Recovery Plan for the Northern Spotted Owl - DRAFT

In Figure H.8, the equilibrium between the supply curve with owl habitatconservation, S., and the demand curve, D, is shown at E, with the timberprice, Pf., higher than P. and timber harvest, Qr With owl conservation, theharvest rate, Qf, is less than Q. but greater than Q,, the harvest rate equal to(Q. - Q') that would occur if there were no increase in the private harvest ratein response to the restriction in federal harvest. These features of Figure H.8can be used to estimate the direct economic effects of the removal of forestlandfrom the timber base to protect the owl.The basic concepts for analysis of the economic effects caused by owl habitatconservation are the economic rent realized from timber harvest and theconsumers' surplus. The graphic representation of economic rent is shown inFigure H.6. The hatched area represents the sum of the profits landownerswould realize from harvest on all of the forestlands contributing to the annualharvest. These lands range from those with low costs that yield high profits toothers with costs nearly equal to the price which logs bring that yield almostno profit. The graphic representation of the consumers' surplus is shown inFigure H.7. The hatched area represents the sum of mill profits ranging fromthe high profits earned by the most efficient mills to nearly zero profits earnedby economically marginal mills with high costs.The federal government will not, of course, produce economic benefits orreceive revenues for the portion of its timber that is on land reserved for owlhabitat and must go unharvested. The economic benefit that would resultfrom this harvest is equal to the difference between the value of the logs thatwould be produced and the cost of harvesting. This benefit is represented byArea A approximately equal to (P. - C) x Q' in Figure H.9. The removal offederal forestland from the timber base to provide owl habitat causes economiclosses equal to this unrealized benefit.The economic benefits from the federal timber harvest that continues despiteprotection of owl habitat would be higher, however, because of the higher priceof timber. The gain resulting from the higher timber price is shown in Figure/~~~~~~~~~~~~~~~~~~~~E0CD0~Q1 Qfd 0Q Rate of timber harvest566Figure H.9. Economic benefit foregone by reduction infederal timber harvest.