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An investigation into the effects of an emissions trading scheme on forest management and land use in New Zealand

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  • Adams, Thomas
  • Turner, James A.

Abstract

An econometric-process simulation model was constructed to investigate the effects of an Emissions Trading Scheme (ETS) on forest management and land use in New Zealand. Profit maximising agents which choose between forestry and agricultural land uses were simulated under carbon price scenarios of $20, $50 and $0 per tonne CO2 equivalent. The model suggests that an ETS will lead to increased afforestation and rotation age, and decreased silviculture and deforestation. A $20 carbon price or higher led to an overall increase in carbon sequestration by the forestry sector, driven predominantly by afforestation on lower fertility sites. Higher carbon prices increase the range of available land for planting. Future carbon price expectancy was critical. Rising carbon price expectancy led to large scale afforestation, but also to significant deforestation. A falling expectancy prevented deforestation but also stifled afforestation. The most sustainable solution was a stable carbon price expectancy allowing land to consistently work towards an economically optimal use. The recommendation of this report is for policy which promotes a stable long-run carbon price and flexibility for change between land uses. Suggestions include a guaranteed maximum carbon price, or allowing a forest to be felled at reduced penalty if another is concurrently planted.

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  • Adams, Thomas & Turner, James A., 2012. "An investigation into the effects of an emissions trading scheme on forest management and land use in New Zealand," Forest Policy and Economics, Elsevier, vol. 15(C), pages 78-90.
    • Handle: RePEc:eee:forpol:v:15:y:2012:i:c:p:78-90
    DOI: 10.1016/j.forpol.2011.09.010
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    3. Rämö, Janne & Tupek, Boris & Lehtonen, Heikki & Mäkipää, Raisa, 2023. "Towards climate targets with cropland afforestation – effect of subsidies on profitability," Land Use Policy, Elsevier, vol. 124(C).
    4. West, Thales A.P. & Monge, Juan J. & Dowling, Les J. & Wakelin, Steve J. & Gibbs, Holly K., 2020. "Promotion of afforestation in New Zealand’s marginal agricultural lands through payments for environmental services," Ecosystem Services, Elsevier, vol. 46(C).
    5. Dominic White & Niven Winchester, 2023. "Logs or permits? Forestry land use decisions in an emissions trading scheme," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 67(4), pages 558-575, October.
    6. Richard Yao & David Palmer & Barbara Hock & Duncan Harrison & Tim Payn & Juan Monge, 2019. "Forest Investment Framework as a Support Tool for the Sustainable Management of Planted Forests," Sustainability, MDPI, vol. 11(12), pages 1-22, June.
    7. Tang, Ling & Wang, Haohan & Li, Ling & Yang, Kaitong & Mi, Zhifu, 2020. "Quantitative models in emission trading system research: A literature review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 132(C).
    8. Zack Dorner & Dean Hyslop, 2014. "Modelling Changing Rural Land Use in New Zealand 1997 to 2008 Using a Multinomial Logit Approach," Working Papers 14_12, Motu Economic and Public Policy Research.
    9. Aino Assmuth & Janne Rämö & Olli Tahvonen, 2021. "Optimal Carbon Storage in Mixed-Species Size-Structured Forests," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 79(2), pages 249-275, June.
    10. Coleman, Andrew, 2018. "Forest-based carbon sequestration, and the role of forward, futures, and carbon-lending markets: A comparative institutions approach," Journal of Forest Economics, Elsevier, vol. 33(C), pages 95-104.
    11. Juutinen, Artti & Ahtikoski, Anssi & Lehtonen, Mika & Mäkipää, Raisa & Ollikainen, Markku, 2018. "The impact of a short-term carbon payment scheme on forest management," Forest Policy and Economics, Elsevier, vol. 90(C), pages 115-127.
    12. Paul W. Fischer & Alison C. Cullen & Gregory J. Ettl, 2017. "The Effect of Forest Management Strategy on Carbon Storage and Revenue in Western Washington: A Probabilistic Simulation of Tradeoffs," Risk Analysis, John Wiley & Sons, vol. 37(1), pages 173-192, January.

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