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A fundamental change is occurring in the economics of production versus permanent forests. The policy environment is getting left behind

A fundamental change is occurring in the economics of production versus permanent forests. The policy environment is getting left behind

During 2019 I wrote five articles discussing land-use transformation that would be driven by forthcoming forestry investments.  One of the key themes of those articles was that New Zealand’s forestry policies are a mess. The rules are complex and confusing. Also, the alignment of those rules with the overall public good is at best debatable.

I wrote about how policy communication by Government has been driven by public relations spin about the so-called billion trees programme. It has been virtue signalling but little else.

I also wrote that the investor focus to date has largely been driven by production forestry with that focus shaped by proximity to ports rather than the most appropriate land-use.  In that context, selling carbon units has been seen as a bonus.

In contrast, I suggested that the future would be dominated more by the price of carbon than the value of production forests. And I stated with some fervour that I would much prefer New Zealand’s carbon-forestry investments to be funded by New Zealanders, with there being no need for overseas funds for any permanent forests.

It is now 13 months since I wrote the last article, so what has changed in the meantime?

The biggest change is that the price of carbon units (NZUs) has risen from around $25 to $37.50 per tonne of carbon dioxide. That in itself is not a total surprise. But there is always a difference in the decision-making weight to be placed on what might happen and what is happening. So, this price rise is a big reinforcement of the upward trend.

Conversely, in this last year the focus on climate change and the Paris Agreement has been dulled. This is because COVID19 has crowded out other issues. However, the Paris Agreement has not gone away. The focus will come back, and New Zealand has committed.

In this last year, I have also become increasingly cautious as to the long-term value of production pine forests. Right now, most of the trees go to China where they are used for formwork on big infrastructure projects. Then they get burned for energy.

By my reckoning, the Chinese infrastructure programme may well have another ten years to run with more roads and skyscrapers still to be built. By then, the Chinese population will be declining.  There will still be more apartments to be built as old buildings are torn down, but the overall pace of infrastructure growth will by then be much slower. Hence, the demand for New Zealand timber will also be lower.

Not everyone will agree with that perspective on future log prices. Perhaps we will find new uses for logs at a scale that replaces formwork and paper. However, I see increasing caution from investors until those new uses become embedded in the economy.

More immediate, there is a flood of international capital looking for a home. This is a key reason why interest rates are so low. Look forward another year or two as COVID19 recedes, and international investors will be clamouring for business-class seats to come, ‘look see’, and invest in carbon-trading activities.

Pulling those factors together, the consequence is that the focus will soon shift fundamentally from production forests to permanent forests that will be planned on the basis of never being harvested. That means that investors can afford to look at the hinterland, without worrying too much about road access and proximity to ports.

The shift in thinking from production to permanent forests creates an associated shift in the financial assessment framework.  In a physical sense, a permanent forest is there for ever. In a financial sense, the investment is like a mine with a limited life.

The value of land for permanent forests is the assessed present value of a carbon annuity that extends for around 50 years, perhaps a little more, and then stops. That is because the forest is no longer producing new carbon.

The notion that a permanent forest is a short-term investment seems incongruous, but in a financial context it is true. It is a direct consequence of carbon trading being a market for carbon sequestration, not maintenance of existing carbon.

As to where these permanent forests might be located, as a starting point I went to Beef and Lamb’s ‘Sheep and Beef Survey’, focusing initially on Class 3 North Island hard hill country. There are about 920 of these farms averaging 670 hectares (6.7 square kilometres) per farm and totalling about 600,000 hectares. These farms have land and buildings valued at about $8300 per hectare.  This gives a gross value of about $5 billion across 600,000 hectares, something that international investors could snaffle up in a few bites. 

Some quick calculations suggest this hard hill-country land, at current carbon prices of $37.50 per one-tonne unit, could earn at least $750 per hectare per annum over a 50-year time horizon after allowing $25 per hectare for rates but with minimal other expenditure needed. As a comparison, these sheep and beef farms net around $330 per hectare on a similar basis. 

Of course, this comparison is not quite the full story. If planted in permanent trees, then the land has minimal further market value after 50 years. But this is not a big deal for international investors who have long recouped their investment and made nice profits along the way.  That is the nature of any mining investment.

This comparison also does not allow for sheep and beef farms providing ongoing employment, whereas carbon farming provides minimal employment once the trees are planted. Nor does it account for the fact that each hectare of these sheep and beef farms earns more than $1000 per annum of export income once the products have been processed. In contrast, the carbon farm is providing carbon units to balance New Zealand’s internal carbon emitting economy, with the proceeds becoming a foreign exchange outflow if owned by international investors.

These numbers illustrate that the issues go much deeper than simple cash flows. Also, when it comes to fixed assets like land, international investors may beat to a drum that does not necessarily align with the greater public good back here in New Zealand.  Although my focus here has been on the hard-hill country, that is really only a start.

