WWETAC Projects
Project Title: Interaction of private and public forest fire risk management decisions
Status: Completed
Principal Investigators: Gwenlyn M. Busby, Heidi J. Albers, and Claire A. Montgome, Department
of Forest Resources, Oregon State University, Corvallis, OR 97331
E-mail Contact: gwen.busby[at]oregonstate.edu; hj.albers[at]oregonstate.edu; claire.montgomery[at]oregonstate.edu
Summary: The wildfires that blaze across the western United States each year burn millions of acres, threaten homes and property, and leave dense, over-stocked forests blackened and charred. These fires continue to burn in spite of the millions of dollars spent every year on fire suppression. The regulatory reaction to these destructive wildfires was the congressionally approved 2003 Healthy Forest Restoration Act, which requires federal agencies to focus fire protection in the wildland-urban interface (WUI)2 where homes and private property are at the greatest risk of wildfire damage. More recently, and in an effort to control wildfire protection costs, the U.S. Department of Agriculture has argued that communities and landowners, not the federal government, should be responsible for managing wildfire risk on private land. These policy debates, however, have continued largely uninformed by economic analysis. Existing economic models of natural hazards provide insight into only some of the issues relevant to wildfire, primarily regarding private insurance decisions and the fuel management decisions of a single land owner. Existing models are unable to adequately address wildfire risk due to their lack of a spatially explicit, dynamic framework that incorporates patterns of landownership and the strategic interaction of private landowners and public land managers.
Because wildfire spreads across the landscape without regard for property boundaries, the risk an individual faces is a function of forest management decisions made both by the individual owner and neighboring landowners. Each landowner considers the state of neighboring forests when making decisions about buying insurance and undertaking wildfire risk-mitigating activities (such as fire-resistant building materials, fuel removal from forests, and no-tree areas around homes). In this paper we examine how the spatial configuration of forest ownership, liability rules, and the availability of private insurance influence the risk-mitigating behavior of the public forestland manager and the private forestland owner over time. We also determine whether or not the predicted equilibrium outcomes are socially optimal and, if not, what liability rules or regulations would lead to socially optimal outcomes.
Because both individual and collective actions affect wildfire risk, this problem is well suited to game theory and the analysis of strategic behavior. We use a game theoretic framework to examine how public land management agencies' investment in fuel management influences, and is influenced by, decisions made by private forestland owners. The two primary questions into which we seek insight are: (1) what are the best policies to address wildfire-risk in the WUI and protect public values outside the WUI, and (2) how does spatial configuration and location affect the timing and amount of fuel treatment on a landscape with mixed ownership?
We approach the wildfire problem using a spatially explicit, dynamic game theory model. We develop both a simultaneous and a sequential move game, each with perfect information. In both cases the game is played between a public land manager and a private land owner a finite number of times. The landscape is composed of two ownership types: public and private. The risk of wildfire each player faces is a function of their on-site decisions and those of their neighbor. The public land manager is budget constrained and chooses fuel management effort to maximize his expected resource value on public land both in the WUI as well as outside the WUI. The private landowner is also budget constrained and chooses the optimal combination of fuel management effort and private insurance to maximize his expected value on private property. Finally, the Social Planner's problem is specified and solved in order to compare the social optimum to the outcome that arises in equilibrium from the game between the private and public actors.
Exploring the equilibrium of the games played over a range of parameter values, spatial configurations, and number of private landowners reveals valuable information about policy. Preliminary results indicate that when public liability is high, private landowners are most likely to free ride on public land manager's fire protection expenditure. Public values outside the WUI are most likely to be under-protected when public liability in the WUI is high, the public budget is tight, and values outside the WUI are great. For each spatial configuration we calculate ownership fragmentation statistics in order to determine how equilibrium outcomes vary with the degree of fragmentation. We expect that on highly fragmented landscapes, the positive spatial externalities associated with fuel reduction would reduce the incentive for additional on-site fuel reduction and make the extreme free riding equilibrium more likely. When insurance is available to private landowners we expect fuel reduction on private land to decrease and, to control wildfire risk, public fuel reduction to increase
The number of people living and building homes in forested areas throughout the Western United States is on the rise and a policy of publicly funded protection of private values over public values is increasingly costly to the provision of public goods from forests both within and outside of the WUI. The outcome of the policy debates over who is responsible for wildfire protection will have a lasting impact on the landscape. Informed decisions in the area of wildfire risk management require careful economic analysis of the strategic interaction between public land managers and private landowners over space and time.
Project ID: FY06TS10
