Source: UNIVERSITY OF WASHINGTON submitted to NRP
MULTI-OBJECTIVE OPTIMIZATION TO EVALUATE AND SELL FOREST ECOSYSTEM SERVICES
Sponsoring Institution
National Institute of Food and Agriculture
Project Status
COMPLETE
Funding Source
AFRI COMPETITIVE GRANT
Reporting Frequency
Annual
Accession No.
0220250
Grant No.
2010-85101-20472
Cumulative Award Amt.
$499,986.00
Proposal No.
2009-04489
Multistate No.
(N/A)
Project Start Date
Jan 1, 2010
Project End Date
Dec 31, 2014
Grant Year
2010
Program Code
[94340]- Managed Ecosystems
Recipient Organization
UNIVERSITY OF WASHINGTON
4333 BROOKLYN AVE NE
SEATTLE,WA 98195
Performing Department
College Administration
Non Technical Summary
Situation: Due to the lack of an efficient market mechanism, forest ecosystem services are underprovided to society. Potential producers, such as forest landowners, have no incentives to continue or enhance the provision of ecosys?tem services leading to environmental problems including land-use conversions or exploitative timber management practices. Purpose: We will build, test and deploy a new mechanism for forest ecosystem services, called ECOSEL. The concept combines multi-objective optimization technology with a unique auction platform to match willing sellers of ecosystem services with willing buyers. Optimization is used to identify management plans that lead to bundles of forest benefits such as timber, carbon and old-forest habitat in the most cost-efficient ways possible. Bids are solicited for the bundles using the opportunity costs of the plans to the landowner as reserve prices. The plan with bids whose combined value most exceeds the reserve price is implemented. The goal of the project is to demonstrate the mechanics of the new technique in a real decision-making context. We will (1) build a web-based implementation of ECOSEL, (2) fine-tune the design variables of the mechanism both theoretically and empirically, (3) run a real auction at the University of Washington?s Pack Forest, and (4) study the participants? bidding behavior along with the winning scenario to better understand the stakeholders? monetary preferences with respect to ecosystem services. Additionally, we will expand the use of ECOSEL as an educational tool in resource management and environmental economics classes, and as laboratory equipment for economists to study public goods contribution games. ECOSEL promises a new mechanism that not only optimizes the concurrent production of multiple ecosystem services but it also provides a funding platform to reward the landowners who implement these production systems.
Animal Health Component
40%
Research Effort Categories
Basic
10%
Applied
40%
Developmental
50%
Classification

Knowledge Area (KA)Subject of Investigation (SOI)Field of Science (FOS)Percent
1230699107010%
1230699202020%
1230699208030%
1230699301020%
1230699310020%
Knowledge Area
123 - Management and Sustainability of Forest Resources;

Subject Of Investigation
0699 - Trees, forests, and forest products, general;

Field Of Science
2020 - Engineering; 1070 - Ecology; 2080 - Mathematics and computer sciences; 3010 - Economics; 3100 - Management;
Goals / Objectives
The goal of this study is to equip forest landowners with a robust and reliable tool to evaluate and sell ecosystem services from their property. We propose a multi-objective mathematical programming framework to identify the opportunity costs and tradeoffs of producing efficient bundles of environmental forest services from a discrete geographic area. The opportunity cost structure and the associated tradeoffs behind the various services will serve as a platform to sell these goods. In particular, we will streamline and test a unique auction platform where the opportunity costs of the alternative management plans serve as reserve prices to trade carbon, mature forest habitat or other services. The auction will be tested at the University of Washington's 4,300 ac Pack Forest. Our long-term goal with this tool is to help forest landowners identify and realize opportunities to diversify their timber and non-timber portfolios and increase profit without resorting to unsustainable commodity production options or land-use conversions. Our project has five research modules, each with its own set of objectives. The objective of Module 1 is to develop a fully-defined optimization model fine-tuned to the needs of Pack Forest stakeholders and potential investors. In Module 2, we will develop an on-line bidding platform that allows bidders to establish user accounts, sign in using a secured web site, view available bidding options, view the other players' bids, and place or reallocate their own contributions. Also in Module 2, an educational version of the platform will be developed for classroom use and for laboratory demonstrations to study public good contribution games. Our objective in Module 3 is to gather empirical support, in the form of test results from experimental auctions, for the design of a real auction that will take place at the University of Washington's Pack Forest. The goal of Module 4 is to implement the Pack Forest Auction and of Module 5 is to analyze and document the outcomes. The deliverables associated with Module 1 are (1) a fully defined and populated optimization model for Pack Forest (by July 2011), (2) a Pareto-optimal set of management plans found by solving the optimization model (by July 2011), (3) a select subset of these management plans to put up for auction (by July 2011), and (4) an automated model builder capable of bundling forest ecosystem services (by January 2013). The deliverables associated with Module 2 are (1) a fully functional web-based bidding platform for research purposes (by July 2011), and a second version for educational purposes (by January 2013). The deliverables for Module 3 is a set of optimal design options for use at the Pack Forest- and other real auctions, along with an accompanying documentation of the experimental tests (by January 2011). The Pack Forest Auction in Module 4 will provide (by January 2012) the investigators with real auction outcomes, i.e., a winning management plan, and a recorded bidding history of the players. The deliverables of Module 5 are (1) peer-reviewed documentation of the analyses and results, and (2) stakeholder reports.
Project Methods
The scientific methods that we will apply in this project to tackle fundamental questions about people's willingness to make monetary sacrifices in support of forest ecosystem services range from mathematical programming analyses to experimental economics, game theory and statistics. While none of these techniques are unique as they have been and are being applied to certain classes of scientific problems, the combined use of these instruments and the context in which we propose to apply them is new. We will use multi-objective mathematical programming to identify specific, cost-efficient forest management plans for Pack Forest and, possibly other test sites. The results of the mathematical programming analyses will be used by Pack Forest administration to (1) ensure that the management plans are viable on the ground, and (2) to select a short-list of plans that will be put up for auction. Experimental economics will be employed to help us design and fine-tune the auction mechanism itself. The goal is to have a mechanism that is the most likely to lead to an outcome that maximizes revenues for the provider while achieving an efficient provision of ecosystem services to the public. The game theoretical investigations have similar purposes and uses as the experimental tests, except that the focus here is on gathering theoretical, rather than empirical evidence in support of design choices. Statistical analyses serve to draw conclusions with respect to the bidders' willingness to pay for certain ecosystem services. We expect to use these conclusions in future auctions and we expect policy-makers to use our findings to optimize their proposed policy instruments. We will survey the bidders prior to and after the actual action to track changes in their knowledge and preferences about forest ecosystem services.