Another part of the needed debate relates to natives versus exotics. The problem with natives is that they are much slower growing than exotics, be that pine or eucalypts. Natives are also expensive to plant. No investor is going to favour natives.

I often walk through a small exotic forest near my home that has an understorey of natives. It has convinced me that exotics can indeed be a transition phase. However, in my local forest the transition has been helped by man doing some plantings. Also, birds have been assisting with transfer of seed. That will not happen in a big forest.

The big message of this article is not that there is a clear path ahead. Rather, exactly the opposite. That is why there is a need for an informed and wide-ranging debate as we search for the path that will lead to the right trees in the right place, planted and owned by the right people.


*Keith Woodford was Professor of Farm Management and Agribusiness at Lincoln University for 15 years through to 2015. He is now Principal Consultant at AgriFood Systems Ltd. . He can be contacted at kbwoodford@gmail.com.

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79 Comments

The abject stupidity of successive NZ governments on climate change policy is never ending;

https://www.stuff.co.nz/environment/climate-news/121052187/can-we-defen…

Great article, Keith. My only hope now is the Rod Carr applies some common sense and has the conviction to tell them they've got it all wrong.

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Congratulations Keith, you are a wonderful wordsmith that can articulate clear meaning and the implications of this subject.
In eighty years the ramification of old pine plantations dying off and slipping off into our waterways, with the remaining soil to be overtaken by blackberry and gorse will leave our grandchildren wondering WTF were they thinking?

The irony of what must be our most carbon intensive electorate electing a green mp will not be lost in them either - the ultimate green washing. Especially considering the state of the waterways around Auckland.

https://i.stuff.co.nz/auckland/123861982/more-than-50-auckland-beaches-…

Thank you for your sage advice and insights

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Unfortunately this piece doesn't ask the bigger question(s). or alternatively, doesn't step back far enough for perspective. And it uses some descriptions carelessly; capital, for instance, is really keystroke-issued debt. nothing more than a forward bet. If we ask what the bet was on?, the answer is: Future availability of stuff to 'buy'. Stuff is merely processed parts of the planet, the processing needed energy. And if stuff isn't there in expected quantity, what is the issued debt worth?

The same question applies to many bets made at distance from the real energy/resources/entropy conveyor-belt. Thus the idea of 'income' being 'made' from a static forest fails to understand that 'all other things being equal' is not possible in a system requiring to sequester the results of its one-off energy-frenzy. That system is clearly at the end of exponential (doubling-time tabulated) growth; beyond which all bets are, if not off, increasingly competing.

How long can a system - already in unrepayable debt atop a never-this-much-depleted planet - keep fooling itself that debt is capital? and that 'income' can be made from static non-production? We're already hitting the wall, and we were extracting, consuming, commandeering and excreting, without mitigation - in other words, with no reserve capacitance/resilience to 'pay' for sequestering.

So the system that would virtue-signal by carbon sequestering, already cannot afford to do so. We need to plant, but we need not to expect income from doing so. Sure, society can reward folk for the gesture, but not under the current set of valuations. And if the system collapses, one suspects nature will re-grow for free.... I saw all this coming a quarter century ago, planted trees but with no intention of making a cent from them.

Agree that this is a first step in a longer verbal/action journey. One thing to remember is that Conservation is societal virtue-signalling (not denigrating those dedicated to it, who I respect for what they do) and as such, was always doomed to be inadequate. You don't need Conservation if you're making no impact, yet you're headed for overshoot/collapse if you're making an impact. That brief ignorant hiatus where we though Conservation should be self-funding or justify itself in the 'market', should be well behind us.

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We need to plant, but we need not to expect income from doing so. Sure, society can reward folk for the gesture, but not under the current set of valuations.

Yes, and we need to look beyond the land as well;

https://www.frontiersin.org/articles/10.3389/fmars.2020.00617/full

A radiata pine forest adds nothing to natural biodiversity. Imagine a world where we incentivised biodiversity, as opposed to monoculture.

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So true Kate. Parts of Japan were covered in radiata pine and I had the opportunity to go hiking through some areas. These places felt completely dead in terms of biodiversity that changed once you got out of them into native forest.

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One slight problem there is no radiata pine in Japan. You were walking through natural native pines that grow in Japan. These have been planted for century’s in plantations and are revered by the Japanese who value forests far higher than we do.

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Absolutely agree with Stevell.

I live in Marlborough Sounds and pines are weeds are up here: a dreadful plant. Mucks up the waterways when they're logging, and similar long term affects if pines are left as permanent forests where they also kill all the plant life below them - have a walk through a pine plantation some day: far better to return land to native bush which suits the area and encourages biodiversity of plants and mammals.

Also given the comparison would indicate more profitable, re sheep and beef for instance, to plant into trees and harvest the carbon credits, this will see food production and hard dollars from selling to overseas markets exchanged for this shonky government/taxpayer money paying carbon credits - and I still have trouble seeing how carbon market solves 'climate change' or even how the financial plumbing of it works - for no production of food on a rising world population. Ultimately, who is feeding the world?

