The ETS – how have farm-forestry & forestry coped Patrick Milne Ph :

Farm forestry – farmers using forestry to compliment their farming business: - mostly farm-foresters or members of NZFFA. Forestry – traditional forestry business. Definitions

Forestry has been a participant of the ETS since day one – 1st Jan Both industries are coping very well with the ETS as defined in the Climate Change Response Act. It’s very complex and far from straight forward. Pre 2008, forestry lobbied hard to be excluded from the NZ ETS.

Forestry has put a huge effort into both understanding the legislation and participating in the ETS – dedicated staff time. The NZFFA has also put in a similar effort to helping its members understand the ETS: - Branch meetings, workshops, field days, - newsletters, updates etc How has forestry coped with the ETS?

NZFFA focused on: Less than 50ha exemption. Weeds exemption. Registering pre1990 forests for partial compensation. Registering post 1989 forests for participation in the ETS. Risk management.

Pre-1990 forest owners – the ETS is a liability. –Land use options are restricted –Government planning to introduce offsetting – but still expensive. The ETS – what’s in it for landowners

To benefit, landowners need to participate in the ETS – by growing trees (practice forestry) and then accumulating and trading carbon. Numerous farming and forestry studies evaluating participation in the ETS. Most show a positive benefit of participating in the ETS. The ETS today – what’s in it for landowners

NZ farm & forest land has potential to produce tonnes carbon (NZU’s) per ha/yr. Depending on location, species & carbon$ – cashflow can be positive from 3 years onwards. For foresters & farm foresters, the ETS offers another income stream to their business. The ETS today

Many farmers already practising forestry on their farms – so they’re not re-inventing the wheel.

The Farm Forestry Model Firstly, its nothing new – it’s what farm foresters and many farmers have been doing for 50 years or more. The Farm Forestry model - trees wisely integrated into the New Zealand landscape for profit, amenity, conservation and sustainability. Now have another income option from carbon

The Farm Forestry Model Numerous examples (case studies) of the FFM on the FFA web site. Many links to other sites.

The ETS today The main financial benefit of trading carbon credits comes from the ‘time value of money’. Income from the sale of carbon credits earned as the forest grows can be invested in more trees, something else, or used to pay off debt.

The ETS today The risks When your forest is harvested or the carbon is lost (wind, fire, pest or disease) the carbon credits claimed from it have to be repaid. Often referred to as the ETS liability - needs to be accepted, understood & managed. Many strategies available to mitigate liabilities including: good forest practices, insurance, silviculture, spreading planting and deferring harvest dates, mix of species and carbon hedging.

All tree species are eligible providing the planting of them meets the definition of a forest. Main species are: Radiata pine, Douglas-fir, Eucalypts, Cypresses, Redwoods, Poplars & indigenous. Plant & leave forest possibly more profitable - consensus amongst foresters to have a dollar each way and also manage the forest to produce a high value timber product. Every farm is different – the importance of good advice can’t be over emphasised. Forests for wood & carbon Regimes & species

Carbon credits Should you participate? In most cases, definitely yes. Potential for income from sale of carbon credits. Farm forestry definitely compliments other land uses eg. sheep & beef farming. The FFM is a well proven, practical approach to integrate trees into the landscape. Get good advice – recommend only Registered Forest Consultants –

Snapshot of ETS: ha exemption – 2,500ha exempt of estimated 17,000 ha eligible. Pre1990: 1100 participants, 0.6m ha of eligible 1.4m ha. Post 1989: 1200 participants. A handful of corporates, but mostly farmers and small forest growers. –200,000ha approved – 32% eligible area –14.4m credits claimed. –MAF very actively promoting the ETS.

Conclusions A significant opportunity for farming & forestry. Real opportunity to introduce / increase liquidity into both industries. Stress the importance of getting good advice – remember that it is complicated. Both Farm Forestry & Forestry have accepted the challenge of the ETS.