Tee, J. and Scarpa, R. and Marsh, D. and Guthrie, G. (2014) 'Forest valuation under the New Zealand Emissions Trading Scheme : a real options binomial tree with stochastic carbon and timber prices.', Land economics., 90 (1). pp. 44-60.
Abstract
Under the New Zealand Emissions Trading Scheme, forests planted on or after January 1, 1990, earn carbon credits. These credits have to be repaid when the forest is harvested. This paper analyses the effects of this scheme on the value of bareland on which radiata pine is to be planted. A real options method is developed and applied, assuming stochastic carbon and timber prices. We find that land value increases by about 73%, with the optimal rotation age substantially lengthened. The derived optimal harvest price thresholds are useful in deciding whether to harvest or to wait. (JEL Q23, Q28)
| Item Type: | Article |
|---|---|
| Full text: | Publisher-imposed embargo (AM) Accepted Manuscript File format - PDF (Copyright agreement prohibits open access to the full-text) (924Kb) |
| Status: | Peer-reviewed |
| Publisher Web site: | http://dx.doi.org/10.3368/le.90.1.44 |
| Date accepted: | 30 October 2012 |
| Date deposited: | 04 February 2016 |
| Date of first online publication: | February 2014 |
| Date first made open access: | No date available |
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