Deforestation Powerpoint

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Deforestation in Australia :

From an economic perspective By Nicholas Dorante Deforestation in Australia


Importance of Australian Rainforests Clean water Protection of soil Recreational Activities and tourism Scientific and educational pursuits Cultural, heritage, aesthetic values


Consequences of Deforestation Climate change Loss of biodiversity Flooding Siltation Soil degradation


Externalities of Deforestation Agriculture related forest clearing involves the use of herbicides and pesticides that travel to the ocean and destroy the GBR Deforestation in Australia is responsible for 12% of the countries greenhouse gas emissions (CSIRO)


Economic Background of Deforestation in Australia Agriculture is the primary contributor to deforestation Continued growth in agriculture can be attributed to increasing human population & demand for socio-economic development (Braithwaite, 1996) Australia is only country in top 20 land-clearing countries with a developed first world economy Currently a return to weakened laws on deforestation control in Australia (Conroy, 2015)


Theoretical Policy/ Management Tools to Combat Deforestation Agriculture sector in Australia produces $155 billion annually, a 12% share of GDP Very profitable industry in Australia’s economy that needs to be carefully managed Two options have been considered:


Option A: A reform of the Carbon Farming Initiative (CFI) where incentive is maintained but payment is cash rather than carbon credits Eliminates uncertainty in carbon credit prices, and reduced liquidity risk to farmers Lead to a down ward shift in the MC curve, leading to an increase in output


Option B: Implementation of agricultural export tariffs, proven effective method in other parts of the world (Robalino, 2009) Creates an economic barrier to trade for farmers, due to increased prices they will need to charge for exported goods Lead to limited demand for overseas importers, and reduces the demand on farmers to clear more land for crops


Option A: Pros and Cons Fixes the value of carbon credits over 5 year periods Land rent should increase for the farmers, provided subsidies outweigh opportunity cost of land clearing Long run incentive to farmers to not clear land Would be expensive for the government to implement Not the most cost-effective option, but it would dramatically reduce deforestation in agricultural sector


Option B: Pros and Cons Harsh alternative to farmers that do not choose Option A The increase in production prices to farmers would lead to reduced demand from foreign importers – thus reducing output/ land clearing Provides a barrier to trade and farmers have limited choice but to choose Option A Not the most popular option for exporters, and thus unlikely to be adopted by farmers immediately


Best Option? Without going into too much detail, Option A seems the most viable scenario Would be the politically acceptable option of the two Rather than reduce farmers income through export tariffs, its better to offer an alternative form of income in the form of government subsidies Immediate results would be noticeable as farmers come on board to receive the government subsidies

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