May risk aversion lead to near-natural forestry? A simulation study

Summary Based on a literature review and on a new bioeconomic modelling approach, we investigated whether or not clearcutting and mono-species forests are the optimal silvicultural strategies under the presence of risk. The model reflects a risk-avoiding attitude and builds upon portfolio theory. The selected tree species and the timing of regeneration harvests constitute a total of 22 management alternatives. Optimal area fractions of the alternatives were combined at the stand level to find the maximum value at risk (VaR, annualized net present value exceeded with probability of 0.99). Relevant uncertainties were integrated via Monte Carlo Simulation and bootstrapping. The results showed a maximum VaR for a highly diversified treatment combining 42 per cent Norway spruce and 58 per cent European beech and included area fractions with regeneration harvests from age 50 to 120 years. This treatment avoids clearcutting and a mono-species forest composition. It uses tree species diversification and extends the regeneration period over 70 years to diversify hazard and price risks. The resulting scenario may be called ‘near-natural’ and emerges as the optimal choice, particularly for cautious, and thus risk-avoiding forest owners who do not have the opportunity to diversify risks by means of large-scale forest properties.