Wet season resting - economic insights from scenario modelling

Pasture degradation, particularly that attributable to overgrazing, is a significant problem across the northern Australian rangelands. Although grazing studies have identified the scope for wet season resting strategies to be used to rehabilitate degraded pastures, the economic outcome of these strategies has not been extensively demonstrated. An exploratory study of the prospective economic value of wet season resting is presented using an economic simulation model of a 28000 ha beef enterprise located in the Charters Towers region of north-eastern Australia to explore seven hypothetical scenarios centred on the projected performance of a wet season resting strategy. A series of 20-year simulations for a range of pasture recovery profiles, stocking capacity, animal productivity responses, beef prices and agistment options are compared with a baseline scenario of taking no action. Estimates of the net present value of the 20-year difference in total enterprise gross margins between the various resting options and the 'do nothing' option identify that wet season resting can offer a positive economic return for the range of scenarios examined, although this is contingent on the assumptions that are made concerning the trajectories of change in carrying capacity and animal productivity. Some implications for management and policy making to support the practical implementation of wet season resting strategies are discussed.

Economic case study of ABCD cane management practices in the Burdekin River Irrigation Area (BRIA) region

A case study was undertaken to determine the economic impact of a change in management class as detailed in the A, B, C and D management class framework. This document focuses on the implications of changing from D to C, C to B and B to A class management in the Burdekin River irrigation area (BRIA) and if the change is worthwhile from an economic perspective. This report provides a guide to the economic impact that may be expected when undertaking a particular change in farming practices and will ultimately lead to more informed decisions being made by key industry stakeholders. It is recognised that these management classes have certain limitations and in many cases the grouping of practices may not be reflective of the real situation. The economic case study is based on the A, B, C and D management class framework for water quality improvement developed in 2007/2008 for the Burdekin natural resource management region. The framework for the Burdekin is currently being updated to clarify some issues and incorporate new knowledge since the earlier version of the framework. However, this updated version is not yet complete and so the Paddock to Reef project has used the most current available version of the framework for the modelling and economics. As part of the project specification, sugarcane crop production data for the BRIA was provided by the APSIM model. The information obtained from the APSIM crop modelling programme included sugarcane yields and legume grain yield (legume grain yield only applies to A class management practice). Because of the complexity involved in the economic calculations, a combination of the FEAT, PiRisk and a custom made spreadsheet was used for the economic analysis. Figures calculated in the FEAT program were transferred to the custom made spreadsheet to develop a discounted cash flow analysis. The marginal cash flow differences for each farming system were simulated over a 5-year and 10-year planning horizon to determine the net present value of changing across different management practices. PiRisk was used to test uncertain parameters in the economic analysis and the potential risk associated with a change in value.

Economic case study of ABCD cane management practices in the Burdekin Delta region.

A case study was undertaken to determine the economic impact of a change in management class as detailed in the A, B, C and D management class framework. This document focuses on the implications of changing from D to C, C to B and B to A class management in the Burdekin Delta region and if the change is worthwhile from an economic perspective. This report provides a guide to the economic impact that may be expected when undertaking a particular change in farming practices and will ultimately lead to more informed decisions being made by key industry stakeholders. It is recognised that these management classes have certain limitations and in many cases the grouping of practices may not be reflective of the real situation. The economic case study is based on the A, B, C and D management class framework for water quality improvement developed in 2007/2008 for the Burdekin natural resource management region. The framework for the Burdekin is currently being updated to clarify some issues and incorporate new knowledge since the earlier version of the framework. However, this updated version is not yet complete and so the Paddock to Reef project has used the most current available version of the framework for the modelling and economics. As part of the project specification, sugarcane crop production data for the Burdekin Delta region was provided by the APSIM model. The information obtained from the APSIM crop modelling programme included sugarcane yields and legume grain yield (legume grain yield only applies to A class management practice). Because of the complexity involved in the economic calculations, a combination of the FEAT, PiRisk and a custom made spreadsheet was used for the economic analysis. Figures calculated in the FEAT program were transferred to the custom made spreadsheet to develop a discounted cash flow analysis. The marginal cash flow differences for each farming system were simulated over a 5-year and 10-year planning horizon to determine the Net Present Value of changing across different management practices. PiRisk was used to test uncertain parameters in the economic analysis and the potential risk associated with a change in value.