Then employment? A sheep and beef farm will be feeding a family (perhaps commonly two generations of a family), plus there will be 2 to perhaps 4 employees: all these jobs will go with the landowner sitting on his duff building fat into their first coronary, and all that has big implications for increasing wealth disparity which governments seem to think is as big a problem as climate change.

Without thinking on it all too hard, it's seems dumb and regressive in the longer term to base a significant area of our valuable land into planting a weed that itself isn't even going to end logged and incorporated into something useful, like a house.

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Valuable? See my comment above.

And population will be about 3 billion by 2050 - too late for that not to be an ugly morph, but using projected population increases at this stage, to justify a land-use practice, is invalid. Rowarth territory. History.

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I have no idea what you're on about above, to be fair. But I'm gleaning we'd agree on pretty much nothing.

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That's OK Mark.. you're in a pretty large (majority by far) group of people here. PDK is a tinhat wearing crackpot stuck in the same repetitive looped track going 'round and 'round on his treadmill.

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Ar Hook starting off the year degenerating others..well done keep it up mate. PDK is one of the brighest commenators on this site..lucky to have him/her. And sorry to burst your bubble but you are on the minority here.

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Oh Hook. Where to start.

The human economy can’t grow forever. Even a child knows this. If you were looking, you would see the evidence for this basic fact all around you.

PDK is articulating this in detail that clearly goes well over your head.

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MH - yep, we've had this conversation before. You're fairly 'steeped' in the conventional narrative, if I recall correctly.

Have a read of this (and keep your mind open while you do; many apply their inbuilt biases/assumptions to what they read, thus skewing the mesage):
https://www.google.com/search?client=firefox-b-d&q=surplus+energy+econo…

"Behind this near-term bet, though, is another and bigger wager, albeit one of which few are aware.
It is that we can win out by backing the mystical powers of money to triumph over the physical determinants of resources and the environment."

The latest 3-4 posts might set you thinking. Which will put you ahead of some...... :)

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1. No overseas land buyer is allowed to grow a permenant radiata forest. They have to be harvested and under new rules will only get carbon for 17 years. If you don’t have a timber basis you won’t do it. Some of these companies investing are over 400 years old and aren’t stupid. They see a future for timber - maybe we could learn a bit from these very long term thinkers.
2. Even the NZ companies doing permenant are changing to timber plus carbon. There very few of them.
3. Forecasting the future is dangerous and we don’t know. Wool looks like a bad nightmare going forward so maybe we had better stop growing sheep!!
4. At high land prices pure carbon doesn’t work.
5. Radiata can be used to transition to native - look at Dr Adam Forbes work. Science not guess work.
6. HBRC have identified over 200,000 ha plus in northern HB which needs to go into some type of tree cover for erosion. Currently being farmed and pouring soil into the ocean - it’s all in peer reviewed science reports from many years. Environmental vandalism in action.
7. The sooner the carbon price goes really high the sooner it will come down as we stop emitting. The long term price is zero. If you have a permenant forest and in 50 years the carbon price is low you have an immensely valuable timber crop with little liability.
8. If it’s so profitable why don’t more farmers plant some trees? I know many good quiet ones are and are very happy. As one 4th generation farmer said to me about farmers “they are all queer - they keep doing something that’s not working - I’m not condemning my family to anymore of that” after 12 years of planting trees flat out he now has the farm debt free, producing as much farm product as before, holiday house and house in town, manager on the farm and everyone gets an annual dividend.
This is the saviour of hill country farming in NZ. A massive wealth transfer from urban NZ to rural NZ. Miss it at your peril.

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HBRC lobbied OIO to allow Panpac to buy another 10,000 hectares close to the port, then they gave them ages to fix a leaking outfall pipe pumping heavy metals into the bay that was leaking onto the beach.

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Well the science shows this land needs to be in forest and the current owners don’t seem to be doing it. Not necessarily exotic as most should go back to native. Good stewards of the land should be conserving and using our topsoil, water and biodiversity in a sustainable manner as possible.

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Great contributions, Jack. Glad you joined the conversation :-).

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Jack,
Can you show me the regulation preventing overseas owners from purchasing permanent forests?
As I understand it, new permanent forests now come under the ETS.
Although they are classed as 'permanent' they will initially be assumed as having a 50 year rotation and therefore allowed averaging for the first 30 years thereof. They can also signup for extending the rotation period and thereby get further credits.
KeithW

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If you go to OIO site it’s there on decisions and there have been a number of statements from government confirming this. I will find the detail for you will be next week as I’m going out of range tomorrow but I assure you it’s real as I deal with some of these.