Progress 01/01/10 to 12/31/14

Outputs
Target Audience: We had two main pools of stakeholders, potential buyers and potential sellers of forest ecosystem services, plus the scientific community with a research focus on forest ecosystem services. Throughout the project, we worked with forest landowners and public forest management organizations, whom we reached primarily through focus group and board meetings we hold for the Precision Forestry Cooperative. These organizations included the Port Blakely Tree Farms, Weyerhaeuser, Hancock Forest Management, The Campbell Group, and The Washington Forest Protection Association from the industry side, and the Washington State Department of Natural Resources, the U.S. Forest Service, the Bureau of Land Management and the Seattle Public Utilities from the public land managers' side. Potential buyers are private individuals and conservation organizations who are concerned about how certain forest resources are managed and want to have a say in management decisions. We also have target audiences for the scientific publications that had come out of this project (listed under "Products"). These are the operations research community for environmental and natural resource applications, environmental and experimental economists and forest ecologists. Lastly, the project director had several opportunities, both nationally and internationally to deliver key-note presentations specifically about Ecosel. The audiences of these exchanges included the forest and public good economics and forest mensuration communities (Newport, OR, USA and Zurich, Switzerland - 2012) and forest decision support systems experts (Umea, Sweden and Lisbon, Portugal - 2013, Cascais, Portugal -2015). Changes/Problems: Despite the two no-cost extension requests, both of which were approved by NIFA, we have not been able to implement the auction at the University of Washington's Pack Forest to date. We received approval in March 2014 from the President of the University of Washington to go ahead with the auction and we subsequently cleared all titles for the property in July 2014. Our progress has been slow in translating the forest management plans to legal contracts that would go with the bundles of forest ecosystem services that we decided to offer for bidding. The Director of Pack Forest, Prof. Ettl, who is also a Co-PD on this project is in charge of this piece of work and until the management plans and legal documents are in place, we are unable to hold an auction. As a result, Activity 2 and 3 in Stage 4 of the Project Plan (see p. 15 of the Project Narrative) are on hold as bidding behavior can only be analyzed once an actual auction is implemented. All preceding activities in Stages 1 through 3, as well as Activity 4 (scientific publications) in Stage 4 have been completed without variance. The only manuscript that is yet to be written is the one that would report on the results of the actual auction. We continue to hope to be able to implement the auction. What opportunities for training and professional development has the project provided? The following graduate students were supported fully or partially by this project: * Bijetri Bose (PhD, Economics): Learned and experienced how to design and administer experimental auctions and survey instruments; * Nóra Könny? (PhD, Forest Resources): Learned how formulate and solve multi-objective mathematical programs, how to use the Forest Vegetation Simulator and how to write scientific manuscripts; * Gabrielle Roesch (MS, Forest Resources): Learned how to design and administer focus group surveys and meetings and how to conduct qualitative focus group analyses; * Rachel St.John (MS, Quantitative Ecology & Resource Management): Learned how formulate and solve mathematical programs and how to write scientific manuscripts. The following learning activities have been incorporated in the faculty participants' teaching portfolio: * Co-PD Rabotyagov incorporated the ECOSEL concept in two of his courses, ESRM/ENVIR/ECON 235 (Introduction to Environmental Economics) and ESRM 490 (Economics of Sustainability). The ECOSEL idea nicely meshes with several of the concepts covered in these courses. First, it extends the treatment of simple games of cooperation (e.g., prisoners' dilemma, voluntary contribution mechanism (VCM), provision point mechanism (PPM)) and further illustrates the issues present in private provision of public goods. Second, it provides a nice demonstration of the concept of cost-efficiency, or achieving environmental objectives at the lowest cost. Thirdly, it provides a concrete example of multiple dimensions of ecosystem services and ideas of Pareto-improvements, multi-objective management, and tradeoffs. Students generally find the presentation interesting and good discussions are generated. * PD Tóth teaches about Ecosel as an example of a contribution game in his graduate course: SEFS 540 "Optimization Techniques in Natural Resources". * Co-PD Ettl has incorporated the Ecosel concepts into two undergraduate courses: ESRM 300 Sustainability Seminar, ESRM 428 Principles of Silviculture, where the concepts are used to illustrate the relationship between forest harvesting, carbon storage, and wildlife habitat. A modified version of the Ecosel auction has also been used in pilot trials of a residential environmental education center the Mount Rainier Institute designed to enhance STEM education for middle school students (described here: http://www.packforest.org/mtrainierinstitute/Focus%20Areas.html). How have the results been disseminated to communities of interest? We had two main channels of research dissemination to communities of interest. One was the use of the Ecosel website (https://ecosel.sefs.uw.edu/) that we had created as part of this project. The second was workshops, tutorials, focus group meetings, mock auctions and board meetings of the University of Washington's Precision Forestry Coop. Workshops: 1. November 28, 2014. Porto, Portugal: Ecosel workshop at the invitation of the Mediterranean Forestry Consortium (MedFor); 2. November 27, 2014. Leiria, Portugal: Ecosel workshop at the invitation of the Mediterranean Forestry Consortium (MedFor); 3. 