Money can grow on trees: Part 2

This is the second in a two part-series which looks at the incentives and opportunities available to farmers looking to integrate trees into their farm.
Tuesday, 23 April 2019

Seek advice as to which is the best species to grow.

There is a huge variation between the value of species based on growth rates. Exotics grow quickly compared to natives – and are cheaper.

Early sequestration maximises the internal rate of return on investment.

From a simple economic perspective, indigenous species are not a good investment but many land owners will have reasons apart from straight economic returns that dictate what they may wish to plant.

Despite differences in growth rates, economically there is not much variation between regions such as Northland and Canterbury. Growth rates and hence carbon production will vary by sites and species. Growth rates are dependent upon altitude, soil and moisture. Dry hard sites will grow lower levels of wood and carbon compared to moist sheltered sites.

There is funding support available for farmers through the government’s One Billion Trees programme-but this funding varies depending on the species being planted.

Given the low economic returns of natives, mixed indigenous tree plantings attract the most funding under the 1BT programme, with 30 per cent being paid when the application is granted, 50 per cent once planting is completed and a final 20 per cent when the landowner is able to prove the trees are being actively managed.

The government has made $200 million available for this fund over the next three years, so there is a huge opportunity for farmers to make use of this funding.

“The government doesn’t want large-scale farm conversions, this is targeted at landowners who want to plant areas of their farms best suited to trees.

“It’s about integration.”

However-once the land is in forestry it is likely that it will be in trees for the long term given the potential cost of repaying carbon credits if deforested.

Under the proposed rule change to the emissions trading scheme Timber crops such as radiata will generate a return in the form of carbon payments for the first 18 years, after that there are no payments, however there are also no carbon repayment obligations at harvest provided the forest is replanted. The average rate of return for timber is 5-7 per cent, but for timber and carbon it is around 9 -11 per cent).

The front-end carbon income can help off-set costs.

When planting trees, it is important to consider the feasibility of harvesting them in 25 years-time.

The regulatory environment around harvesting (building roads, health and safety etc) is huge now and will only get worse.

It may not be feasible to harvest small-scale forestry blocks of between 3-10ha.

New Rules for Permanent Forests

These rules have removed the risks from permanent forests.

  • Permanent forests will receive full carbon stock allocation.
  • There is no carbon liability if adverse events kill or damage trees, but the forest must be re-established.
  • No credits will be earned until the forest returns to pre-adverse event carbon stocks.
  • There is no need carbon loss insurance but forestry owners may want to consider lost carbon income insurance.

Find out more

B+LNZ is rolling out a series of “Farms, Trees and Carbon” workshops nationally to help farmers understand the opportunities available to them including through the One Billion Trees fund. To request or workshop or for more information contact your local B+LNZ Extension Manager.