CORVALLIS, Ore. — The value of private timberland in Oregon, Washington and California has fallen by nearly 10% over the last 20 years due to more frequent wildfires and drought, according to new research by Oregon State University.

A study published Nov. 7 in the Journal of Environmental Economics and Management puts the total losses at about $11.2 billion.

Impact of fires

David Lewis, professor of applied economics at OSU, said he was motivated to look into the data following the 2020 wildfire season in Oregon, where more than 1.2 million acres burned, thousands of homes were destroyed and nine people were killed.

For the study, Lewis and postdoctoral student Yuhan Wang analyzed more than 9,000 sales of privately owned timberland across the three states from 2004 to 2020.

Information about each transaction, including price and location, was then compared to wildfire activity at or around the time of sale.

During the 1980s and 1990s, Lewis said an average of 0.42 wildfires burned within 15 kilometers of the forests per decade, or what he called the “fire arrival rate.”

However, from 2000 to 2020, that rate increased to 0.72 fires per decade.

Risk up, value down

“Economic theory would say that if you’re holding any kind of asset, if the risk goes up, then the price of that asset should go down,” Lewis said. “We were interested in testing that, because nobody had tested that particular channel between wildfire and timberland before.”

Indeed, the researchers found that wildfires have caused an 8.7% decline in the value of private timberland.

Most of the losses were not due to direct burning on the properties, but by the higher risk of investing in private timberland as fires have grown more recurrent.

“The bulk of the damage is from altered risk expectations in land markets, not direct damage to the existing tree stock on the stand,” said Wang, who was the lead author on the study. “That is a key, and somewhat surprising finding.”

Wang and Lewis also incorporated drought stress into their examination, using a metric known as vapor pressure deficit — or the difference between the amount of moisture that’s actually in the air versus the amount of moisture that the air could hold when it is saturated.

Impact of drought

Drought further reduced the value of private timberland by an average of 1%, they found. Based on other recent climate studies, Wang and Lewis attributed about $6.2 billion of the $11.2 billion in total damages to climate change.

“I think one of the main things (this study) answers is it gets at how climate change, wildfires and drought are affecting the value of what we call natural capital,” Lewis said. “Wildfires are changing the risk of holding timberland, so it’s worth less now with that higher risk. Even if the land hasn’t burned directly, damages are still happening.”

State by state

Breaking the data down between the three states, Wang and Lewis found that:

• In Oregon west of the Cascade Range, drought stress reduced private timberland values by 1.6% and wildfire losses were 7.7%. East of the Cascades, drought stress dropped to 1.1% and wildfire losses to 6%. The difference was largely due to more private timberland west of the Cascades being closer to large wildfires in recent years, according to the researchers.

• The pattern was reversed in Washington, where drought caused a 0.2% decline in private timberland value and wildfires caused a 5% decline west of the Cascades. East of the Cascades, the losses were 3.5% due to drought and 8.1% due to fires.

• In California, wildfires caused a 13.7% decrease in private timberland values and a 0.2% drought stress gain, which the researchers said was the result of most private timberland being located in the wetter northwestern region of the state.

Wang said the study gives new insights into estimating wildfire damages beyond property loss, health care costs, fire suppression costs and environmental damage.

”The study helps us understand the effects of historical climate shocks on the economic value of natural capital and also provides insights into the potential benefits of actions to mitigate extreme weather events,” she said.