Assessing the impact of policies and regulations on log supply : a British Columbia case study

British Columbia is one of the major log producers in Canada and is somewhat unique compared to the rest of the world since the majority of its forests are publicly owned. Log supply is the key underlying economic driver in the performance of British Columbia’s wood-products industry. Despite its importance, little work has been done recently to analyze it. Moreover, there have been significant changes in markets and policies in the past decade that needs to be addressed in these analysis. This research investigates the impacts of government policies and market changes on British Columbia`s log supply. The objectives of this research are (1) to develop a log supply model for British Columbia regions (coast and interior) and (2) to identify relationships between government and market factors and log supply. Monthly time-series data from 2000 to 2013 were used to develop regional regression models for log supply. These models take into account differences in log quality as well as log prices, cost of labour, seasonality, and policy. The methodology used in this research is based on developing simultaneous equations models where the price is endogenously determined at the intersection of the demand and supply models. Two Stage Least Square (2SLS) method is used to estimate the models. The results showed that log supply is elastic in the coast region and inelastic in the interior. Own price elasticity was significant in all regions with respect to different grades except for the low grade logs in the interior. Changes in policy impacted the log supply and harvest levels in BC. These changes in the policy included the elimination of minimum harvest levels and introducing take or pay policy. Costs and other market factors such as wage and log export price impacted log supply but the effect differs based on the region and log quality. Seasonality is the other factor impacting log supply in all regions and for all log types.Forestry, Faculty ofGraduat