Impact of Australian tree species selection research in China: an economic perspective

Abstract

Given increasingly limited research budgets, there is a growing need for forestry research to be more systematically evaluated. Such evaluations can often provide insights for setting research priorities and guiding the allocation of research resources. The Australian Centre for International Agricultural Research (ACIAR), through collaborative projects with the Commonwealth Scientific and Industrial Research Organisation, Australia (CSIRO) and the Chinese Academy of Forestry (CAF), has been involved in tree species selection trials in southern China since 1984. In particular, the trials have examined the potential of fast-growing species of Eucalyptus, Acacia and Casuarina. The Chinese have been planting Australian tree species since 1890, but there has been little progress in determining which species and provenances would be best for the local climate and soils. This paper presents an assessment of the likely economic impact of these trials. Owing to the long term nature of forestry, the analysis primary has an ex ante perspective. That is, while the trials have been underway for a number of years, large-scale production plantations of the newly selected species are only just now being planted. Most of the wood from these plantings will not be harvested for another 7–15 years. Sensitivity analysis on both the cost and benefits of the research is required to gauge the impact of different assumptions on the overall benefits. In this analysis, sensitivity analysis suggests internal rates of return of 27–45%. Base-case benefit estimates suggest economic gains to China of a net present value of $A72 million in 1986, the commencement of the project, and an internal rate of return of about 34%, indicating the research is an attractive economic investment.