Carbon forestry - To harvest or to leave?

Wednesday 24 Feb 2021

The Viability of Harvesting Blocks based on Carbon Price in New Zealand - Since 2019 we have seen a dramatic rise in the price of NZUs in response to various government policies and regulations. Along with the Billion trees incentives, this have driven an expansion in the New Zealand forest estate not seen since the early 1990s.

Much of this new establishment will be entered into the ETS under the averaging accounting method. However, the government has delayed compulsory entering under averaging until 2023, so forest owners with new establishment from 2019 through to 2023 have the option of entering under the ‘old’ stock change system, or the new averaging accounting method. The averaging scheme results in a much higher rate of return than the stock change ‘safe carbon method’ for standard rotational forestry. Given this fact, and with the increase in NZUs prices, predictions for continued long term strong NZU prices, and increasing uncertainty regarding long term log export prices, is there the possibility that a ‘plant and leave’ regime may be more economic?

Margules Groome has constructed a model forest on the East Coast of New Zealand’s North Island, using yield and costs benchmarks from Margules Groome’s extensive database the AgriHq December 2020 Prices for log pricing. The MPI lookup tables were adjusted by 10% upwards to compensate for some of the conservativeness inherent in the generic tables. Land price was assumed at NZD6 500/ha, to reflect the high prices being paid for unforested Post 89 land currently.

The results of this specific modelling exercise were surprising, click here for more >>

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