The new Permenant forest works on forest stock. Under this you can claim carbon every year. If over 100ha you measure once every 5 years to get your own tables. So you can claim carbon each year up to age 50. At age 50 you have 3 choices.
1. Revert to averaging. Under this you would get to keep the first @26 years of carbon but have to repay the last 24 years. These exact dates are coming out in the new regs which we won’t see for 12 months as they come into effect 1 Jan 2023.
If you choose this you are locked into having to replant back to forest and run on a long rotation TBA but probably 35 to 45 years or else you incur more repayment liabilities. No further carbon issued on 2nd rotations. If you don’t replant under averaging you have to pay all the carbon back.
2. Deregister completely and repay all the carbon you have been issued in the last 50 years. You can then harvest and do whatever you wish with the land within other RMA laws etc.
3. Sign up for another 25 years and remain as a permenant forest - this is really committing to long term conversion to native.

The only companies doing permenant radiata are 2 NZ companies and not on a large scale. 1 has indicated they are now going to keep their exotic in averaging as with higher land prices you need to have a timber element to make it work. Everything else we see is timber and carbon.

Permenant forest ie best suited to farms that have areas that are best in trees but are small and/or not logical to harvest. You can have native, natural regen is best I can assure you but that’s another story, but the yield from exotic is higher. This permenant option is great for them. As you see you get credits every year, no harvest, good income for the farm and all the problem children areas are removed. It gives the farm more income, soil and water issues resolved and concentrate on the best parts of the farm. People are doing this but no one hears about it as they keep their head down due to the flack they get from some farmers. The most common comment is that it’s to good to be true but it is real as at current carbon prices you can average well over $1,000 per ha NETT after around age 5 on exotics. Native is a lot less as yields are low but we are getting between a 30 and 50% premium for native credits so the market will pay more. We have some very large areas that farmers are retiring to native as their is/was a1BT option to pay people to simply shut the gate plus fencing help.
Happy to answer any other questions.

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Thanks Jack
I agree that farmers are increasingly thinking about permanent forests and I visited a farmer just a few days ago who is doing exactly that. What I am saying is that we will see a lot more of that with current carbon prices. And I don't think that there will be too much opposition to that as long as it is the steep and dirty faces. I look forward to seeing the OIO cases where overseas investment in permanent forests has been turned down as I have failed to find anything.
What I am also saying is that the Government has focused very much on the billion trees programme - most of which will be replanting of existing forests and these will not be eligible for carbon credits. Also, the focus of the ETS has very much been on production forests. As a consequence, policy is not sufficiently addressing the emerging situation.
KeithW

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Well said Mr Woodford. Also your article is up to it's usual high standard of information. I do agree with Mark Hubbard and Sevell that Pinus Radiata are nothing but farmed weeds however. Unfortunately until the IPCC allows counting of indigenous forests I fear NZ has little choice but to continue down that road in the near term.
BTW - what's Jaquelyn Rowerth up to these days? Her comments are sorely missed on FW, RN and NZF.

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Hook,
Indigenous forests can be counted but only if they are new forests. The Brazilians do not get any credit for the existing Amazon forests and nor do the Indonesians get any credit for their rain forests. We in NZ get credit for new indigenous forests because it is so long ago that we chopped down the original forests.
KeithW

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Should we forfeit credits because NZ farming contributes to rainforest-depletion via PKE demand?

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As Keith points out - rainforests don't count. Ludicrous, I know.

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Therein lie the idiocy of the UNFCCC/Kyoto/Paris planetary train wreck - no recognition whatsoever regarding irreplaceable biodiversity and ancient natural sinks whatsoever. No, no, no - the whole intention of this 'offsets-based' mitigation scheme is to create a market in order to financialize atmospheric pollution.

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Good comment Kate. I agree that the whole intention of this is to create a financial market for climate which means $$$'s for banks and intermediaries allows the wealthy to purchase and pursue their lifestyles.

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Kate, someone has misled you. The international accounting framework does recognise the value of old forests, which is why you are hit with a liability if you deforest them. (The ETS doesn't hit you with a liability for clearing native forests in NZ - I guess it assumes they have enough protection, and that farmers need the flexibility to do whatever they like on their land, subject to regional council rules).

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Accounting rules are designed to incentivise different behaviour - not to hand out windfall gains to people who have done nothing. If a forest has been storing carbon for hundreds of years without your input, and will carry on even if you are hit by a bus, why does your role in all this need to be rewarded? In fact, the international rules will sometimes reward you, but only if you do something that helps the forest to increase its carbon storage, and you'll only be rewarded for the additional increment.

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Rule below

On 22 October 2018, rules for overseas investment in forestry were changed to streamline the consent process and encourage investment.

The special forestry test was introduced as a more straightforward test for conventional forestry investments. This followed consultation on changes to the Overseas Investment Act, the acquisition of certain forestry right interests being brought into the screening regime along with the Government’s One Billion Trees programme and climate change targets. The special forestry test is designed for conventional forestry investments, and it is not available for other forestry investments such as permanent forestry

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Thanks Jack
I agree that permanent forests cannot currently be approved under the special forestry test - I have now found that on the LINZ site. So, those applications would currently have to go through the normal OIO process.
KeithW

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I presume yes if you wanted to but no one has tried and the OIO has made it very clear they will not approve any permenant exotic forests. It’s a dead duck.

