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Presentation ID 16461

Agricultural and forestry GHG emissions are a key feature of New Zealand’s emissions profile, and New Zealand is the only country, to date, to have indicated that agricultural and forestry emissions will be covered under their domestic climate policy – the New Zealand Emissions Trading Scheme. Coupled with climate policy development is the increasing scrutiny of agricultural impacts on water. This paper uses New Zealand Forest and Agriculture Regional Model (NZ-FARM) to assess the potential economic and environmental impacts of imposing both a climate and nutrient reduction policy on the agricultural and forestry industries in the Manawatu and Hurunui/Waiau catchments in New Zealand. We find that adding a scheme that reduces catchment-level nutrients by 20% on top of a national policy that puts a price of $25 per ton carbon dioxide equivalent on agricultural GHG emissions could result in greater environmental benefits at a relatively small cost, but the converse is not always true and could be significantly more costly for landowners.

While greenhouse gas emissions trading schemes, taxes and other measures have already been implemented or are proposed in many countries and regions, global action to mitigate climate change remains insufficient. A major concern in many countries is that actions taken alone, or even in a limited coalition of countries, might result in competitive disadvantage to firms in emissions-intensive, tradeexposed industries. Additionally, this might results in emissions leakage, reducing environmental effectiveness. The problem of emissions leakage has been extensively studied in the case of mitigation by individual or coalitions of developed countries, most often, using comparative static partial or general equilibrium models. In this paper we use a multiregional dynamic general equilibrium model to study the imposition of harmonised carbon taxes on industrial and energy greenhouse gas emissions in OECD countries and in China. This tax rate is increasing over time. We find that the overall rate of emissions leakage is very low and decreases over time. We also find significant differences between regions in the marginal rates of leakage with respect to their participation (or not) in the carbon-pricing coalition. Differences in leakage rates and their change over time can be related to differences in energy systems, general economic structure and growth rates.

Adequately representing dynamic characteristics of land use change and forestry in computable general equilibrium models is challenging but essential if modellers are to provide credible assessments of policies that directly or indirectly influence these phenomena. In this paper, we show how a dynamic representation of planted or naturally regenerating forests may be integrated within a neoclassical, intertemporal general equilibrium model. We demonstrate the application of such a model to assess the impacts of including forestry within a hypothetical emissions trading scheme in the US, showing the resulting changes in land use and increases in the optimal rotation length.

Despite the importance of the agricultural and downstream processing sectors in the New Zealand economy, there is no tradition of using partial or general equilibrium models to evaluate policies or other measures directed at the agricultural sector. Policy-makers have instead relied on the development of ad hoc scenarios of land use change, farm budget models, and simple multiplier analysis of flow-on effects. To redress this situation, we have developed a catchment-scale partial equilibrium framework based on the US REAP model, which we have thus far calibrated for two different catchments. In this paper, we present an application of the model to the Hurunui Catchment in North Canterbury in which we assess several scenarios for the development of irrigated area under several water storage options. This application is timely, given that there are increasing pressures on water resources in the catchment, and frequent conflicts between abstractive users (mainly pastoral), recreational users (e.g. kayaking, fishing) users, and environmental needs. Currently, a private consortium are pursuing storage options similar to those that we have modelled, while a newly constituted Water Management Zone Committee is tasked with developing a strategic approach to managing water in the Hurunui and adjacent Waiau catchments. In addition, water quality limits are also being developed in the Hurunui catchment. Our modelling approach includes pastoral (dairy, sheep, beef and deer), arable, horticultural and forestry enterprises along with an array of management including various irrigation and fertiliser regimes. The model allows us to test policy scenarios for addressing environmental issues such as mitigating climate change and improving water quality, and changes in resource constraints such as water availability. Using a profit maximizing objective function we compare the impact of the proposed irrigation scenarios in the Hurunui catchment on total catchment profits and a variety of environmental parameters like greenhouse gas emissions and nutrient losses.

A key consideration for development of energy and climate policy affecting the forestry and agricultural sectors is that the selection of specific mechanisms implemented to achieve bioenergy production and/or greenhouse gas (GHG) mitigation targets may have substantial effects on landowner incentives to adopt alternative practices. For instance, the prices of allowances and offsets are expected to diverge under some policies being considered where there is a binding cap on the quantity of offsets from the agricultural and forest sectors. In addition, provisions that limit or exclude specific practices from receiving carbon payments will affect the quantity and cost of GHG mitigation opportunities available. In this study, the recently updated Forest and Agriculture Sector Optimization Model with GHGs (FASOMGHG) was used to estimate GHG mitigation potential for private land in the contiguous U.S. under a variety of GHG price policies. Model scenarios suggest that U.S. forestry and agriculture could provide mitigation of 200 – 1000 megatons carbon dioxide equivalent per year (Mt CO2e/year) at carbon prices of $15 to $50/tCO2e. Binding limits on offsets have increasingly large effects on both the total magnitude and distribution of GHG mitigation across options over time. In addition, discounting or excluding payments for forest sinks can reduce annualized land-based mitigation potential 37-90 percent relative to the full eligibility scenario whereas discounting or excluding agricultural practices reduces mitigation potential by less than 10 percent.

This paper develops a model that solves for the optimal economic harvest rotation problem to maximize revenue of an even-aged forest plantation when there is a risk of a catastrophic forest fire. The paper also investigates the feasibility of using fire prone stands for carbon sequestration and estimates the effects that it would have on the optimal management regime and rotation age empirically using a typical Douglas-fir stand in the Pacific Northwest. The model incorporates risk-reducing management practices that allow risk and growth to be endogenous, and the optimal rotation model is solved using numerical simulation techniques. Results show that higher carbon prices increase the rotation length regardless of the probability of fire and that the frequency of risk-reducing management practices increase as the stand approaches the optimal harvest age. Results also indicate that intermediate fuel treatments can provide economical and environmental benefits, even with a high probability of fire.