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Untangling the NEM: A policymaker's guide to the National Electricity Market

June 14, 2022

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

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.

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