Economic case study of ABCD cane management practices in the Tully region

A case study was undertaken to determine the economic impact of a change in management class as detailed in the A, B, C and D management class framework. This document focuses on the implications of changing from D to C, C to B and B to A class management in the Tully region and if the change is worthwhile from an economic perspective. This report provides a guide to the economic impact that may be expected when undertaking a particular change in farming practices and will ultimately lead to more informed decisions being made by key industry stakeholders. It is recognised that these management classes have certain limitations and in many cases the grouping of practices may not be reflective of the real situation. The economic case study is based on the A, B, C and D management class framework for water quality improvement developed in 2007/2008 by the wet tropics natural resource management region. The framework for wet tropics is currently being updated to clarify some issues and incorporate new knowledge since the earlier version of the framework. However, this updated version is not yet complete and so the Paddock to Reef project has used the most current available version of the framework for the modelling and economics. As part of the project specification, sugarcane crop production data for the Tully region was provided by the APSIM model. Because of the complexity involved in the economic calculations, a combination of the FEAT, PiRisk and a custom made spreadsheet was used for the economic analysis. Figures calculated in the FEAT program were transferred to the custom made spreadsheet to develop a discounted cash flow analysis. The marginal cash flow differences for each farming system were simulated over a 5-year and 10-year planning horizon to determine the Net Present Value of changing across different management practices. PiRisk was used to test uncertain parameters in the economic analysis and the potential risk associated with a change in value.

Economic Analysis of Sugarcane Farming Systems for Water Quality Improvement in the Great Barrier Reef Catchments.

In this report we analyse the private financial-economic impacts of transitioning to improved sugarcane management in the National Resource Management regions of the Wet Tropics, Burdekin Dry Tropics and Mackay Whitsundays. In order to do so, we: 1) compare farm GMs; 2) present information on capital investment associated with the transition; 3) perform a net present value analysis of the investments and; 4) undertake a risk analysis for cane and legume yields and prices. It must be noted that transaction costs are not captured within this project.

Kohti hyvää suometsien hoitoa : harvennusten ja kunnostusojitusten vaikutus ojitusaluemänniköiden puuntuotokseen ja metsänkasvatuksen taloustulokseen

This thesis examines the impacts of silvicultural activities on productivity and financial returns of Scots pine (Pinus sylvestris L.) stands on drained peatlands in Finland. The effects of ditch network maintenance operations (DNM) and thinnings, with different timings and intensities, were studied. Based on stand development simulations, the best regimes for different types of stands according to site type, climatic area, and stand silvicultural status were defined from the viewpoint of both wood production and financial profitability. Certain aspects affecting the management outcomes, such as the timing of the first thinning, were examined using data from thinning experiments. Long-term predictions of the impacts of different management regimes were carried out by simulating the development of well-representative model-stands which were composed from appropriate inventory data sets. The MOTTI stand simulator used to perform the simulations enables the predictions by utilizing specific models for drained peatland stands. In addition to natural stand dynamics, these models describe the effects of silvicultural treatments on the development of a given stand. The mean annual increment of merchantable wood (MAImerch) was used as the measure of wood productivity, and the financial feasibility of the regimes was compared using net present value (NPV) analysis. Silvicultural treatments, when applied to appropriately match stand condition, increased both the productivity and financial returns of stand management. Applying DNM resulted in a small increase in MAImerch. When thinning was introduced along with DNM, their combined effect on wood productivity was considerable. According to current operational practices, DNM is generally combined with thinning. In some cases, e.g., in sites of low productivity, the need for DNM may become apparent prior to the thinning stage. As for profitability, thinnings proved to be crucial. The regimes with heavy and late thinnings were generally more profitable than those with normal thinnings. Further, early thinning (relative to stand volume) lacked appeal when seeking a financially profitable removal from the first thinning. In young stands with an initially poor silvicultural condition, however, applying even a low-yielding first thinning considerably increased the NPV when compared to a regime with no thinning at all. Generally, the regimes resulting in the best profitability included heavier thinnings and fewer DNM and thinning treatments than did the regimes resulting in the best yield results. This study demonstrates considerable potential for profitable wood production-oriented management in pine stands on drained peatlands despite their challenging circumstances and long rotations. The results can be used for defining new and more site-specific silvicultural guidelines for various types of drained, pine-dominated peatland stands within the entire range of boreal conditions.

Uncertainty in forest simulators and forest planning systems

The forest simulator is a computerized model for predicting forest growth and future development as well as effects of forest harvests and treatments. The forest planning system is a decision support tool, usually including a forest simulator and an optimisation model, for finding the optimal forest management actions. The information produced by forest simulators and forest planning systems is used for various analytical purposes and in support of decision making. However, the quality and reliability of this information can often be questioned. Natural variation in forest growth and estimation errors in forest inventory, among other things, cause uncertainty in predictions of forest growth and development. This uncertainty stemming from different sources has various undesirable effects. In many cases outcomes of decisions based on uncertain information are something else than desired. The objective of this thesis was to study various sources of uncertainty and their effects in forest simulators and forest planning systems. The study focused on three notable sources of uncertainty: errors in forest growth predictions, errors in forest inventory data, and stochastic fluctuation of timber assortment prices. Effects of uncertainty were studied using two types of forest growth models, individual tree-level models and stand-level models, and with various error simulation methods. New method for simulating more realistic forest inventory errors was introduced and tested. Also, three notable sources of uncertainty were combined and their joint effects on stand-level net present value estimates were simulated. According to the results, the various sources of uncertainty can have distinct effects in different forest growth simulators. The new forest inventory error simulation method proved to produce more realistic errors. The analysis on the joint effects of various sources of uncertainty provided interesting knowledge about uncertainty in forest simulators.

