An exploratory model and economic evaluation of the use of bio-reengineered trees in plantation forestry

Abstract

The research embodied in the thesis represents a broad conceptual framework regarding the recent developments in the science of biotechnology and their applications to the commercial goals of plantation forestry. The specific developments of tree biotechnology are outlined, with a particular interest in Eucalyptus grandis and its hybrids. A brief overview of the international regulatory schemes for protecting intellectual property rights, as well as for safeguarding the biosafety of commercial deployment of genetically engineered plants is developed in order to outline the advantages and disadvantages in investment decisions regarding plantation forestry of bio-reengineered eucalyptus trees. A more detailed examination of investment potential in this area is undertaken for New Zealand and Argentina, considering their favourable site-specific characteristics for maximizing the growth potential and the quality of eucalypts. To make the picture of investment in the production and growing of bio-reengineered trees even more focused, the goals of a company are matched to the engineered properties of the natural resource and their effects on the marginal changes of the overall chain of production in the forestry industry. Given the above broad framework of developments in tree biotechnology, an economic analysis is conducted in order to evaluate the gains associated with producing, growing and utilizing bio-reengineered trees for the production of specific wood products (e.g. mouldings). A detailed model is developed in which each stage of the production process (selection and re-engineering; plantation forest management; processing and reprocessing; market) is examined in its own merit, and stage-specific assumptions about input/output relationships, as well as cost-benefit factors are established. The qualitative assumptions made in the exploratory model are the base for conducting an economic evaluation of the gains associated with the use of bio-reengineered trees. It is found that the gains in net present value terms from growing the bio-reengineered trees in a shorter rotation length are significant. Such gains, however, are due to both the intertemporal changes involved in shortening the rotation period, as well as to changes of in the product worth due to the higher quality of the grown trees. Thus, an evaluation of the specific gains associated with quality change is also undertaken, where the contribution of each genetic trait of interest (herbicide resistance, insect resistance, lignin enhancement) to changes in the product worth is examined separately. A simple sensitivity analysis is developed to help examine the effects of each trait on the profitability of growing bio-reengineered trees. The internal rate of return of growing the 'superior' trees seems to be more sensitive to changes in the factors associated with lignin enhancement. This, however, is not a general rule and it is susceptible to alterations dependent on the magnitude of the cost factors associated with the other two traits. Given that the gains captured from growing -the bio-reengineered trees are attributed to both the technologist and the grower, royalty schemes are developed to suggest the alternative ways of distributing the gains from technological innovation. Finally, it is found that the gains from utilization of bio-reengineered trees are not only captured at harvest, but also a significant increase in the internal rate of return is associated with processing better and more uniform logs for specific high-quality wood products.