Recognising the importance of social and economic considerations in tandem with ecological ones, RACAC established the Socio-Economic Working Group (SEWG) to provide with rigorous, defensible and clear information and advice on social and economic matters associated with the IAP.
The task was made difficult by the limited time frame and the need to commence and undertake studies without knowledge of the options that would arise from the negotiation process. Nevertheless, it was possible to compile a broad range of relevant social and economic information for decision makers to consider by using existing information; studies being undertaken by NSW Government agencies and other levels of Government; as well as commissioning additional studies commissioned by RACAC.
Five studies were initiated by the SEWG to assess the social and economic impacts of deferred forest areas in the IAP.
These studies are discussed in some detail in Chapters 4 & 5. Figure 2.4 below shows the relationship between these and other studies.
Figure 2.4: Relationship between social and economic studies
Economics, by definition, is all about the allocation of scarce resources, such as native forests, upon which the community places competing demands. The role of socio-economic analysis is to provide as much information as possible about the nature of trade-offs, in terms of changes in community welfare (efficiency) and changes within the community itself (equity).
With the IAP attempting to meet certain physical conservation criteria, the economic efficiency considerations can be partly addressed without undertaking full benefit cost analysis but instead attempting to minimise the economic costs or opportunity costs associated with achieving the criteria. This approach is consistent with the precautionary principle of ecologically sustainable development and generally accords with the safe minimum standards concept referred to by Ciriacy-Wantrup in 1952 and later Bishop (1978). The rationale for establishment of safe minimum standards being that uncertainty and extra market values surround the future use of irreplaceable resources.
Importantly, the adoption of such an approach shows the trade-off in terms of foregone net timber benefits from achieving various levels of the conservation criteria. In economic terms, it indicates the minimum price the community must be willing to pay to justify preservation of the forest areas under consideration. The ultimate decision regarding the desirability of this trade-off, however, rests with the decision makers.
The main approach to measuring the economic costs or opportunity costs of meeting different levels of the conservation criteria was via the SFNSW Wood Resources Study which indicated the reduction in sustainable yield and attempted to identify the indicative timber opportunity costs associated with deferring different forest areas.
As discussed in Section 2.6.5, the timber values derived during the IAP should be viewed as relative values, not as absolute indicators of the opportunity cost attached to forest areas. Greater refinement of the study model and inputs to it should in future allow more accurate opportunity costs to be derived. Nevertheless, these relative values provided valuable indices to utilise during the negotiation process.
The SEWG recognised the importance of considering both the timber and non-timber values of the forest and the economic efficiency implications of the IAP process and the proposed CRA process. A report was prepared on the non-timber values of forested areas. In addition a study was commissioned which included information on non-timber values. This study also developed an economic efficiency framework to give some perspective to the economic studies being undertaken in the IAP and also to provide a template for possible application in the CRA process.
Alternative resource use options will almost inevitably involve changes in the distribution of wealth in the community. These distributional issues are usually considered as an adjunct to economic efficiency analysis. Decision makers addressing resource re-allocations therefore need to draw on information relating to distributional issues in addition to the efficiency data generated by economic efficiency analysis. Distributional information is supplied by social and economic impact studies.
Regional Economic Impact Analysis can be used to identify the economic significance of particular activities to a defined economy and can also be used to identify the economic impact of a change in resource allocation within an economy. In both cases, the impact is generally measured in terms of criteria such as employment, output, income and value added. Multipliers generated from the identification of the linkages in an economy can be used to predict the flow-on significance of an industry to an economy or flow-on impact of a policy change to an economy. A multiplier is a measure of the relationship between direct economic impacts and total economic impacts.
The criteria examined in regional economic impact analysis are generally based on revenues and expenditures as a result of transactions in the economy. As such the direct and indirect impacts considered in input/output (I/O) analysis are essentially concerned with transfer payments (financial transactions) between individuals within an economy (Bennett 1996).
Two sources of regional economic impact information were available for consideration during the IAP process. A study commissioned by SFNSW and prepared by Margules Groome Poyry Pty Ltd (1995), describes the structure and economic significance of the NSW forest products industry on a region by region basis as well as for the State of NSW. RACAC also commissioned an additional study to examine the direct and indirect economic impacts of changes in the available forest resource as a result of various levels of reduction in available wood resource.
An important input to determining the total economic impact of a change in resource availability is the determination of the direct effects of a resource change. RACAC commissioned a micro-economic industry study to examine how businesses directly dependent on the supply of logs might adjust to the revised availability of logs. Via survey work and analysis, this study sought to classify firms in terms of their functions and characteristics that appear likely to influence the way in which they respond to changes in log supplies.
The output results of this micro-economic industry analysis were used in the regional economic impact analysis to estimate the direct and flow-on effects within the context of the local economy.
Social Impact Assessment (SIA) is concerned with assessing the type, extent and duration of effects of proposals on communities, groups and individuals. It can be used to gather information on the values, attitudes and preferences of people with regard to resource uses and to assess their capacity to respond to, accept or cope with change (RAC 1992a). SIA offers a basis to achieve more equitable outcomes by involving the community, anticipating negative and positive social outcomes, and helping to formulate a means of mitigating adverse impacts. SIA is therefore particularly relevant to forest dependent communities.
Ideally, SIA introduces a flexible and participatory approach to decision making and can assist people in sharing control over the pace and direction of changes affecting them (RAC 1992a).
Consideration of regional economic impacts such as changes in employment and income can provide an important input into the consideration of social impacts. However, even in the absence of such information SIA can be used to gauge the effect of uncertainty on communities, groups and individuals and the resilience of communities to change. RACAC commissioned a preliminary SIA to pilot test a methodology and examine the probable impacts of changes in timber resource. The communities involved were Bulahdelah, Wauchope, Kempsey, Narooma and Walcha. The Commonwealth Government also made available to RACAC the results of social impact studies it commissioned for Urbenville / Woodenbong, Grafton, Gloucester and Bombala, as well as summaries it had prepared of social impact information provided in Environmental Impact Statements (EISs).
The results of each of the economic and social studies and the Wood Resources Study address different but important aspects of re-allocating forest resources.
The fundamental economic problem in the IAP is to allocate forest areas to competing uses so as to maximise the net present value to society. There are likely to be a number of land allocations that meet this criteria. The key question is which one of these resource allocations best meets the needs of society.
To answer this fundamental economic question, the approach has been to assess the balance between the ecological values and the commercial values of forested lands. This has been achieved by examining the socio-economic effects on industry, society, broad economic regions and also assessing the likely changes in non-timber values.
The IAP process has essentially been a constrained optimisation process in which the conservation benefits have been represented by non-monetary indicators. The application of economic efficiency criteria to the IAP has been achieved by the use of the threshold value approach, ie. the forgone timber (and other) benefits have been traded off implicitly with the preservation benefits as indicated by the irreplaceability model which encapsulates the notion of safe minimum standards and the precautionary principle.
The CAR process will involve a fuller application of a benefit cost analysis in which the benefits of conservation are measured and compared with the benefits of logging in a more comprehensive fashion.
In undertaking socio-economic analyses such as those outlined in Chapters 4 & 5, it must be recognised that the problem of choosing between different options does not alter the fact that ultimately such choices are a matter of judgement, not computation (Jacobs 1991).