Does New Zealand have enough economically viable land for Pinus radiata afforestation to meet its climate change targets?

Authors: Mark Bloomberg
Publication: New Zealand Journal of Forestry, Volume N.Z.J.For. 2023, Issue N.Z.J.For. 68(1) 2023, pp 17-21, May 2023
Publisher: New Zealand Institute of Forestry

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Abstract: One of New Zealand’s main tools to reach emissions commitments by 2050 is the New Zealand Emissions Trading Scheme (NZ ETS). Under the NZ ETS, businesses can earn credits (emission units or NZUs) by reducing the amount of greenhouse gas (GHG) in the atmosphere. Commercial newly planted forests (afforestation) can reduce atmospheric GHG levels because they act as carbon sinks – areas that absorb and store more carbon dioxide (CO₂) than they emit. Afforestation can therefore earn NZUs, the sale of which generates income for forest owners, providing early cash flow as CO₂ is absorbed from when the forest is established. This early cash flow improves the economics of planted forests in New Zealand as revenues from harvesting the forest are not seen for 20–30 years after paying afforestation costs. We developed a spatially-based model to identify areas of New Zealand where afforestation is economically profitable compared with existing land use (usually pastoral farming). Land expectation value (LEV) and internal rate of return (IRR) were assessed and compared with land market value (LMV) and annual investment return (AIR) from farming, respectively. The impact of NZU price on profitability, ranging from $0–150/NZU, was also considered. Several factors drive the feasibility and profitability of afforestation, but NZU price showed a clear effect on profitability.

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