Friday, May 25, 2007

Climate change: why we can't leave forestry to the market

MAF has just released the latest version of its National Exotic Forest Description [PDF], giving a snapshot of New Zealand's forestry industry as it stood at 1 April 2006. And the picture it paints is not pretty: total forest cover declined for the third year in a row, new planting rates for the ninth year, and a record 12,900 hectares of harvested forest was not replanted. National has been quick to blame this on the government's climate change policies, but the blunt fact is that forest owners are doing this because it is profitable - because log prices are low (though apparently beginning to improve), while prices for dairy land are high. And they will continue to do it for as long as that is the case.

This is what the free market gives us: net deforestation, and new "forests" planted in scrub which are absolutely useless from a Kyoto perspective.

This is disastrous. Kyoto's rules around forests are complex, but given New Zealand's emissions situation the net effect is that every tree cut down must be offset with emissions reductions elsewhere or carbon credits purchased on the international market. The cost of this - almost $200 million for last year at Treasury's (lowball) estimated carbon prices - will be borne by the taxpayer. Meanwhile, forest owners get to laugh all the way to the bank.

They shouldn't be allowed to. Instead, they should be paying the full cost of their activities, rather than being allowed to dump them on society. The taxpayer should not be subsidising the profits of private businesses in this way.

As for ways of doing it, the government is currently proposing a deforestation permit trading system, which would cap deforestation at 27,000 hectares over 5 years and force forest owners to pay each other for the right to cut down trees. And if the National Party actually cared about the problem, rather than seeing it simply as another stick to beat the government with or an excuse to funnel public money into the private pockets of their donors and cronies, they'd vote for it.


Nuh uh. Kyoto states that the carbon credits for forests go to the government and it is up to individual states to do with it what they will. That fulfills the sovereignty issue. Mugabe, for example, probably gives them to his horse. Singapore, with such puny forests, probably wouldn't bother splitting the credits.

Forests aren't being cleared because there's good money in it. Between the high dollar and competition with Indonesia, China and Brazil, it's rubbish. But it's more money than nothing, which is why not giving them the carbon credits is a bad idea.

Leave the market to do what is does. Keep the rulebook to ensure the market does what you want it to do. As Kim Stanley Robinson posited with the eco-economics thing in
Red Mars, it is a matter of setting the initial conditions properly. Carbon credits were a novel step in this direction.

Labour have stuffed up the implementation of Kyoto. Bad accounting, bad policy, bad salesmanship. Even now, their commitment to be carbon-friendly is a sham, if going past the MED and MSD offices is anything to go by. They're lit up like Xmas trees.

Posted by Will de Cleene : 5/25/2007 09:33:00 PM

"This is what the free market gives us..."

You could say "under-regulated", if you think so, but it's hardly "free".

Posted by Anonymous : 5/25/2007 09:40:00 PM

What's with these 'deforestation credits'??? Aren't they just a harder way to implement carbon credits? With carbon credits you already have a Kyoto-compatible system which would make it easier to integrate with any global carbon credit system that emerged in the future.

It would seem to me far easier to just give foresters the ability to trade the carbon credits their industry is already responsible for than, to create a whole other system.

In creating such a new system you run the unneccessary risk of getting the numbers associated with the system, or other aspects of the system wrong (as the EU has with its cap-and-trade system).

Posted by Anonymous : 5/27/2007 09:41:00 AM

And I thought people were cutting down forests now because Labour was going to put a huge charge on anybody cutting down trees in the not so distant future?

Posted by Just my opinion : 5/28/2007 09:28:00 AM

Low log prices have nothing to do with this.

In terms of harvesting, when prices are low, people delay harvesting in the hope they will rise again - so when prices are low, as they have been, you would expect to see less chainsawing going on in the short-run.

In terms of planting, it is the expected price in 25 years that drives investment and everyone understands that with environmental concerns the demand for sustainably-grown timber is likely to increase over native trees from Brazil and elsewhere - and in comparison to synthetic products.

You'll need to try harder to identify the reason for this than today's (or yesterday's) log prices.

Posted by Anonymous : 5/28/2007 10:38:00 AM