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Jack,
My focus is on the journey ahead. I expect to see changes in forestry policy over the coming years - in a policy sense I don't think anything is a dead duck. I see a need for more permanent forests on the steep back country and I expect Government policy will eventually reflect that. I would prefer that to be done without overseas investment, but I am increasingly aware that it will become very attractive to overseas investors if the carbon price continues to rise - which I expect to happen. I would prefer to see entities like the Superannuation Fund take up those opportunities on behalf of all of us rather than overseas investors.
KeithW

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I agree there is a large amount of land that needs to be in some form of tree cover, exotic and native, not just for carbon but preserving soil and avoiding downstream events. The issue is that this land is in private ownership so it’s these owners who make the decision. Under the 1BT and earlier grants these owners could get the cost of planting paid for but no one takes it up, so the moneys there. This is were carbon really offers an amazing opportunity for these land owners. They can get paid to retire the land plus get an income stream ongoing from it. They then concentrate on the best parts of their farms and find its easier and more profitable all round.

The vitriol around this from some farming groups, and so called environmentalists, is such that the average farmer is totally confused and scared and governments back off offering free money to them. It’s also a big culture change in planting or regenerating trees for many farmers. There is a lack of brutal honesty about the profitability and sustainability of land use in NZ. I see this in the 38 years I’ve been working in this area. Many farms are struggling to make any meaningful profit and how this land is going to be passed on is a horrifying proposition. A lot of the angst on land use change is a desire to retain the past which in many areas doesn’t work anymore.

It’s not expensive in the scheme of things to fund this planting as it will need to be done over time to match seedling and labour resources so is well within the ability for this to be done within NZ means. Native can simply be shut up and left to regen. It takes time but the power of nature is immense and we need to use it. Look at hinewai on banks peninsula or the hills around Wellington. They used to be gorse but are now native shrublands. We may need to provide seed sources for higher forest trees but nature will do it. On the land you can harvest and access with water and soil considered at harvest you grow timber crops. Farm the cultivatable land.

The problem, and challenge, is in our minds and all of our unconscious bias and beliefs, which I and everyone else has.

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Look at hinewai on banks peninsula or the hills around Wellington. They used to be gorse but are now native shrublands.

And my own observation is that much of that transformation to native shrubland has happened inside the 40-odd years I've lived and worked in the area. It's really the blink of an eye in geological/biological terms - not even a generation in demographic terms. How can we be so stubborn/blind?

I often quote Rachel Carson from Silent Spring (1962);

"Man's attitude toward nature is today critically important simply because we have now acquired a fateful power to alter and destroy nature. But man is a part of nature, and his war against nature is inevitably a war against himself. [We are] challenged as mankind has never been challenged before to prove our maturity and our mastery, not of nature, but of ourselves."

Great points again, Jack.

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Great retort JL

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It's a piss poor retort. For a start credits aren't allowed for any plantings younger than 3 years.

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1BT was only for new land planting and only for farmers. Overseas investors weren’t eligible. OIO will not approve any permenant exotic plantations. 2 nd rotations earn no credits under averaging and only forests on eligible P89 land can earn credits so around 1.2 million hectares of the existing estate, planted before 1990, have never and will earn credits. The bulk of the early 1990s planting’s have or are being harvested so have no carbon flow attached.

You earn carbon from year 1, small volume but it builds and increment normally peaks around year 10.

Even without carbon buying reasonable land is returning between 4 to 6% IRR on timber alone. On high cost land carbon plays a diminishing role in return so forestry won’t take over the best land. In reality the amount of land planted will depend upon the current land owners, farmers. If they decide to plant themselves or sell to a forestry interest. The reality is some farms have sat on the market for years with no farm buyers. Forestry interests have bought them and believe in their future predictions and have planted them. Strangely I get calls from farmers asking if want to buy their land and they don’t care who buys it - they just want out.

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" HBRC have identified over 200,000 ha plus in northern HB which needs to go into some type of tree cover for erosion. Currently being farmed and pouring soil into the ocean - it’s all in peer reviewed science reports from many years. Environmental vandalism in action."

I agree with this.

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Climate Emergency has been declared, govt will be carbon neutral by 2025, all public servants petrol, diesel based cars will be replaced by all Electric, the power generated more by using ex. Tiwai point, future possible green is the clean, green Nuclear power plant for more cheaper electricity. The car itself, most of it's carbon based material, will all be replaced by the non oil based synthetic materials. The central bank already hinted before majority won Lab govt. how important to address this climate change, future NZ gold mine to invite 'foreign investors' to prop further into housing market, so apart from negative OCR, expect soon trillions will be printed into QEs/LSAPs that basically to counter BTC stellar performance, 2020 QE is to safe the Banks, 2021 QE is to safe the Insurance..this as part of overall cyclical hand out to main back bone of FIRE economy.

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I'm guessing here that them pills need a Safe Drugs test, stat.....

