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Transition support for the NSW native forest sector

With the Victorian government announcing an end to native forest logging by 1 January 2024, we revisit a recent report prepared for WWF–Australia (World Wide Fund for Nature Australia) in August last year. In it, Rachel Lowry, Acting CEO, WWF–Australia explains, “This report was not commissioned to ignite or exacerbate ‘forestry wars’. Instead, it is designed to inform and motivate critical solution-focussed discussions, ideally led by the NSW Government.”

The New South Wales (NSW) native forest sector has been contracting over a long period as publicly provided wood supply has fallen to more sustainable levels. The 2019–20 Black Summer fires compounded this trend, significantly reducing sustainable wood supplies, particularly in the South Coast and Tumut regions. This shock to the sector, economy and regional communities – combined with an increased recognition of the significantly higher value that standing native forests offer in comparison to logging– provides an opportunity to reconsider the best use of NSW’s native forest resource. Other states including Victoria and Western Australia facing similar issues have made the decision to end the native forest logging.

In this context, Frontier Economics was engaged by WWF–Australia to consider options for the design of appropriate structural adjustment arrangements that would accompany a decision to end public native forest logging in NSW. Our Report, Transition support for the NSW native forest sector, outlines a design and cost estimate of such structural adjustment supports.

The financial return and economic contribution of public native forestry is small

Our Report found that Forestry Corporation of NSW’s (FCNSW’s) native forest logging business appears to offer poor financial returns to NSW taxpayers, with some parts of the hardwood business unlikely to be covering costs. The Independent Pricing and Regulatory Tribunal of NSW (IPART) has also reported on the loss-making activities of FCNSW’s hardwood division.

There is also clear evidence that that value of the native forest would be higher as a standing resource.

The volume of wood supplied by FCNSW’s native forest business has been falling, and is unlikely to return to historic levels of production given the current state of the native forest after the Black Summer fires and the increasing impacts of climate change.

Employment and economic contribution have also fallen to modest levels, even when both hardwood and softwood, and private and public industry in NSW is accounted for. Direct employment associated with FCNSW’s hardwood business is in the order of 1,070 across the State – including those employed by FCNSW, harvest/haulage contractors and mills.

Designing a comprehensive structural adjustment support package

A comprehensive structural adjustment package should accompany the decision to cease the remaining native forest logging activity by FCNSW. This package would support impacted employees, firms and communities during the transition.

Across jurisdictions, there is a broad consistency in the design of public native forest logging structural adjustment packages, including:

Structural adjustment packages are also often complimented with longer term support for increased investment in plantation resources.

Alongside a package of structural adjustment support, our Report finds there are likely to be alternative employment opportunities for displaced workers from the public native forestry sector, particularly in management of protected forest areas, recreation and tourism, plantation-based forestry work, fire and invasive species management and the management of carbon and biodiversity credits.

The estimated cost of structural adjustment support

The estimated cost of the government-funded structural adjustment is $302 million in total. This includes:

Our Report developed these estimates along similar lines to those adopted in other jurisdictions. It is assumed the adjustment package would be implemented from 2028- 29 once the majority of the current WSAs with processors have expired.

The cost of the structural adjustment package is likely to be readily outweighed by a range of positive budgetary impacts including:

FCNSW and plantation investment

Complementing a structural adjustment support package, the NSW Government may invest in increased plantation resources. The Victorian and West Australian governments have announced funding for plantations of $110 million and $350 million, respectively.

Alternatively, FCNSW may consider the investment opportunity to expand its hardwood plantation estate in the expectation of a long-term financial return.

The forestry sector would sensibly lead any plantation expansion in NSW based on its understanding of the best locations, appropriate size of expansion, plantation species and market needs.

View the full report commissioned by WWF-Australia here.

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Introduction

In September 1990, Scientific American published a special issue entitled ‘Energy for Planet Earth’. In this publication, Scientific American explored the sources of energy, the future for energy, made predictions on technological breakthroughs and suggested solutions for what they considered was an imminent energy crisis.

Many of these predictions by Scientific American were made for 2020. Given we have reached that date, we can look back and compare the predictions with what actually happened. In a three-part series, Frontier Economics compares actual outcomes to 2020 with the predictions made by Scientific American.