2014. An auction mechanism to sell forest ecosystem services. A mock-auction run by Co-PD Ettl for the Doris Duke Conservation Scholars Program. 4. December 4, 2013, Lisbon, Portugal (Technical University of Lisbon): Ecosel workshop at the invitation of the Mediterranean Forestry Consortium (MedFor) http://www.2013forestdss.chil.org/page/program); 5. December 16-20, 2013, Kobe, Japan (University of Hyogo): Ecosel workshop at the invitation of the University of Hyogo, Japan; 6. December 17, 2010, Eatonville, WA: Ecosel: An auction mechanism to increase public goods - a mock auction run by Co-PD Ettl. Pack Forest, Eatonville, WA. 7. February, 2010, Rotorua, New Zealand (Scion - Forest Research Institute): Ecosel workshop and mock auction at the invitation of the New Zealand Forest Research Institute (Scion). Precision Forestry Coop (PFC) Board Meetings: The University of Washington's PFC is a technology development and transfer unit with a Board that consists of representatives of forest sector companies, landowners and agencies in the Pacific Northwest. PD Tóth is a faculty member in PFC and Ecosel has been a significant part of the Coop's reports and presentations to the Board since 2008. The board meetings, of which we had two per annum between 2010 and 2013 and one in 2014, have been an excellent platform to make the tool visible and available to the forest sector. What do you plan to do during the next reporting period to accomplish the goals? Nothing Reported

Impacts
What was accomplished under these goals? All proposed activities in Stages 1-3 have been completed. Activities 2 and 3 in Stage 4 (the Pack Forest Auction and the subsequent reports) are still on hold for reasons that we explain in more detail under Section 8 (Explanation of Variance) of this document. What follows is a summary of our accomplishments in this project in layman's terms. We developed a new, auction-based, mechanism, called Ecosel that matches willing sellers of forest ecosystem services (such as forest landowners) with willing buyers. Ecosel uses multi-objective optimization to generate forest management plans that would lead to different combinations of forest ecosystem services, such as carbon sequestration or wildlife habitat preservation, at minimum costs if implemented. The costs of the plans, which are often opportunity costs such as foregone timber revenues, are then used as minimum bid prices in an auction where willing "eco-investors" can contribute with monetary commitments towards the production of services that would result from the plans. We tested the alternative features and rules of the mechanism extensively using experimental economics (mock auctions). We found that it was desirable to enable the participants to communicate with each other anonymously during the auction. Further, we found that having a fewer number of management alternatives and associated bundles of ecosystem services leads to more bidding and a higher likelihood of auction success than having more bidding options. Out results with respect to whether or not the minimum bid prices should be disclosed to the participants were mixed; the decision was a function of the perceived value of the public services that were offered for bidding. Using the empirical results from the experimental auctions, we designed and created a web-based bidding platform that allows any person or organization with internet access to bid remotely on forest ecosystem services. The platform also allows potential sellers of ecosystem services (forest landowners) to set up auctions on-line to attract interested eco-investors. The website is located at https://ecosel.sefs.uw.edu/ and is available for scientists and interested parties for experimental auctions and research. In the meantime, we collected information about the preferences of Pack Forest (University of Washington's research forest that we selected as a demo site for our first Ecosel auction) stakeholders with respect to the ecosystem services that they would like to see being produced. Based on this information, we built a 3-objective spatial harvest scheduling model for Pack Forest that maximized (1) discounted timber revenues, (2) the amount of mature forest habitat that would evolved in large contiguous patches, and (3) carbon sequestration. We solved this model and identified about 100 alternative forest management plans of which the Director of Pack Forest selected three for the actual auction. The President of the University of Washington approved the auction at Pack Forest in March, 2014 and the Director of Pack Forest cleared the titles for the land in July, 2014. However, the actual auction has not been implemented at the time of writing this Final Report. We explain the delayin the"Explanation of Variance" section. Lastly, we have also conducted experiments about the use of random drawing as a way to encourage participation in ecosystem services auctions such as Ecosel. All of the accomplishments listed above have been documented in refereed journal articles. Please seethe Products section for further details.

