Optimal management of a forested catchment providing timber and carbon sequestration benefits: Climate change effects

Climate change is predicted to increase fire frequency and exacerbate water scarcity. The effect of these changes on the tree harvest decision in a forested catchment is investigated using stochastic dynamic programming, taking a stand of mountain ash (Eucalyptus regnans) in south-eastern Australia as a case study. We find that for a range of water and carbon sequestration values, it is optimal to cease harvesting in the absence of climate change. Whether it is optimal to do so under climate change will depend on the magnitude of the increases in fire frequency and water value. Potential increases in forest productivity also have a significant impact on the tree harvest decision.