The optimal rotation for a fully regulated forest is the same as, or shorter than, the rotation for a single even-aged forest stand: comments on Helmedag’s (2018) paper

This paper discusses Helmedag’s article concerning Faustmann’s formula (Helmedag in Eur J For Res, 2018. https://doi.org/10.1007/s10342-018-1101-8 ). He computed the present value of a fully regulated forest, including standing timber and theoretical land values. He showed that the optimal rotation in a fully regulated forest would always be the one that maximized the sustainable forest net revenues. Helmedag concluded that the discount rate would have no significance for the optimal rotation in a fully regulated forest, while his solution would still fulfil the optimality condition implied by Faustmann’s formula. Here, we refute this assertion. In fact, the assumption of a fully regulated forest has no impact on the optimal rotation period, or may even reduce it. We illustrate this by appropriately considering the actual costs of achieving a fully regulated forest with altered rotation. One must not ignore the alterations of the financial flows when changing the underlying rotation age in an established fully regulated forest. When the opportunity costs of the transition period are included, the optimal rotation becomes the same as that of a single even-aged forest, or shorter, depending on the transition regime. Under the optimal transition regime, the diminishing marginal rate of return for extending the rotation period in a fully regulated forest matches the discount rate, when we achieve the Faustmann rotation. We conclude that the optimal rotation period is independent of the status as fully regulated forest, provided efficient harvest operations during the transition period.