A link between the housing market and climate change

I usually ignore the business-y stuff in the WSJ Morning Report, Evening Wrap, etc. But this one caught my eye:

Forest-products company Weyerhaeuser swung back to profitability during the first quarter following a year-earlier loss, boosted by a gain from the sale of its fine-paper business. But revenue fell 13%, and sales at its wood products unit tumbled by 29% as the downturn in housing and construction has damped both demand and prices. Underlining Weyerhaeuser's housing headaches, sales in its real-estate business plunged by an identical 29%. Timberlands sales slid 11%. The company also said that its board is considering strategic alternatives for its containerboard, packaging and recycling business.

According to my simple Faustmann model (or is it Hartmann?), a fall in prices leads to a longer rotation ... and more carbon sequestration (I think ... the stumpage value is somewhere in the marginal benefit and marginal cost curve and both shift, but I'm thinking the marginal benefit of cutting shifts more ... corrections welcome)!

See, all we had to do was wait and the USA's economic policies would kick it with a solution for climate change. Just call me doubting Thomas ...

Comments

[Dano]

Lower prices increase rotations, but at what scale are you talking sequestration if they are eventually coming down and not allowed to reach climax stage. But remember you're still sequestering quite a bit of carbon in 2x4s.

You're losing it, though in operations through the soil disturbance, emissions from equipment, milling and transport, and exacerbating the effects with clearcuts in the PacNW. So the drop in housing market lowers emissions and in the near-term scale sequesters C.

Plum Creek and Wayerhauser types find their marginal costs these days after the third rotation too low, hence their turning their timberlands into exurbs in Western WA, ID and OR.

Best,

D

[Dano]

marginal costs too high...

D

[Steve]

I think the generally agreed upon timespan for carbon sequestration in building materials is 80 years. So cutting a tree today to build a house will put off the carbon release for 80 years. I guarantee that the timber industry will seize on this and the fact that young forests sequester more carbon per year than older forests to propose cutting old growth to save the world. Of course, this ignores the fact that 82% of new pharmaceuticals introduced last year were derived from naturally ocurring plants and animals and that large old growth stands, and the flora and fauna that accompany them, are rapidly disappearing.

Oregon is also working on fixing the exurb problem created by the much maligned Measure 37. Stay tuned on that one...

Also, these days "clearcuts" are known as "regeneration harvest." Get with the times!

[Bill Barron]

If the price lowers an increase in selling the product should occur resulting in fewer trees to sequester carbon.

[Bill Barron]

I apologies the other post didn't seem to show up. Shouldn't a lower price result in selling more products and leave us with fewer trees to sequester carbon dioxide?

[Eric]

It is the value growth that is key in determining rotation length, and value growth is a function of biological growth and stumpage price.

So, if my discount rate is 6%, then as long as the value growth of the stand exceeds that I'll let it grow another year.