Forestry – A Commercially Viable and Environmentally Beneficial Land Use Alternative

Tena Koutou

PF Olsen’s purpose is to provide high quality professional forestry services delivering increased value for our clients.  Many our clients are astute pastoral farmers who recognise the significant benefits of integrating multiple land use onto their farms through improved commercial returns, improved land value, and risk mitigation in both environmental impacts and diversification of commercial outcomes.  We see our partnership with farming as critical to delivery of national goals around carbon emission offsets, improving erosion control, improving water quality, and providing employment to a number of industries.  To this end, I’m taking the opportunity to address some of the concerns raised with facts interspersed with opinions.

NZ Farmland – 12.6M Hectares.  8.5M Hectares of this is sheep and beef.

NZ Plantation Forestry – 1.7M Hectares.  To reach the 1 Billion Trees goal, this will require another 230,000 – 430,000 hectares to be planted, therefore if all planting was on farmland, only 3% conversion across 10 years would be needed.

Unfavourable and potentially catastrophic climate change brought about predominantly by carbon emissions is the underlying premise for the worldwide intervention aimed at carbon emission reductions and offset through carbon sequestration (carbon sink).  Without defending the science and if this premise is challenged, the reality is successive NZ governments (both Labour and National led) have subscribed to this premise and have made commitments to reducing or offsetting carbon emissions.  One of the vehicles created to accomplish this international obligation is the ETS where emitters of carbon can offset the emissions by purchasing units of carbon from sellers.  Forests are a way to create carbon units through sequestration.  The ETS is a market mechanism to address supply and demand for carbon, based on the national commitment and is not taxpayer funded subsidisation.  Some domestic emitters are addressing the offset requirements by planting and buying forests directly.  Interestingly approximately 50% of our carbon emissions are from agriculture (methane and nitrous oxide) and 95% of the agriculture industry is exempt from having to buy carbon units meaning the government is compelled to address this either through delay of meeting target reductions, or even direct investment into carbon reduction.  The point is afforestation positively affects the global climate through sequestration of carbon.

Forests create improved water quality, they reduce erosion, and even in monocultures like a pine forest, create biodiversity and environments for indigenous flora and fauna to proliferate.  Nitrogen entering major water bodies from farming operations, either directly by flow or indirectly through soil leaching is increasing in importance to us environmentally.  Utilisation of strategic area afforestation on a small or large scale can improve this.  In terms of erosion control, there is no doubt that afforestation has positive effects on the landscape.  It is acknowledged that there is a timeframe post forest harvest where debris flows are possible during significant weather events such as what occurred at Tolaga Bay last year.  This outcome was not acceptable, and it can and will be mitigated with changes to legislation and practices.  However, the damage that is caused when an entire catchment is in a cleared state is more pronounced albeit less visually with thousands of tonnes of earth flowing out to sea.  Biodiversity benefits of afforestation are also significant, sometimes to the chagrin of foresters and forest owners.  This year PF Olsen has utilised our existing biodiversity management practices that minimise the impact of forestry and protect the North Island Brown Kiwi, the NZ Falcon, Native Lizards, Bats, Koura, and Totara Snails.  These were all found in pine forests we manage.  The point is afforestation has positive implications for land use and environmental concerns.

There is a suggestion that forestry is the reason for decline of drystock farming in rural communities and reduction in employment.  Unfortunately, there doesn’t seem to be any data to support this assertion.  A relevant case study completed by Lincoln University in Wairoa, McKenzie District, and Victoria found the opposite to be true, that forestry provided more employment on farm, in support services, and in downstream processing.  What is true is rural communities are disappearing without forestry as a function of other social issues including urbanisation, centralisation of work, cost focused retail and distribution, and reduction in rural support by government (schools and government agencies centralised).  Whilst forestry has become more efficient and reduced requirements for labour, so too has agriculture illustrated by farm amalgamation (increasing farm size) and declining on-farm employment.  The point is there are social impacts with forestry, but these are far less than other more influential factors.

The economics of converting farmland to forestry stack up in some places.  Not unlike the wholesale conversion of land from forestry and drystock into dairy a decade ago, the economic returns coupled with previously mentioned factors including carbon trading cashflows, environmental factors, and social benefits, are propelling conversion.  The astute landowners have recognised this and are “making hay” through identification of land on farm that is not yielding sustainable returns relative to forestry (alongside other activity like horticulture, viticulture, honey and the like) and are switching land use.  In some cases, either selling the farm, or parts of it to investors that recognise this value and are prepared to monetise this early.  The concern that some have around increased conversion from farmland is real and no different to any supply and demand driven market situation.  Farm owners have increasing options, they understand the value of their properties, they have more buyers who are willing to pay more than they were able to extract a few years ago, and they are not forced to sell, nor are they required to partition out areas ideally suited to afforestation.  This is the landowner’s choice.  Whilst we may suggest that socially this is a problem for whatever reason, it is one created by market forces with support from social and environmental drivers.

At this point it is worth a quick mention regarding the 1Billion Trees grant that is assisting this conversion.  Our position on 1BT grants is that in most cases, if cashflow can be supported, these are not recommended for planting radiata forests.  The reason is the offset in that entering the ETS (assuming this is possible) must be delayed by 6 years, and most radiata afforestation would have more benefit from entering than not.  For other exotic afforestation, the grants will be a help, but not cover the costs and the long-term commercial returns are much lower than radiata. If they are planted for erosion control and water quality improvement this is where the 1BT grants for exotic afforestation are very helpful – as they assist environmental improvement and make it easier for landowners who might not have established forests in the past.  Regarding native tree species where 90% of the 1BT grants are targeted, whilst they seem generous, they cover at best 30% of the establishment costs.  This is excellent for landowners who intended to retire land to forests, and where some others may be looking to diversify further into honey and oils.  The grants absolutely assist where land is being afforested for the purpose of carbon offset.

In summary, the value of afforestation has increased recently for several reasons although the majority of these are driven by environmental factors (climate change), which has influenced social drivers, that are now manifesting as political policy.  At PF Olsen, we are unashamedly strategically aligned to this direction as members of our communities and of our country.  We are committed to assisting astute land-owners including the farming community to recognise and extract the value that afforestation has, and we are proud of our slightly different approach in that we actively advocate for conversion where it makes sense from multiple perspectives, not just commercial ones.  We accept that the change we are seeing in forestry at the moment has some negative consequence, but overall, there are compelling and very positive outcomes for astute landowners; commercially, environmentally, and socially.