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Table 25 – Analysis of Alternative Forestry Policy Options

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	Criteria			Options
		1A	1B	2	3	4	5
		Government retains all benefits and liabilities (no PFSI)	Government retains all benefits and liabilities (retain PFSI)	Payment for afforestation/ reforestation and replanting, no devolution of liabilities and no deforestation cap	The current policy, operationalisation of the deforestation cap and other policies to encourage new planting (includes PFSI)	Deforestation charge/afforestation rebate	Devolution of carbon benefits and liabilities
A	Appropriate land-use signals	Poor No positive or negative signals sent on climate change, although flexibility of land-use change is high.	Slightly better than 1A because signals sent by PFSI.	Medium Some signals sent by payment. Lack of deforestation cap means no signals sent on effects of deforestation.	Medium Improved – clear policy on deforestation cap and others encouraging planting (plus PFSI).	High Clear positive and negative signals sent through payment and rebate system.	High Strong and clear signals sent by accounting for carbon sequestered or released.
B	Reduction of uncertainty	Reduced uncertainty because deforestation cap is removed.	Reduced uncertainty because deforestation cap is removed.	Reduced uncertainty because deforestation cap is removed.	Certainty provided by operationalising the deforestation cap.	Certainty for forestry sector from having clear rules and price signals for activities.	Certainty about rules and obligations for credits. Uncertainty about carbon price.
C	Resilience	High The absence of a strong policy signal leaves future options open, but no long-term signals sent.	High The absence of a strong policy signal leaves future options open, but no long-term signals sent.	Medium Payment for plantings can be altered to suit any new situation beyond CP1. No resilience on issue of deforestation.	High Can be altered to suit new situation beyond CP1.	High Can be altered to suit situation beyond CP1.	Poor After devolution of benefits and liabilities, issues arise if forestry rules change beyond CP1.
D	Equity	High No liabilities for owners of KFs or non-KFs - equitable. No recognition of benefits from forestry through allocation of proportion of benefits.	High No liabilities for owners of KFs or non-KFs - equitable. No recognition of benefits from forestry through allocation of proportion of benefits (aside from PFSI).	High No deforestation cap removes the equity issue for the owners of non-KFs. Depends on start date for payment.	Potential inequity arises for owners of non-KFs from operationalising the deforestation cap. Depends on start date for policies to enhance plantings.	Some land owners will pay charge for deforestation, while not receiving the payment for earlier planting. Depends on start date for charge and rebate.	Not equitable for owners of non-KFs if the Kyoto Protocol rules are followed.
E	Sector acceptance	High – because of removal of the deforestation cap. Loss of PFSI would not impact greatly on sector acceptance.	High – because of removal of the deforestation cap.	High No deforestation cap and also receive payment for benefits of forestry.	Mixed Operationalising the cap will have negative effect, but policies on planting may improve sector acceptance.	Okay Sector buy-in would be reasonable as payment recognises some, but not all, forestry. Deforestation charge may not be acceptable to sector.	Depends on the circumstances Negative for owners of non-KFs, and positive for KF owners, if Kyoto Protocol rules followed.
F	Maximising co-benefits	Poor Co-benefits not incentivised. Co-benefits lost through deforestation not addressed, in absence of cap.	Poor (better than 1A) Co-benefits not incentivised, aside from the PFSI. Co-benefits lost through deforestation not addressed, in absence of cap.	Payment may assist with co-benefits. Co-benefits lost through deforestation not addressed, in absence of cap.	Potential from co-benefits depending on how policies to enhance plantings are implemented.	Would result in some new planting and associated co-benefits – could link payments to where the co-benefits were desired.	Poor. No influence over maximising co-benefits – location of planting driven by market.
G	Minimisation of Crown risk	Uncertain Removal of deforestation cap means that the level of liability is unknown.	Uncertain Removal of deforestation cap means that the level of liability is unknown. Fiscal cost of the PFSI is minimal.	The fiscal liability from deforestation is unknown because it is not capped. Fiscal costs associated with payments are unknown (but remains within the surplus of sink credits above the level of deforestation liabilities).	Costs capped at 21Mt CO₂e for non-KFs and clear policy for operationalising the deforestation cap. Fiscal costs of any new policies to enhance plantings is unknown.	No deforestation cap and therefore fiscal risk depends on the response of the sector to the charge. The fiscal cost of the afforestation rebate depends on the degree of uptake. If the option is undertaken as a forestry off-set scheme(see Box 1), this latter cost is transferred to the purchasers of the sink units.	Removes 67.8Mt CO₂e of liability from the Crown account.
H	International obligations	Unknown – further work required on this.	Unknown – further work required on this.	Unknown – further work required on this.	Unknown – further work required on this.	Unknown – further work required on this.	Unknown – further work required on this.
I	Feasibility	High Easy to implement, with some issues relating to national-level monitoring.	High Implementation of PFSI makes option slightly more difficult than 1A.	Medium Managing some activities through payments and deforestation centrally (with no deforestation cap).	Difficult Complex arrangement of multiple programmes.	More difficult Measurement and verification for payments and rebates. Enforcement issues.	Most difficult - monitoring - enforcement - transaction costs - point-of-obligation issues.

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