon payments are made from the baseline optimal rotation age (Baseline
2 scenario). The study also integrates the penalty associated with carbon
emissions form the decay of forest products and machinery used during
harvesting operations, which were assessed using the life-cycle assessment
approach. In addition, the carbon payments for the amount of carbon
emissions avoided due to use for forest biomass for generating electricity
was considered. This study is unique in considering carbon offsets from
both carbon sequestration and the use of bioenergy in the context of mixed
hardwood forests in the CHFR.
As expected, the results indicate that net carbon payments and wood-
based bioenergy production increase LEV in both baseline scenarios con-
sidered, also, the former lengthen the optimal rotation age, whereas, the
latter decrease the optimal rotation age. The results also suggest that pay-
ing for only additional carbon can result in longer rotation ages and greater
amounts of carbon sequestration. Finally, the results show that carbon prices
and bioenergy production affect the supply of forest products and carbon.
With few exceptions, the supply of sawtimber and bioenergy increase with
the increase of the carbon prices whereas that of pulpwood decreases with
the increase of carbon prices. Bioenergy supply showed a backward bending
supply curve as the supply decreased with an increase in bioenergy prices.
This result can be understood from the fact that in terms of the financial
benefit to the landowner, the timing of the flow of revenue stream from
the stand is an important factor as well as the size of the revenue stream.
Under the conditions represented in this model, as the price of bioenergy
increases it is beneficial for the landowner to decrease the rotation age to
harvest earlier even if it means a decrease amount of bioenergy harvested.
In addition, as mentioned previously, and increase in bioenergy price also
decreases sawtimber supply. This is an interesting result as it shows that
policy to induce higher bioenergy prices may not increase the amount of
bioenergy produced but may lead to concerns about bioenergy competing
with other timber products.
Finally, as expected, the supply of carbon increased with the increase
of carbon prices in both the scenarios. The results also indicate that carbon
payments under the Baseline 2 scenario lead to greater stand level carbon
supply (except at low carbon prices when bioenergy is $5 per metric ton).
This result is particularly true for higher carbon prices and can be understood
when considering how payments are made under the two baseline scenarios.
Since under Baseline 2 the landowner only gets paid for carbon after trees
reach a certain age (e.g., 50 yr), harvesting has a greater opportunity cost in
terms of forgoing carbon payments relative to the Baseline 1 scenario. Under
the Baseline 1 scenario, when the trees are harvested the landowner gets
paid for sequestered carbon as soon as the new stand is planted. Thus, from
a public policy perspective it may be preferable for payments to landowners
to be made only for additional carbon sequestered. Such a payment design
could actually induce landowners to sequester more carbon.
All of the results—bioenergy, pulpwood, and carbon supplies—are
based on only examining the intensive margin (i.e., assuming that market
changes do not influence the amount of land planted in forests). Future
studies could make a substantial contribution to these results by examining
the extensive margin by using a dynamic land use model. Also, future work
that investigates whether similar results would be obtained in other forest
types or regions would provide useful information regarding optimal policies

regarding wood-based bioenergy and carbon sequestration. Finally, expand-
ing the life-cycle assessment to include the emissions from transportation
and other harvesting/management regimes would be useful.
NOTES
1. All sawtimber was assumed to be of average quality as the growth and yield data from Gingrich
(1968) does not include information on the yields of different log grades.
2. Sawtimber, pulpwood, and bioenergy prices are stumpage prices reflecting the cost of harvesting
and transporting.
FUNDING
The authors would like to thank the University of Kentucky and the
United States Department of Agriculture (USDA) McIntire–Stennis program
for funding.
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Journal of Sustainable Forestry

ISSN: 1054-9811 (Print) 1540-756X (Online) Journal homepage: http://www.tandfonline.com/loi/wjsf20

Economic and Life-Cycle Analysis of Forest Carbon

Prativa Shrestha, G. Andrew Stainback, Puneet Dwivedi & John M. Lhotka

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Download by: [180.247.130.68] Date: 08 December 2015, At: 18:44

Economic and Life-Cycle Analysis of Forest

PRATIVA SHRESTHA1, G. ANDREW STAINBACK2,

This study investigates the combined impact of carbon and bioen-

Address correspondence to G. Andrew Stainback, Department of Forestry, University of

KEYWORDS climate change, additionality, greenhouse gas,

been a growing interest to promote the use of wood-based bioenergy in the

pulpwood could be substantially impacted. Finally, using Life-Cycle Analysis

treatments (e.g., thinning) within a rotation is infrequent. Therefore, pas-

Mixed hardwood forests in this region are usually naturally regenerated

for electricity production and sawtimber and pulpwood were assumed to

Growth and Yield Model

TABLE 1 Parameters Estimated for Predicting Sawtimber and Pulpwood Yield

Sawtimber Pulpwood Energywood

V (t) = at b e−ct , (1)

Amount of Carbon Sequestered: C(t)

Amount of Carbon Emissions Associated With Harvesting Operation

harvesting was determined using Equation 2:

Amount of Carbon Released From the Decay of Each Wood Product

C (n) = Nn − N(n−1) , (3)

Amount of Carbon Emission Saved From Substituting Bioenergy for

EC = WC ∗ CV ∗ CE ∗ (100 − TRAN ) ∗ 1000/3.6, (5)

where WC is total availability of wood chips (metric tons), CV is the calorific

Net Timber Benefits

pvt (t) = PQ (t) e−rt , (7)

Optimal Rotation Age and Land Expectation Value

the benefits from forestry are assumed to be perpetual then, profitability of

pvc (t) + pvt (t)

Stand Level Supply of Forest Products

or bioenergy) at the optimal rotation age (t); Sc is the supply of carbon as

Association for Community Economic Development (MACED) sells carbon

this study were 0 and $5 per metric ton.

RESULTS AND DISCUSSION

Land Expectation Value

energywood price ($/mt) 0 5

Optimal Rotation Age

Optimal Rotation Age

Sawtimber, Pulpwood, and Energywood Supply

0 0 56 0.123 1.431 1.691

5 55 0.116 1.430 1.681

0 0 56 0.123 1.431 1.691

In both the scenarios, the bioenergy supply increases with respect to

Carbon supply (CO2 e metric ton/ha/year)

Energywood price CO2 e price

($/metric ton) ($/metric ton) Baseline 1 Baseline 2

0 0 66.98 (56) 66.98 (56)

15 71.33 (58) 82.05 (63)

scenarios are presented in Table 3. As expected, the carbon supply increased

DISCUSSION AND CONCLUSIONS

This study assessed the economic impact of a combination of net carbon

types or regions would provide useful information regarding optimal policies