Tullus, A. *, Lukason, O., Vares, A., Padari, A. Lutter, R., Tullus, T., Karoles, K. and Tullus, H. 2012. Economics of hybrid aspen (Populus tremula L. × P. tremuloides Michx.) and silver birch (Betula pendula Roth.) plantations on abandoned agricultural

We analysed the economics of hybrid aspen and silver birch which are both fast-growing deciduous trees recommended for the establishment of plantations on abandoned agricultural lands in Northern Europe. If managed during one rotation period the internal rate of return (IRR) of hybrid aspen plantations was 4.4-7.3% and the IRR of silver birch plantations was 4.7-6.7%. The highest value of IRR of 8.1% was estimated for the two-rotation (26+26 years) hybrid aspen management scenario in excellent site conditions. Higher IRR values were reached at excellent quality sites whereas hybrid aspen was more sensitive to site quality. With land cost included in the analysis, 1.1-1.7% lower IRR values were obtained compared to the case where land cost was excluded from the analysis, but the ranking of scenarios did not change. The financial maturity ages of one-rotation scenarios corresponding to maximum expected IRR values were 26 or 34 years for hybrid aspen in excellent or good to moderate sites respectively, whereas the maturity age did not change with the inclusion of land in the analysis. The maturity ages for different silver birch scenarios varied in the range of 34-45 years. The land expectation values (LEV) remained positive in case of 1-5% discount rates. In case of 3% discount rate, LEVs of all scenarios were roughly comparable to the current median agricultural land price. We conclude that the establishment of plantations with both studied hardwoods can be a profitable investment in Northern Europe and to ensure greater profitability such plantations should be managed under shorter rotations than traditionally used for birch and aspen forests in the region.

Keywords: abandoned agricultural lands, afforestation, deciduous trees, forest economics, hybrid aspen, internal rate of return, land expectation value, plantation forestry, short-rotation fore.ry, silver birch.