It makes better financial sense for the native forests of southern NSW to remain un-logged and left to generate carbon credits, a new report suggests.
NSW taxpayers would be able to generate carbon abatement, conservatively valued at about $222 million over the next 2¬Ω decades, and use some of the money to fully compensate timber companies, according to the analysis by think tank The Australia Institute.
The NSW government disagrees, saying the report is based on an unrealistically high carbon price.
Taxpayers are presently losing money on native forest logging.
”Stopping harvesting and using the native forests of the Southern Forestry Region to generate carbon credits offers a viable alternative to commercial forestry,” the report said, citing public data about the profitability of all current logging operations, government subsidies, and company tax received from logging corporations.
The NSW government has reviewed the report, but said it used incorrect assumptions.
“One such error identified is the assumed net financial benefits from carbon sale quoted at $222 million,” a spokeswoman for Primary Industries Minister Katrina Hodgkinson said.
”This estimate is over-inflated and based on a carbon price of $9 increasing at 2.5 per cent real from 2015, where in reality the carbon price is likely to be around $5 flat.”
While most sawmillers turn small profits, the industry overall loses money, and the losses are largely borne by the government-run Forestry Corporation of NSW. The details of their contracts remain commercial-in-confidence, but net losses via subsidies between now and 2033 are estimated to be about $77 million.
”Under current and likely future market conditions, the harvesting and processing of native logs in the Southern Forestry Region is likely to generate substantial losses, and the aggregate net financial benefits are likely to be significantly higher if commercial harvesting is stopped and the native forests ‚Ä¶ are used to generate carbon credits,” the report said.
The main glitch in the proposal is that native forestry logging operations are not yet eligible to generate carbon credits under the federal government’s Carbon Farming Initiative. However, both the government and the federal opposition have said they intend to expand the scheme soon.
”The growth in eucalypt plantations has been massive, and these are now coming online and muscling in on native forest logging,” said the report’s co-author, Andrew MacIntosh, associate director of the Centre for Climate Law and Policy at the Australian National University.
Ben Cubby, Environment Editor
The Age, July 8, 2013
The technical briefing (PDF) from TAI is available here