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Another straight shot from the hip. It is too much to expect perfect congruence across Gubmint policy siloes, but what Keith has exposed is a buggers muddle of the first water.

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Keith ant the Government are on the same page - both are missing the point that we are extracting historical sunlit acreage (fossil energy) at rates that are orders-of-magnitude more than daily solar energy arrival (all of which is doing something, already already.

And we are, rather than abandoning the once-off frenzy, choosing to virtue-signal by using real-time, already here acreage, to plant not mature stores of carbon, but future promises of same. Which allows us to extend and pretend a little longer, while blocking-in more and more of what should be future generation's options.

Even stupider - see my link above - they think money can be made from the exercise. And the purpose of money is? To buy stuff (see above, rinse and repeat).

We do, indeed, need to re-forest large swathes of this land, plant more riparian buffering and re-establish wetlands. But we need to to that as habitat redress, not as protection-racket to excuse our continued draw-down (of both the stock and the sink-capacity).

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Carbon credits are nothing more than financialisation, a transfer of wealth from the middle and lower income earners to the rich and the elite. It's a resource grab with little thought of the long term implications, stuck like deer in the headlights we go along with this charade.

It's also another nail in the coffin of the West, a war we are losing in plain sight. Everyday ,shops in regional cities like and Bunnings/Mitre 10, sell over 100k a day of mostly cheap Chinese products, we are slowly selling ourselves down the drain, this stupidity will impact us before we run out of resources, we will be too poor to afford lunch let alone gas.

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Well as a hard hillcountry farmer, I can tell you our carbon income is what keeps us going. Without it we would be in a very poor financial sittuation. We can put on fertilizer etc. Carbon income gets spent in the local area the same as livestock income, it is a win win and more farmers should incorporate carbon in to their business model.

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I would be Interested to know Hans why are you are not planning to plant out the whole farm for carbon income ?

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We still enjoy our livestock. But ultimately it is possible over time as farming on some land types is unsustainable. Some areas will suit permanent forest cover other areas will be production forest.

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Hans,
Do you have any estimates for farms in your area as to the proportion of income they will be getting from carbon, now that carbon is priced around $37?
KeithW

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I guess it all depends on proportion of farm planted. In reality many hill farms only run 4-7 stock units per hectare so keeping up with Fert, weed control etc is a downward spiral. Obviously you need outside income to survive which in the past I have done. Being able to boost income on farm is a bonus. In our situation at current carbon prices 70% of our income is carbon. But bear in mind we have very marginal country so our forest estate is reasonably substantial. There are many farms in our area where the cost of production out weighs income. In my opinion after 40 yrs working hillcountry the long term outlook is bleak because of soil degregation, constant chemical application for weed control and general costs. Much of NZ,s so called food producing country is not viable into the future.

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Hans,
That is very interesting. I would be interested in knowing your region and any further information you are willing to share. If you want to keep that private then I can be contacted at kbwoodford@gmail.com
KeithW

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Has your moves motivated any others in your region to look at some changes? I just ask as in my experience change takes a long time to occur but interested in your experiences.

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I am not sure if my moves have motivated anyone but there are private land owners that are jumping on board. Equally there are others who are digging in and are spraying and burning regrowth faster than ever.

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PDK,
I think that both I and the Government understand that fossil fuels are being extracted much faster than they are being laid down. So perhaps we are not quite so stupid as you think. The challenge is to find specific pathways forward that will allow a transition to more sustainable livelihoods. People have been saying 'we are doomed' for a very long time. My preference is to try and work on finding specific pathways that might be both helpful and feasible.
KeithW

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Totally agree Keith. The government does have some very bright people working on this and understand the problem. It’s finding a pathway to change that doesn’t cause massive disruption overnight but still induces change. This is a very complex problem and trees are only 1 small part of it. They simply buy some time in holding back the volume of emissions but we need to use this time to change behaviour. Climate change won’t destroy the planet it will simply make it uncomfortable for humans. Nature will adapt. In effect we need to save ourselves from ourselves.

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Agree with you last sentences.

Where I differ is that I don't see us - and I've been watching and measuring for 45 years - morphing the existing to what is needed. Every year, we've gone in the opposite direction and every chance we had to change, we chose to 'lets' keep moving'. Actually, we should have been choosing to let's keep not moving......

And we're out of time.

So we need new, ground-up leadership and a teaching of the future-relevant skills.

Oh, and with respect, trees don't 'buy time'. I champion them, own them, plant them, but they don't grow as fast as we increase our extraction. So we are continually going backwards, time-on-time. That's the same mistake people make when they point to the exponential increase in EV's - without tracking FF-powered SUV production..........

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I agree and the only thing many human brains comprehend is cost so push the carbon price up and price them out of the market.

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Why does the value have to end after 50 yrs..??
Unlike a Mine... a forest grows and regenerates..
If valuable trees are planted... ( eg. furniture making timbers ) , why cant a permanent forest be "farmed" , in a regenerative way. ?

