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.
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.
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 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:
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.
DOWNLOAD FULL PUBLICATIONThermal waste-to-energy involves converting residual waste into electricity, typically through direct combustion or high temperature gasification. It promises to put rubbish to good use – reducing greenhouse gas emissions by diverting waste from landfill and offsetting electricity generation from the grid. However the reality is not that simple.
The analysis of thermal waste-to-energy emissions is often assumption driven, and fails to accurately account for extensive energy capture at modern landfills and major changes already underway in the waste and electricity sectors. Well intentioned policy, supported by inaccurate analysis, risks unneccesarily locking in high emissions in the waste sector for decades to come.
In this bulletin, we explore the drivers of waste to energy emissions and consider how the trade offs between landfill energy and thermal waste-to-energy will likely change over the next ten years.
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DOWNLOAD FULL PUBLICATIONThermal waste‑to‑energy is the process of converting rubbish into electricity, typically through direct combustion. It promises to reduce emissions by killing two birds with one stone – diverting waste from landfill and offsetting high emissions electricity generated in the grid.
Several large waste‑to‑energy projects have been supported recently, partially based on their promised emissions reductions.
Unfortunately, it isn’t that simple. Frontier Economics recently investigated the potential emissions from thermal waste‑to‑energy, looking closely at two recently approved projects in Western Australia and Victoria. We found that the analysis of thermal waste‑to‑energy emissions often depends on three faulty assumptions:
These assumptions aren’t true today, and will become even less accurate over time.
We found that thermal waste-to-energy risks locking in unnecessarily high emissions for the long‑term despite changes in the electricity and waste sectors that should make emissions reductions possible. Well intentioned policy, supported by faulty analysis, can easily lead to poor environmental outcomes.
For an overview and to see the key findings, read our bulletin: Emissions from landfill and thermal waste-to-energy.
Read the full report: Assessing emissions from waste to energy.
The 2020 emissions projections confirm our long stated position that Australia will not need Kyoto carryover credits to meet the Paris 2030 emissions target.
Much is made of whether the Federal Government will meet Australia’s 2030 emissions target or adopt a net zero target for 2050. But all States have announced net zero emissions targets by 2050, so the lack of formal acceptance of the target at Federal level is more symbolic.
For 2030, the combination of current State 2030 emissions targets should see Australia on track for a 33% reduction of 2005 emissions, which is more than required to meet the National target of 26-28% by 2030 and closer to the 36% 2030 target that we recommended in 2015[1].
State and Territory targets provide a floor on emissions reductions. For Australia to miss the 2030 national emissions targets, it would require failure at both Federal and State level to meet respective targets.
Australia currently has a national emissions target of 26-28% reduction on 2005 levels by 2030. However, almost all State and Territory Governments (with the exception of WA and NT) have announced more ambitious 2030 targets as pathways to net zero targets that all states and territories have announced for 2050.
Table 1 summarises the State and Territory ambitions and the implications of these targets for the national target. The combination of State 2030 emissions targets should see Australia on track for a 33% reduction of 2005 emissions, which is more than required to meet the national target of 26-28% by 2030.
The following are most noteworthy:
If all State and Territory targets are achieved, then Australia should comfortably meet the national target.
It follows that if Australia is to miss the national target then this would require failure at both the Federal and the State level in meeting applicable targets. More formal bipartisan collaboration on achieving common targets would be welcome in climate and energy policy in Australia.
