Economic and employment implications of a carbon market for industrial plantation forestry

Industrial plantation forestry has the potential to make a significant contribution to carbon sequestration, subject to eligibility in carbon markets and other accounting rules. We considered the sequestration potential and economic viability of industrial forestry in four case studies across Australia: softwood sawlog production in regions of high and low rainfall, and hardwood pulpwood production in regions of high and medium rainfall. We considered both the establishment of new plantations on cleared agricultural land and increases in rotation length of existing forests to increase carbon sequestration. Our study found that establishment of new plantations in cleared agricultural land is generally not economically viable with current costs of establishment (including land value) and returns for wood products. On average, for scenarios of hardwoods and softwoods, a payment for carbon sequestration of about $10 and $30 per tonne of CO2-e is required, respectively, for expansion of the estate to be economically viable (AU$2011). With the exception of softwoods grown in high rainfall, even higher payments for carbon sequestration are required to make increasing rotation lengths of existing forests economically viable, with a break even carbon price for hardwoods and softwoods of about $10 and $40 per tonne of CO2-e, respectively. Although crediting carbon stored in soil and wood products can significantly increase economic viability in some regions, more work is required to verify these predictions and to develop cost-effective measurement methodologies. In contrast, our analysis showed that there was little impact on economic viability of debiting emissions associated with forestry operations and harvesting, as these are a small proportion of the overall carbon balance. On an average annual basis, employment in industrial plantations was found to be comparable to alternative land uses, suggesting forestry does not result in a net loss of regional jobs. We conclude that there is considerable sequestration potential through industrial plantation management if the price on carbon is sufficiently high (e.g. $50 per tonne of CO2-e) and there are no limiting institutional factors (e.g. policies that restrict expansion of plantations onto agricultural land). (C) 2012 Published by Elsevier Ltd.