Trees could be worth four times as much as sheep to Wairarapa farmers under carbon credit trading - but there are risks, say forestry leaders.
New hill-country forests would be moneymakers even at the lowest carbon prices predicted by Infometrics last week, according to NZ Forest Owners Association president Peter Berg.
The
Government plans to reduce carbon emissions through carbon price, and figures from Infometrics - an economics forecaster - suggest a price of $200 a tonne is needed to meet likely targets, Mr Berg said.
"Even at $100 a tonne, a typical radiata forest would generate an average of $2000 or more in carbon credit income per hectare per year for 30 years.
"That compares with a gross annual income of $530 a hectare on a typical hill country sheep and beef operation."
Steve Wilton, of Forest Enterprises in Wairarapa, said yesterday those prices would change everything.
"If you were talking a five or 10-year time frame, the risk profile is quite different, but we're not - we're talking 25 to 30 years and with people who plant douglas fir, even longer."
"Were those sorts of values to arise it would completely revolutionise forestry as a land use - it would be a paradigm shift," Mr Wilton said.
There might also be changes in species planted, perhaps to the slower-growing douglas fir.
He outlined three major pitfalls for those considering carbon trading: the lifespan of a forest, changes in carbon prices, and on a national scale the changing use and value of land.
n Mr Wilton said with forests lasting 30 years and therefore potentially through 10 governments, there is a need for "policy stability" on emissions trading.
"If it isn't tied up the value could swing back and forth ... if the policy environment is not carefully controlled.
"If you were talking a five or 10-year time frame, the risk profile is quite different, but we're not - we're talking 25 to 30 years and with people who plant douglas fir, even longer."
n "There may be very high prices at the start, but what happens down the track?" Mr Wilton said.
"The job's been done. Substitution occurs, alternative technologies arise and carbon pollution is no longer a problem - it worked exactly that way with sulphur dioxide."
Mr Wilton was referring to the American "acid rain" project, where industry incentives to reduce sulphur dioxide air pollution resulted in new ways to contain the sulphur.
In that case there would be no demand for carbon credits and prices would fall, perhaps to zero.
"And what if you've signed up for the Permanent Forest Sink Initiative?
"You've still got rates, maintenance and other outgoings, and you've foregone the income that existed before."
Mr Wilton said farmers need to ask themselves: 'Can I live with that change of land use permanently?'.
"It's pretty difficult to undo a forest, especially where these are planned to go, on eroding hill country.
"On the flat you can get machines
in to dig out the stumps; it's not so easy
on the back of a hill out on the East Coast."
n With increased income from the land, Mr Wilton said, how much of the carbon credit profits would be eaten away by higher land value, "which would defeat the whole purpose?"
"The farmer might say: 'I won't sell it for $4000 if you're going to make think, you can pay me $10,000 - or whatever'."
He said land value has always been tied to land income.
Mr Wilton said nobody wants "every square metre of New Zealand in trees".
"The value of food goes up and you get a seesaw between land use - it's a minefield; it's uncharted territory."