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Title: Projecting potential adoption of genetically engineered freeze-tolerant Eucalyptus in the United States

Author: Wear, David N.; Dixon IV, Ernest; Abt, Robert C.; Singh, Navinder;

Date: 2015

Source: Forest Science

Publication Series: Scientific Journal (JRNL)

Description: Development of commercial Eucalyptus plantations has been limited in the United States because of the species’ sensitivity to freezing temperatures. Recently developed genetically engineered clones of a Eucalyptus hybrid, which confer freeze tolerance, could expand the range of commercial plantations. This study explores how freeze-tolerant Eucalyptus might be adopted as a preferred land use based on comparative returns and a real options land-use switching model. Climate factors other than freezing are assumed to limit potential adoption to the southeastern region of the United States. Comparison of returns indicates that Eucalyptus would probably not compete with cropland but could be competitive with forest uses, especially planted pine. Real options analysis, using both geometric Brownian motion and mean reverting models of stochastic returns, indicates that switching could be expected on a portion of planted pine forestland. Models predict about 0.8 –1.4 million acres of Eucalyptus plantations (5–9% of the current area of planted pine). Extending the analysis to also consider the current area of naturally regenerated pine results in as much as 2.8 million acres of Eucalyptus. Actual adoption will probably depend on uncertain future markets for cellulose, especially for bioenergy feedstock.

Keywords: real options, investment analysis, genetically modified organism (GMO), bioenergy

Publication Notes:

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Wear, David N.; Dixon IV, Ernest; Abt, Robert C.; Singh, Navinder 2015. Projecting potential adoption of genetically engineered freeze-tolerant <I>Eucalyptus</I> in the United States. Forest Science, Vol. 61(3): 15 pages.: 466-480. 10.5849/forsci.14-089


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