Clarkys Comment - August

On 9th of August a large group of forestry and green ENGO leaders met with invited politicians and government officials in Wellington to celebrate the 25th anniversary of the signing of the New Zealand Forest Accord. This 1991 Accord was an agreement between the New Zealand plantation forestry sector and the environmental movement. In essence the Accord protected indigenous forest from clearance and conversion to plantations and supported plantations as a legitimate land use that had economic and environmental benefits to New Zealand society. Click here for a copy of the Accord. The Accord has been a good thing for both planation forestry businesses and the environment.

Some of that gathering was devoted to recognition of the leadership of those that conceived and worked hard over a 2 year period to reach agreement on wording for the Accord, but much of the gathering was devoted to today’s issues challenging both our environment and the forestry sector and how we can work together to address those. And that really has been the enduring value of the NZ Forest Accord. Since it was signed 25 years ago it has been honoured by all signatory organisations. That has resulted in a mature relationship of mutual trust between commercial forestry and ENGOs, that in turn allows us to agree to disagree on some matters but work cooperatively on others.

The starting point for the conversations is the common view that view New Zealand’s economic and environmental performance are “joined at the hip”. We need a pure/green New Zealand image to underpin both our safe food exports and our tourism that together make up the bulk of our export earnings. Our dairy farmers have now lost the low-cost commodity producer battle with subsidised European and much more productive grain-fed cows in the US. It follows that to succeed we must sell quality consumer products at a price premium.

The pure/green brand that many exporters rely upon is under threat for a variety of reasons, the most prominent being declining fresh water quality and domestic action on climate change. There is recognition that both of these matters are the subject of substantial government and private sector attention and investment, but both forestry and environmental leaders are frustrated that the contribution forests could be making has not yet been mobilised. In fact some policy settings work against investment in expanding forest cover.

There is very little new forest planting today and certainly no appetite to plant land that has mature or emerging indigenous forest cover; the issue that led to the Accord. The economics of plantation forestry struggle to match the current asking price for rough hill-country land and simply do not support expensive land clearing operations, whether we had an Accord or not. 

Plantation forests are an absolutely complimentary land use on farms. All our primary commodities, including pine logs, experience cyclical swings in price. But the good news is that these swings happen at different times. A mix of land use at the individual farm level provides financial resilience that I’m sure many of our dairy farmers and their bankers would love to see today.

Plantation forestry is very capital intensive. The taxpayer is unlikely to have capacity to do very much as there are other more pressing demands on the taxpayer dollar.

But for the private sector to contribute meaningfully to both improving freshwater quality and NZ’s net carbon emissions forestry must be given the right investment environment. The major constraint to that at the moment is land values inflated by messages that:

  1. Farming will never be in the ETS.
  2. Farming practices to improve freshwater quality will take decades to implement; and
  3. Forested areas will be allocated less Nitrogen Discharge Allowances than pastoral farming, and/or be locked into forest use forever.

How do we expect an investor, or a farmer, to plant trees when such policies are sloping the playing field and penalising forest owners relative to pastoral land use?

The role of forestry in addressing climate change has only increased in importance. The country commitments made in Paris were heavily reliant on forestry and the recent New York declaration on forests is a further sign. Of course, it is wood products as well as the growing trees that have such an important role to play for New Zealand’s climate mitigation efforts.

The Accord partners’ agreement to promote the role of plantation forestry has never been more important. I am sure there will be a strong interest by the signatories in working with government to achieve greater use of wood in construction and greater awareness by specifiers and designers of just what is possible and why we are seeing such a revolution in wooden structures elsewhere in the world with government encouragement.

The profitability of forestry, and also the GDP contribution we make by processing more logs onshore, is also closely linked to domestic wood markets, as without profitable wood processing we are subject to additional risk from volatile and very concentrated export log markets.