Publications

  • Type: Journal Articles Status: Awaiting Publication Year Published: 2015 Citation: St. John, R., and S.F. T�th. In Press. Spatially-Explicit Forest Harvest Scheduling with Difference Equations. Annals of Operations Research.
  • Type: Other Status: Published Year Published: 2010 Citation: T�th, S.F., J. Turner, S.A. Kushch, R. Yao, S.S. Rabotyagov, B. Dhakal, and L.W. Rogers 2010. ECOSEL: Application of Environmental Auctions to a New Zealand Planted Forest. New Zealand Forest Research Institute (Scion) General Technical Report no. 47085. October 2010.
  • Type: Conference Papers and Presentations Status: Published Year Published: 2012 Citation: Ettl. G.J., T�th, S.F., S.S. Rabotyagov, L.W. Rogers, N. K�nny?, J. Comnick, P. Fischer, K. Ceder and A. Wirsing. ECOSEL: An Online Market Mechanism for Monetizing Ecosystem Services. 2012 SAF Annual Convention, Spokane, WA (10/27/2012)
  • Type: Conference Papers and Presentations Status: Published Year Published: 2012 Citation: Ettl. G.J., T�th, S.F., N. K�nny?, J. Comnick, K. Ceder, S.S. Rabotyagov, A. Wirsing and L.W. Rogers. ECOSEL, An Online Market-based Tool for Monetizing Ecosystem Services: Pack Forest, A Case Study. 2012 ESA Annual Meeting, Portland, OR (8/8/2012)
  • Type: Conference Papers and Presentations Status: Published Year Published: 2011 Citation: T�th, S.F., G.J. Ettl, S.S. Rabotyagov, N. K�nny?, and L. Rogers. Selling Forest Ecosystem Services with ECOSEL: A Case Study at Pack Forest Washington. 2011 INFORMS Annual Meeting, Charlotte, NC (11/14/2011)
  • Type: Conference Papers and Presentations Status: Published Year Published: 2010 Citation: Kushch, S.A., S.F. T�th, J. Turner, and S.S. Rabotyagov. Bundling Water Quality and Native Forest Restoration Services in a New Zealand Forest Plantation. 2010 INFORMS Annual Meeting, Austin, TX (11/9/2010)


