Grant Hauer, Marty K. Luckert, Denys Yemshanov and Jim Unterschultz.
Department of Resource Economics and Environmental Sociology, University of Alberta, Edmonton, Alberta, Canada.
A spatial model is developed that estimates agriculture landowner option values associated with converting land from traditional agriculture to hybrid poplar energy plantations. The model considers optimal timing of land use conversion from agriculture to forestry and potential re-conversion back to agriculture in the presence of volatility in prices of ethanol and agriculture land. Spatial variability of land use change is captured by linking plantation growth rates to the spatial distribution of soil types, accounting for transport costs, and differences in agriculture land values across Manitoba, Saskatchewan, Alberta and British Columbia. Results suggest the importance of future prices trends and volatility in determining option values for cellulosic plantations, and that sustained price increases, and/or cost decreases, and/or subsidies are necessary for poplar energy plantations to provide positive option values for agriculture landowners.