The Tairāwhiti region’s economy and job prospects will be hammered if the rate of carbon-only forest conversions continue unabated and unregulated, Federated Farmers Gisborne-Wairoa President Toby Williams says.
“That’s the grim outlook confirmed by the final report by accountancy and financial advisory firm BDO.
“My concern is that when our authorities and residents – and central government – wake up to the danger and call a halt, it may be too late. The damage will be irreversible and the life we enjoy out east currently will no longer be available to us,” Toby said.
Federated Farmers and others have been warning that productive farmland all over New Zealand, but particularly on the East Coast, Wairarapa, Tararua and Otago is being swallowed up by planting of blanket pines – and even more worrying, in many cases it’s only to earn carbon credit, with no intention to ever harvest the wood.
The BDO report was commissioned by the Tairāwhiti Economic Action Plan (TEAP) Operations Group and was presented to Tairāwhiti forestry, farming, native forest, iwi, local government and central government stakeholders. TEAP says all of the responses were in agreement there needed to be regulation of the permanent carbon farming industry.
The headline findings from BDO include:
- Due to carbon price increases the average east coast forest’s highest financial return is now from permanent exotic carbon farming which is significantly in excess of returns on production forestry and livestock farming until the forest matures. Carbon farming returns will continue to increase with increases in carbon price;
- If all Te Tairāwhiti land use class 6-8 land was placed into permanent carbon forests the total jobs at risk is over 10,000, or almost half the production and industry jobs within Tairāwhiti (taking into account wood and meat processing and manufacturing jobs, road transport, etc.)
- The number of jobs at risk would be less but still significant if the forests were semi-permanent involving selective harvesting;
- Once permanent carbon forests are mature and the carbon runs out the GDP lost to the region would be $146 million from livestock farming and $173 million from forestry, based on 2019 values.
The report said not all of the jobs would disappear as it would take generations for the conversion of the Tairawhiti region to permanent forest and significant amounts of land would not be converted even at high carbon prices as some landowners will resist.
Toby Williams said the damage would occur by a thousand cuts.
“Criticism here does not lie with individual landowners, the money on offer is simply too great. It’s the current rules and incentives that allow this to happen – and that’s what we need to change.”
Just as worrying are the long-term prospects. Although the cash flow returns from exotic permanent carbon farming are positive for the current generation of forest owners, BDO found that once the forest matures the forests will have negative returns for future generations.
“The negative cash flow post forest maturity means future generations will not be able to meet annual overheads such as rates and insurance.
“The land would be worthless on sale as the ETS liability attached to the land would far exceed the land value, meaning rates and other creditors of the landowner may not get paid,” the BDO report said
The landowner of permanent exotic carbon forests is usually a company meaning individuals could not be pursued for outstanding debts especially if they were not directors at the time of distributions.
BDO dismissed the assertions of those permanent carbon farmers who say they will transition the exotic forest to native. Based on current growth data there is a significant financial cost within the ETS for anyone transitioning exotic forests to native forests “so this is unlikely to happen”.
“BDO were right to call that bull crap,” Toby said. “It is nothing more than a sales pitch so they can line their pockets.
“When it comes time to fulfil their promises there will be no money left or the liability will be too great to. They will simply wash their collective hands and walk away leaving locals to eke out an existence with the pollen that is left.”
BDO noted the burgeoning industry of financial incentives for native forests “but at present they do not offset the financial incentives in the ETS for exotic forests and are unlikely to in the future due to the focus on finance rates.
“The Government and taxpayer would have to incur a significant liability at the international level if it were to allow forestry participants to transition exotic forests to native without a cost.”
There is one plus: BDO found that replacing farmland and production forests with permanent exotic forests would increase water quality as a whole. But it would decrease surface water availability.
Water yield from pine forests average 100 mm less per year than indigenous forest and 160-260 mm less per year than pastoral farming depending on the silviculture regime. This will have an effect on water available for activities downstream, such as orchards and cropping.
BDO also noted the increased fire risk from greater coverage of land in pines, and found the benefit to native or endemic species from developing large areas of densely populated mono-culture exotic permanent forest would be “negligible”.
And apart from ensuring pests like deer and pigs didn’t eat saplings when they were small, carbon farmers would have no interest or incentive to get involved in pest control.
The BDO report (and stakeholder feedback to it) does not recommend banning permanent and semi-permanent exotic forests. Their call is for more research, and regulation.
One possibility was to require permanent exotic forest owners of greater than 50 hectares to get consent to keep exotic forests past normal production forestry age (say 35 years for Pinus radiata and 50 years for eucalyptus).
An example of an incentive-based solution that could work well in conjunction with the resource consent (but not by itself) would be to provide bio-diversity credits for native plantings within 30 metres of waterways in either production forests or farmland, BDO said.
“There is an existing voluntary market for this but it would be bolstered if, for every defined number of exotic carbon credits purchased in the ETS by an emitter they had to purchase one biodiversity credit (ratio to be determined by Govt native planting goals). The market would require the cost of the biodiversity credit to at least meet the establishment cost of the natives which is the current deterrent to native plantings.
There would initially be a shortage of biodiversity credits which could be filled with emitters entering into forward contracts with landowners for biodiversity credits for future native plantings. This would also go a long way to solve biodiversity and water quality issues nationwide while not impacting significantly on production forestry or farming or resulting in whole-region plantings due to being limited to 30 metres from waterways.
“The 30 metres from waterways would be essential to prevent whole block plantings concentrated in only a few regions and to ensure that all regions benefit. He Waka Eke Noa could be used for these credits,” the report said.
When considering the tests the consent applicant should meet to prove sustainable management of the exotic forest, the expert group should focus on the wellbeing, environmental and financial implications for generations of New Zealanders after the carbon runs out.
“The time is right for such wide-ranging consents with the review and replacement of the Resource Management Act. It is likely regulation outside of the RMA would be needed,” BDO said.
“In forming the tests we should be stepping into the shoes of our mokopuna.”