Mon, Sep 18, 2023 5:00 AM

Forestry investors ‘looking elsewhere.’




Forestry plantings look set to dry up after this year as industry frustration over the Emissions Trading Scheme (ETS) uncertainty grows, prompting investors to look elsewhere.

That bleak warning came from Chris Dawkins, the forestry section chairman of Marlborough Federated Farmers.

Speaking at a recent meeting of Federated Farmers, he said the recent package of proposed changes to the ETS, and to forestry planting rules, leaves little reason for foresters to want to invest beyond the plantings they have in front of them for this season.

Recently the government announced plans to give local councils more powers to block out and control the planting of permanent pine forest plantations, mostly for what is termed,” carbon farming.”

Forestry Minister Peeni Henare said the changes are about getting the right tree in the right place, by seeing fewer pine forests planted on farmland and more on less-productive land.

“We are empowering local councils to decide which land can be used for plantation and carbon forests through the resource consent process,” Henare said.

Government ministers are grappling with cross-purpose priorities around carbon forests, which are planted with the primary purpose of earning carbon credits and not harvested and replanted.

The political and policy problem for the government is that planting more forests helps New Zealand meet its carbon budget but has other consequences.

One is a fear that productive farmland will be planted in pine trees and depopulate rural communities. On the other hand, there are the rights of property owners to make choices about land use.

Take the Money Trail

Adding to the quandary is the environmental perspective where those emitting industries (e.g., Air NZ) will tend to plant trees instead of reducing emissions if that is a cheaper option.  Māori forestry interests added to the tangle by arguing that a way to earn money off some of their highly marginal land was being removed through a change in the rules.

Then again, National recently said if elected it would introduce limits for new farm-to-forest conversions – including a moratorium on whole-farm conversions to exotic forestry on high-quality land from 2024.

Dawkins said that proposals to give councils more power over what forests go where, and the halving of the carbon price since December, were particularly hard for the sector to bear.

"The message has clearly gone out that forestry investors, particularly on farmland, are not wanted,” he said.

“Overseas investors are relatively indifferent to where their forestry investment goes and can consider Scotland, Canada and Wales as options.”

Estimates by NZ Forestry Service are that up until early 2023, 474 million trees were planted under the One Billion Trees scheme with an additional 120 million to be planted this year. In addition, there have been significant plantings by farmers who have not applied to the fund, or who have been funded through projects such as catchment groups and hill country erosion programmes, said Dawkins.

Everyone’s Gun-shy

The total area under exotic forests to April last year was estimated at 1.76 million ha, with about 45,000ha of new plantings, up from 34,000ha the year before.

“Everyone is now gun-shy given the proposals coming out from both Labour and National,” says Dawkins.

Of particular concern to investors is any retrospective legislation that could further impact carbon prices. The collapse in carbon prices from a high of $89 a unit late last year had already wiped $4 billion of wealth from farmers, investors and iwi who had invested in ETS forestry.

“The removal of forestry as a land use option will see farm prices drop back to historic dry-stock farm levels, possibly as much as $8000 -10,000 a hectare,” he said.

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