Progress 01/01/13 to 12/31/13

Outputs
Target Audience: We have two pools of stakeholders: potential buyers and potential sellers of forest ecosystem services. During the reporting period, we worked with potential sellers, forest landowners and public forest management organizations, whom we reached primarily through the board meetings we hold for the Precision Forestry Cooperative. These organizations included the Port Blakely Tree Farms, Weyerhaeuser, Hancock Forest Management, The Campbell Group, and The Washington Forest Protection Association from the industry side, and the Washington State Department of Natural Resources, the U.S. Forest Service, the Bureau of Land Management and the Seattle Public Utilities from the public land managers’ side. Potential buyers are private individuals and conservation organizations who are concerned about how certain forest resources are managed and want to have a say in management decisions. We also have target audiences for the scientific publications that came out of this project (listed above) during the reporting period of 2013. These are the operations research community for environmental and natural resource applications, environmental and experimental economists and forest ecologists. Changes/Problems: None to date, except the two 1-year no-cost extensions. What opportunities for training and professional development has the project provided? Bijetri Bose, graduate student: 1. Learned and experienced how to design and administer experimental auctions, 2. Learned and experienced how to design and administer survey instruments. Teaching: 1. Co-PD Rabotyagov incorporated the ECOSEL concept in two of his courses, ESRM/ENVIR/ECON 235 (Introduction to Environmental Economics) and ESRM 490 (Economics of Sustainability). The ECOSEL idea nicely meshes with several of the concepts covered in these courses. First, it extends the treatment of simple games of cooperation (e.g., prisoners’ dilemma, voluntary contribution mechanism (VCM), provision point mechanism (PPM)) and further illustrates the issues present in private provision of public goods. Second, it provides a nice demonstration of the concept of cost-efficiency, or achieving environmental objectives at the lowest cost. Thirdly, it provides a concrete example of multiple dimensions of ecosystem services and ideas of Pareto-improvements, multi-objective management, and tradeoffs. Students generally find the presentation interesting and good discussions are generated. 2. PD Tóth teaches about Ecosel as an example of a contribution game in his graduate course: SEFS 540 “Optimization Techniques in Natural Resources.” How have the results been disseminated to communities of interest? International workshops: December 4, 2013, Lisbon, Portugal (Technical University of Lisbon: http://www.2013forestdss.chil.org/page/program) December 16-20, 2013, Kobe, Japan (University of Hyogo). Precision Forestry Coop Board Meetings: June 4 and December 9, 2013 What do you plan to do during the next reporting period to accomplish the goals? If our request for no-cost extension is approved, we have the following plan for 2014: 1/1/2014 - 9/1/2014: Documentation of the latest series of experimental auctions about the lottery feature (Bose and Rabotyagov) 1/1/2014 -6/1/2014: Completion of the legal work for Pack Forest auction (Liegel, Casius and Ettl) 6/1/2014 – 10/1/2014: Completion of the Pack Forest auction (Tóth, Rogers, Ettl, Rabotyagov). 9/1/2014 – 12/31/2014: Analysis and documentation of bidding behavior during the Pack Forest auction (Rabotyagov and Tóth) 9/1/2014 – 12/31/2014: Implementation of the automated bid-reallocation mechanism (Tóth and Rogers). 9/1/2014 – 6/1/2014: Website: Complete payment processing, social media integration, and a post-campaign “dashboard” for understanding and managing the closeout process.

Impacts
What was accomplished under these goals? ECOSEL website updates: During the reporting period, we finished work on the back-end of the ECOSEL website (http://ecosel.cfr.washington.edu/) mainly concerning auction set-up and management functions. User messaging functions have also been added. This work is critical to the success of running real auctions which is the main goal of the project. Experimental auctions: A new series of experiments have been implemented with a focus on using lottery to encourage auction participation. The computerized experiments ran from late August 2013 with the final session conducted on November 18, 2013. Thus, the majority of the data has been collected but not yet analyzed in depth. Overall, 10 experimental sessions were conducted (3 of which will likely have to be excluded from the main analysis as the sessions involved participation of only 4 subjects). Preliminary looks at the data reveal that our hypotheses appear to be finding experimental support, although the multiple public good lottery does not appear to be generating as much improvement in the mechanism performance as the single-good lotteries.

Publications

  • Type: Journal Articles Status: Under Review Year Published: 2013 Citation: McDill, M.E., S.F. T�th, R. St. John, J. Braze, and S.A. Rebain. Comparing Model I and Model II Formulations of Spatially-Explicit Harvest Scheduling Models with Adjacency Constraints. Forest Science.
  • Type: Journal Articles Status: Under Review Year Published: 2013 Citation: K�nnyu, N., S.F. T�th, B. Rajasekaran, and M.E. McDill. Temporal Connectivity of Mature Forest Patches in Spatially Explicit Harvest Scheduling Models. Forest Science.
  • Type: Journal Articles Status: Awaiting Publication Year Published: 2013 Citation: St. John, R. and S.F. T�th. Spatially-Explicit Forest Harvest Scheduling with Difference Equations. Annals of Operations Research.
  • Type: Journal Articles Status: Published Year Published: 2013 Citation: Rabotyagov, S.S., S.F. T�th, and G.J. Ettl. 2013: Testing the Design Variables of ECOSEL: A Market Mechanism for Forest Ecosystem Services. Forest Science. 59(3): 303-321.
  • Type: Journal Articles Status: Published Year Published: 2013 Citation: T�th, S.F., N. K�nnyu, G.J. Ettl, L.W. Rogers and S.S. Rabotyagov. 2013. ECOSEL: Selling Forest Ecosystem Services. Forest Policy & Economics. 35(2013): 73-82.
  • Type: Journal Articles Status: Published Year Published: 2013 Citation: T�th, S.F., N. K�nnyu, M.E. McDill, and S. George. 2013. Lazy Constraints for Area-Based Adjacency Formulations in Harvest Scheduling Models. Forest Science. 59(2): 157-176.
  • Type: Journal Articles Status: Published Year Published: 2013 Citation: Passolt, G., M.J. Fix, and S.F. T�th. 2013. A Voronoi Tesselation-based Approach to Generate Hypothetical Forest Landscapes. Canadian Journal of Forest Research. 43(1): 78-89.


