Wednesday, December 02, 2009

The Green New Deal, part II

The Greens today released the second part of their Green New Deal, this one focusing on employment opportunities through forestry [PDF]. Like the first one, its a good, serious, environmentally-focused policy, lightyears from the right's parody of the Greens as flakes. OTOH, looking at the maths, not all of it seems to be worth implementing.

The core of the policy is a package to boost forestry by giving investment certainty for new forest planting, promoting farm forestry through the afforestation grants scheme and tweaking the Permanent Forest Sink Initiative, and through direct planting on crown land. Together, these measures are expected to cost $121 million, create over 18,000 jobs, and save 27 million tons of carbon as well as producing other environmental benefits - which means that they pay for themselves five times over from the carbon costs alone (assuming a conservative $25 per ton). We'd be mad not to do it.

The first of these ideas is likely to prove controversial. The Greens are suggesting that the government provide financial certainty and promote planting by guaranteeing a minimum price of $25/ton for carbon from new permanent forests. If they can't sell it for more, the government will buy it at $25 / ton. The Greens word this in a way that makes it look like a subsidy, but its better to think of it as a hedge. Forest owners pay a small amount for price certainty, and the government gets a contingent liability. But if carbon prices rise as expected - and the government is assuming they will average $50 per ton after 2013 - that liability will never be realised and will expire with the scheme. If they don't rise, the government wears the difference on an estimated 11.2 million tons of forest carbon - unless (and the Greens suggest this) they buy insurance for that risk on the international market. Its a conceptually sound idea, and the only question is what the price should be (from the Greens' pricing, they seem to be assuming a 25% chance that carbon prices won't rise, but Treasury may have a different idea of the odds).

The planting on crown land aspect is similar to that already talked about by the government, and is simply a matter of making land available for plantation forestry. The Greens would prefer to see this used for crown-administered land (e.g. that owned by the defence forces, LINZ, LandCorp and various other entities) rather than the conservation estate, or at least see the latter limited to native trees rather than more pines. They assume no cost, in other words that forest planters would be paying for a commercial lease, and that this could lead to 11.2 million tons of carbon stored over ten years. The down side, unmentioned, is that if these are plantation forests, that carbon is merely borrowed and will be released when the trees are cut down. But it will tide us over in the meantime, and there seems little reason not to do this.

The second strand is pest control and forest management. This is the more expensive part of the overall package, producing fewer jobs per dollar spent. Worse, as New Zealand does not want to account for forest management under the Kyoto Protocol, the 6.6 million tons of carbon saved won't count against our international liability, and can't be used to offset the costs of the scheme (not that they would; at a conservative $25 per ton, it only yields $165 million). So this strand comes down to whether you think its a good idea to spend $25 million a year to kill possums - and I'm not sure whether that's a good equation.

The third strand is control of a different form of pest: wilding pines. This is relatively cheap in terms of annual cost - $9.5 million a year for ten years - and the jobs it creates are relatively expensive ($70,000 per direct job - as much as subsidised carbon!). But wilding pines are becoming a serious problem, and the cost of their removal will only get higher. This is probably worth doing, and arguably its something that DoC should be funded to do properly anyway.

Overall, the entire package is expected to cost $474.5 million over 10 years, create more than 25,000 direct jobs, and save 36 million tons of carbon. But most of these benefits are in the initial forestry section (and most of those are in the two policies I've highlighted which effectively cost nothing). Fortunately, we don't have to adopt the package as a whole, so the government could just do the stuff where there is a clear economic case, and ignore the stuff where there is not. Doing that will still create over 15,000 jobs while saving us a billion in carbon - and the government would be mad not to do it.