Two Manifestations of Market Premium in the Capitalization of Carbon-Forest Estates

Petri P. Kärenlampi

doi:10.20944/preprints202203.0330.v1

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preprints.org > biology and life sciences > forestry > doi: 10.20944/preprints202203.0330.v1

Preprint Article Version 1 Preserved in Portico This version is not peer-reviewed

Two Manifestations of Market Premium in the Capitalization of Carbon-Forest Estates

Petri P. Kärenlampi

Version 1 : Received: 20 March 2022 / Approved: 24 March 2022 / Online: 24 March 2022 (10:41:22 CET)
Version 2 : Received: 22 April 2022 / Approved: 26 April 2022 / Online: 26 April 2022 (09:45:34 CEST)

A peer-reviewed article of this Preprint also exists.

Kärenlampi, P.P. Two Manifestations of Market Premium in the Capitalization of Carbon Forest Estates. Energies 2022, 15, 3212. Kärenlampi, P.P. Two Manifestations of Market Premium in the Capitalization of Carbon Forest Estates. Energies 2022, 15, 3212.

Abstract

The effect of capitalization premium in forest estate markets on forest management and climate change mitigation economics is investigated. It is shown that proportional goodwill in capitalization induces linear scaling of the financial return, without any contribution to sound management practices. However, there is a financial discontinuity as harvesting deteriorates goodwill. On the contrary, capitalization premium set on bare land as a tangible asset would increase timber storage and carbon sequestration. Observations indicate that the proportional goodwill is closer to reality within the Nordic Region, resulting in continuity problems but a reduced capital expense for carbon storage.

Keywords

capital return rate; expected value; carbon storage; carbon rent

Subject

Biology and Life Sciences, Forestry

Copyright: This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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