This comparison of actual versus predicted outcomes, especially where technological change is involved, can help us learn about the factors that have been determinative to the global community and provide guidance on how we can improve economic forecasts.

We focus on three areas where Scientific American made long term forecasts:

This is the third and final part of this series, examining the performance of Scientific American’s forecasts of emissions intensity.

Scientific American gets it right in Parts One and Two

In Part One - Energy demand we reviewed the performance of Scientific American’s long-term forecasts on primary energy demand. We found that, overall, Scientific American’s forecast was reasonably accurate. However, Scientific American did not perform as well on the growth performance by country. Most significantly, Scientific America materially underestimated the rapid and large increase in the growth of developing nations, such as China and India. That is, countries that were relatively poor in 1990 grew more quickly than expected, and they used energy to achieve this growth.

In Part Two - Energy intensity we reviewed the performance of Scientific American’s forecast of energy intensity. While Scientific American’s original historical depiction of energy intensity was stylised, it did accurately convey the historic profile of energy intensity – rising as countries develop, and then falling as economies mature. Given the size of the populations in developing countries in 1990, there was a genuine concern about the impact on energy demand (and resulting environmental problems) if these countries followed the same energy intensity profile as developed countries. However, Reddy and Goldemberg predicted that developing countries would benefit from improvements in materials science and energy efficiency innovations from developed nations. This technological transfer would avoid the high energy intensity peaks that occurred over the course of the previous 150 years of economic development of, now, developed economies. Reddy and Goldemberg were correct. The energy intensity of developing countries, while starting on the higher side of developed countries in 1990, quickly fell as they adopted the latest technologies. By 2015, developing countries had lower energy intensity than the developed countries originally analysed by Reddy and Goldemberg. In fact, by 2015, developing countries exceeded the most ambitious energy intensity decline forecast by Reddy and Goldemberg.

We conclude our three-part series by looking at Scientific America’s global projections for CO2 emissions from fossil fuels.

To view the full report, download the publication via the button below.DOWNLOAD FULL PUBLICATION

Introduction

In September 1990, Scientific American published a special issue entitled ‘Energy for Planet Earth’. In this publication, Scientific American explored the sources of energy, the future for energy, made predictions on technological breakthroughs and suggested solutions for what they considered was an imminent energy crisis.

Many of these predictions by Scientific American were made for 2020. Given we have reached that date, we can look back and compare the predictions with what actually happened. In a three-part series, Frontier Economics will compare actual outcomes to 2020 with the predictions made by Scientific American.

This comparison of actual versus predicted outcomes, especially where technological change is involved, can help us learn about the factors that have been determinative to the global community and provide guidance on how we can improve economic forecasts.

We focus on three areas where Scientific American made long term forecasts:

Each of these is the subject of a separate note. This note examines the performance of Scientific American’s forecasts of energy intensity.

Scientific American gets it right in Part One

In Part One we reviewed the performance of Scientific American’s long-term forecasts on primary Energy Demand.  We found that, overall, Scientific American’s forecast was reasonably accurate. However, Scientific American did not perform as well on the growth performance by country. Most significantly, Scientific America materially underestimated the rapid and large increase in the growth of developing nations, such as China and India. That is, countries that were relatively poor in 1990 grew more quickly than expected, and they used energy to achieve this growth.

In this second part of our three-part series, we assess the performance of Scientific American’s forecast of energy intensity.

To view the full report, download the publication via the button below.

DOWNLOAD FULL PUBLICATION

At a speech to the Competition and Consumer Workshop 2021 of the Law Council of Australia on 27 August 2021, the Chair of the ACCC, Rod Sims, proposed a single new formal process for assessing the effects of mergers on competition.

Philip Williams, competition and dispute support lead at Frontier Economics, has been an expert witness in numerous merger matters that have appeared before the courts. He discusses this proposal in the attached note.

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Introduction

In September 1990, Scientific American published a special issue entitled ‘Energy for Planet Earth’. In this publication, Scientific American explored the sources of energy, the future for energy, made predictions on technological breakthroughs and suggested solutions for what they considered was an imminent energy crisis.

Many of these predictions by Scientific American were made for 2020. Given we have reached that date, we can look back and compare the predictions with what actually happened. In a three-part series, Frontier Economics will compare actual outcomes to 2020 with the predictions made by Scientific American.

