Modelling Forestry in Dynamic General Equilibrium

Adequately representing dynamic characteristics of land use change and forestry in computable general equilibrium models is challenging but essential if modellers are to provide credible assessments of policies that directly or indirectly influence these phenomena. In this paper, we show how a dynamic representation of planted or naturally regenerating forests may be integrated within a neoclassical, intertemporal general equilibrium model. We demonstrate the application of such a model to assess the impacts of including forestry within a hypothetical emissions trading scheme in the US, showing the resulting changes in land use and increases in the optimal rotation length.