Agricultural Opportunity Costs of Woodland Creation: Understanding the Influence of Woodlands on Land Values

This PhD project will be carried out in collaboration with the Forest Research and the University of Aberdeen, which will be the degree-awarding organisation. The student will be based in Aberdeen, at both the James Hutton Institute’s Social, Economic and Geographical Sciences group and the university but will have the opportunity of spending time at Forest Research.

Background: Expanding the area of woodland in Scotland and the UK has, for the last decade, been a major policy goal in order to achieve various societal objectives including climate change mitigation. However progress towards achieving the desired level of woodland coverage has been limited suggesting existing policy incentives are not working (Valatin et al., 2016).

As most of the desired expansion will need to be on privately-owned land, understanding and quantifying agricultural opportunity costs of farm woodland creation is a key element in assessing the cost-effectiveness of policies aimed at expanding woodland area. Within this, spatial variations in opportunity costs between and within farms are critical (Bateman, 2009). As more marginal areas of farmland tend to be the least costly to convert, these have often been those chosen historically. In some cases opportunity costs may be zero or negative. (E.g. this may have been the case with some of the 22% of farms in Defra’s 2010 survey of UK agriculture which had a net farm income below zero).

One approach to estimating agricultural opportunity costs is to consider the impact of woodland creation on land values. A change in the market value of land, for example, could be expected to reflect a change in the expected net revenue over time into the future (i.e. changes in the ‘land expectation value’). It may also reflect factors such as the loss of option value associated with the legal prohibition on reconversion of woodland to agriculture, and non-pecuniary factors, such as the extent to which the woodland is expected to provide amenity values (related in part to the tree species planted).

Aim: To explore the influence of woodland creation on agricultural land values in the UK so as to understand better the agricultural opportunity costs and implications for policies aimed at farm woodland expansion.

Research questions: The principal question to be addressed is: what is the impact of creating woodland on agricultural land values in the UK.

Potential sub-questions (to be selected and adapted by the student) include the following:
 Which characteristics of woodland (e.g. type, extent, configuration, expected value of ecosystem service flows) and of agricultural land (e.g. previous crop/use and income level per ha) are primary determinants of the change in land prices? What is their relative importance? And How does this vary across regions?
 What is the time-profile of the changes in land values - do differentials persist or change (rise or fall) subsequently?
 What levels of opportunity cost are due to loss of option value on woodland creation? What proportion is associated with loss in potential agricultural subsidies and other government transfers?
 What is the impact of woodland creation on the social value of the land in different parts of the UK (excluding losses in agricultural subsidies and other government transfers)