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each year in Massachusetts (and in our Low-Price Biomass scenario) are assumed to be part of this land area. In this new scenario, higher biomass stumpage prices encourage more of the landowners in the operable land base to harvest timber in any given year. How many more acres would be harvested annually? Or, put another way, what would be a reasonable time frame over which to enter these stands and initiate forest management? We have assumed that 25 years would be a reasonable period over which bring these stands into production. The most important factor is the age structure of these stands. As shown earlier (Exhibit 3-9), the majority of the timber on private lands in Massachusetts has reached the age where it is appropriate to begin thinning based on silvicultural and economic considerations. Another important factor is that the harvest is “scheduled” to accommodate the life expectancy of electric power and other bioenergy plants—the facilities will need some assurance that wood supplies will be adequate on an ongoing basis in order to attract capital for large-scale investments. If we assume that 1,071,000 acres are available among the private land base in Massachusetts, and that partial harvests will occur on these lands over a 25-year period, then 42,800 acres would be potentially available for harvest each year. 3.2.4.3 The Supply Curve for Landowner’s Who Harvest Timber Our analysis so far has attempted to determine the maximum operable land base, which we have defined as the land that would be harvested at much higher prices. In order to provide more perspective on how much of this land might be accessed, we need to incorporate the assumptions of our High-Price Biomass scenario (biomass stumpage prices averaging $20 per green ton). How do these owners value their nontimber amenities and at what prices would they be willing to become active players in the timber market? Would these price levels be sufficiently compelling to bring all of these lands into production? The prices required to increase harvests significantly on private lands in Massachusetts are outside the range of recent historical experience. This is obvious from the remarkable stability in harvest levels that we have seen in Massachusetts over the past two decades. In order to assess whether this harvest stability is simply the result of limited price variation or the fact that landowners are insensitive to price swings, we have examined the relationship between timber prices (a weighted index of real red oak and white pine sawtimber stumpage prices) and harvest volumes (sawtimber harvests according to FCPs). From 1994 to 2005, observations on prices and volumes are tightly clustered and somewhat random: the average absolute deviation from the mean is only 5% for prices and 6% for volumes. However, a much different story emerges over the last few years. From the average of 2003−2005 to 2009, planned sawtimber “harvests” fell about 30%, while real prices dropped 60%. This would suggest a price elasticity of timber supply of about 0.5, a result that is consistent with the conventional wisdom that short-run timber supply is inelastic. Of course, this calculation is merely suggestive of ownership behavior because of the quality of the data and the limited sample size.41 Furthermore, there is no possibility to consider asymmetric behavior and to evaluate whether landowners would respond in a similar fashion if prices rose sharply. While this result is interesting, one must also be cautious in extrapolating the conclusions much beyond the historical range: in this scenario, we are considering prices and poten- tial landowner income that is far above historical levels. Over the 2000−2006 period, an average harvest on private lands generated about $400 per acre.42 If we assume that 20 tons of biomass are harvested on an acre with stumpage prices of $1 per green ton, then per-acre income would rise by $20, or by only about 5%. However, if biomass prices jump to $20 per green ton, landowners could now earn an additional $400 per acre, thus doubling their income on a per-acre basis. As biomass stumpage prices increase, we would expect that many of the owners in the operable land base would move to take advantage of the opportunity to earn more income. However, landowners possess a complex set of objectives and it is difficult to say how high prices would need to rise to induce all landowners in the operable land base to harvest biomass. It seems likely that the response would be mixed at $20 per green ton: the financial incentives would likely be too compelling for many to ignore; on the other hand, they are probably not adequate to attract many landowners who place high value on the nontimber benefits of owning forests and are not focused on timber revenue. A final consideration in making a realistic assessment of the response in biomass harvests to higher prices, particularly in the near term, is the limitations of the labor and logging infrastructure. These would need to expand dramatically to achieve much higher harvest levels and this is another development that would be at odds with recent trends. In assessing the ramifications of this from the perspective of biomass supply, the concern is that harvesting costs may need to rise sharply to attract investment in this sector: this could mean reduced stumpage prices that would mitigate the supply response, or an increase in delivered wood prices that would choke off demand. We would anticipate that harvesting and transport costs would subsequently retreat with increasing competition and new invest- ment in harvesting machinery and equipment. 3.2.4.4 AForecastofForestBiomassSupply with Higher Biomass Stumpage Prices This outlook assumes that biomass stumpage prices rise to $20 per green ton as a result of higher demand from bioenergy plants. A 41 We should underscore this point by recalling that the FCP data report only planned harvests, not actual harvest volumes. 42 We calculated this value by assuming a harvest of 2 MBF and using a weighted average of median red oak and white pine stumpage prices for western Massachusetts from 2000−2006 (University of Massachusetts Amherst, 2008). BIOMASS SUSTAINABILITY AND CARBON POLICY STUDY MANOMET CENTER FOR CONSERVATION SCIENCES 48 NATURAL CAPITAL INITIATIVEPDF Image | NATURAL CAPITAL INITIATIVE AT MANOMET
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