Market and non-market benefits in government-assisted reforestation in the Queensland wet tropics

Eono, Jean-Claude (2003). Market and non-market benefits in government-assisted reforestation in the Queensland wet tropics PhD Thesis, School of Economics, The University of Queensland.

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Author Eono, Jean-Claude
Thesis Title Market and non-market benefits in government-assisted reforestation in the Queensland wet tropics
School, Centre or Institute School of Economics
Institution The University of Queensland
Publication date 2003
Thesis type PhD Thesis
Supervisor Dr. Steve Harrison
Dr. John Herbohn
Total pages 418
Language eng
Subjects 140205 Environment and Resource Economics
Formatted abstract There have been many studies to estimate the total economic value (TEV) of protected forests, but little attention to the total economic value of plantation forestry programs with high non-wood benefits. This thesis examines the economics of the Community Rainforest Reforestation Program (CRRP), a program implemented in the Wet Tropics of Queensland in 1992. This aspect of the thesis contributes to the environmental economic field by estimating the TEV of the reforestation undertaken in this program. The thesis also examines the factors that led to the creation of the CRRP, the reasons as to why landholders took part in this program, and if 'community' forestry is feasible under the property rights regime in place in Queensland.

Two surveys were undertaken to identify the most important economic benefits and economic costs of reforestation under the CRRP. An important survey finding is that local government representatives ranked timber production and employment as most important goals of the program, while landholders ranked non-wood forest benefits (NWFBs) such as greenhouse gas reduction, improving water quality and arresting soil erosion as most important. Labour and land (unsuitable for other crops) restraints appear to be the main resource factors explaining why more tree plantations were not established. Establishment costs are the main financial barrier to planting without financial assistance, but taxation of timber income is not perceived as a major barrier for the landholders surveyed.

Within a cost-benefit framework, the economic model of small-scale forestry developed in the thesis extends existing economic models of plantation forestry by integrating the NWFBs to derive the TEV and the net present value (NPV) of the CRRP plantings. The various methods used in the economic evaluation of the CRRP to derive estimates of the direct use values include market prices (timber benefits) and input-output analysis (upstream regional benefits). To derive estimates of the indirect use values, the benefit transfer technique (to estimate carbon sequestration benefits), the defensive expenditure technique (water quality improvement benefits) and the opportunity cost approach (conservation benefits) have been selected. These market-based techniques were selected for their low cost. The CRRP plantings include 400 widely dispersed small land parcels of two or three hectares each, therefore the use of survey-based techniques such as contingent valuation or discrete choice modelling, would have been costly. With no passive use values identified in the CRRP, the use of these techniques was not critical to the valuation of the CRRP.

The economic analysis covers the main tree-planting period of the CRRP - the first three years from 1992-93 to 1994-95 - when 400 landholders participated in the program and reforested 1,142ha of mostly degraded land. Application of the economic model, using a 7% discount rate, reveals that in 2001 dollars, the net present value (NPV) in the CRRP amounts to $1.5m and the economic internal rate of return is 7.3% when NWFBs are included and 5.2% when they are excluded. The total economic value of the benefits in the CRRP amounts to $9.4m. The TEV includes direct use values of $5.6m and indirect use values of $3.7m (carbon sequestration benefits are valued at $2.9m, the benefits from education and training are valued at $0.1m, the conservation value is valued at $0.5m and the combined values of water quality improvement and increased water yield amount to only $0.1 m).

It has not been possible to include all categories of program benefits identified in the surveys in the economic analysis. No allowance is made for improved landscape amenity and wildlife habitat, or for increase in property values as a result of tree planting. A further intangible benefit arises from the fact that the CRRP was to some extent a government compensation program and an exercise in social healing, following bitter community divisions in north Queensland arising from the unilateral World Heritage nomination of the Wet Tropics of Queensland by the Federal government in 1988.

This study suggests that the NPV derived from this program justifies the government subsidisation of tree planting on private land. However, the NWFBs are not as high as might be expected from reading of the literature on 'total economic value' of forests. This study has implications for other government-funded reforestation programs. Under the CRRP, landholders could plant various mixture of native and rainforest tree species on their land and the surveys reveal that availability of these tree species was a critical factor in the high participation rate. A balance between harvesting and conservation is also required to keep the NPV positive. If the CRRP plantings were either wholly harvested or wholly 'conserved', the NPV would be negative.
Keyword Reforestration -- Economic aspects -- Queensland

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