DANA FORESTRY CONFERENCE
DANA’s annual conference in Rotorua was an opportunity for foresters to get together to be updated on the latest developments taking place in the industry and hear from some of the politicians standing for this month’s election.
The forestry sector could receive a welcome income boost from higher carbon prices in the coming years.
That’s the prediction from Nigel Brunel, whose company OMF Financial Markets has been dealing in carbon trading since the Emissions Trading Scheme (ETS) was introduced ten years ago.
Mr Brunel told the 2017 DANA Forestry Conference in Rotorua last month that forestry is set to play a bigger role in helping New Zealand meet its commitments under the Paris Accord on Climate Change.
Under the Paris agreement, New Zealand has pledged to reduce emissions by 30% below 2005 levels by 2030 and he says that is a big ask for this country given much of our power is already generated by hydro, wind or geothermal. Other reductions would be more difficult, so the options are to purchase carbon credits from offshore – at a cost of around $1.4billion annually – to make up for the short-fall or plant a lot more trees to soak up the carbon.
Describing forestry as the “printing press” of the ETS, Mr Brunel says there is plenty of government and Maori owned land that could be planted in mass numbers of trees and deliver the 50 million tonnes of carbon sequestration needed annually. Farmers could also plant trees on their marginal land – and this may become a necessary option if a future government decides to bring agriculture into the ETS.
Mr Brunel says the recent announcement by the National government that it would remove the $25 per tonne price ceiling could kick-start interest in new planting. He believes the carbon price could climb to $35 per tonne within the next decade and may go higher (currently it sits around $18) as the international demand for carbon credits is expected to increase.
“Given the changes coming into effect it’s hard to be bearish on the price of carbon in any way – and as international carbon prices develop it is quite likely that carbon prices will be significantly higher than where they are now,” he says.
Mr Brunel predicts that New Zealand forest carbon units are likely to be in demand through to 2030 and that will put forest owners in the box seat.
This is good news for those who already own forests that can be included in the ETS or have land that can be planted with trees. But the price of carbon will have to more than double for anyone considering the purchase of new land to convert to forestry – somewhere north of $50, he suggests.
Mr Brunel says there is an opportunity for forest owners to enter long-term contracts with emitters to provide certainty of income.