Colin Jacobs
A typical forest takes 30 years from planting to harvest. That’s 10 election cycles. Up to 10 different governments and ministers of forestry – the previous government had three in eight months – and policies that impact outcomes over the 30-year investment … and that’s for just one harvest cycle.
Forestry generates NZ$7 billion per annum and creates 40,000 jobs. The ability to plant forests and register them in the Emissions Trading Scheme (ETS) provides valuable diversification choices for farmers and landowners struggling with economically marginal land, high input costs and depressed prices for sheep and beef.
Revenue from registering a forest in the ETS is now essential to meet the much higher costs of actively managing a forest through to harvest.
New Zealand cannot meet its international climate change commitments without a sustained contribution from exotic forestry. Our forests are New Zealand’s only bridge to a low carbon economy, buying emitters time to decarbonise by 2050.
Forestry could double its economic contribution through developing domestic wood processing and finishing prior to export. Currently, we are in the crazy position where we export raw logs and then import value-added timber products.
We should be doing this ourselves and meeting the world’s growing demand for high-quality, sustainable products. The juxtaposition between timber that absorbs and stores carbon and the emissions-intensive production of cement and steel supports timber as the building material of choice in a low carbon global economy.
New Zealand is also facing an energy crisis as we transition to an economy based on renewable electricity. Natural gas is the best transition fuel to support this energy and economic transition, but we are rapidly running out. There are now mature technologies that use wood products to generate electricity at scale, as well as to generate process heat and electricity for industrial applications.
We can and should be producing alternative energy products with our timber resource and building new clean industries around it.
There’s no argument around the massive potential for our forestry industry and its ability to contribute more to our economy, environment and communities. But unless we stop continuously fiddling with forestry policy settings, we are now at real risk of collapsing one of the pillars of our economy.
Lewis Tucker operates approximately 30,000 hectares of rotation forestry for timber and carbon on economically marginal land across the country.
Most of these blocks have been subdivided away from productive farms, farmers have sold the steep hill country out the back that is unprofitable and tough to farm. This land, typically Land Use Class 6 (LUC 6), is perfectly suited for forestry. These subdivisions provide farmers with important cashflow and diversification options, including growing the more productive parts of their operations.
We must protect the right of farmers to make the best land use decisions for their farms and families.
But we are now at a crunch point in the policy process. The government’s recent Emissions Reduction Plan (ERP) contains a proposal to prohibit forestry on LUC 6 land from being registered in the ETS, with only a small amount of LUC 6 land allowed to be planted and registered.
This possibility is beginning to paralyse the sector. Planting has dried up and the government’s forestry forecasts look well overstated.
If implemented, this policy will restrict choices for farmers around what they can do with their own land at precisely the time they need as many options as possible. It also runs the risk of wiping significant market and option value off their properties.
In the ERP this possible policy outcome is couched in the context of needing to “protect highly productive land”. Yet much LUC 6 land is not highly productive: it’s economically marginal. Generally, on its own, LUC 6 land is not profitable to farm.
It is the land many farmers are choosing to subdivide or plant into forestry.
While a large proportion of LUC 6 land is poor for pastoral farming, it does lie at the heart of a healthy, sustainable forestry industry. Up to 10% of the country’s 5 million hectares of LUC 6 land needs to eventually end up in trees, for both economic and environmental reasons.
Adopting the potential policy will mean more permanent pine forests – with no intention or capability to harvest – are planted on LUC 7 and 8 land, setting up future generations for a lost opportunity.
We share the government’s concern around planting highly productive land. However, limiting ETS-registered forestry on LUC 6 land is drawing the line in the wrong place. Drawing the line on productive LUC 1-5 land makes more sense: it would enable continued growth in pastoral production as well as the rotation forestry that will assist us to meet our climate obligations.
We also support a requirement that any forestry planted on LUC 6 land must be maintained for timber harvest.
This approach represents the best outcome for the country: for farmers and rural communities, our energy and forestry sectors, our global climate change commitments, and our economy.
Colin Jacobs is an executive director of Lewis Tucker and Co. Lewis Tucker and Co is an investment banking, funds management and corporate advisory firm servicing New Zealand’s middle market and specialising in the agribusiness, forestry and food sectors.
This article was first published in Farmers Weekly New Zealand.
