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Evaluation of alternative carbon accounting categories for forestry in Gisborne District under the Emissions Trading Scheme

Authors: Bruce Manley, Head of School and Professor of Forest Management, School of Forestry, University of Canterbury, Christchurch. Corresponding author: Cong (Vega) Xu, WIDE Trust Lecturer in Geospatial Technologies / Rien Visser, Professor, Forest Engineering, Christchurch / Final year BForSc students of 2022, Christchurch
Publication: New Zealand Journal of Forestry, Volume N.Z.J.For. 2022, Issue N.Z.J.For. 67(3) 2022, pp 30-38, Nov 2022
Publisher: New Zealand Institute of Forestry

Abstract: the delivered wood cost (DWC) at the time of harvesting and assessed the likelihood of harvesting. They also evaluated the profitability of afforestation under different carbon accounting approaches and categories. It was found that the mapped area of the small scale estate in Gisborne District is 68,810 ha compared to the National Exotic Forest Description (NEFD) estimate of 77,382 ha. Comparison of the distribution of DWC with weighted average log price over the 10 years to March 2022 indicates that at least 98% of this area will be profitable to harvest. The carbon trading opportunity has a major impact on land affordability for land that is eligible to be registered in the New Zealand Emissions Trading Scheme (ETS). At a carbon price of $75/NZU, Land Expectation Value (LEV at a 7% required rate of return) increases from an average of $1,500/ha without carbon to $18,000/ha for averaging with look-up table carbon and $26,500/ ha with measured carbon. The optimum rotation age under the averaging approach remains the same as that for forestry without carbon, although it does increase with harvest difficulty. Some 94% of sampled area has optimum rotation age in the range 25 to 35 years. Of the balance of 6% with an optimum rotation age in excess of 35 years, only half (3% of all the sampled area) has an optimum rotation age of 40 years or more. At a carbon price of $75/tonne, permanent forestry in radiata pine gives a higher LEV than averaging for 96% of sampled area with look-up table carbon and 100% of sampled area with measured carbon. Production forestry (with averaging and look-up table carbon) is preferred (for land that is ETS-eligible) only for the 4% of sampled area with a DWC (at age 28) of less than $48/tonne. The long rotation averaging category, put forward by the Ministry for Primary Industries (MPI) in 2022, is preferred to averaging for most blocks at a carbon price of $75/NZU. This category would have a minimum rotation age of 40 years and would allow carbon to be earned for 21 years rather than 16 years for averaging. Although this category was proposed for remote and marginal land, the extra five years of carbon mean that the longer rotation is preferred to averaging for 89% of sampled area with look-up table carbon and 99% of sampled area with measured carbon.