Monday, July 24, 2017

Fight Fires AND Stimulate Rural Economies

Part of the challenge with wildfire is fuel load, that is to say, that over time when you control fires fuel builds up – then when conditions are opportune, the fire starts and is more severe than if the fuel load were reduced by regular fires or other means. It is the “other means” that interests me, how can we reduce the risk of fire and spare ourselves the smoke. Much suggestion for mitigating the severity of wild fires centres around controlled burns, perhaps there is another solution.

It has also come to my awareness that thinning and limbing, a part of the interface treatment process and an essential part of good forest management offers a substantive return on investment. Numbers I was provided indicated an approximate 5% / annum return on invested capital for thinning and limbing (this number is dependent on the various timber types and growing conditions – 5% is a conservative number).

The question becomes, how to fund Thinning and Limbing and garner the double benefit of increasing forest productivity and reducing the risk of forest fire – (reducing forest fire risk would require a slight expansion of normal prescription for thinning and limbing). If it were private land, ownership would seek a capitalization medium to fund a process with a known return. In the case of government, silviculture practices, as fire prevention, tend to be viewed as an expense rather than an investment. In light of a known of a known return, there is an opportunity for the government to fund silviculture programs at little or no real cost to the government.

The government could develop a silviculture bond program, that is to say, it could issue bonds at a given rate of return to the public against the anticipated return generated by various silviculture programs.  There is a tremendous amount of benefit that is derived from silviculture, the forest production increases, fire risk is lowered, the tree production cycle is shortened, there is immediate employment in the activity and related multiplier effect and there is the maintenance of an industry critical to rural British Columbia. While there is a 5% or better direct return, there are other benefits, the quantification of which is outside the scope of this document, but common sense would indicate are significant.  Given this reality, the government could issue bonds with a rate of return at a few points over the expected rate of return the increase in fiber would generate; offering opportunity for a British Columbia Forest Bond with a rate of return perhaps as high as 7 to 10% - by present day standards, a rate of return that is attractive especially when supported by a provincial government.

A policy like this does two things, it reduces the cost of silviculture processes, and it, in effect, “subsidises” retirement savings. If done aggressively is would be a form of region specific “quantitative easing” directed at the “RRSP” security seeking investor – highly stimulative.  We need a policy like this due to the nature of our population, in the same vein as Japan but to a lesser degree, British Columbia is stagnating somewhat, if not overall, most certainly in the rural economies – simulative policy is required.


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