THE FOREST AND AGRICULTURAL SECTOR OPTIMIZATION MODEL (FASOM) - MODELSTRUCTURE AND POLICY APPLICATIONS - INTRODUCTION

Recent concern over accumulation of atmospheric carbon dioxide has pro mpted the development of options for mitigation strategies to prevent climate change, including strategies to increase carbon sequestration in U.S. forests. The FASOM model initially was developed to evaluate w elfare and market impacts of alternative policies for sequestering car bon in trees, but since its development it has been applied to a wider range of forest and agricultural policy scenarios. The FASOM modeling system has a joint, price-endogenous, spatial equilibrium market stru cture, with the linked agricultural and forestry sectors competing for a portion of the land base. Prices for agricultural and forest sector commodities and land are endogenously determined given demand functio ns and supply processes. The structure of the two sectors is based in part on elements of the TAMM and ASM models. Unlike TAMM, decisions pe rtaining to land use and timber management investment in FASOM are end ogenous. Intersectoral land transfers are important in the analysis of sector-specific and cross-sectoral policies, but land does not transf er freely in FASOM. The FASOM model was developed with (a) explicit la nd balances in each sector, (b) land transfer costs, and (c) limits on land transfers based on land suitability. Through an optimization app roach, the FASOM model maximizes the net present value of the sum of c onsumers' and producers' surpluses (for each sector), with producers' surplus interpreted as the net returns from forest and agricultural se ctor activities. Farmers and private timberland owners are assumed to have perfect foresight regarding the consequences of their behavior; t hat is, expected future prices and the prices realized are identical. The model provides estimates of economic welfare disaggregated by agri cultural producers, timberland owners, consumers of agricultural produ cts, and purchasers of stumpage. The GAMS programming language is used for the compact representation of the large forestry and agricultural sectors and to solve the model; it was formulated originally as a non linear mathematical programming problem. The programming structure all ows easy expansion of the FASOM model. FASOM can model the forest and agricultural sectors either independently or simultaneously. The model ing system is designed to provide information about the effects of a w ide range of potential policies on carbon sequestration, market prices , land allocation, and consumer and producer welfare under alternative supply and demand scenarios and producer eligibility-participation co nstraints. The modeling system is designed so that the sensitivities o f these policies and their results can be evaluated given different as sumptions about policy structure and finances.