Financial consequences of losing admixed tree species: A new approach to value increased financial risks by ungulate browsing

The influence of ungulates on the growth of young trees is amply discussed in forestry literature, particularly game browsing. Although there are a few appraisal methods that consider negative long-term influences on forest regeneration, hitherto no approach has addressed the financial consequences of lost admixed tree species. A homogenised species composition may lead to an increased financial risk of a forest. Based on financial return and risk ratios of mixed forests, this paper derives the financial compensation that would be necessary to make acceptable the increased risk of pure forest for forest owners. In this conceptual case study we consider a two-species mixed forest (Norway spruce, Picea abies [L.] Karst. and European beech, Fagus sylvatica L.) and calculate a tree species composition with maximum financial return per unit of risk. The financial indicators were generated via 1000 Monte Carlo scenarios, which consider natural hazard risks as well as timber price fluctuations. In case of an assumed reduction of European beech in different mixed forests by 30 percentage points, a compensation rate for ungulate browsing of between 16 and 23 € ha− 1 yr− 1 was estimated. Compared to the annual gains of mixed-forest between 89 and 113 € ha− 1 yr− 1 for admixtures of beech between 70 and 30 percent, we consider this amount substantial and conclude that the appraisal of game browsing effects should include the changed risk profiles between homogenised and mixed forests.

Research highlights
► High ungulate densities result in demixing and increase of financial risk.
► Hitherto, no approach has addressed the loss of admixed tree species.
► Derivations of optimal species mixtures are possible with methods of financial theory.
► Financial compensations can make acceptable the increased risks of pure stands.