Changes to the Emissions Trading Scheme which would allow farmers to claim carbon credits without any harvesting liability would significantly change the economics of farm forestry, says Peter Clark, president of NZ Forest Owners Association.

“A review of the ETS was begun by the previous government. The coalition agreement is to establish an independent Climate Commission and a Zero Carbon Act. A meaningful price on carbon and tree planting are obvious tools to help reduce New Zealand’s net greenhouse gas emissions,” he says.

Part of the work under review was to make it easier for farmers to participate in the existing ETS scheme, encouraging the planting of more trees with farmers able to claim New Zealand emission units (known as NZU) from the time trees reached five to six years of age.

“If that idea continues, it changes the economics of farm forestry as it would generate an income without waiting up to 25 years for the harvesting of the trees.”

Significant benefits

Peter says many farmers lost confidence in the complicated carbon trading scheme when the National government allowed foreign credits to be bought, and the price dropped.

However, he believes if the new government continues with the review and a commitment to meet New Zealand’s obligations under the Paris accord on climate change, there will be significant benefits for farmers who plant trees on their land.

There is a strong possibility farming, under the new coalition government, will be included in the ETS at a rate of around five per cent, calculated on the volume greenhouse gas emissions from the farming activity.

“Farmers will want to offset that cost and one way to do that will be to plant trees.”

For landowners, the only cost of planting marginal land in trees is the loss of profitability from that area. However, if the land requires high inputs of fertiliser and is costly to manage, taking it out of pasture allows resources to be focused on the most productive parts of the farm.

Emission obligations

“At the same time farmers would be growing NZUs that would offset emission obligations, de-risking the possibility of a higher price of carbon in the future.”

The Labour/New Zealand First/Greens government has signalled an intention to plant roughly an additional 50,000 hectares in trees each year for 10 years. “I believe most of those trees will be planted on farms and on iwi land,” says Peter.

That’s because the value of suitable land has gone well beyond the $1000-$2000 a hectare that forestry investors had paid in the past.

In fact, Peter believes securing enough land to plant the extra trees is the biggest hurdle the government will face in achieving its objective. The second will be finding the labour to plant the trees.

Sourcing enough young trees will not be a major issue, although Peter says there could be a shortage of the best genetic stock, as the seed and nursery industry gears up to meet demand for improved varieties.