Key Points:

Forest owners are angry that Government plans to defer the inclusion of transport fuels in the emissions trading scheme will leave them with carbon credits they will struggle to sell.

"We look around and we don't see a lot of other people in the ETS," NZ Forest Owners Association David Rhodes told members of Parliament's finance and expenditure select committee yesterday. In the early years of the scheme, oil companies would have been the biggest buyers of carbon credits which the owners of post-1990 forests fought long and hard for.

Following a backdown by the Government last week, that demand will now be deferred until 2011.

NZFOA chairman Peter Berg said: "There is a sense among foresters that anything is liable to happen in the future, so why invest in forestry."

Concerns about the market for devolved carbon credits come on top of existing concerns about the treatment of pre-1990 forests arising out of provision of the Kyoto Protocol.

If landowners want to switch to another land use, such as dairying, upon harvest, they face a prohibitive liability for the carbon in the trees, which is deemed to be emitted then and there. The effect is to lock the land into forestry, which might not be its best use.

Federation of Maori Authorities chief executive Paul Morgan told the MPs that Maori owned 60 per cent of the pre-1990 forest estate (and 10 per cent of post-1990).

The federation wants all land owned by Maori to be excluded from the scheme unless its owners want to opt in. "Most of our members are in forestry for the long haul," he said.

"But it is abhorrent to us that this generation should tell future generations how to manage their land."

Ngai Tahu representatives argued that the ETS' deforestation provisions substantially devalued forestry land it acquired under its Treaty settlement 10 years ago. Either it should be exempted from the provisions in the current bill or the deforestation provisions should be radically redesigned, along lines it proposed.

The Timber Industry Federation, which represents sawmillers, questioned where its supply of logs would come from if foresters began growing trees for carbon credits rather than wood. And it argued that any increase in cost to its suppliers would make it harder to compete in export markets.

But Steve Wilton, of forest manager Forest Enterprises, said he did not expect to see forest owners switch from growing trees for wood to growing trees for carbon credits.

"The forest industry is struggling to see how it can make money out of the ETS, unless you have the ability to manage your liability at harvest. So the opportunity to farm carbon is seriously constrained."