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Roelof
It would seem that very little of our current production timber is used for furniture. Much of it is used as boxing in construction, and then burnt for its energy. I look forward to more sustainable uses of timber being developed. However, I notice that here in NZ some of the major home builders are now moving to steel framing for reasons of strength and resilience.
KeithW

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Radiata is a great furniture timber and this is a big use in China and Asia. A lot of it gets remanufactured and exported to Europe and USA. It glues well, screws and nails well and stains well. In fact this is the key strength of the timber. Yes a lot gets used in form work and packaging as well. Packaging is a huge market as all things need to be packaged and radiata is well suited to this. I’ve seen orders in China and India from Europe and US where it is specified radiata must be used as the packaging - mince is still a good product!! Pruned radiata produces mouldings for high end windows and doors in the USA and Europe. Demand is through the roof and prices very high. Trees are like any product you have high value parts and lower value parts.
There is some steel framing as there is always competition just as wool has found and we see plant based meat and potentially cultured meat and milk on the horizon. There will be potential to culture timber one day probably as well.

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Thanks Jack
Your insights are valuable
Keith W

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Problem is , we see very little of the pruned log for sale here, mostly the framing log or top half. I saw NZ radiata in Ca and it was of a much higher quality than we see.

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You can buy the high quality here but we don’t have a culture of timber doors and windows. Radiata in the US substitutes for ponderosa pine which was used for doors and windows but the ponderosa is nearly all gone now. Same in Europe where people want real natural wood not plastic doors and windows.

The timber market is going through a massive change with large forest losses in Canada, USA and Europe through conservation, losses through fire and disease etc. I’m near the end of my working time but as I look out I’m struggling to see where all the wood fibre is going to come from in the future. It will be there at a price or be substituted but the pressure is growing if we now want to lockup forests for conservation and carbon etc (which we should in many cases) plus use wood fibre for fuel, and replace high carbon input materials such as steel and concrete with more timber. I’m not advocating plastering NZ in pine trees - I would march against that - but NZ was once 80% in forest. It is a natural forest land and we need a better balance over what we have now.

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Jack,
Given your interest in high-end uses, do you see a need for more pruning as we used to do, or is what we are currently doing OK?
Keith W

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Pruning is a hard one on several fronts.
1. The differential between unpruned logs and pruned is to small to really justify pruning. BUT this is based upon current differentials and what will they be in 30 years?
2. Many integrated companies such as PanPac try to prune nearly all their forest BUT they can’t get enough labour to do the work. Mohaka forest in Wairoa district is a classic they want to prune it all but can’t get enough workforce so some remains unpruned. As it is their workforce is 80% offshore. This in a region which claims forestry produces no jobs - it’s hard work but very well paid. This labour problem is a real issue as it is with all primary industry.
3. Pruning should only be done in high growth areas to get good pruned logs. Some areas in NZ won’t grow good pruned so it’s not worth it.

I personally believe if you have the right site pruning is a risk and cost worth doing. I’m doing this myself it’s not cheap but I still believe a good product spread is wise and you will be rewarded for quality in time as the world markets in China and India mature. Labour availability is the big issue and the cost increases every year. As our population ages and young people have multiple options this is a real problem but one shared by many industries.

Overall we could be pruning more but the cost, price spread between pruned and unpruned logs and labour availability are big issues.

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Thanks Jack
Very helpful.
Nothing beats 'on the ground' knowledge.
Presumably pruning can be done 12 months of the year?
Where do most of the workers come from and what do they get paid?
KeithW

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Overseas workers are varied but islands, Philippines mainly. NZ are mixed but a high proportion of Maori often. I couldn't 100% be sure on worker rates but based upon what we pay the crew owner i would expect they gross between $250 to $300 per day. Really good staff can do up to $350 to $450 per day but they are fit and experienced. Pruning is 12 months of the year but normally planting is between June and September. Also thinnig to do as well.
Interesting 1 company I know got some RSI workers this year from the horticulture industry. They were blown away with what they could earn in forestry. They thought it was obscene - we just want the work done and will pay well. Most often the crews get accomodation, transport and food provided on top if this.

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Before anyone has a go at me about rates this is what I see. Others may vary and there are ratbags out there as well.

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The problems with New Zealand forestry can be tracked back to the Labour government of David Lange, Roger Douglas, Richard Prebble et al. Since them we have seen an explosion of foreign owned and controlled forestry, total reliance on a single species (radiata pine), short rotations and abandonment of pruning and thinning regimes - all intended consequences of government policy.
Meanwhile, in the rural Maori community where I live, I see trees being pruned to 12 metres which would be ridiculed by forest economists, and probably looked at askance by OSH, but which will produce high volumes of dense, strong, stable, knot free wood at harvest time. If the New Zealand government had decided to model forest ownership on the dairy industry as it was then the industry would not be short of labour, and would be producing better quality timber in larger volumes. It is the gross inequality of New Zealand society which leaves its primary industries chronically short of the labour required to carry out essential work.