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[1] https://www.frontier-economics.com.au/australian-targets-emissions-36-by-2030/
DOWNLOAD FULL PUBLICATIONGovernment policy is increasingly putting green infrastructure front and centre of its vision for the future cities where most of us will live. Urban green infrastructure refers to the canopy, parks, waterways, vegetation, wetlands and lakes in our cities. More than just urban nature: these features are assets which deliver valuable services. They can make our cities cooler, healthier, more ecologically sustainable, and attractive places to live and work. To realise a policy vision of greener cities and change our future urban landscapes, we need to start treating green infrastructure in the same way we treat traditional physical ‘grey’ infrastructure ─ by subjecting it to rigorous economic assessment and assurance processes.This isn’t easy, but it can be done. Right now there is significant opportunity to embed green infrastructure in growth areas as part of the urban fabric, especially in areas with large greenfield developments in the planning phases (such as in NSW). But the clock is ticking as development continues, and this needs to happen quickly. This bulletin explores how we can build green infrastructure into our infrastructure planning processes and what challenges still lie ahead for greener urban communities.
The NSW State Government in Australia recently released two documents that, together, indicate a policy vision for the role of green infrastructure in the urban environment. ‘Greener Places’ from Government Architect NSW outlines what green (and blue) infrastructure is in the urban context and how it can improve our cities. In addition, the discussion paper and draft ‘50-year vision for Greater Sydney’s Open Space and Parklands’ outlined four key strategic directions to grow and improve parks, open spaces, connectivity and greenery, and resilience.
Both documents convey a fundamental shift in thinking which considers urban nature as genuine infrastructure that delivers valuable services to the community and which merits policy and planning priority. They recognise that the natural green (and blue) assets of a city can deliver real public benefits like mitigating the urban heat island effect, protecting and restoring ecological health, promoting active lifestyles, and providing beautiful places to live, work and play. These benefits can be measured and quantified in dollar terms such that they are no longer an incidental bonus of investment, but part of the baseline justification and cost-effectiveness of green infrastructure in delivering critical services to the community.
A clear government policy vision for green infrastructure is a good (and necessary) start. But for green infrastructure to be funded it must be robustly integrated into formal proposal, evaluation and assurance processes. Realising a vision for greener cities will depend on how effectively we can develop rigorous processes, methods, resources, datasets, and capabilities to value and assess green infrastructure as an ongoing, long-term package of service-delivering investments.
There are different ways we could embed active consideration of green infrastructure into our planning and decision-making processes on a more equal footing with traditional ‘grey’ infrastructure options.
For example, government policy could mandate investment in green infrastructure. But green infrastructure will not always be the best option in all circumstances and prescribing a one-size-fits-all approach does not guarantee smart investments. The alternative approach is to assess green infrastructure proposals on their individual merits—by requiring a fair, rigorous, quantitative assessment of the economic, environmental and social impacts of each investment—as we do with traditional physical ‘grey’ infrastructure. Investment would then occur where and when it can be demonstrated to deliver genuine community value relative to the alternative levers available.
However, green infrastructure impacts can be tricky to evaluate because:
We look at each of these issues below.
Decisions to invest in infrastructure by governments or other parties are (or should be) determined by the relative weight of benefits to costs. A cost-benefit analysis is the formally preferred evaluation tool of state treasuries and infrastructure agencies around the country and is essential to ensure that limited public money is used as wisely as possible.
Although measuring the costs of green infrastructure is (mostly) straightforward, many of its benefits are not as easy to identify or measure. This can lead to a cost side of the equation that looks robust, ‘real’, and in many cases relatively large, but a benefit side of the equation that looks vague, unreliable and risky.
Take the example of a neighbourhood park. The costs of building and maintaining it are easy to estimate. We could look at what other, similar parks have actually cost. Or, a landscaping firm could provide an estimate of the cost of design, earthworks, materials, park benches, tree planting, tree trimming, etcetera. But how do we measure the benefits of that park to the local community? It’s irrefutable that we value relaxing, exercising, and socialising in parks. Parks clearly provide a range of identifiable community services for mental and physical health, amenity, and aesthetic enjoyment (and others). But none of those benefits are directly paid for per use or otherwise traded directly in a market (for most parks). This means there’s often no observable price to provide some indication of the value of park visits – a so-called ‘non-market’ benefit.
