Research on Investment Analysis of Forestry Engineering Project Based on Real Option

Abstract

Forestry carbon sequestration plays a crucial role in both addressing and adapting to global climate change. The large investment scale, long recovery period, and uncertain returns associated with forestry carbon sequestration projects have made forestry investment decisions increasingly complex. Traditional valuation methods, such as discounted cash flow analysis, struggle to provide a comprehensive, objective, and accurate assessment of carbon sequestration projects overall. In contrast, the physical option method can fully consider uncertainty factors and quantify them into the form of options, analyzing the time value of cash flows in carbon sequestration projects more realistically, scientifically, and reasonably, thus making a more comprehensive assessment of carbon sequestration projects and addressing the shortcomings of traditional methods.

Based on the research results of China’s voluntary forest greenhouse gas emission reduction projects, this study takes the forestry carbon sequestration project in Gaotianyan Ecological Forest Area, Lianhua County, Pingxiang City, Jiangxi Province as an example. The traditional NPV method and the Black-Scholes model are used to evaluate the value of the project. The conclusions drawn are as follows: (1) Under the existing technical support conditions, forestry carbon sequestration projects, such as Chinese fir carbon sequestration afforestation projects, have significant carbon sequestration and emission reduction effects, while also exhibiting characteristics of skewed distribution. (2) The option value of afforestation projects constitutes the main part of the carbon sequestration value based on the project. The purpose of this study is to provide a reference for promoting the healthy development of forestry carbon sequestration projects and scientifically evaluating the value of forestry carbon sequestration projects.