Progress 01/01/12 to 12/31/12

Outputs
OUTPUTS: 1. Redesigned ECOSEL website: The new website is up and running: http://ecosel.cfr.washington.edu/. We still need to optimize the content for actual use in public auctions. 2. Experimental auctions: The Forest Science paper (Rabotyagov et al.) that reports our findings about the 2010 experimental auctions has been accepted for publication. Most recently, a new round of experiments have been designed with a focus on using lottery to encourage participation in the auction. 3. Several publications are forthcoming: a. St. John, R. and S.F. Toth. Spatially-Explicit Forest Harvest Scheduling with Difference Equations. Annals of Operations Research. b. Toth, S.F., N. Konnyu, G.J. Ettl, L.W. Rogers and S.S. Rabotyagov. ECOSEL: Selling Forest Ecosystem Services. Forest Policy & Economics. c. Rabotyagov, S.S., S.F. Toth, and G.J. Ettl. Testing the Design Variables of ECOSEL: A Market Mechanism for Forest Ecosystem Services. Forest Science. d. Toth, S.F., N. Konnyu, M.E. McDill, and S. George. Lazy Constraints for Area-Based Adjacency Formulations in Harvest Scheduling Models. Forest Science. PARTICIPANTS: Sandor F. Toth, University of Washington. Toth is the Program Director leading the ECOSEL projects and responsible for developing the optimization component of the mechanism. Toth is also in charge of overseeing the budget. Gregory J. Ettl, University of Washington Ettl is the Director of the Center for Sustainable Forestry at Pack Forest who is responsible for managing the 4,200 ac resource to provide educational, research and revenues opportunities for the University of Washington's School of Environmental and Forest Sciences. Ettl was in charge of collecting and developing the economic and growth and yield data to be used in the Pack Forest auction to be held in the second half of 2012. Ettl was also responsible for selecting the management plans for the Pack Forest Auction. Sergey S. Rabotyagov, University of Washington. Rabotyagov is a natural resource economist who designed and administered the experimental auctions, focus group meetings and market surveys. Luke W. Rogers, University of Washington Rogers continues to be in charge of the computer programming tasks to create the ECOSEL website. Konrad Liegel and Marie E. Quasius, K&L Gates Law Firm Liegel and Quasius continued working on producing the legal framework for ECOSEL. K&L Gates has been providing legal services for ECOSEL, as "Special Counsel" contracted by the University of Washington on a Pro Bono basis. Jennifer McCullar, University of Washington, Center for Commercialization. McCullar is our technology manager who is coordinating our business and communications efforts. TARGET AUDIENCES: We have two pools of stakeholders: potential buyers and potential sellers of forest ecosystem services. Potential buyers are forest landowners and public forest management organizations such as the US Forest Service or the Bureau of Land Management. Potential buyers are private individuals who are concerned about how certain forest resources are managed and want to have a say in management decisions. Conservation organizations such as The Nature Conservancy, the Cascade Land Conservancy and others should also be interested in ECOSEL as a tool to facilitate deals on conservation easements. We also have target audiences for the scientific publications that came out of this project (listed above). These are the operations research community for environmental and natural resource applications, environmental and experimental economists and forest ecologists. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

Impacts
One of the group's presentations titled "ECOSEL: Selling Forest Ecosystem Services" has been selected as one of only 7 talks for the International Union of Forest Research Organizations' (IUFRO) International Conference on "New Frontiers in Forest Economics" in Zurich, Switzerland in June 26-29, 2012.

Publications

  • Konnyu, N. and S.F. Toth. 2013. A Cutting Plane Algorithm for Area-Based Adjacency Formulations in Harvest Scheduling Models. European Journal of Operational Research. 228(1): 236-248. Passolt, G., M.J. Fix and S.F. Toth. 2013. A Voronoi Tesselation-based Approach to Generate Hypothetical Forest Landscapes. Canadian Journal of Forest Reseach. 43(1): 78-89.
  • Toth, S.F., M.E. McDill, N. Konnyu, and S. George. 2012. A Strengthening Procedure for the Path Formulation of the Area-based Adjacency Problem in Harvest Scheduling Models. Mathematical and Computational Forestry & Natural-Resource Sciences 4(1): 16-38.
  • Toth, S.F., G.J. Ettl and S.S. Rabotyagov. 2010. ECOSEL: An Auction Mechanism for Forest Ecosystem Services. Mathematical and Computational Forestry & Natural-Resource Sciences 2(2): 99-116.


