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An investment model for commercial afforestation in Scotland

Macmillan, D.C., Chalmers, N.A.
Forestry 1992 v.65 no.2 pp. 171-188
afforestation, investment, forest economics, costs and returns, decision making, models, Scotland
The decision to invest in forestry is based on the assessment of a wide range of factors which include the location and amenity of the land and its wildlife and sporting potential. In the context of commercial forestry schemes however, forestry investment is underpinned by the likely financial return on capital invested. The approach described in this paper involves modelling the physical and economic characteristics of commercial forestry using a structured, systematic sample of over 3000 sites throughout Scotland. The objective is to identify the location and area of land with afforestation potential on the basis of returns to capital and Expectation Land Value. Output from the model suggests that commercial forestry is competitive with agriculture on approximately 1.3 million ha. Greatest potential exists on Land Capability for Agriculture classes 4, 5 and 6. The ability to assess the effect of changes in grant support, land and timber prices is an important feature of the model. It has the scope for application at regional and national levels, and particularly in the development and ex-post assessment of Indicative Forestry Strategies. Future work will concentrate on expanding the model to include more species and to improve the integration with computer-based Geographical Information Systems.