Air New Zealand, Contact Energy, Genesis Energy and Z Energy have joined forces to create a partnership that will establish a forest portfolio to sequester carbon and help meet their annual requirements under the emissions trading scheme.
Dryland Carbon LLP, or Drylandcarbon, chief executive Anthony Beverley said that now the partnership has been created, the next task is to focus on the land and the portfolio establishment.
The main aim is to produce a stable supply of forestry-generated NZU carbon credits for the four companies. The initiative, however, will also expand New Zealand's national forest estate.
Beverley said Drylandcarbon will target the purchase and licensing of marginal land across the country but will focus on where New Zealand has traditionally seen the strongest forest growth rate.
"We are targeting the highest growth areas as the purpose of the partnership is to sequester as much carbon as we can," he said.
The portfolio strategy is to both acquire land and license land.
"We see this as a really good opportunity for us to partner with landowners. We think there is a really compelling opportunity with landowners with marginal land that are looking for partners with capital and carbon expertise," he said.
The portfolio will focus on permanent forests but will also look to include some rotation forests.
"Because of our carbon focus we would prefer some of the more remote, more difficult land as it's more cost effective."
The initial plan is to plant exotics but the aim is to transition to natives over time, he said.
All four partners said the investment amount is commercially sensitive.
Both Genesis and Air New Zealand said the value of the partnership is "far greater than purely financial."
"We're expecting it to contribute to the sustainable development of the regions, and produce a stable supply of forestry-generated NZU carbon credits which will support Genesis and its three Drylandcarbon partners to meet their requirements under the New Zealand Emissions Trading Scheme," it said.
Air New Zealand gave a similar response. Z Energy also said it was commercially sensitive but said that it will participate as a limited partner contributing capital over an initial five-year period, subject to certain pre-agreed investment criteria being met. It did not specify those.
Contact chief generation and development officer James Kilty said he could not specify the amount but said all partners had made a "significant investment."
He said Drylandcarbon "is a great example of taking a leadership role as a private enterprise, unsubsidised, finding a way to do the right thing for future generations, and in a way that is commercially sensible."
There is currently a $25 a tonne upper limit on the price of a New Zealand unit of carbon dioxide under the emissions trading scheme.
The government, however, is exploring a possible change where the price of carbon would rise to reflect international prices.
Kilty said Contact's view is that the "cap will and should be removed and emitters exposed to a price that is connected to an international carbon price. That is where we will get behavioural change."
Forestry planting has emerged as a key element of the government's efforts to tilt the New Zealand economy towards action on climate change, land erosion, water quality and regional unemployment.
The government has committed to help fund around half of its 'One Billion Trees' initiative on land unattractive to commercial foresters.
Under the initiative, the government has set a goal to plant one billion trees by 2028.
Drylandcarbon will be managed by Lewis Tucker & Co, which describes itself as a boutique agri-business advisory service.
The four companies will not have day-to-day involvement in the running of the business.
"Given the potential size of the portfolio, the partnership is well placed to make a real contribution to New Zealand's broader emission reduction objectives. In targeting some of the more remote and difficult marginal land, Drylandcarbon also anticipates its activities can support improved environmental outcomes in areas needing land use change," said Beverley.
Drylandcarbon is currently engaging with farming and regional communities around establishing carbon forests on private land.