6.2.a Value of capital investment and annual expenditure in forest management, wood and non-wood forest product industries, forest-based environmental services and recreation and tourism

Rationale

This indicator quantifies investment and expenditure in developing, maintaining and obtaining goods and services from forests. Maintaining and enhancing forests and their benefits often depends on regular investments in restoring, protecting and managing forests, as well as in operations, forest industries and forest-based environmental services. When the capacity to protect, manage and use forests is eroded through lack of funding, the benefits that forests provide may decline or be lost.

Current state

Systematic information and estimates are available on the capital stock annual expenditure (and revenue) for the commercial (planted) forest sector and for expenditure by the Crown and private sector on several specific forestry-related issues.

Expenditure on non-wood forest product industries, forest-based environmental services, recreation and tourism information collection is less systematic. Information that is collected and tagged as being forestry related frequently relates to specific (and possibly time limited) projects. There is significant and ongoing Crown expenditure, for example, in pest control and/or biosecurity, most notably by the Department of Conservation (DOC) but also by the Ministry for Primary Industries (MPI) and Ministry of Business, Innovation and Employment (MBIE), which affects the long-term environmental services of both forest and other lands where the forest-based component of that expenditure is not clearly separated and identified.

Commercial forest management and wood- based products

Both capital investment and annual expenditure by commercial forestry enterprises are influenced by market conditions. Detailed data is currently only available to 2012, while the expenditure data is only to 2013. The broader gross domestic product (GDP) measure (output less intermediate consumption) is available for forestry and logging and for the combined wood and paper products manufacturing for 2012 and 2013.

The data indicate growing forestry and logging output and a relatively stable net contribution from local wood-based manufacturing.

For wood product, and paper and paper product manufacturing, all investment and expenditure is from private enterprises. Central and local government own about 5 percent of the planted forest resource, so a small component of the expenditure under forestry and logging is from public sources.

For forestry and logging, the growth in expenditure over the period is accounted for by the levels of harvest, which grew from 20.4 million cubic metres in 2008 to 30.3 million cubic metres in 2014 (years ending 31 March).

Crown forestry

Forestry-related operational expenditure and transfer payments by New Zealand’s two principal government agencies with forestry responsibilities, DOC and the then Ministry of Agriculture and Forestry (now the Ministry for Primary Industries), is projected to be $270 million for the 2014/15 year.

Other expenditure is carried out by both agencies (but particularly DOC) and some other agencies that is intended to maintain and enhance environmental and recreational services in general, for example, pest control. This expenditure can be undertaken on forestry lands but is not specifically tagged as forest expenditure.

Under the Conservation Act 1987, all Crown land in New Zealand designated for conservation and protection is managed by DOC. The land area involved (about 8.8 million hectares) represents over 30 percent of the country’s land mass, the bulk of which is classified as indigenous forest land. DOC has an annual appropriation in excess of $440 million to manage all its lands, and a portion of this expenditure should be counted as part of state forestry spending.

Non-wood forest products

The non-wood forest products industry is not well developed in New Zealand, and little information is available on investment or total income potential. The main recognised products, in commercial terms, are game meat (feral deer and pigs), pelts, sphagnum moss and honey. In addition, small quantities of berries and fungi are harvested annually, along with plant extracts for medicinal remedies and healthcare products (see Indicators 2.e and 6.1.b).

This summary does not do justice to the wide range of species and products harvested both commercially and non-commercially. Nor does it indicate the economic impact many non-wood products could potentially make. For example, recent research that attempted to scope the ginseng industry potential in the central North Island concluded not only that the product adds a layer of possibilities for standard commercial forestry, but over half of the 450 000 hectares of planted forests in the central North Island have suitable environmental and geophysical conditions to grow wild simulated ginseng. That potentially offers a large and significant benefit for New Zealand’s economy, because the analysis also indicated that adding ginseng could double profitability compared with forestry alone, returning an additional 154 percent to 188 percent value per hectare of planted forest.

