AgriHQ analyst Sarah Friel says the carbon price could reach $41.90/NZ Unit within three years, given the price rose from $35/NZU in early December to $38/NZU in mid-January.
One NZU represents one tonne of carbon dioxide equivalent, with units traded on the Emissions Trading Scheme (ETS) market.
Foresters can sell units equivalent to the carbon sequestration value of their plantations, to emitters seeking to offset their greenhouse gas emissions.
Friel attributed the NZU price increase to “a soft supply of units” at a time of high demand as emitters look to offset their emissions.
The Climate Change Response Amendment Act altered trading of NZUs and Friel says following that change in the middle of last year, prices rose from $25 to $35.
This appreciating price could prompt forest owners to delay harvesting which could inflate export log prices.
If the unit price reaches $50/NZU, Friel says it will trigger a cost containment reserve in which the Government will release more NZUs to ease demand.
“Additionally, the introduction of quarterly auctions to the market will offer further opportunities to shift units ideally taking pressure off supply,” Friel said.
NZU investors approached for comment were reluctant to speculate on the extent unit prices will appreciate or whether the price will hit $50/NZU.
In a statement to Farmers Weekly, Drylandcarbon executive director Ant Beverley says farmers could benefit financially from carbon forestry.
His company, which invests in forestry to offset greenhouse emissions for Air NZ, Contact Energy, Genesis Energy and Z Energy, says planting needs to be done carefully with the right tree in the right place.
“Regardless of the carbon price, Drylandcarbon is only interested in economically marginal land – land predominantly graded five and above – and is not interested in planting flat, productive land,” Beverley said.
Trees can provide an economical option for owners of steep, erosion-prone and economically marginal land, while creating jobs and supporting their rural communities.
“We’re aware this hasn’t always been the case, but this is what we stand for and we’ve walked away from opportunities to plant productive, profitable pastoral land and will continue to do so,” he said.
Joint ventures are an option being pursued by Drylandcarbon in which farmers retain ownership of the land and the investor manages the planting and the emission trading scheme requirements. The farmer will get an annual lease payment immediately and a share of the profits.
Climate Change Minister James Shaw says in a statement that draft advice on the first three carbon budgets being released by the Climate Change Commission (CCC), will provide a pathway to net-zero emissions by 2050.
“It is likely this will include recommendations on matters like land use change, so I would encourage everyone to read the advice once it’s published,” Shaw said.
As for the rising price of NZUs, Shaw says that was a response to changes in supply and demand.
“It’s worth noting that a steadily increasing price does give farmers with less productive marginal land an opportunity to increase their income by using some of that land for carbon sequestration,” he said.
