The carbon forestry rules are going to change, with high likelihood of unintended consequences

There is considerable evidence that the Government plans to change the carbon-farming rules and to do so in the coming months. The big risk is that unintended consequences will dominate over intended consequences.

Forestry Minister Stuart Nash has made it clear that he does not like the idea of permanent exotic forests.  In an opinion piece published in the Herald on 1 February of this year, he stated there are 1.2 million hectares of marginal pastoral lands that should be planted only in native species. He says that there is another 1.2 million hectares that is also unsuitable for pastoral farming but that is suitable for production forestry.

Minister of Agriculture Damien O’Connor states his opinion somewhat differently. On January 26 he was reported in the Herald as saying that he too disagrees with permanent exotic forests, but that it is up to famers not to sell their farms to people planning to plant forests. Instead, they should sell to those who will farm the land.  Well, my experience is that this is not how markets work.

Minister Nash is convening a workshop in early March with groups described as key stakeholders. Production-forestry groups, plus Beef+Lamb, plus various local councils will be there. However, I am not convinced that there is anyone, and that includes Beef+Lamb, who truly represents the interests of the existing farmers.

The role of Beef+Lamb includes protecting the sheep and beef industries from other land-uses. In contrast, the challenge for sheep and beef farmers is to find a pathway that protects their livelihood, which is not quite the same thing.

One of the key issues is the role of indigenous species. A lot of people are part of a bandwagon saying that only native forests should be permanent. But a lot of people on this bandwagon don’t seem to understand the challenges therein.

For example, Dame Anne Salmond, who is an emeritus professor of anthropology from Auckland University, has authored multiple articles at Newsroom. Her plan would include incentivising native plantings by granting them carbon units (NZUs) at the same rate as pine forests despite the fact that native forests grow much more slowly than exotics. 

This proposal would take all integrity away from the concept of a carbon unit, just like the Ukrainians did with the Kyoto units about 12 years ago. This illustrates how influencers can easily get it wrong, when they latch onto apparently simple solutions to complex problems.

If New Zealand wants to incentives native plantings, then it will have to be by direct subsidies.  All such subsidies have an opportunity cost of other activities that have to be foregone. Those activities might be less ICU beds in hospitals, less houses built for the homeless, or less police officers. 

When put in this context, then the issues are no longer quite so straight forward. Nor do large-scale native plantings make sense in relation to meeting New Zealand’s short and medium-term commitments to greatly reduce the net emissions of greenhouse gases.  

Native plantings are very expensive. Let there be no doubt, there is no commercial justification for large-scale native plantings. It has to be for other objectives.

These plantings may well be justified in relation to ecological issues on the most fragile lands, but that is a very different set of objectives. In most cases it is going to be very expensive.

As it stands, and here I quote some figures used by Minister Nash in his opinion piece, “New Zealand has 10.1 million hectares of forests, covering 38 per cent of our land. Eight million hectares is native forest and 2.1 million hectares is plantation forests.  Of the plantation forest, 1.7 million hectares is productive and the remainder is in reserves or unplanted areas near water and infrastructure.”

These numbers put things in perspective. We do already have a lot of land in native forests.

There are good reasons why we might put more land into native forests, but we also need to be clear that this is not the way to meet the targets that Climate Minster James Shaw promised at COP26 last year, with those targets endorsed by the Labour Government.

New Zealand will get itself into big trouble with these COP26 commitments, with Minister Shaw acknowledging that they will require large-scale purchases of carbon units from overseas. They will be purchased with hard-earned export earnings. Where will that money come from? And what will be the opportunity cost of that?

If New Zealand is truly going to meet its new commitments, then it has to be by rapid sequestration of carbon in New Zaland. And that means exotics.

In recent weeks some of my farming-forestry mates have been showing me something of the diversity of afforestation options. I have seen some magnificent native regeneration including in association with grazing.

I have also seen plantings of pine trees on steep erosion-prone country where natives trees, at least in the short and medium term, are not an option. Quite simply, on much of the fragile land, the necessary conditions for natives to thrive do not exist.  And I don’t at all like the notion that those pine trees might be harvested if permanent pine forests are removed from the ETS.

In another location, I have seen exotic plantings in which a wonderful understory of natives is now coming through.

These last two examples illustrate that implementing the ‘right tree in the right place’ is complex.

I have also seen land, currently in very productive pasture, which some years back was in pine trees. The farmer removed the pine trees because he considered they were not the right trees in the right place.

In all of these situations, knowledgeable farmers with good information have made good decisions. In contrast, I am cautious about a centralised regulatory system imposed from above.  It’s all very well to have a policy of the right tree in the right place. But who is going to make those decisions?

Within this complexity, one thing I am confident of is that the current policy of allowing overseas entities to invest in farms, as long as the dominant purpose is to convert the land to production forestry, is greatly flawed. I am aware of recent purchases of North Island land for production forestry on precipitous land that should never be harvested, where the purchasers are apparently driven by simple objectives of profit. 

As foreign purchasers, these investors are required to commit to harvesting the forests that they will plant.

It was several years back, when carbon was valued much less, that I first became concerned about foreign investors. Since then, my concern has only increased as the supply of global money looking for a home has increased.  

It is too late to worry about what has or has not already happened. The big issue is what is now going to happen, given current policy settings for foreign investors.

In among all of the complexity, I also see excessive difficulty in ETS-registration of land that is naturally regenerating.  It would be great if Ministers Shaw, Nash and O’Connor could get together and sort that out.  There is genuine carbon sequestration occurring that is not in the ETS simply because of the complexity.

There are other issues which need to be addressed with a nuanced approach rather than blanket bans on permanent pine forests. Perhaps one such solution would be to allow up to 20 percent of any sheep and beef farm to be planted in exotic trees as a permanent land use. Most farmers have a good understanding of the parts of their farm where this makes both economic and ecological sense.

Under this system, planting of more than this prescribed area would require meeting some consenting hurdles relating to ‘the right tree in the right place’. This would weed out the business entities, be they local or foreign, that are driven by narrow profit-making devoid of wider issues.

And some final words of caution. If anyone thinks there are simple solutions to the overall situation that we have created for ourselves, then they don’t understand the problem.

*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. You can contact him directly here.