Trouble reading this
report, click to
reverse
colour scheme
Attempts have been made in the past to incorporate a LUCF module in GTEM (Ahammad and Mi 2005). This modelling work was inspired by the elaborate database on land use at a global scale (Lee, Hertel, Sohngen and Ramankutty 2005). Although Ahammad and Mi’s work did not include the LUCF module as an integral part of GTEM, it represented a step forward in deriving a carbon accounting framework of the forest biomass that is informed by a CGE model. Like many CGE models with a single forestry sector, the module developed by Ahammad and Mi (2005) did not distinguish between plantation and native forests behaviourally and therefore could not identify deforestation of native vegetation as a major source of net greenhouse gas emissions. This limitation was later addressed by Golub et al. (2007) in which they allowed both heterogeneity of land, as was done in Ahammad and Mi (2005), as well as the possibility of accessing new land using the access cost function developed in Gouel and Hertel (2006). With the possibility of native forest being cleared for agricultural use thus modelled, Golub and Hertel (2008) further analysed whether global integration (that is, more trade) would have implications in regional land use patterns and possibly deforestation.
These developments in GTEM and GTAP models were substantial. However, they still relied on exogenous determination of rotation length of forests as did other partial equilibrium models such as the one used in Lawson et al. (2008). Therefore, land rents offered by the forestry sector while competing for land are not based on the optimised harvesting time. This problem was tackled in Sands and Man-Keun (2008), but their model of land use change and forestry has two issues. First, it still needs to be integrated with a properly specified CGE model to take the full feedback into account and, second, it is also a single country model.
Because forestry involves a longer time horizon, from plantation to harvesting, output harvested in any one year depends on the inputs applied over a number of previous years. This is not the case with a standard production sector model in recursively dynamic CGE models. Outputs produced by these sectors depend on the inputs applied in the same year. Therefore, consistent modelling of input demand, particularly competition for land between these asynchronous sectors, becomes extremely problematic. It is difficult to determine how current input demands of the forestry sector can be related with the future output they will contribute to.
Many CGE models, including GTEM and GTAP, are recursive. This means that agents in these models cannot make informed decisions in choices that depend on future values of variables, such as the price a plantation forest will fetch at its harvest time down the track and its output level at that time. Nevertheless, these models use relativities of current rental rates to allocate land between forestry and other land using activities. Therefore, the demand price of land offered by the forestry sector in these models has remained ill specified. As a result, the responses of the forestry activity to policies such as carbon credits on sequestration services are not fully and properly captured.
Moreover, many of these models, except Golub et al. (2007), Golub and Hertel (2008) and Hertel et al. (2008), have so far failed to distinguish between native forests and plantation forests, which in itself is a significant limitation. This is the case because clearing of native forest is a major source of additional agricultural land and the major cause of land use change based carbon dioxide emissions. Agricultural activities have been able to get the supply of land increased mainly by clearing native vegetation, not by reducing plantation forests.
Further, it is not uncommon to find that the approach followed in these models implies that increased harvesting of forests leads to increased demand for land (or natural resources) by the forestry sector. This is because demand for land from the forestry sector moves in proportion to timber output if prices are constant. Therefore, these models currently lack the ability to explain the extent of deforestation associated with increased timber harvests from native forests which is a worry from an environmental point of view. In addition to this, a clear accounting of land movements between the activities in physical units has not yet been instituted in these models.
In summary, significant progress has been made in modelling LUCF in CGE models but so far they have not been able to benefit from the insights forestry economics can offer as the modules suffer the limitations described above. In this stage of model development, some of these issues will be considered.