Progress 01/01/11 to 12/31/11

Outputs
OUTPUTS: Redesigned ECOSEL website: The website that provides a bidding platform for matching willing sellers of forest ecosystem services with willing buyers has been professionally redesigned. The new website is functional but has not been published yet. We still need to optimize the textual content before it can go public. We have been using the prototype for mock auctions and focus group meetings. Experimental auctions: The Forest Science paper (Rabotyagov et al.) that reports our findings about the 2010 experimental auctions is still in review after major changes were requested. The new ECOSEL website allows us to conduct additional experimental auctions in a far more efficient way than it was previously possible with paper ballots. In fact, we will be able to do additional experimental research well beyond the lifespan of the present project. Management plans for the Pack Forest Auction: The optimization and forest planning work in preparation for the Pack Forest auction have been completed. Using optimization, we generated about hundred forest management plans with the objectives of maximizing (1) timber revenues, (2) carbon sequestration, (3) and old-forest habitat production in contiguous patches of 110 years of minimum age and 100 acres of minimum size. The second two objectives represent the ecosystem services that we will attempt to sell using ECOSEL. These services were identified based on stakeholder input. Further, we subjected the management plans to five different sets of restrictions, representing different forest certification standards and silvicultural scenarios, in an attempt to make the plans as attractive for bidders as possible. We documented this work in a publication titled "ECOSEL: Multi-Objective Optimization to Sell Forest Ecosystem Services" by Toth, S.F., G.J. Ettl, N. Konnyu, S.S. Rabotyagov and L. Rogers. PARTICIPANTS: 1. Sandor F. Toth, University of Washington: Toth is the Program Director leading the ECOSEL projects and being responsible for developing the optimization component of the mechanism. Toth is also in charge of overseeing the budget. 2. Gregory J. Ettl, University of Washington. Ettl is the Director of the Center for Sustainable Forestry at Pack Forest who is responsible for managing the 4,200 ac resource to provide educational, research and revenues opportunities for the University of Washington's School of Forest Resources. Ettl was in charge of collecting and developing the economic and growth & yield data to be used in the Pack Forest auction to be held in the second half of 2012. Ettl is also responsible for making sure that the alternative management plans created by ECOSEL are feasible in practice. Ettl will also be in charge of selecting the management plans for the auction. Sergey S. Rabotyagov, University of Washington. Rabotyagov is a natural resource economist who designed and administered the experimental auctions, focus group meetings and market surveys. Luke W. Rogers, University of Washington. Rogers continues to be in charge of the computer programming tasks to create the ECOSEL website. Nora Konnyu, University of Washington. Konnyu was graduate student in 2011 under the supervision of Toth. Konnyu has written the computer programs and used these programs to create the minimum-cost management plans for the Pack Forest auction. Ms. Konnyu has since graduated with a PhD. Gabrielle Roesch, University of Washington Konnyu was graduate student in 2011 under the supervision of Rabotyagov. Roesch worked on the focus group meetings and market surveys and the associated analyses. Ms. Roesch has since graduated with an M.S. degree. Konrad Liegel and Marie E. Quasius, K&L Gates Law Firm. Liegel and Quasius continued working on producing the legal framework for ECOSEL. K&L Gates has been providing legal services for ECOSEL, as "Special Counsel" contracted by the University of Washington on a Pro Bono basis. Jennifer McCullar, University of Washington, Center for Commercialization. McCullar is our technology manager who is coordinating our business and communications efforts. TARGET AUDIENCES: We have two pools of stakeholders: potential buyers and potential sellers of forest ecosystem services. Potential buyers are forest landowners and public forest management organizations such as the US Forest Service or the Bureau of Land Management. Potential buyers are private individuals who are concerned about how certain forest resources are managed and want to have a say in management decisions. Conservation organizations such as The Nature Conservancy, the Cascade Land Conservancy and others should also be interested in ECOSEL as a tool to facilitate deals on conservation easements. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

Impacts
(1) ECOSEL has been selected by the University of Washington's Center for Commercialization (C4C) as one of about 15 innovations out of more than 500 in 2011 for commercialization. On August 26, 2011, a provisional patent application (Application no. 61/527,997) has been filed on behalf of the University. Significant resources have been allocated to the commercialization process including patent attorneys, technology managers and entrepreneurs-in-residence. With the help of UW MBA students and communication majors, we are currently in the process of developing a business plan and communication strategy. ECOSEL will initially reside within the University of Washington domain as a university service. The innovation has been reported by the University to the Federal Government and the Department of Agriculture should have a record of this notification. (2) One of the group's presentations titled "ECOSEL: Selling Forest Ecosystem Services" has been selected as one of only 7 talks for the International Union of Forest Research Organizations' (IUFRO) International Conference on "New Frontiers in Forest Economics" in Zurich, Switzerland in June 26-29, 2012. (3) We are in preliminary talks with 4 forest sector companies in the Pacific Northwest to implement ECOSEL auctions.

