Does Forestry Make Money – Part 2

About 2 years ago I wrote a blog asking the simple question of whether the forest industry in British Columbia makes money or whether it is operational only because of subsidies and the failure to recognize that biodiversity and ecosystem services could be valuable. A recent report from the research group in the Fenner School of the Australian National University has put the spotlight on the mountain ash forests of the Central Highlands of Victoria to answer this question for one region of southern Australia. I summarize their findings from their report (Keith et al. 2016) that you can access from the web address given below.

The ANU research group chose the Central Highlands study area because it included areas with controversial land use activities. The study area of 7370 sq km contains a range of landscapes including human settlements, agricultural land, forests, and waterways, and is used for a variety of activities including timber production, agriculture, water supply and recreation. It is also home to a range of species, including the endemic and critically endangered Leadbeater’s Possum. These activities and their use of ecosystems can be either complementary or conflicting. Managing the various activities within the region is therefore complex and requires evaluation of the trade-offs between different land uses and users, an issue common to forestry areas around the world.

The accounting structure (System of Environmental-Economic Accounting) which is used by the United Nations is described in more detail in the report. Both economic and ecological data are needed to produce ecosystem accounts and these sources of data must be integrated to gain an overall picture of the system. This integration of ecosystem services with traditional cash crops is the key to evaluating an area for all of its values to humans. In this particular area the provisioning of water to cities is a key economic benefit provided by this particular area. The following table from their report puts all these accounts together for the Central Highlands of Victoria:

Table 5. Economic information for industries within the study region in 2013-14
Agriculture Native Forestry Water supply Tourism
Area of land used (ha) 96,041a 324,380b 115,149c 737,072d
Sale of products ($m) 474 49 911 485
Industry valued added ($m) 257 9 233 260
Ecosystem services ($m) 121 15 101 42
Sale of products ($ ha-1) 4918 151 7911 659
Industry value added ($ ha-1) 2667 29 2023 353
Ecosystem services ($ ha-1) 1255 46 877 57

a area of agricultural land use
b area of native forest timber production
c area of water catchments
d total area of study region

The key point in this table is that the value-added per ha of forestry is $29 per ha per year. The equivalent value for water is $2033 per ha per year – or 70 times more, and the value added for agriculture is about 90 time more than that of forestry. The value-added value for tourism is $350 per ha per year, about 12 times more than that of forestry. None of this takes into account any potential government subsidies to these industries, and none involves directly the endangered species in the landscape. Three main points emerge from this analysis:

  1. In 2013-14, the most valuable industries in the region were tourism ($260 million), agriculture ($257 million), water supply ($233 million) and forestry ($9 million). This is as measured by the estimated industry value added (the contribution to GDP).
  2. In 2013-14, the most valuable ecosystem services in the region were food provisioning ($121 million), water provisioning ($101 million), cultural and recreation services ($42 million).
  3. At a carbon price of $12.25 per ton (the average price paid by the Commonwealth in 2015), the potential ecosystem service of carbon sequestration ($20 million) was more valuable than the service of timber provisioning ($15 million).

The main implications from the report for this large geographical area are three:

  • The benefits from tourism, agriculture, and water supply are large, while those from forestry are comparatively small. There is a potential for income from carbon sequestration.
  • The activities of tourism, agricultural and water supply industries are complimentary and may be combined with biodiversity conservation and carbon sequestration.
  • Timber harvesting in native forests needs to better account for the occurrence of fires and can be incompatible with species requirements for conservation.

The recent global interest in both climate change and species conservation has pushed this type of analysis to uncover the complementary and conflicting activities of all major global industries. Replacing the conventional GDP of a country or a region with a measure that takes into account the changes in the natural capital including gains and losses is a necessary step for sustainability (Dasgupta 2015, Guerry et al. 2015). This report from Australia shows how this goal of replacing the current GDP calculation with a green GDP can be done in specific areas. Much of biodiversity conservation hinges on these developments.

Dasgupta, P. 2015. Disregarded capitals: what national accounting ignores. Accounting and Business Research 45(4): 447-464. doi: 10.1080/00014788.2015.1033851.

Guerry, A.D., et al. 2015. Natural capital and ecosystem services informing decisions: From promise to practice. Proceedings of the National Academy of Sciences 112(24): 7348-7355. doi: 10.1073/pnas.1503751112.

Keith, H., Vardon, M., Stein, J., Stein, J., and Lindenmayer, D. 2016. Exzperimental Ecosystem Accounts for the Central Highlands of Victoria. Australian National University, Fenner School of Environment and Society. 22 pp. Available from:
http://fennerschool-associated.anu.edu.au/documents/CLE/VCH_Accounts_Summary_FINAL_for_pdf_distribution.pdf

One thought on “Does Forestry Make Money – Part 2

  1. jeffollerton

    No real surprises here, Charlie, a number of studies have found similar things, especially that tourism/recreation is often one of the largest (but largely unaccounted) contributions to the local economy. One of my postdocs, Jim Rouquette, did a similar analysis for the Nene Valley Nature Improvement Area project and found that recreation exceeded other ecosystem services by a couple of orders of magnitude:

    http://www.nenevalleynia.org/wp-content/uploads/2015/03/Valuation-of-ecosystem-services-in-the-Nene-Valley-NIA.pdf

    He’s revising these figures and adding in total agricultural production but the pattern is similar, tourism is more valuable than the rest, which is a strong argument for multi-functional landscapes, as you say.

    Reply

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