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Branching Out: Exploring Alternate Land Use Options for the Native Forests of NSW

April 27, 2023

Australia is home to some of the world’s most ancient forests. The benefits of native forests are extensive—they are efficient carbon sinks, they are amongst the most biodiverse environments on the planet, and they provide vast quantities of water (and preserve the quality of the water table).

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 the native forests of the Upper and Lower North East Regional Forest Agreement areas of New South Wales, also known as the North Coast. This piece of work builds upon Blueprint’s previously published cost-benefit analysis of alternate land uses versus logging in Victoria’s Central Highlands. We assess the economic potential of native forest conservation by modelling the value of carbon sequestration and tourism against continued logging. Our findings demonstrate conclusively that there is no economic case for continued logging of native forests on the North Coast of New South Wales. As in the Central Highlands of Victoria, logging of native hardwood forest on the North Coast is a loss making enterprise, subsidised by Forestry Corporation of New South Wales’ (FCNSW) profitable softwood plantation division, along with the taxpayer via periodic equity injections from the state government. Based on its own merits, we find that FCNSW’s native hardwood division is not commercially viable.

Using cost-benefit analysis modelling we find that ending native forest logging in 2023–24 instead of 2039-40 (the date that the North East Regional Forestry Agreement is currently scheduled to expire), and instead utilising the land for carbon sequestration and tourism will deliver a net benefit valued at $45 million in present-day dollars. This includes the estimated cost of providing transitional packages to the industry as it shuts down, as well as the cost of breaking wood supply agreements that extend to 2028.

The native forests on the North Coast have significant capacity to immediately generate major alternate revenue streams that can replace revenue generated from logging. In particular, we find that managing the North Coast region in a manner consistent with conservation would abate an average of 0.45 million tonnes of carbon annually. This equates to a net present value of $174 million. Our analysis also indicates that increased tourism to the region could, over 17 years, provide a net present value of $120 million. In totality, from present to FY2040, using the forests of the North Coast for purposes other than logging will generate at least $294 million in revenue.

The next government-led five yearly review of the logging industry will commence in 2024, making now an ideal time for impactful analysis. We encourage the New South Wales Government and Opposition to enact the following recommendations

1. Immediately cease all government subsidies to FCNSW.

2. Create a ‘natural capital’ weighting that increases the Benefit Cost Ratio of native forests when Expenditure Review Committee decisions affecting them are made.

3. Legislate the end of native forest logging in New South Wales.

4. Expand land valuation methodologies to include carbon storage, tourism and water.

5. Expand hardwood timber plantations to meet hardwood demand.

6. Incentivise private investment in timber plantations.

7. Expand formal policy mechanisms aimed at conserving native forests.

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