Research History

Afforestation and the Emissions Trading Scheme (ETS)

In New Zealand, “afforestation”, increasing the carbon density of the landscape by the conversion “grassland” to “forest land”, is a relatively cheap greenhouse gas mitigation opportunity.  On some sites afforestation will also deliver co-benefits such soil conservation; water quality improvement; and biodiversity gain. The Government has decided emissions trading as being the preferred policy setting to address climate change; the ETS legislation was recently passed; and land owners are beginning to look seriously at the profitability of carbon farming.

NZCEE developed a feasibility study of a 150 hectare afforestation project on a farm property East of Dannevirke.   People contributing to aspects of the study include:

• Ian Cairns from the Ministry for the Environment (seconded to NZCEE for approximately 6 months in 2008)
• Charles Chrystal from NZCEE
• Malcolm Todd and John Jamieson from Horizons Regional Council
• Greg Sheppard from Sheppard Agriculture, Dannevirke
• Roger May from Tomorrow’s Forests, Nelson
• Peter Gorman from MAF Policy, Wellington
• Dr Alec Mackay from AgResearch, Grasslands, Palmerston North
• Dr James Turner from Scion , Rotorua

Given carbon pricing through the NZ Emissions Trading Scheme (ETS), the study firstly addressed the question: “on this farm, how much land should be allocated to forestry” and secondly: “what kind of forestry might this be”. Concerning the first question, a key aspect might be expected profitability relative to the existing land use (grazing). Concerning the second question, aspects be considered include: species choice, exotic vs indigenous; and silvicultural aspects such as whether to grow for harvest, and the longer term forest ecology objective, timber production versus indigenous restoration.

We have developed a spread-sheet based decision support tool (DST) to assist land owners who are contemplating entering the NZ Emissions Trading Scheme with respect to forestry and by means of joint venture arrangements with a forest investor.  We traced through the implications for financial position of the farm business, and investigated the opportunity to intensify livestock production on other parts of the farm to minimise any short term fall in farm income should land be re-allocated to forestry. The outcome of an analysis of this kind typically depends on a few key assumptions.  The DSTs will allow the user to explore changes to the result consequent on changes in assumptions for: carbon price; log price; livestock product prices. We believe the case study farm to be representative of many in the Southern North Island Hill country.

TheDST allows consideration of (for example):

• Financing and profit sharing arrangements between the joint venture partners
• forest composition decisions: planted forest for harvest vs plant forest not for harvest vs indigenous reversion
• in eroding landscapes, an appropriate level of soil and water grant from the regional council.

A reference group is trying out the DST at the moment and it will ultimately be made available on the NZCEE website.

A report is being prepared for publication that discusses:

• Carbon sources and sinks in New Zealand; our decision to sign the Kyoto Protocol; and subsequent development of domestic policy.
• With focus on land use and land-use change, the selection of a case study farm property; the development of a decision support tool and identification of "leverage points" such as forest composition choices;
• Emerging national-level issues; for example connections between climate change and other environmental policy goals; transaction cost consideration and land value impacts.

For more information about this research, please contact Ian Cairns, who has now completed his secondment with NZCEE and is back at the Ministry for the Environment:
ian. cairn@mfe.govt.nz