Economic incentives for sustainable management: a small optimal control model for tropical forestry

The main purpose of this article is to evaluate different policy options for promoting low-impact logging through the use of economic incentives. To do this we construct a small optimal control theory model within an integrated framework including both the biological and the economic implications of timber extraction. The approach uses detailed stock, yield and cost data from Ghana. A numerical solution is reached by the use of multi-period non-linear optimisation. Direct subsidies to low-impact logging activities through area-dependent subsidies is found to be far more efficient than subsidising prices of tropical timber. The model takes a novel approach in combining growth and stock in a tropical forest area with the cost and damage connected with timber extraction. It allows us to analyse the interactions between stock, growth, timber extraction, logging damage and operating costs in an integrated manner.