Seeing the forest for the trees

From: https://www.blueprintinstitute.org.au/seeing_the_forest_for_the_trees

Download the blueprint at the link above.

Australia is home to some of the  world’s most ancient forests. These native forests are some of the most  biodiverse environments on the planet, and are a valuable tool in the  fight against climate change through their ability to capture and store  carbon and regulate the water cycle.

This paper offers policymakers a  blueprint for assessing the true value of our native forests.  Recognising the inherent preferencing of the quantitative (particularly  when it comes to Expenditure Review Committee processes), we conduct a  comprehensive cost-benefit analysis of conserving Tasmania’s native  forests, in particular those which are currently subject to logging by  the state-run firm Sustainable Timber Tasmania (STT). This paper builds upon Blueprint’s  previously published studies on the economic potential of alternate land  uses of native forests in Victoria’s Central Highlands, and New South Wales’ North Coast.

Using a cost-benefit analysis based  on cash flows, we evaluate the economic potential of native forest  conservation by modelling the value of carbon sequestration against  continued logging. Our forecast shows that if STT ceased their native  logging operations in FY2025 instead of FY2049, the use of this land for  carbon sequestration would provide a net-benefit valued at $72 million in present day dollars. We find that a move to alternate land uses will  result in a positive net present value, even when factoring in the  estimated cost of providing a transitional package to the broader  forestry industry to facilitate its move toward a more sustainable  plantation-based future.

Our cost-benefit analysis  incorporates a range of assumptions that were deliberately designed to  overstate the costs and minimise the benefits of halting STT’s native  timber logging. Were we to remove these assumptions from our  cost-benefit analysis, we find a net benefit of $936 million in ceasing logging immediately. By including these favourable assumptions, we, methodologically  speaking, have given the logging industry the benefit of the  doubt—demonstrating that even when every conceivable dollar is counted  in favour of STT’s native timber operations, it nevertheless shows  itself economically uncompetitive against alternate land uses.

The native forests of Tasmania have  significant capacity to generate major alternate revenue streams that  can replace that which is generated from logging—on the proviso that a  robust carbon methodology is put in place, to enable the generation of  Australian Carbon Credit Units (ACCUs) from a cessation of timber  harvesting. In particular, we find that managing Tasmania’s native  forests in a manner consistent with conservation principles would abate  an average of one million tonnes of carbon annually. This equates to a net present value of $345 million at current ACCU spot prices.

Lastly, we must comment upon the  unusual and declining transparency in STT’s annual reports. Other  state-run forestry corporations that we have studied were noticeably  less opaque, particularly with respect to pricing information. The lack  of publicly available pricing information likely acts as an impediment  to private investment by increasing uncertainty, thus deterring private  plantation-based competitors from entering the market.

In light of our findings, we  encourage the Tasmanian Government and Opposition to work in concert  with the Federal Government to enact the following recommendations:

1. Immediately cease all government subsidies to STT.

2. Legislate the end of STT’s native forest logging operations in Tasmania by FY2025.

3. Implement a  robust carbon methodology that would enable the generation of ACCUs  through a cessation of native timber harvesting and a suite of  conservation-based management practices.

4. Expand timber plantations to meet timber demand.

5. Incentivise private investment in timber plantations.

6. Improve  STT’s transparency to match that of other state-run forestry  corporations, particularly as it relates to the price of timber.

7. Create a  ‘natural capital’ weighting that increases the value of native forests,  thus ensuring that they have a higher Benefit Cost Ratio when  Expenditure Review Committee decisions affecting them are made.

8. Support  the development of environmental markets to channel private capital  toward nature-positive biodiversity outcomes in Tasmania