But this does not mean those benefits aren’t real. It does not mean that the community will be better off if we choose not to build that park, or preserve urban canopy, or restore an urban waterway. It simply means that we have to work harder and smarter to identify the end-use benefits of these investments, quantify these (with scientific and engineering tools), and convert those benefits to a robust and fair estimate of value in dollar terms.
Economics has a range of methodologies that can assist (e.g. willingness-to-pay methods, hedonic pricing modelling, productivity cost methods, and more). While these methods require assumptions and are affected by uncertainties, they are a great deal better than nothing and can be refined over time as more and better data become available. The key is executing these methods well. This means exploring (rather than shying from) core uncertainties in the modelling, be those assumptions or data inputs.
To ensure a consistent and systematic treatment of non-market impacts of green infrastructure, it is also important to understand what effects green infrastructure actually has in the urban environment.
A core principle of good cost-benefit analysis is that we only compare costs and benefits that are clearly and exclusively caused by the proposed investment, and not those which would happen anyway, or which would happen under every alternative option. This is the incremental impact of investment, and this is the end measure we convert to a monetary value to tally up different types of costs and benefits.
Nailing down the incremental impact of an investment with rigour can be the most difficult, resource-intensive step in the evaluation process. This is because it requires both a) a defensible case that green infrastructure causes the impact, then b) a defensible measure of how big that impact is.
Demonstrating causal links for green infrastructure is challenging, partly because scientific research and data cannot always readily establish a) and b) above. Further, green infrastructure evaluation can require multiple causal chains to be articulated and linked in a sequence to establish the final incremental impact of investment. This can be extremely complex.
A key policy concern is the risk to health, life, and urban amenity of extreme city temperatures. Climate change will likely increase the number of ‘very hot’ (over 35 degrees) days, exacerbated further by the urban heat island effect. This heat can have serious consequences for health, and is a contributing factor for mortality, especially among the elderly and infants. It is also an extreme (and expensive) stress on our electricity infrastructure.
Urban canopy is one form of green infrastructure that can help reduce these impacts. The natural evapotranspiration processes of trees can cool surrounding air temperature. But the first step to evaluating the cooling benefits of urban canopy is to estimate, for the specific site and proposed investment (including what kind of trees, in what numbers, in what kind of environment, at what scale, etc.), the amount of cooling caused by increasing urban canopy. This is a non-trivial exercise, heavily reliant on the state of scientific research and site-specific modelling. Even once achieved, this will only establish one quantified causal chain – how much change in air temperature will result from additional urban canopy (a similar process applies to the case of cooling from retaining water in the landscape).
The second step involves quantifying the causal link between air temperature changes to human health, electricity infrastructure requirements, and potentially other recreation-related outcomes. Again, this would require scientific research and is a data-intensive task.
But both steps are required to eventually establish the benefits, in monetary terms, that result from investment in urban canopy. Recent work in Western Sydney indicates that these benefits can be significant, and more than outweigh the additional costs.
This example demonstrates that that if this process is to be applied as the standard for green infrastructure proposals, it will require developing, accessing and expertly using high-quality, localised primary research and data. Much of this data will be scientific in nature. However, empirical economic data is also critical. Economic research using best-practice research methods is required to uncover the best possible estimates of what value the community places on alternative possible services provided by green infrastructure.
Being able to assess good green infrastructure options from bad is critical. Valuation is a key element and as we have seen, can be a difficult process. Too often this step is avoided, with the focus on ‘how to invest’ (e.g. funding, delivery, governance etc), prior to answering the question ‘should we invest’.
This may be accomplished more easily in some sectors than others. Water utilities, for example, already have experience in the kind of robust green infrastructure evaluation processes described above. This is because many of the ‘assets’ they build and manage include multi-service delivering natural features. For example, from a traditional water industry perspective, an urban wetland might be one way to manage stormwater quantity, quality and floodplain issues. This is one manifestation of Water Sensitive Urban Design (WSUD), which is now a standard industry concept that prioritises smarter use of nature and its materials to provide services in all stages of the water cycle.
