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Effects of the Japanese carbon offset system on optimum rotation periods and forestry profits

Tohru Nakajima, Mitsuo Matsumoto, Keisuke Sakata, Satoshi Tatsuhara

Abstract


The aim of this study was to estimate the effects of the Japanese carbon offsetting system on the optimum forest rotation period in relation to carbon price, timber price and discount rate. The optimum rotation period required to maximize the present value of forestry profits was calculated using the actual forest area formally identified in the Japanese Verified Emissions Reduction (J-VER) system. For calculating the carbon sinks and harvested timber for J-VER accounting, the Local Yield table Construction System (LYCS) and a wood conversion algorithm were used, in which profits derived from carbon were calculated based on the total tree volume. The optimum rotation period and forestry profits were also calculated using a timber-based accounting method where profits derived from both carbon and harvesting timber were calculated according to the timber volume. By comparing these two methodologies we found that the optimum rotation length increases with increasing carbon prices, but decreases with increasing timber prices. Carbon prices had a greater effect on increasing rotation age for the J-VER accounting system. In addition, the difference between the present carbon price and other proposed carbon prices shows that the advantages and disadvantages derived from the carbon market for forestry depend on current stand age; this difference is greater under the J-VER system than the timber-based accounting system. It is important to include the allocation of harvesting area and stand age distribution in the management units for calculating carbon offset credits when trying to optimize medium- to long-term forest management and to avoid reductions in forestry profits under the existing J-VER system.

Keywords


carbon credit, forestry profits, J-VER system, rotation period.

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