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FIRMEC

Modelling the economics of forestry in Ireland

DOWNLOAD 2009 REPORT AS PDF (pdf 153Kb)  
DOWNLOAD 2009 REPORT IN IRISH (pdf 147Kb) 

PROJECT TEAM
Mary Ryan, Teagasc*
Cathal O'Donoghue, Teagasc
James Breen, Teagasc
Trevor Donnellan, Teagasc
Niall Farrelly, Teagasc
Kevin Hanrahan, Teagasc
Stephen Hynes, National University of Ireland, Galway

* Email: mary.ryan@teagasc.ie

COMPLETION DATE: January 2012

BACKGROUND
Forestry has an important and ever evolving role to play in the Irish economy. There is increasing emphasis on the role of forestry as an alternative energy source, its potential to sequester carbon and the provision of non-tradable goods such as forest recreation. However, despite the presence of generous forest premium payments and the decoupling of direct payments, the afforestation rate is in decline. Therefore given the importance of forestry, a better understanding of the relationship between policy and afforestation rates is required.

OBJECTIVES
This project assesses the actual and potential contribution of forestry to the national, regional and local economy, in terms of both tradable goods and services and in terms of public goods as well as building up the capacity to assess the impact of policy reforms on the sector and assess the impact of the forest sector on the wider economy.

  • To measure the impact on farm afforestation rates on the wider economy, competing sectors in terms of land use and the external policy environment.
  • To assess the impact of forestry on the regional and local economy.
  • To estimate the non-market (i.e. recreational, scenic etc.) value of forests.

    PROGRESS
    A paper on the Situation and Outlook for Forestry 09/10 was produced for the 2009 Teagasc Situation and Outlook Conference. This paper examined recent trends in planting and in thinning activity, as well as the state of timber markets and the consequences for afforestation rates.
    A paper was submitted to the Figures for Forests publication in Freiburg, Germany, on using economic models to forecast the participation of farmers in afforestation. A conference paper was delivered on afforestation by farmers at the Agricultural Economics Society International conference. An Excel financial model called Forestry Investment and Valuation Estimator (FIVE) was developed which has the capacity to analyse the financial returns in terms of Net Present Value (NPV) of different afforestation scenarios by species, area, productivity, grant scheme, and other inputs. It also has the capacity to assess the economics of thin versus non-thin scenarios.

    ACTIVITIES PLANNED
  • Inclusion of forestry in the farm-level greenhouse gas emissions model.
  • Derive aggregate visits and economic value estimates for potential farm forestry recreational sites.
  • Because of the unusual and atypical economic behaviour that occurred at the peak of the land and property bubble over the Celtic Tiger period, it has proven impossible to develop an economic model of forestry planting decisions based upon historical aggregate data. For this reason we are using a different strategy to undertake a choice experiment survey to quantify potential farm forest planters attitudes under alternative market conditions. Linking with the Forestry Development Unit's farm advisory software, we will develop a novel survey technique of presenting income streams associated with alternative market conditions and planting type, based upon individual farms' characteristics, rather than theoretical characteristics which would be required in the absence of this software. This survey will generate a dataset of farm characteristics and planting choices which can be interrogated using discrete choice econometric tools to model farmer preferences for afforestation.

     

    2008 report

    PROJECT TEAM
    Mary Ryan, Teagasc*
    James Breen, Teagasc
    John Cullinan, Teagasc
    Trevor Donnellan, Teagasc
    Niall Farrelly, Teagasc
    Dr Kevin Hanrahan, Teagasc
    Dr Stephen Hynes, Teagasc
    Dr Cathal O'Donoghue, Teagasc

    *Email: mary.ryan@teagasc.ie

    COMPLETION DATE: December 2010

    BACKGROUND
    Forestry has an important and ever evolving role to play in the Irish economy. There is an increasing emphasis on the role of forestry as an alternative energy source, its potential to sequester carbon and the provision of non-tradable goods such as forest recreation. However, despite the presence of generous forest premium payments and the decoupling of direct payments, the afforestation rate is in decline. Given the importance of forestry, a better understanding of the relationship between policy and afforestation rates is therefore required.

    OBJECTIVES
    This project assesses the actual and potential contribution of forestry to the national, regional and local economy, in terms of both tradable goods and services and in terms of public goods as well as building up the capacity to assess the impact of policy reforms on the sector and assess the impact of the forest sector on the wider economy:

  • To measure the impact on farm afforestation rates on the wider economy, competing sectors in terms of land use and the external policy environment;
  • To assess the impact of forestry on the regional and local economy;
  • To estimate the non-market (i.e. recreational, scenic etc.) value of forests.

    PROGRESS
    The task of updating the FAPRI-Ireland Forestry model has required substantial changes to the model structure due to changes in Central Statistics Office data. Previously the model was used to estimate afforestation rates for five regions; however, with the change to the NUTS III regions this requires the modelling of afforestation over seven regions. Current model specifications are being examined in order to improve the fit of the model.
    A paper on the Situation and Outlook for Forestry 08/09, produced for the 2008 Situation and Outlook Conference, examined the characteristics of those farmers who currently have or intend to plant forests, as well as the state of timber markets and the consequences for afforestation rates.
    A review of the literature has also been conducted where the patterns of use and economic demand for recreational activities in farm forests in Ireland have been examined. Particular emphasis in the review was given to examining previous valuation exercises that have been conducted in Ireland in relation to recreation in Irish forests.
    A multi-stage modelling approach for simultaneously estimating the total number and aggregate value of recreation-related visits to small-scale community forest sites in the west of Ireland was also carried out. Simulated spatially-referenced individuals from a spatial microsimulation model for Ireland (SMILE) who reside within the forests catchment area were identified using GIS techniques. A travel cost model was estimated for a sample of visitors to the sites and transferred across each individual in the simulated population, using SMILE and GIS-based network analysis to derive the appropriate values for the dependent variables. The results of the modelling approach were used to derive aggregate visits and consumer surplus estimates.

    ACTIVITIES PLANNED
  • Completion of the re-estimation of the FAPRI-Ireland Forestry Model.
  • Inclusion of forestry in the farm-level greenhouse gas emissions model.
  • Derive aggregate visits and economic value estimates for potential farm forestry recreational sites.

    OUTPUTS
    Breen, J.P., Donnellan, T., Hanrahan, K. and Ryan, M. 2008. Projecting future Irish farm afforestation levels. Paper presented at the Figures for Forests Workshop, Freiburg, Germany.
    Breen, J.P. and Ryan, M. 2008. Situation and outlook for forestry 2008/09. Paper presented at the Situation and Outlook 2008/09 Conference, Tullamore.
    Cullinan. J., Hynes, S. and O¿ Donoghue, C. 2008. Estimating catchment area population indicators for outdoor recreation sites in Ireland. Irish Geography 41: 279-294.
    Cullinan, J., Hynes, S. and O'Donoghue, C. 2008. Using spatial microsimulation to estimate aggregate consumer surplus values in travel cost modelling. Presented at the 16th annual meeting of the European Association of Environmental and Natural Resource Economists in Gothenburg, Sweden (25-28 June 2008).
    Cullinan, J., Hynes, S. and O'Donoghue, C. 2008. Aggregating consumer surplus values in travel cost modelling using spatial microsimulation and GIS techniques. Teagasc Working Paper No. 08wpre07.