The Great Carbon Con

The Bill presently before the Parliament to bring peace to the forests contains provisions to amend the Forestry Act 1920 to allow for the creation of more reserves from State forests and to provide for a continuing wood supply to industry. These issues have been the subject of much debate and discussion, and in particular as to whether such decisions will actually deliver “peace”.

The Bill contains a further provision which has not been debated at any length, and that is an intention to amend the Nature Conservation Act 2002 for the purposes of benefiting economically from the carbon in Tasmania’s forests. This provision would enable the generation of “carbon credits” from the newly reserved trees, and the method of generating these credits would be through the Commonwealth’s Carbon Farming Initiative (CFI).

Fascinating idea, but with two obvious flaws. First, how would these credits be determined? And second, how would Tasmania benefit from the issuing of these credits? A window into answering these two questions was provided in the recent Legislative Council committee hearings, where officers of both Commonwealth and State departments advised they had no idea. They did advise that there is no accepted, established or practical methodology which will allow carbon accounting in this setting to be used. Since the CFI administrators will demand rigorous accounting and auditing standards to allow credits to be generated, it is a fair bet that the issuing of credits will be long, drawn-out and fraught process. So no cheques anytime soon.

At the recent “Residue to Revenue” forest industry conference in Melbourne the keynote Speaker - Dr Brooks Mendell - told the audience, of which some were from the conservation movement, of the US and Canadian experience. Brooks said the generation of carbon credits by reserving forest for conservation purposes will never be achieved. Short of putting a serial number on every tree in the forest and annually measuring its vital statistics there will never be a methodology that would stand up to scrutiny to the financial and government institutions who would issue the instruments allowing the credits to be generated

A number of other questions arise from such a move, not the least being the value of a carbon credit.

The Independent Verification Group led by Jonathan West found that net present value of the carbon to be ‘saved’ by the reservation of these native forests was as much as $5.14 billion between 2013 and 2030.

This calculation was made in a report1 authored by Andrew Macintosh of the ANU Centre for Climate Law and Policy titled “Tasmanian Forests Intergovernmental Agreement: An assessment of its carbon value” dated March 2012.

The calculation included a range of estimates from a low price range of $15 per tonne, the floor price of the Clean Energy Act, (since removed in August 2012) and a high price of $60 per tonne in 2015 and rising to $120.00 per tonne in 2030.

More recently, Macintosh upgraded this estimate after the TFA was signed. He claimed2 in December 2012 that the TFA should earn the Australian Government in the order of $6-$7 billion ($1.7-$14.2 billion) in real 2013 $A over the period 2013-2032. These figures were so impressive that they gave rise to Green Minister Cassie O’Connor stating in March that Tasmania would be the beneficiary of untold riches if the legislation was passed. All we had to do was to sit back and do nothing, and wait for the cheques to roll in. Bob Brown had alluded to something similar in November last year when he said that carbon credits would be the biggest potential revenue source for Tasmania.

However, the Commonwealth Government has determined that carbon credits would be traded on the world market and that there would be no national price. In this context, the most recent news from Europe that the carbon price has crashed to below $4 is sobering. Most economists are now saying that the Emissions Trading Scheme (to which Australia will be tied from 2015) has failed, that the scheme will soon self-destruct and that carbon credits will be worthless.

Macintosh has recently issued a report for the Australian Institute, based on a scenario developed in a social and economic analysis of the Bill. The scenario is a worse case, and its authors admit that it is unrealistic due to likely Government mitigation action. Yet Macintosh describes it as a “finding”. Based on this finding he states:

“The creation of the reserves will change the formal tenure but will not change the environmentaloutcome. Ifanything,TasmaniashouldpaymoneytotheCommonwealth to account for the lost forest management credits (and carbon revenues) that will arise as a result of propping up the native forest industry and ensuring ongoing native forest harvesting.”3

In simple terms this academic has changed his advice from a multi-billion dollar windfall to a loss-making folly!

So, not only will the cheques not be rolling in – it now seems likely that the Green agenda will be a further blow to the Tasmanian economy.

As well as the issue as to whether putting State forests into reserves will deliver peace, our legislators would do well to ponder these questions as to the real value of carbon before determining whether the Bill should gain their support. 

 

1 Macintosh A,2012, Tasmanian Intergovernmental Agreement: An assessment of its Carbon value, Commonwealth of Australia
2 Macintosh A, 2012, Tasmanian Forest Agreement: Who is the Winner TB 19, The Australia Institute
3 MacintoshA &Denniss R, 2013, Abbott’s direct action lesson, Climate Spectator, The Australia Institute