Recently we were going through some of our old internet bookmarks and came across a link from 2015 on the controversy surrounding the then proposed logging of the the Mowen State Forest southeast of Margaret River in Western Australia.
The article was published in the West Australian, authored by Daniel Mercer, but the only place we can find it now is on Yahoo News.
Just in case the article ever disappears from the interweb we’ll reproduce it in full at the end of this article.
The plot summary is that the Save Mowen Forest Group (SMFG) had crowdfunded A$90,000, which it claimed was the net economic benefit to Western Australia in the form of estimated royalties to be earned by the Forest Products Commission from logging the forest in question, and offered it to the then Government to not proceed.
The Forestry Minister for the then Western Australian Coalition State Government, Mia Davies, rejected the SMFG’s estimate of economic benefits and the SMFG’s offer, citing employment in the industry and regional and community benefits.
We don’t want to get into the totality of this debate, but it seems like the Mowen State Forest has not yet been logged. The current Labor Government announced in September 2021 that logging native forests would end from 2024.
What is fascinating from our point of view is the methods of economic analysis employed by both sides of this argument.
To be clear, we don’t know whether either analysis is correct and faithful to their respective methods. However, this case is a good opening to a discussion on economic analysis methods.
We hope to develop this argument further over the coming months.
The SMFG analysis roughly considers economic (more strictly financial) benefits to be royalties, or the surplus created over and above the costs of production. This is consistent with Cost-Benefit Analysis (CBA), or economic welfare analysis.
Society-level CBA also allows for valuation of non-market costs and benefits or externalities, such as peoples’ valuation of the beauty of, and animal habitats in, native forests.
For a project to be worthwhile its benefits must exceed all of its costs, including these non-market costs. In this case the benefits from the logging must exceed its costs, including the loss of the native forest in question.
Conventionally, we would value externalities with some sort of survey, known as contingent valuation, where people are asked how much they would be willing to pay to save a sensitive environmental area.
However, the SMFG went further than asking how much people would be willing to pay. It crowdfunded real money, or more correctly commitments for real money, exceeding what it claims as the economic benefit of the logging.
While the SMFG doesn’t outright say it, the obvious implication is that if it can raise the money to buy out the financial benefits to Western Australia, then the amount all Western Australians would be willing to pay must far exceed this amount.
According to the SMFG, the costs of logging the Mowen Forest (loss of environmental amenity) far exceed the benefits (royalties).
In contrast the then Forestry Minister cites jobs and community benefits, which is roughly analogous to economic impact analysis.
Economic impact analysis can involve quotation of direct benefits, such as direct jobs created, but can also involve calculation of indirect or flow-on benefits through input-output multipliers or Computable General Equilibrium (CGE) modelling.
The then Minister doesn’t quote numbers, in fact we doubt there was a formal study done, but her implication is that the benefits of jobs and impact of regional communities far outweighs the environmental benefits from retaining an area of previously logged (i.e. non-old-growth) forest.
So who’s right?
Should we be using CBA, or more generally economic welfare analysis, or CGE modelling, or more broadly economic impact analysis?
We’ll develop that answer in a series of posts over the coming months – you didn’t think we’d get to the good bit straight away did you?
Besides, to sensibly answer this question we first need to outline the basic concepts behind each method. We might throw in some detail on input-output multipliers, building on some of our previous posts.
Stay tuned.
As always, we encourage you to read our disclaimers here and here.
Crowd funding fails to save forest
The West Australian
Daniel Mercer
17 February 2015Forestry Minister Mia Davies has dismissed a bid by protestors to buy forest earmarked for logging, saying the area was already protected enough and the forestry jobs were more important.
Conservationists used crowd funding to source $90,000 in donations and pledges as part of a last-ditch bid to save an area of marri and jarrah forest outside Margaret River known as Mowen block.
Among the donors were high profile figures including musician John Butler, writer and comedian Ben Elton and chef Ian Parmenter.
According to protestor Naomi Godden, the money raised was a genuine attempt to spare the Mowen forest by appealing to the State Government’s financial reasoning.
Ms Godden said the forest was worth more to the community and the environment standing than it was logged, at which point she said it would be sold for low value purposes such as wood chips.
She said responses to a Freedom of Information request showed $90,000 is all the State’s Forest Products Commission would make in net terms from the sale of logs from Mowen forest.
As such, she said, the Government would be better of the take the protesters’ money and keep the forest.
“The Forest Products Commission does not make a profit from logging native forests – it’s heavily subsidised by the Government,” Ms Godden said.
“Basically we’re speaking the language of the Government.
“If economic rationalism is in fact the ideology that is the foundation of this Government then we’re meeting them on that.”
However, Ms Davies flatly rejected the offer, saying it was regrowth forest that was suitable for logging.
Ms Davies said there were already sufficient protections for old growth forests in the South West, and the forestry industry was an important part of the region’s economy.
“Harvesting of forest areas, like Mowen, employs people in the harvesting, processing and manufacturing sectors and also has flow on benefits to the wider communities including kids in schools, increased participation in community groups and sporting clubs and income being spent in local economies,” Ms Davies said.
“Old-growth forest continues to be protected and is not available for timber harvesting. The forest proposed to be harvested is regrowth forest.
“The State Government remains committed to the forestry industry.”