Application of real options theory to forestry investment analysis

This paper demonstrates the utility of the real options approach to forestry investment analysis. The main objectives are to discuss the real option theory and show how it can be adopted to model uncertainty and managerial flexibility in forest management and investment. Secondly, we show how to calculate the option values of selected options that may be available to managers of forest industry firms. The paper provides an empirical application, which compares a forestry investment using the static Faustmann model and the real options approach. Four management options are used for the real options approach: an option to delay reforestation, an option to expand the size of the wood processing plant, an option to abandon the processing plant if timber prices fall below a certain level or due to corporate take-over, and multiple options that evaluated all three options together. All options were evaluated using the binomial option-pricing model, where timber values are assumed to follow a multiplicative binomial process. The results show that the Faustmann analysis rejected the investments as unprofitable, while the option analysis showed that all three options were highly valuable if exercised. When real options are considered, the traditional Faustmann model for assessing the profitability of a forestry investment may fail to provide an adequate decision-making framework because it does not properly value management's ability to adjust to shocks in the economy, as well as risks and uncertainty.     

不同利用方式红壤反硝化势和气态产物排放特征

采用厌氧培养-乙炔抑制法测定了4种不同利用方式红壤的反硝化势和气态产物N₂O和N₂的排放速率。结果表明，不同利用方式红壤反硝化势和N₂O和N₂的排放速率差异明显，土壤反硝化势强弱顺序依次为：竹林>茶园>林地>旱地。反硝化势与土壤有机碳(P<0.05)、厌氧培养期间土壤CO₂累积排放量(P<0.01)、nirS基因丰度( P<0.05)和nirK基因丰度(P<0.05) 呈显著正相关关系。逐步回归分析结果表明，CO₂累积排放量表征的易矿化碳是造成不同利用方式红壤反硝化势差异的主要原因，可以解释反硝化势变化的66%(P<0.01)。不同利用方式红壤N₂O和N₂排放速率差异明显，旱地红壤N₂O和N₂排放速率均最低，表明土壤pH的提升并没有增加旱地红壤的反硝化损失风险和N₂O排放速率。土壤易矿化有机碳含量也是影响不同利用方式红壤N₂O和N₂排放速率的主要因素。反硝化功能基因nirS、nirK和nosZ的丰度均与CO₂累积排放量呈显著正相关关系，进一步支持了土壤易矿化有机碳含量是影响不同利用方式红壤反硝化势和气态产物排放的主要因子。土壤pH是影响不同利用方式红壤反硝化气态产物N₂/N₂O的主要因素，但是pH影响红壤N₂/N₂O的微生物机制仍需要进一步研究。     

Inter-regional comparisons of production technology in Canada's timber harvesting industries

Enhanced productivity in the logging industry is one of the key factors that determine the competitiveness of the forest products sector. Policy measures to improve efficiency must therefore start at the timber harvesting stage. This study analyzed and compared the production technologies in the timber harvesting industries of British Columbia (B.C.), Ontario, and Quebec, which are Canada's largest timber producing provinces. The study used annual data of log output and four inputs: labour, capital, energy, and materials from 1961 to 1999. Six models, encompassing different restrictions on the long-run translog cost function, were applied to each industry to determine the best technology for that industry. The cost function that best described each industry's technology was used to estimate own- and cross-price elasticities, input substitution elasticities, scale effects, technological change and bias, and total factor productivity. The production technologies of B.C. and Quebec were best described by homothetic, linearly homogeneous functions, while that of Ontario was found to be non-homothetic. Based on the Morishima elasticities of substitution, the results in general indicated inelastic substitution among all the four factor inputs. As a result the industries had limited options to make input adjustments with respect to changes in relative input prices; and hence required output levels were maintained at higher production costs. All three provincial industries exhibited biased technological changes, saving on capital and labour, and intensively using energy and materials. Labour and capital therefore recorded higher productivity than energy and materials over all provinces; consequently, efforts at improving the efficiency of the logging industries should focus on increasing the productivity of the latter inputs. Scale effects ranged from 2.17 in B.C. to 1.44 in Quebec implying that the timber harvesting industries appeared to have had the greatest potential for cost reduction through output expansion. In a competitive market structure, the strategic policy implication of these scale effects is that low-cost producers force high-cost industries out, leading to industrial concentration. The low levels of technological change in the timber harvesting industries observed in this study may reflect these industrial concentration problems. Policies that reduce the rental cost of capital, such an increase in investment tax credits and cuts in the corporate income tax rates have the potential to increase productivity and hence improve on the timber industry's competitive position.