Publications

  • No publications reported this period


Progress 01/01/10 to 12/31/10

Outputs
OUTPUTS: We have completed the following objectives: 1. ECOSEL on-line bidding platform and website: The website that provides a bidding platform for matching willing sellers of forest ecosystem services with willing buyers has been built and is available at http://ecosel.cfr.washington.edu/. The website provides a simple explanation of how ECOSEL works, it allows potential buyers to set up auctions and it allows potential bidders to bid in a hypothetical fashion. Real dollar transactions are not yet available. The website also allows the investigators to set up experimental auctions and to track bidder behavior. 2. Experimental auctions: We implemented more than 40 experimental auctions using University of Washington undergraduate students as subjects to test the design variables of the mechanism. Our findings from these experimental auctions are currently being used to streamline the on-line bidding mechanism. The details of our findings are currently under peer review in Forest Science: Rabotyagov et al (In Review). 3. Market Analyses: We performed market analyses and collected stakeholder input through a stated preference survey. A total of 192 respondents took the survey. PARTICIPANTS: 1. Sandor F. Toth, University of Washington. Toth is the Program Director leading the ECOSEL projects and responsible for developing the optimization component of the mechanism. Toth is also in charge of overseeing the budget. 2. Gregory J. Ettl, University of Washington. Ettl is the Director of the Center for Sustainable Forestry at Pack Forest who is responsible for managing the 4,200 acre resource to provide educational, research and revenues opportunities for the University of Washington's School of Forest Resources. Ettl was in charge of collecting and developing the economic and growth and yield data to be used in the Pack Forest auction to be held in the second half of 2012. Ettl is also responsible for making sure that the alternative management plans created by ECOSEL are feasible in practice. Ettl will also be in charge of selecting the management plans for the auction. 3. Sergey S. Rabotyagov, University of Washington. Rabotyagov is a natural resource economist who designed and administered the experimental auctions, focus group meetings and market surveys. 4. Luke W. Rogers, University of Washington. Rogers was in charge of the computer programming tasks to create the ECOSEL website. 5. Nora Konnyu, University of Washington. Konnyu is graduate student under the supervision of Toth. Konnyu has written the computer programs that were used to create optimal management plans for pack Forest. 6. Gabrielle Roesch, University of Washington. Roesch is graduate student under the supervision of Rabotyagov. Roesch worked on the experimental auctions, the focus group meetings and market surveys. 7. Konrad Liegel and Marie E. Quasius, K&L Gates Law Firm. Liegel and Quasius worked on producing the legal framework for ECOSEL. K&L Gates has been providing legal services for ECOSEL as it is applied to the University of Washington's Pack Forest on a Pro Bono basis. TARGET AUDIENCES: We have two pools of stakeholders: potential buyers and potential sellers of forest ecosystem services. Potential buyers are forest landowners and public forest management organizations such as the US Forest Service or the Bureau of Land Management. Potential buyers are private individuals who are concerned about how certain forest resources are managed and want to have a say in management decisions. Conservation organizations such as The Nature Conservancy, the Cascade Land Conservancy and others should also be interested in ECOSEL as a tool to facilitate deals on conservation easements. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

Impacts
ECOSEL has not been launched yet because it is still in the development phase. As a result, there are no outcomes or impacts per se to report at this time. As far as user feedback, information from focus group meetings and the response of the scientific community to our papers and presentations are concerned, we can report that the concept alone made a lot of people very excited about the prospects of voluntary mechanism for forest ecosystem services. The primary impact that has been achieved so far in this regard is the discussion among some players in the forestry sector about how ECOSEL could help them make non-timber revenues. Here are our findings from the experimental auctions: 1. We found that allowing the participants to communicate with each other during bidding increases the likelihood of an outcome that maximizes social surplus. 2. We also found that a lower number of alternatives presented for bidding increases seller profit. 3. Lastly, threshold cost disclosure, whether to disclose the amount of money to the bidders that would have to be raised for a particular alternative, has a mixed impact depending on the perceived value of the services. 4. We identified a range of public good values where cost disclosure is always the best policy with respect to both social surplus and seller profit. These findings are currently being used to streamline the on-line bidding mechanism. Here are our findings from the market analyses: 1. We found the market is split with respect to preferred strategies for the enhanced provision of environmental services. Some people expect the government to ensure services via regulations and are willing to make monetary sacrifices by voting for self-regulation or by hiring professional advocacy: lobbyists or attorneys. Others prefer to use voluntary markets such as ECOSEL. 2. We administered a stated preference survey of Oregon and Washington households to assess willingness-to-pay for forest ecosystem services through an ECOSEL-type, provision point mechanism. 63% of the survey respondents preferred to pay for a program that delivered enhanced ecosystem services in comparison to 37% who preferred the status quo. For an average program chosen from a hypothetical ECOSEL portfolio, we found that respondents were willing to pay $102/year per household for a specific management plan that delivers carbon storage and mature forest habitat. 3. While our market results are encouraging, we acknowledge that only real auctions will provide hard evidence for the revenue generating capacity of the mechanism.

Publications

  • Rabotyagov, S.S., S.F. Toth, and G.J. Ettl. 2011. Testing the Design Variables of ECOSEL: A Market Mechanism for Forest Ecosystem Services. Forest Science (in review).
  • Toth, S.F., G.J. Ettl and S.S. Rabotyagov. 2010. ECOSEL: An Auction Mechanism for Forest Ecosystem Services. Mathematical and Computational Forestry & Natural-Resource Sciences 2(2): 99-116.