But that wetland is also a piece of green infrastructure that delivers open space, recreational opportunities, wildlife habitat, and possibly other services (for example, large water in the landscape might also be able to cool urban temperatures). The water industry has developed capability because of the regulatory framework that requires scrutiny of spending by utilities. The resultant expertise, datasets, and experience includes quantification of impacts of green infrastructure and the values placed on these impacts by the community (for example, impacts of WSUD options on water quality and species diversity). Sharing and accessing the information held by various sectors will be a key part of unlocking the data and skill required in the valuation process across different forms of green infrastructure.
Government policy encouraging different industry sectors to view our future urban environments with a green infrastructure focus invigorates the approach to infrastructure development and broadens the horizons for what our future urban landscapes can become. Policies should encourage industry players to factor in liveability, amenity, sustainability, the circular economy and a range of other urban policy goals in infrastructure development. However, demonstrating the value that could result from these investments (or broader interventions) is critical. If we genuinely see these investments as value-enhancing community infrastructure, this step must come first. Further, it must be done well if the case is to be made convincingly and for the long-term that multi-servicing delivering green infrastructure is a sound use of the community’s resources.
DOWNLOAD FULL PUBLICATIONAs we transition to a ‘cleaner’ portfolio of generation, the supply diversity of renewables comes under question in relation to the intermittency of supply. We explain that the positive correlation in wind and solar generation in the National Electricity Market means that these forms of generation do not offer adequate supply diversity to provide the reliable electricity supply that consumers need.
As a society we demand power at the flick of every switch. We expect this power to be reliable, affordable and increasingly, sustainable. The increasing penetration of renewables into the energy market has resulted in further delivering the ‘clean’ aspect of society’s demands but has led to changing the fundamentals of the energy market. The intermittency of supply is raised as the reason we cannot switch to 100% renewable electricity generation. We continue to need a portfolio of generation types in order to meet society’s demands for energy. This bulletin explains why.
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DOWNLOAD FULL PUBLICATIONThe Water Services Association of Australia (WSAA) has published a report prepared by Frontier Economics, Health Benefits from Water-Centric Liveable Communities. This landmark report looks at understanding and quantifying the liveability-associated health benefits of water industry investments to better inform investment decisions.
The challenges posed by urban development are complex, and as we shift away from traditional development patterns, decisions about water are critical. Good decisions can transform urban areas into cooler, greener and liveable spaces. Bad decisions are costly, far-reaching, and locked in for generations.
Addressing these challenges requires critical decisions to be made about how we use land and other resources, including decisions around housing, infrastructure corridors, environment and our waterways; and evaluate and value potential investments in grey, green and blue infrastructure. Appropriate policy enables community resilience to pressures such as population change, climate and drought.
This project aimed to understand, quantify, and crucially, monetise, the contribution of water investments within real world project evaluations. Our work shows that investing appropriately in water infrastructure has benefits for the community. Water investments can improve health to create more liveable cities through four pathways:
The Urban Economics team at Frontier Economics has been advising clients on a range of projects at policy and implementation level addressing challenges particular to our urban environment.
In-house modelling undertaken by Frontier Economics (Asia-Pacific) projects that Australia will comfortably meet its 2030 28% emissions target for the electricity sector due to existing and announced policies supporting energy efficiency, renewables and closures of high emissions coal plants. The Commonwealth Government will receive credit for State renewable policies that contribute to meeting the 2030 emissions target, while admonishing them for any energy security issues that may result.
An urgent priority for climate policy in electricity is how to ensure energy security in a market increasingly dominated by intermittent renewable generators. This urgency should be evident in recent electricity market events and this is why the Federal Government should reconsider its position on an Emissions Intensity Scheme. This scheme will provide greater certainty for investors in existing and new thermal generators that must play a vital role in managing the transition of the power sector.DOWNLOAD FULL PUBLICATION