Merestä Metsäksi - yhteistoimintaverkostohankkeen sosiaaliset ja taloudelliset vaikutukset

The object of this study was to find out which factors made landowners interested in From Sea to Forest co-operation network. Co-operation networks protect biodiversity across boundaries and among groups of landowners with different kind of protection contracts. The social effects of From Sea to Forest - project are studied by analyzing the experience of co-operation and trust. Furthermore the possibility to influence decision making when choosing the pilot areas and doing the contracts was surveyed. Economical effects are estimated for those landowners, who signed a protection contract for ten years. The study is part of The Finnish Forest Research Institute s Ecological considerations in landscape-level collaborative planning of private forestry project. The material of the study comprises 13 interviews done in January 2006; seven interviewed were landowners and six forest professionals. The interviews were transcripted and analyzed with Atlas.ti programme. The economical effects were estimated with MOTTI forest simulation programme. From Sea to Forest project interested the landowners for similar reasons: the voluntariness of participation, compensation, fixed-term contracts and the possibility to protect forests so that the proprietary right remains. It was possible to form four different groups of interviewed landowners according to trust: networkers , opportunists , carefuls and selfemployed . Only in the group of opportunists the project created so much trust that a significant increase of interest to participate in the project was noticed. In all the other groups the project didn t create remarkable trust, so trust didn t have an effect on landowners decisions to participate. Other factors, like compensation and voluntariness were decisive for their interest to participate. From Sea to Forest project wasn t a network based on landowners co-operation, the communication was directly with the project worker. The effects on landowners income by signing a ten year ´Natural value trading´ -contract was analyzed by comparing the protection income with predicted forestry income in case that the protection contract wouldn t have been agreed on. For two landowners there was no suggested forestry work within ten years, so their protection income might be an additional income, if they decided to log their forests later. For three landowners delayed thinning of the sapling stand would cause income losses in the future, if they decided to move to active forestry after ten years of protection. For eight landowners the effect of protection is positive to income if they moved to active forestry after the ten years protection period. This occurred, because the tree stand is now mature for final felling on behalf of its age, but ten more years of growth increase the net present value. Longer term protection might diminish the net present value. The protection was profitable because hectare specific forestry income grew compared to forestry cutting plan income.

Energiapuuharvennus osana metsänkasvatusta ja ilmastonmuutoksen hillitsemistä

The aim of this study was to compare the differences between forest management incorporating energy wood thinning and forest management based on silvicultural recommendations (baseline). Energy wood thinning was substituted for young stand thinning and the first commercial thinning of industrial wood. The study was based on the forest stand data from Southern Finland, which were simulated by the MOTTI-simulator. The main interest was to find out the climatic benefits resulting from carbon sequestration and energy substitution. The value of energy wood was set to substitute it for coal as an alternative energy fuel (emission trade). Other political instruments (Kemera subsidies) were also analysed. The largest carbon dioxide emission reductions were achieved as a combination of carbon sequestration and energy substitution (on average, a 26-90 % increase in discounted present value in the beginning of rotation) compared to the baseline. Energy substitution increased emission reductions more effectively than carbon sequestration, when maintaining dense young stands. According to the study, energy wood thinning as a part of forest management was more profitable than the baseline when the value of carbon dioxide averaged more than 15 €/CO2 and other political subsidies were unchanged. Alternatively, the price of energy wood should on average exceed 21 €/m3 on the roadside in order to be profitable in the absence of political instruments. The most cost-efficient employment of energy wood thinning occured when the dominant height was 12 meters, when energy substitution was taken into account. According to alternative forest management, thinning of sapling stands could be done earlier or less intensely than thinning based on silvicultural recommendations and the present criteria of subsidies. Consequently, the first commercial thinning could be profitable to carry out either as harvesting of industrial wood or energy wood, or as integrated harvesting depending on the costs of the harvesting methods available and the price level of small-size industrial wood compared to energy wood.

A flexible tool for integrated planning of active distribution networks

This paper presents a flexible and integrated planning tool for active distribution network to maximise the benefits of having high level s of renewables, customer engagement, and new technology implementations. The tool has two main processing parts: “optimisation” and “forecast”. The “optimization” part is an automated and integrated planning framework to optimize the net present value (NPV) of investment strategy for electric distribution network augmentation over large areas and long planning horizons (e.g. 5 to 20 years) based on a modified particle swarm optimization (MPSO). The “forecast” is a flexible agent-based framework to produce load duration curves (LDCs) of load forecasts for different levels of customer engagement, energy storage controls, and electric vehicles (EVs). In addition, “forecast” connects the existing databases of utility to the proposed tool as well as outputs the load profiles and network plan in Google Earth. This integrated tool enables different divisions within a utility to analyze their programs and options in a single platform using comprehensive information.