Another example of ongoing research with positive environmental effects and potentially significant economic impacts is the “High-performance Mānuka Plantation” programme. Mānuka honey was worth $75 million to the New Zealand economy in 2010. This research programme, which is jointly funded by industry ($1.49 million) and the Crown ($1.4 million), aims to convert lower quality land to mānuka plantations, principally for honey production. Conversion is likely to have positive environmental effects in terms of land stabilisation and reduced erosion. It also has the potential to increase honey income from the 2010 figure of $75 million per annum to around $1200 million by 2027. To date, Crown expenditure on this project is $379 000, and private sector funding has been comparable.

Environmental services

All forests provide environmental services of differing types and to differing degrees. For New Zealand, the primary environmental services include maintenance of biodiversity, soil conservation, maintenance of water quality, carbon sequestration and storage, and landscape values. Environmental, recreational and tourism services are the main output of indigenous forests under DOC management.

Environmental services, at least as far as the commercial planted forest estate is concerned, are only components of, or secondary benefits from, broader forest management objectives. Given that over half of all the New Zealand planted forest area is Forest Stewardship Council-certified and that certification requires management incorporating environmental values, there is specifically recognised environmental spending associated with over half of all the planted estate. Systematic information on total financial expenditure for any specific environmental service clearly tagged to being purely “forestry” related and on a national basis, is not readily available.

The Erosion Control Funding Programme (ECFP) (previously the East Coast Forestry Project) is a government-tendered grant scheme that has been in operation since 1992 (first plantings occurred in 1993). Its aim is to help mitigate severe soil erosion in the East Coast region of the North Island through forest establishment, using poplar and willow treatments and indigenous (native) regeneration. Since 1992, landowners have used the fund to treat soil erosion on 42 000 hectares.

Nearly $26 million remains available in the ECFP until 2020, after which no new applications will be accepted. Some funding will still be available for final maintenance payments available until 2028 when the ECFP is due to expire. The remaining money is sufficient to treat around another 12 000 hectares to 25 000 hectares.

The New Zealand Emissions Trading Scheme (ETS) allows owners of post-1989 forest on eligible land to freely choose to participate in the ETS, take responsibility for managing carbon stock changes on that land and earn carbon credits where the carbon stock increases (see Indicator 6.1.c).

Recreation and tourism

The management of recreational opportunities by DOC in 2013/14 cost $137.95 million, and the 2014/15 expenditure is budgeted at $144.9 million. DOC’s annual report for the year ended June 2013 indicates current expenditure is maintaining the recreational and tourism value of the estate it administers.

Planted forests are commonly available for restricted recreational activities, with a few forests having high levels of use. A national assessment of ecosystem services in New Zealand indicate significant recreational benefits arising from a small sub-set of planted forests.

The book Ecosystem Services in New Zealand (Dymond, 2013) indicates not only significant recreational and tourism values for the indigenous estate but that those for the planted forest estate are also significant. Two studies of recreation benefits in Whakarewarewa Forest (an exotic planted forest) worth $9 million and $28 million per annum respectively; these recreational values exceed the value of the annual wood production from this forest.

Trends

There is an increasing capital stock in the forestry and logging subgroup, relatively stable capital stocks in wood product manufacturing, and a possible slow decline in the capital stocks associated with paper manufacturing (although there has been a recent $60 million investment in upgrading tissue manufacturing plus investment in refurbishing one pulp mill). This result is in line with the increase in harvest and the growth of the export log trade rather than growth in manufactured timber exports, as evident in Indicator 6.1.a.

For 2005, forestry-related operational expenditure and transfer payments by New Zealand’s two principal government agencies with forestry responsibilities, DOC and the then Ministry of Agriculture and Forestry (now the Ministry for Primary Industries), were estimated as being $221 million. The forestry-related component of these two agencies’ expenditure has grown to a projected $270 million for the 2014/15 year.

In 2001/02, the provision of recreational opportunities and management of visitor and public information services by DOC accounted for $60.6 million. The management of recreational opportunities by DOC in 2013/14 cost $137.95 million and the 2014/15 expenditure is budgeted at $144.9 million.

Trend Status

Data Quality L / M

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