Authored by Professor Bruce Manley at Canterbury University’s New Zealand School of Forestry, the report suggests forestry planting would accelerate to exceed 30,000 hectares a year if the price of carbon were to reach the current ETS cap of $25 or higher.
Submissions were due by February 19 on whether to change the transitional arrangements, which cap carbon prices under the ETS at a maximum of $25/t and a subsidy to heavy emitters requiring them only to meet costs associated with half their greenhouse gas emissions.
Industry-wide expectation is that both will be abandoned, which would be an incentive for forest planting, as long as Government policy seemed likely to remain stable and land and log prices were also favourable.
“The consensus is that carbon prices would need to be at least $12 to $15 (a tonne) for material levels of afforestation to occur,” he concludes. “A typical response was ‘$15 and a solid outlook that the Government isn’t going to interfere’.”
Manley’s model assumes a carbon price of $32.27/t would produce 30,000ha-plus forecast. It predicted 13,900 ha/year of new planting at a carbon price of $15/t, increasing to 50,500ha annually at $50/t. Below $15/t, there would be “limited afforestation”.
The report also noted a lack of nursery capacity as a possible barrier to early action.
While nurseries were able to gear up quickly for a planting boom in 2010/11 that evaporated on Government policy changes, “nursery owners are now more prudent and will generally require a substantial deposit when they take orders”.
“There were a number of well-publicised cases in 2012 and 2013 of nurseries having to plough nursery beds full of seedlings when investors changed their minds about afforestation once carbon prices started to fall,” the report says.
It predicted “different effects … for large-scale owners and small-scale owners given the different liabilities that each group faces”.
“Most deforestation by large-scale owners will be on pre-1990 forest land whereas most deforestation by small-scale owners will be on post-1989 forest land.”
Deforestation of large-scale owners decreased once carbon prices reached $7/t, when it virtually stops, “apart from carbon-equivalent offsetting using the flexible land use provision, once carbon prices exceed $15/NZU”, the report says. “Deforestation by small-scale owners continues, at a reduced rate, even at high carbon prices.”
The report notes land sales around the country for afforestation have ranged between $1500/ha in Marlborough to $5500 in Southland and more than 3.8 million ha was available at prices between $3400 and $6097/ha.
The report assumed an unpruned regime for its findings with clearfell at 28 years and a yield of 29.3m3/ha/p.a.
An accompanying analysis from NZIER, also released by Climate Change Minister Paula Bennett, forecast at a carbon price of $50/t, national GDP would be 0.2% lower than it would otherwise be for a net emissions reduction of 1.5%, including afforestation.
The economic impacts would be borne most heavily by the farming and food processing sectors, because of their use of fossil fuels for transport and industrial processes, with such fuels currently covered by the 2-for-1 surrender obligation.
