An overview of the economics of plantations in Canada

Input examples
Growth rate assumptions: Hybrid poplar
(MAI), m 3 /ha/year (CFS-Edmonton)
list ccsuid
ROI, (%) – real rate of return yielding NPV = 0
Output Metrics of Interest
Break-even carbon value, ($/t CO 2-e ) – the carbon unit price yielding NPV = 0
(Carbon price is 0 when NPV is positive)
Physical carbon, (t/ha) – total ecosystem carbon sequestered over a project life
(minus carbon in harvested biomass and decay emissions)
USA
Geographical variation of the output metrics
(helps to identify economically attractive areas for afforestation)
150 0 300 600 900
Km
Other metrics include Present Values and break-even wood prices
Urban areas MAI, m3/ha/year
< 4
4 - 6
6 - 8
8 - 9
9 - 10
10 - 11
11 - 12
12 - 13
13 - 14
14 - 15
15 - 16
16 - 17
17 - 18
18 - 19
19 - 20
20 - 21
21 - 22
22 - 23
23 - 24
Results: ROI
Returns on investment, % (real rate)
Afforestation scenarios (~70-75 years time horizon)
“Best” Red Norway Black
area, ha * pine spruce walnut
Hybrid poplar
Fibre only scenario
Max.value 4.6 3.6 3.7 2.8
10k 4.3 3.4 3.5 2.5
100k 4.1 3.3 3.3 2.3
500k 3.8 3.1 2.9 2.1
Fibre + carbon scenario – Carbon at $3.4/t CO2
Max.value 5.2 4.3 4.1 5.1 [6.0] **
10k 4.8 4.1 3.9 4.7 [5.7]
100k 4.5 3.9 3.7 4.2 [5.2]
500k 4.2 3.6 3.2 3.9 [4.9]
* The regions with the highest NPV values
** ROI from a single rotation (25 years) – shown in brackets
Hybrid poplar –75-year horizon (3 x 25-year rotations)
Other species – 70-year horizon (1 x 70-year rotation)
150 0 300 600 900
Km
Int.rate of return
0
USA
< 1%
1 - 2%
2 - 3%
3 - 4%
Results: ROI
Geographical Variation
Hybrid Poplar: Return on Investment (%)
(fibre + carbon at $10/tonne CO 2-e )
4 - 5%
5 - 6%
6 - 7%
7 - 8%
8 - 9%
9 - 10%
10 - 11%
11 - 12%
Urban areas
Results: Carbon
Break-even carbon price ($/t CO 2-e )
and physical carbon accumulation (t/ha):
“Best” Break-carbon even price, $/t CO 2-e Total ecosystem carbon, t C/ ha **
area, ha * Red pine N.spruce B.walnut H.poplar Red pine N.spruce B.walnut H.poplar
Max.value 0 *** 2.3 3.1 2.0 109 98 109 159
10k 0 3.3 4.8 2.7 100 98 109 148
100k 0 4.0 6.6 3.0 96 98 106 139
500k 2.1 5.7 10.2 3.5 91 88 100 132
* Areas with the highest NPV values
** Above- and belowground ecosystem pools minus harvested wood and biomass decay
(IPCC method)
*** Zero carbon price means positive NPV for a 4% discount rate
Hybrid poplar –75-year horizon (3 x 25-year rotations)
Other species – 70-year horizon (1 x 70-year rotation)
Conclusions
• Returns from fibre approach 4% on average – not likely to induce large
scale industry investments (7-9% needed?)
• Main challenges include low growth rates, high costs of land use
conversion and silviculture and low value of fibre
• Some native species (Red pine) have better economic potential than
hybrid poplar in selected regions (Ontario)
• Carbon incentives boost ROI, however the effect is highly dependent on
the carbon price assumptions:
- 0.7-2% ROI increase for current N. American carbon prices (CCX)
- 3-4% increase assuming $10/t CO 2-e price expectations
• Other benefits may be required to improve a competitiveness of
afforestation projects and achieve industry-level rates of return
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