Graduate Thesis Or Dissertation

Empirical analyses of the impact of climate-induced natural disturbances on the economic value of U.S. forests

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  • Forests provide a wide range of timber and non-timber products along with providing a range of ecological services and support for biodiversity. Climate change poses various risks to forest health, as it can disrupt tree growth functions and trigger natural disturbances that increase tree mortality. In recent decades, altered disturbance patterns due to climate change have emerged as the major threat to U.S. forests. While economic theory suggests that the economic value of natural resources capitalizes changes in risks, there is a lack of evidence regarding how natural resource markets have responded to recent increases in climate-induced extreme events. This dissertation aims to fill the gap in the literature by investigating the relationship between climate-induced natural disturbances and market transaction prices of timberland in two major timber-producing regions in the U.S.: The Pacific states and the Southeastern U.S. Timberland markets have been underexplored in the literature due to data limitations. In Chapter 2, we propose a set of cleaning procedures along with a robust quality check to construct a large-scale parcel-level dataset for timberland transactions from 2004 to 2020, using the CoreLogic property database. We confirm the validity of CoreLogic data by showing that CoreLogic timberland transaction prices are reasonably aligned with timber rents estimated based on stumpage prices and tree growth equations. In Chapter 3, we examine the impacts of climate-induced extreme events such as large wildfires and drought stress on timberland prices across the three Pacific states of the western U.S. using the pooled cross-sectional parcel data on timberland transactions over a seventeen-year period. Results indicate that the observed increases in large wildfires and drought stress over the past two decades have already caused a roughly 10% decrease in the economic value of timberland, or about $11.2 billion in total losses across the three Pacific states, with half of these losses attributed to climate change. Importantly, most of the wildfire damage occurs from higher wildfire arrival rates on neighboring land that alter landowner risk expectations of future fires, rather than direct burnings on private timberland. Results provide evidence on the costs of climate-induced extreme events on natural capital that have already occurred. In Chapter 4, we investigate the impacts of climate-induced insect damage on timberland prices in the Southeastern U.S. using parcel-level data on timberland transactions and county-level data on insect damage. Results indicate that insect damage has a statistically significant but economically modest negative impact on timberland prices. This negative impact reflects an average effect that arises from two mechanisms – direct damage to the growing stock on timberland parcels and neighboring insect damage that shifts landowners’ risk expectations. Changes in average climate conditions by 2050 are projected to increase insect damage by over 1000 acres per county on average, which will lead to an approximately 1.42 % reduction in timberland values, or about $6.7 billion losses in total for the entire timberland population in the southeastern U.S.
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