Forestry benefits as Govt gets serious


The forestry sector is enjoying improved profitability this year.
Log prices have been firm for the past 12 months and there has been an impressive recovery in the New Zealand carbon price.
Carbon Solutions and Southern Forests New Zealand managing director Paul Molloy said planting rates had increased due to cutover re-establishment and the Afforestation Grant Scheme creating more enthusiasm for plantings.
‘‘The New Zealand Emissions Trading Scheme (NZ ETS) always had the potential to improve investment in new forestry but that has been unrealised due to the weak carbon price,’’ Mr Molloy said.
Carbon units are now trading at about $18 per NZU and the potential annual cash flow from carbon forestry is good news for ETS participants and the forestry sector.
The trigger for the recovery has been political, initially arising from the Paris Climate Conference in December 2015, where 195 countries adopted the first-ever universal legally binding global climate deal.
That was followed by the 2016 NZ ETS review, which was being considered now by the Government, he said.
More recently, the Government has announced it is phasing out the one-for-two transitional measure that allows non-forestry businesses to pay one emissions unit for every two tonnes of carbon-dioxideequivalent emissions.
That was always the intention when the ETS was established in 2008 but the non-forestry sector (representing emitters and the carbon market) has strongly opposed the phase-out, which has been deferred until now.
‘‘The Climate Change Response (Removal of Transitional Measure) Amendment Act 2016 provides for the phased removal of onefor-two over three years from January 2017, and will allow the NZ ETS to more effectively support New Zealand to achieve climate change targets, incentive emissions reductions, and help transition the country to a loweremissions economy,’’ he said.
This is very good news for the forestry sector, which is the main supplier of carbon credits into the NZ ETS.
That is, the scheme relies on forestry sequestration of carbon as a source of carbon units.
New Zealand has an independent carbon market and the price is determined by domestic supply and demand.
The opportunity to generate cash flow from forestry and not have to wait 30 years for harvest returns and any income is a game-changer for an industry where liquidity has always been an issue.
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