FWPA has commissioned an economic analysis to better understand the potential carbon dioxide emissions abatement associated with the use of more wood in construction, as opposed to alternatives such as concrete and/or steel, under a number of different scenarios.
This work will support the development of a new methodology under the Australian Government’s Emissions Reduction Fund (ERF).
The ERF is a voluntary, government-run scheme that aims to provide incentives for a range of organisations and individuals to adopt new practices and technologies, and reduce their carbon emissions.
A number of activities are eligible under the scheme, and participants can earn Australian carbon credits by demonstrating their reductions. These credits can be sold to generate additional income, either to the government through its carbon abatement contract, or a secondary market.
As well as directly supporting Australia’s efforts to reduce greenhouse gas emissions and meet its international target — currently set at a 26 to 28 per cent reduction on 2005 levels by 2030 — the construction industry has the potential to benefit financially from the ERF. It is therefore important that the forestry industry is able to demonstrate the impact of replacing current building materials with less emission-intensive timber alternatives.
FWPA engaged Natural Capital Economics (NCE) to investigate the potential benefits of increasing the use of timber in Australian construction under a range of scenarios.
The analysis involved high-level desktop research, drawing on publicly available data. Economic models were developed to calculate the potential direct and indirect emissions reductions achievable between now and 2050.
Investigations found a one per cent upward shift in the market share of structural timber in place of steel and concrete alternatives — across Class 1, Class 2, and non-residential buildings — would reduce emissions by 1.3 million tonnes of carbon dioxide equivalent (CO2-e) in total, and 1.0 million tonnes of CO2-e domestically.
This one per cent increase would require a 5.3 million m3 increase in above-ground tree biomass by 2050. Any increase in supply, however, would have to be prompted by increased saw log demand placing upward pressure on prices, thus incentivising investment in plantations.
The study also considered how an increase in structural timber demand could boost carbon sequestration in Australian forests and plantations, based on the expectation that domestic supply would rise to meet demand. It was found the extra biomass involved would have the potential to sequester 4.7 metric tons of carbon dioxide equivalent.
However, the likelihood of any proposed ERF method resulting in boosted supply would depend on the extent of change in demand and price, as well as the economics of plantation timber including land values, the price of carbon, and international competitiveness.
For context, the annual emissions reductions from a one per cent increase in market share for structural timber, combined with the potential for additional carbon sequestration, was calculated to be equivalent to 2.2 per cent of the total value of credits purchased by the government’s Clean Energy Regulator through its carbon abatement contract during 2020.
The full findings of these investigations can be found here.
