Whole-tree harvesting with stump removal versus stem-only harvesting in peatlands when water quality, biodiversity conservation and climate change mitigation matter

• Alternative forest harvesting regimes as also ecosystem services are accounted for.
• Whole-tree harvesting (WTH) and stem-only harvesting (SOH) are analyzed.
• Both a carbon neutral and a carbon non-neutral bioenergy policy are examined.
• For a carbon neutral bioenergy policy WTH has the highest social net benefits.
• For a carbon non-neutral bioenergy policy SOH has the highest social net benefits.

This article examines alternative forest harvesting regimes when ecosystem services in terms of water quality, biodiversity conservation and climate change mitigation are included in the analysis. The harvesting regimes are whole-tree harvesting with stump removal and conventional stem-only harvesting. The harvesting regimes are evaluated under two alternative climate policy contexts. The first alternative is a carbon neutral bioenergy policy, which assumes the carbon dioxide (CO2) neutrality of bioenergy and produces substitution benefits, as bioenergy replaces fossil fuels. The second alternative climate policy, a carbon non-neutral bioenergy policy, takes into account the fact that bioenergy causes carbon dioxide emissions, producing substitution costs, and that harvested woody biomass affects the ability of a forest to act as a carbon sink. We extend the traditional Faustmann (1849) rotation model to include nutrient load damage, biodiversity benefits, and climate impacts. The empirical analysis is based on Finnish data from a catchment experiment carried out on drained peatland forests. The empirical results show that under a carbon neutral bioenergy policy, whole-tree harvesting with stump removal produces the highest net social benefits. However, if a carbon non-neutral bioenergy policy is assumed, the net social benefits are greater under stem-only harvesting.