Optimal Risk Adoption: A Real Options Approach

This study develops a real options approach for analyzing the optimal risk adoption policy in an environment where the adoption means a switch from one stochastic flow representation into another. We establish that increased volatility needs not decelerate investment, as predicted by the standard literature on real options, once the underlying volatility of the state is made endogenous. We prove that for a decision maker with a convex (concave) objective function, increased post-adoption volatility increases (decreases) the expected cumulative present value of the post-adoption profit flow, which consequently decreases (increases) the option value of waiting and, therefore, accelerates (decelerates) current investment.

Optimal management of conflicting species: Grey seal (Halichoerus grypus) and Atlantic salmon (Salmo salar) in the Baltic Sea

The objective of this thesis is to examine the economic effects in the conflict between grey seal population and the salmon fishery in the Baltic Sea. We will formulate a bioeconomic model which provides new insights on the optimal management of Atlantic salmon with respect to the effects brought about by the grey seal population. As the catch losses caused by seals have an effect on salmon fishery in Baltic, we will study how seal population affects the present value of the salmon fishery. The study considers the Finnish coastal trap net fishery. The bioeconomic model considers a scenario of sole salmon fishery and a scenario of salmon fishery affected by the grey seal population. On the basis of these scenarios, a seal compensation scheme is introduced. We can observe a significant economic seal-induced effect on the salmon fishery. The results suggest that the present seal compensation scheme emploid by the Finnish government is suboptimal. This thesis is part of the TARMO –project, in which the conflict between grey seal population and salmon fishery is studied using the methods of environmental economics.

Hydropower Project Design Incorporating Submergence Costs

Submergence of land is a major impact of large hydropower projects. Such projects are often also dogged by siltation, delays in construction and heavy debt burdens-factors that are not considered in the project planning exercise. A simple constrained optimization model for the benefit~ost analysis of large hydropower projects that considers these features is proposed. The model is then applied to two sites in India. Using the potential productivity of an energy plantation on the submergible land is suggested as a reasonable approach to estimating the opportunity cost of submergence. Optimum project dimensions are calculated for various scenarios. Results indicate that the inclusion of submergence cost may lead to a substanual reduction in net present value and hence in project viability. Parameters such as project lifespan, con$truction time, discount rate and external debt burden are also of significance. The designs proposed by the planners are found to be uneconomic, whIle even the optimal design may not be viable for more typical scenarios. The concept of energy opportunity cost is useful for preliminary screening; some projects may require more detailed calculations. The optimization approach helps identify significant trade-offs between energy generation and land availability.

Optimal multispecies fishery management in the Baltic Sea: A bioeconomic analysis

The aim of the thesis is to assess the fishery of Baltic cod, herring and sprat by simulation over 50 years time period. We form a bioeconomic multispecies model for the species. We include species interactions into the model because especially cod and sprat stocks have significant effects on each other. We model the development of population dynamics, catches and profits of the fishery with current fishing mortalities, as well as with the optimal profit maximizing fishing mortalities. Thus, we see how the fishery would develop with current mortalities, and how the fishery should be developed in order to yield maximal profits. Especially cod stock has been quite low recently and by optimizing the fishing mortality it could get recovered. In addition, we assess what would happen to the fisheries of the species if more favourable environmental conditions for cod recruitment dominate in the Baltic Sea. The results may yield new information for the fisheries management. According to the results the fishery of Baltic cod, herring and sprat are not at the most profitable level. The fishing mortalities of each species should be lower in order to maximize the profits. By fishing mortality optimizing the net present value would be almost three times higher in the simulation period. The lower fishing mortality of cod would result in a cod stock recovery. If the environmental conditions in the Baltic Sea improved, cod stock would recover even without a decrease in the fishing mortality. Then the increased cod stock would restrict herring and sprat stock remarkably, and harvesting of these species would not be as profitable anymore.

Pulse vs. Optimal Stationary Fishing: The Northern Stock of Hake

Pulse fishing may be a global optimal strategy in multicohort fisheries. In this article we compare the pulse fishing solutions obtained by using global numerical methods with the analytical stationary optimal solution. This allows us to quantify the potential benefits associated with the use of periodic fishing in the Northern Stock of hake. Results show that: first, management plans based exclusively on traditional reference targets as Fmsy may drive fishery economic results far from the optimal; second, global optimal solutions would imply, in a cyclical manner, the closure of the fishery for some periods and third, second best stationary policies with stable employment only reduce optimal present value of discounted profit in a 2%.