Impact of global warming on forestry investments

Abstract

Up until recently afforestation projects had been looked at from the viewpoint of timber production. Efforts to combat climate change have added a new dimension to investment in forestry which has been encouraged by the Kyoto, Marrakech and Cancun Deals. As trees grow overtime, they capture CO2 from the atmosphere which moderates the problem of global warming. The article 3.3 of the Kyoto Protocol states that “the net changes in greenhouse gas emissions by source and removal by sinks resulting from human induced land use change and forestry activities limited to afforestation, reforestation and deforestation activities since 1990 measured as verifiable changes in carbon stock in early commitment period, shall be used to meet commitments in the Protocol.” In this respect Kyoto granted carbon credits to newly created forests. Such credits can now be used directly by firms with greenhouse gas emissions or could be traded into a future emissions scheme at prevailing prices. The rules for the implementation of the Kyoto Protocol were agreed at the Marrakech Conference in 2001 which placed limits on the amount of credits which can be obtained from forest management. Trees because of their large biomass content make an important contribution to the global carbon cycle. Unfortunately, as more and more greenhouse gasses are released into the atmosphere every year deforestation is continuing unabated especially in the tropics. It has been estimated that about a quarter of the global warming problem stems from forest destruction as deforestation adds about 1 gigatons of CO2 to the atmosphere per annum. That is, if we slowed down forest destruction and increased our efforts in afforestation this would give us precious time to construct more comprehensive policies in dealing with the climate problem. This paper estimates how long planted trees with carbon sequestration will stay on the ground as compared with wood only situation. In order to find out this we use a British data on Sitka spruce which is the most favoured species planted extensively throughout the United Kingdom and the Republic of Ireland.