Molly Elder, Woods Hole Research Center (WHRC), Economic Analysis of Alaskan Forest Fires

Since late 2018, I have been working with two scientists, Brendan Rogers from Woods Hole Research Center and Carly Phillips from Union of Concerned Scientists, on forest fires in Alaska. The broad context for this work is that Alaska contains about half of all the land carbon in the United States. The largest fire years in Alaska (2004, 2005, and 2015) have released approximately the same amount of carbon into the atmosphere as all of the fossil fuels burned in the state of Florida in a typical year. As the effects of climate change become increasingly evident, the annual fire season is expected to become more intense.  

When I joined the project, Brendan and Carly were in the process of developing a model to link the total area burned in a forest fire to ecological factors like vegetation type and weather. While Brendan and Carly were finishing their ecological model, I worked on a literature review on the Social Cost of Carbon (SCC). In essence, this is a number that measures the expected cumulative damages from releasing an additional ton of carbon dioxide into the atmosphere. While all estimates of SCC include uncertainties, it is a crucial tool for policymakers who wish to perform cost/benefit analyses of policy. It is also crucial for researchers to understand how SCC is calculated, because choices like the discount rate (which dictates how heavily damages from climate change that occur far in the future are weighted relative to damages today) can have a large effect ton the final value. Ultimately, the larger the value of SCC, the more mitigation projects appear to be cost effective. I gave this literature review to Brendan and Carly, who needed a better understanding of the concept before incorporating it into their work. I also gave a presentation on the topic to Brendan’s lab group when I visited WHRC at the beginning of the summer. 

Once I finished my literature review, I moved on to working on an economic model to estimate the impact of fire management on fire size. My approach is to combine the ecological model Brendan and Carly have generated with data on money spent fighting each fire. I am using regression analysis to tease out the influence that increasing the amount of effort (money) spent managing a fire has on the ultimate size of the fire, on average. However, if I do a simple regression, I might actually be capturing the situation in which a fire is ignored until it gets large, and then management effort is diverted to it. In this case, burned area would be influencing cost, not the other way around. In other words, the cost/burned area relationship might be endogenous; each variable can influence the other, rather than exhibiting a simpler cause and effect type relationship.  

To be more confident that we are capturing only the relationship we are interested in, I use an “instrumental variables” approach. Alaska is organized into four “options” for fire management, Critical, Full, Modified, and Limited. Fires in Critical, which designates areas with high population or infrastructure, are attacked more aggressively than fires in Limited, which designates areas farthest from population centers or culturally significant locations. By using these four options as a proxy for cost, I believe I can remove the endogeneity problem and make the regression results unbiased.  

I have been working with two different data sets. While there are some significant differences between these two data sets, the results have been broadly in agreement. I find that a 1% increase in management spending is expected to reduce total burned area by between 1% and 2.5%. Combining these results with data on carbon dioxide emissions per acre from these fires, I estimate that the average cost of reducing CO2 emissions by one ton is between $0.04 and $1.27. This is very exciting, because this would imply that increasing fire management spending is one of the most cost effective climate mitigation strategies.  

I will be continuing to work with Brendan and Carly through the coming year and anticipate using the results of this research as the basis for my second year paper (i.e., master’s thesis). The three of us will be attending a conference in Alaska in October to hear from some of the people working in fire management there and hopefully to get their feedback on our work. We also hope to meet with the people who provided the data sets we have been working with to clarify some lingering questions. This should be very helpful as we work to tighten up the analysis and anticipate questions before trying to publish the results of our research. I will also be working on a cost/benefit analysis, using the results on the cost to avoid emissions from my model as the incurred cost of mitigation, and the SCC as the benefit. There seems to be very little academic work applying SCC to emissions from fires. It is a complicated question, since unlike in the case of fossil fuels, at least some emissions from fires are eventually reabsorbed when forests regrow. I am very excited for this next step, and am looking forward to continuing to work with WHRC.  

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