He does not focus on the social and economic implications of the land use change but notes Government climate and forestry policies make forestry more appealing than it has been in the past.
Three Government policy initiatives lower forest establishment costs, underpin consistent, long-term carbon prices and reduce risks of participating in the Emissions Trading Scheme.
The NZ First billion-trees policy, adopted by the coalition Government, aims to reach its goal by 2028 and provides grants up to $4000/ha for landowners for up to 300ha for land clearance preparation and planting depending on whether the species is exotic or indigenous.
The Government also offers a joint-venture scheme with Crown Forestry for blocks of pines over 200ha for one rotation or a 30-year term. The Crown can pay for the establishment and management costs over the lifetime of the crop and pay rent to the landowner through an annual fee, a share of the profit at harvesting or a mix of both. The landowner retains all rights to any carbon credits.
The introduction of the Zero Carbon Bill, which aims to make NZ carbon neutral by 2050, sets in law greenhouse gas emission reduction targets.
The ETS will be the primary tool to achieve those reductions, using carbon-absorbing forestry and trading of NZ Units to offset emissions.
The bill could remove politics from the issue of climate change, provide greater long-term certainty about future policy and reduce sharp swings in the price of NZ Units, Holgate said.
The third initiative involves ETS amendments to eliminate the need for landowners to repay NZU when forests are harvested, provided the land is replanted.
It also abolishes the obligation to repay NZU for reductions in carbon stock that result from a storm or fire.
Holgate says the opportunities from forestry will vary according to the class of land and pine cannot be registered in the ETS until six years after planting.
For some it could involve planting a portion of land in trees, which will have minimal impact on their existing livestock business.
“For other landowners forestry will provide an opportunity to generate income from large areas of land they have previously effectively received very little economic benefit from.”
Holgate assesses annual carbon farming earnings before interest, tax and rent (EBITR) for three classes of land in Hawke’s Bay-southern North Island based on an NZU price of $25.
For class three hard hill country running six to nine stock units a hectare, EBITR is $291.46/ha, class four East Coast hill country running eight to 13 stock units a hectare is $386.81/ha and intensive finishing East Coast land running 10 to 14 stock units a hectare is $478.97/ha.
But any land use change analysis requires a robust assessment because the legacy implications are more permanent than other land use changes and mean forgoing future opportunity costs.
Depending on a landowner’s stage of life and plans it could have a positive or negative impact on lifestyle, land value and income stream, succession, the community and appetite for risk.
Planting to supply manuka honey is another option.
If planted since 1990 manuka earns NZU and the Government offers subsidies to landowners of up to $1800/ha for areas of 5ha to 300ha.
Manuka honey volume has grown at 10% a year since 2007 and accounts for most of NZ’s $350m of honey exports.
Native forests are also eligible for NZU with grants of $4000/ha available.
To qualify the area must exceed 1ha, the forest canopy must cover more than 30% of the ground and trees must be at least 5m high.