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Keith - you missed his point. You said that permanent forests would only provide revenue for 50 years. Obviously native forests keep packing away carbon long after that - nothing to do with wood products. Perhaps you got confused by the ETS lookup table, which stops at 50? The plan was always to extend it before the first plantings get that old.

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How significant is the distinction between a properly managed sustained yield production forest and a permanent forest? The difference is that in the production forest the net increment is extracted in the form of timber, while in the permanent forest it falls to the forest floor and rots into the ground. Other things being equal, in terms of carbon sequestration there need be no difference between the two forests.
New Zealand forestry has failed us not because it is production forestry, but because New Zealand professional foresters rely on a single low value plantation species and a crude silvicultural system which when put together produce low quality wood and relatively low average standing volumes of wood (carbon sequestration).
We can do much better than that of course, and non-professional foresters are doing much better, with a variety of species, production thinning, pruning, and longer rotations all of which make for improved wood quality and higher volumes of carbon sequestration. The trouble is that they are only able to do it on the small areas of private or Maori land available to them, while over the fence vast areas of commercial forestry land are managed in ways that would not be tolerated in most developed nations.

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Good article , with lots to think about.
a "permanent" native/ non pine forest has usable outputs as well , honey been the most well known. While manuka doesnt grow to the height requirement, Kanuka and Rewarewa etc do. I'm not sure if farm forestry is allowable under the rules , as long as it doesn't effect the canopy cover, I think it should be allowed. seed mast , acorns , truffles , again I don't know how specific the rules get , I know they exclude orchards.
A lot depends on how automation / drone technology progresses. I don't think it is unreasonable to expect that automated drones could prune/ harvest from a forest in 30 years time.

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There's a link between automated pruning and the sort of brute-force technique used to strip logs once felled: essentially a knife run up the tree at speed.

Get a little soft-tracked crawler with a miniature chainsaw sticking up, roving around and up the tree, and ka-ching.... The Bosch mini-saw sold at Mitre10 is a harbinger/proof-of-concept here. Invention waiting to happen.

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Nifty little tool . Ive got a 8 inch 18v battery powered pruning saw, which got me thinking. Especially when i got charged $ 500 to prune a Totara that was too close to the powerlines. took them less than an hour.
With reduced labour content the trees could be pruned when the branches are smaller, a small skilsaw blade type saw could probably suffice.

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The key to earning carbon is that the land was not in forest at 1990 - this is the key to deciding if you can earn carbon - the land status - not the trees on it. If this is the case any tree that reaches over 5m height at maturity and has more than 30% canopy cover per ha qualifies. Orchards don't qualify. So native that has regenerated since 1990 is eligible along with exotic tree species planted. As long as the manuka makes over 5m at maturity in your region it will qualify. You can have bees etc as well. A lot of other detail in getting registered but this is the basis for eligibility. 2nd rotation exotics wont be eligible for carbon unless in permanent forest (again a few other detail rules here). Wide spaced poplars planted since 1990 can qualify but you need to have a continuous 30% forest canopy - ie you cant chop it all down at once

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Thank you Jack. I have planted 1000's of trees, mostly native, but it is hard for me to qualify, due to the long skinny nature of my land. Long and skinny ,30 metres each side would leave little or none in the middle in places.

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You can get narrow bits in BUT they at some point start from a full 1ha area. In effect if you can get 1 area of 1 ha you can run narrow threads of trees - shelterbelts. A bit like a spider web. As long as they all link to the 1 area of 1 ha they qualify.

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Thanks , will check it out .

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The key to earning carbon is that the land was not in forest at 1990

Yes, understood. But as a forester (in the biological as opposed to commercial sense) what do you think about that time-bound, targeted incentive, i.e., the international framework regarding CC mitigation?

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As with all things in life it’s never fair. To measure things you need some point in time. One thing to remember is that in the initial proposed international rules NZ would have had even harder rules around what was eligible. In light of what was proposed NZ did very well to get what we have. We need to remember we are a very small country and have limited weight.
In reality a lot of forest, especially native, that was young say planted, regened in the 1980s misses out even though it stores carbon.
We could recognise this internally within NZ but the issue for the Government is it can’t use this to meet international obligations so if used by say Ag or anyone the government then needs to find an offset that is eligible at the taxpayers expense.
Another issue is the process to recognise and measure this. Even with the rules now MPI is overwhelmed in trying to process applications while at the same time develop all the rules around the amended ETS.
SO
There is forest storing carbon that is not recognised but for the reasons above I don’t see this changing. Not perfect by any means but to get changed and avoid massive cost to taxpayers we need to change international rules. We have the best of imperfect options.

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If there is a swing to permanent forests. Then they should be native hardwoods only. Pine and others like that, are massive polluters of the surrounding ecosystem - strip the soil, carpet forest floor with needles preventing undergrowth, en masse - pollen and other related detritus pollutes nearby waterways. All inhibiting the native ecosystem

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