During the 2008-2009 financial crisis, the terms “expenses” and “investments” were often confused. One province drafted a crisis plan allocating hundreds of millions of Euros to stimulate employment. The proposed measures included insulating houses and increasing employment in healthcare. At the same time this province sold its stakes in a large energy corporation in order to afford these “investments”. Were they mixing definitions?
Before we discuss expenses and/or investments concerning the planting of trees we should first ensure a firm understanding of these concepts.
An investment is an expense with the purpose and intention of making money. Suppose you invest 1000 Euro in a machine that bakes bread. This expense allows you to sell 2000 Euro worth of bread annually and therefore makes money. Because of maintenance costs you have to get rid of the machine after four years. Suppose its final value is still 200 Euro. Then the total costs were 1000 minus 200 = 800 Euro. This is depreciation. The financial result in four years is as follows:
- the investment is 1,000
- the annual depreciation costs are 800 / 4 = 200
- the interest is 4 year x (5% x half of the investment) = 100
- the final value 200
- the total costs of the machine are 900.
The sales are 4 x 2,000 = 8,000. The gross profit with which we are able to pay all other costs like wages, energy, housing and from which we recuperate the net profit, is 7,100 Euros. This is how you make money.
When a government spends money and it does not generate revenue, it is not an investment. These are costs or expenses. In the course of time all the money is spent so that same government can only make new expenses when it levies higher taxes or borrows money. A government that exploits an energy corporation that generates hundreds of millions in profit annually and spend this income as expenses remains prosperous. A government that sells the energy corporation and uses that money as expenses but calls it investments will eventually be poor. A farmer who sells his cows has no more milk production. After he has spent the money that he made by selling the cows he has to sell his farm.
The same principle applies to CO2 solutions. If we pump the CO2 underground we don't just deprive ourselves of the oxygen but we also have enormous annual expenses. If a government says that we have to invest in carbon storage, it uses two wrong expressions. It should say, we must make expenses to store carbon and oxygen. These expenses don't generate any returns. In contrast, if the machines have worn down after 20 years we have to make more expenses to buy new machinery. This solution will only make us poorer because money spent on expenses cannot be invested. However, trees will create a return in the form of products. Planting trees to solve the CO2 problem is not an expense; it's an investment. It's prosperity enhancing. Carbon storage is an expense that is poverty enhancing.
Besides these benefits, planting trees is a matter of long term thought and calculation. The question each of us must ask is: "where will we get our timber in 40 years when the deforestation of the Amazon, Indonesia and Borneo is complete?" In order to be able to cut trees then, we need to plant them now. Trees take 40 years to grow and in many places that timeframe is even longer. In ”The figures of the Treesolution” on page 93 you can read that the current return in timber is already approximately 28,000 Euros per hectare. The calculation is based on a plantation setup. This method consists of cutting all trees 100% bare when they have reached the appropriate size. The harvest is then about 280 m3 with a value of 100 Euros per m3. Depending on the location, there are differences in growth rate and in return per m3. Tropical hardwood is about twice as expensive as in the calculations’ examples mentioned. Really tall trees in tropical forests sometimes require up to 300 years. There is also a major difference as to when certain trees can be cut. The best way is selective harvesting. This allows a forest to produce timber indefinitely. Selective harvesting allows 100 to 200m3 of timber to be cut from a forest each 100 years without causing permanent damage. If a forest is FSC approved –which we hope will happen within 25 years - then 10% of it is left untouched in order to stimulate ecological variation. This practice enhances biodiversity, prevents ecological impoverishment, creates a safe breeding ground for a number of animal species and in future allows forests to function as a gene bank.
It is highly likely that the price of wood will rise considerably once it becomes scarce. The same thing happened to the price of crude oil in 2008. It is expected that the price of unprocessed wood, depending on what you can do with it, will become over 1 Euro per kilo at least. This is based on the fact that building materials such as iron and polymers cost already more than 1 Euro per kilo. Since both building materials will become scarce because of population growth, these prices will climb considerably. This will cause the demand for wood as alternative building material to increase and this will have positive effects on the prices.
Timber could be the new financial standard.
Governments worldwide are looking for solutions to their collapsed financial systems. The gold standard was abolished in March of 1973. Since once in a while there is another type of crisis, it would be advisable to develop a system in which credit risks should always be secured by collateral. This could prevent nations from printing endless sums of money, causing perhaps the next financial bubble. Such a system could also prevent tens of millions of people from losing their jobs. The solution for this security is closer at hand than governments think: timber could replace gold as the basis for a financial system. If a hectare of wood returns approximately 300,000 kilos of timber and the value is around 1 Euro per kilo then the collateral value of two billion hectares of forest is 600,000,000,000,000 = 600 trillion Euros. This amount should be enough to ensure that the financial system can never collapse again like it did in 2008. In order to fund the worldwide financial system with a firm and reliable collateral governments could choose to oblige banks to plant 1.5 hectare of trees for each lent million and keep it as collateral.
Untaxed growth of value
Eroded soil without any crop is cheap. If you change this soil into an area producing food, wood, charcoal, fruit, medicines, extracts, oils, essences, cork and many other p-roducts, suddenly the soil’s value will rise. This growth of capital is interesting and in most of the countries untaxed. The fast decision takers will have the highest profits once understanding the interesting growth in value of worthless soil changing into valuable soil.
Trees need time
If we plant trees today, we can only cut them when the world’s population has increased by 50%. This means that, if we don’t start planting today, not only will there be less timber available because we have “ran out” of forests, but also the demand for trees will be 50% higher because there will be more people by then. It will take 40 years – the growing period – to solve this scarcity. We can estimate that it will take even longer because in order to sustain the increased world population, all fertile land will be used for the production of food. Trees will be banned to places where they grow less well = less fast. Whoever is willing to consider the long term opportunities and hasn’t been convinced by the advantages of the Treesolution can be convinced by the argument of profit. Every person or entity or country who plants trees now, will have great economic benefits later. Those who calculate and think ahead, will plant trees today.