This comparison of actual versus predicted outcomes, especially where technological change is involved, can help us learn about the factors that have been determinative to the global community and provide guidance on how we can improve economic forecasts.

We focus on three areas where Scientific American made long term forecasts:

Each of these will be the subject of a separate note. This note examines the performance of Scientific American’s forecast of primary energy demand.

To view the full report, download the publication via the button below.

DOWNLOAD FULL PUBLICATION

Introduction

Coal is a word that immediately polarises the community nowadays. Coal has been the mainstay of electricity production since the late 1800s. More than 100 years later, coal-fired generation is a particularly controversial topic in Australia.

Some suggest that we should build new coal-fired power plants with more efficient coal burning technology (therefore producing less emissions) for continuing reliable power generation, while others argue that Australia should proactively abandon coal sooner and replace it with a combination of renewable generators and energy storage. A third argument is that the rapid growth in renewable capacity globally will soon take over coal and other fossil fuel generation as a natural progression and therefore no policy action is required.

No matter which side of the argument you are on, the fact is coal generators produce much more greenhouse gas emissions per megawatt hour (MWh) than most other forms of electricity generation. To the extent that the global community believes that human-produced greenhouse gas emissions are a problem, then it should be worried about the build-up of greenhouse gases over time as it is the atmospheric concentration of these gases that creates adverse climate changes.

To help understand the contribution that electricity generation from sources such as coal have made to current and, more importantly, future atmospheric concentration levels of carbon dioxide (CO2) we attempt to estimate CO2 emissions for the global stock of generation from 1904 to 2017. We also attempt to estimate the future growth in CO2 emissions using highly conservative assumptions that underestimate the future contribution from electricity generation using coal.

The purpose of undertaking this projection is to determine whether concentrations of CO2 are likely to flatten out, grow slowly or rapidly or decline and, at what rate. This projection of CO2 production will help understand whether the growth in generation from renewables is likely to result in a material reduction in the growth in the concentration levels of CO2 or whether more governments should take active steps to avoid further CO2 emissions from thermal power stations.

To help assess whether governments need to actively take action to curtail emissions from coal plants, or other forms of high emission generation, we examine the extent to which the development of renewable capacity, which is often presented as nothing short of miraculous, is likely to be sufficient to abate the emissions from fossil fuel generators. If these new renewables are not sufficient to cap global emissions from other sources of generation and governments have decided that even current emissions are too high, then governments will need to implement policies that actively reduce emissions from the electricity generation sector.

Our report finds this is not the case. To view the full report, download the publication via the button below.

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The Australian Prime Minister has repeatedly claimed that Australia will meet our Paris 2030 emissions targets “in a canter”. Yet commentary consistently reports that Australia is not on track to meet these targets. Our analysis suggests that despite official projections, Australia is well on track for Paris and should consider more ambitious targets in 2030, including Labor’s proposed 45% target. This briefing note explains why.DOWNLOAD FULL PUBLICATION

​A gap remains between Federal Coalition Government and Federal Labor ambitions for emissions reductions. Labor is attempting to bridge the divide (or wedge the Government) by adopting the mechanism that the Government developed and then abandoned: the National Energy Guarantee (NEG). We project that Labor’s 45% emissions reduction target will result in prices that are about the same as the Federal Government’s current policy of achieving an emissions reduction of 26% by 2030. Importantly, we also find that the Government’s costly Snowy 2.0 proposal does not deliver any price or emissions benefit. It is a waste of money.DOWNLOAD FULL PUBLICATION

Voodoo Economics gets a run

​The post-GFC period has witnessed the emergence of a new 'school' of heterodox macroeconomic thinking known as Modern Monetary Theory, or 'MMT'. While conventional macroeconomics has focused on refining existing policy frameworks to better account for recent experience and contemporary conditions, MMT purports to overturn the conventional wisdom altogether. While it offers a seemingly irresistible intuitive appeal, MMT unfortunately has little to offer that is new or helpful to policy-makers and much that is harmful.

To access the briefing, click below.

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A new briefing from Frontier Economics discusses the latest edition of the ACCC NBN Wholesale Market Indicators Report, which contains data regarding the number of services in operation in the NBN market. While the focus of analysis is often on the headline average bandwidth (CVC), a deeper look at the figures reveals the challenges for small retailers in competing on the NBN.

Frontier Economics regularly advises clients in the communications and media sector.

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