Rural land use is important for New Zealand's economic and environmental outcomes. Using a dynamic econometric model and recent New Zealand data, we estimate the response of land use to changing economic returns as proxied by relevant commodity prices. Because New Zealand is small, export prices are credibly exogenous. We show that land use responses can be slow. Our result implies that policy-induced land-use change is likely to be slow or costly. JEL codesQ15, Q24

Rural land use is important for New Zealand’s economic and environmental outcomes. Using a dynamic econometric model and recent New Zealand data, we estimate the response of land use to changing economic returns as proxied by relevant commodity prices. Because New Zealand is small, export prices are credibly exogenous. We show that land use responses can be slow. Our result implies that policy-induced land-use change is likely to be slow or costly.

In this paper, we construct a dataset of annual expected forest profits in New Zealand from 1990–2008 at a fine spatial resolution. We do not include land values in any of our profit calculations. We estimate four measures of expected forest profits based around net present value (NPV), land expectation value (LEV), equal annual equivalent (EAE), and internal rate of return (IRR). Our estimates of expected profits are based on the assumption that land owners form their expectations adaptively; that is, they use recent data on prices and costs to form expectations. We illustrate our data by showing regional variation in each of our measures, changes over time in NPV on land in forest in 2008, and variation in NPV over space in 2008. The final dataset, working datasets, and the code used in this work are publicly available to the research community and can be accessed from the authors’ website: http://www.motu.org.nz/building-capacity/dataset/u10073_forest_profit_expectations_dataset.

Abstract:We perform simulations using the integrated Land Use in Rural New Zealand (LURNZ) model to analyze the effect of various New Zealand emissions trading scheme (ETS) scenarios on land use, emissions and output in a temporally and spatially explicit manner. We compare the impact of afforestation to the impact of other land-use change on net greenhouse gas emissions and evaluate the importance of the forestry component of the ETS relative to the agricultural component. We find that the effect of including agriculture in the ETS is small relative to the effect of including forestry. We also examine the effect of land-use change on the time profile of net emissions from the forestry sector. Finally, we present projections of future agricultural output under various policy scenarios.

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