The private cost and timber market implications of increasing strict forest conservation in Finland

In this paper the private costs of strict forest conservation are studied using Finnish data. First, the conservation-induced changes in the net present value of forest land are estimated together with the consequent compensation needs. Second, a dynamic reduced-form econometric model is estimated to derive the dynamic impacts of forest protection on the Finnish timber markets and forest sector. The estimations show that a conservation program that sets aside up to 3% (an additional 270 000 ha) of the total productive forest land area in southern Finland could result in up to 1 milliard euros in compensation to private landowners. The results of the dynamic analysis of the forest sector indicate that conservation has a price-increasing and quantity-decreasing effect on the timber markets. However, the raw material supply effects on the forest industry's output and raw timber imports are less than expected.