Silence of the trees: Why the rise of forestry has farmers worried

Mention Tuscan Hills in the Tararua district and you're bound to get a reaction.

The hill country farm was known for generations as a successful sheep and beef operation, and for producing some of the area's best lambs.

But last year Tuscan Hills was sold to New Zealand Carbon Farming and is now being planted in trees that may never be harvested.

That change from livestock to pine trees is one that farmers fear will spread - thanks largely to efforts to cut New Zealand's carbon emissions - in the process reducing agricultural output and gutting rural communities.

The Tararua district stretches from Mount Bruce in the south to Dannevirke in the north, and east to Ākitio, on the wild Wairarapa coast.

With 424,000 hectares and just 17,900 residents, the trick is attracting people to the district and not losing them, which is what locals fear will happen if forestry takes hold. As things stand, the planting crews come in, do their job, and leave.

The locals are worried that as the trees advance, the shearing jobs will go, along with the shepherds and the truck drivers. Then there are the ancillary services: vets, mechanics, schools ...

The fabric of rural living frays at the edges. Finally, all that is left is the sound of trees growing.

Tararua District Council mayor Tracey Collis says the issue of forestry versus pastoral farming is never far below the surface in rural communities - particularly in the Wairarapa and Hawke's Bay.

Some people see the resurgence of forestry as a direct result of Coalition partner NZ First's One Billion Trees policy, which offers grants for tree planting over the next decade.

The Labour Party this month proposed to curtail the conversion of highly productive land into forests. Forestry spokesman Stuart Nash said any conversion of such land to forestry would require a resource consent, as a way to ensure rural communities were well-supported during the economic recovery.

Nash pledged that within the first six months of its next term of government, Labour would revise the rules to enable councils to once again determine what classes of land can be used for plantation and carbon forests.

New Zealand's soils are graded on a scale from 1 - the very best - to 8 - suitable only for conservation use. Under Labour's plan, resource consent would be required for plantation or carbon forests on Land Use Capability Classes 1-5, above a threshold of 50 hectares per farm to allow farmers flexibility in creating small plantations to support environmental goals.

New Zealand has about 12.1 million hectares in farmland. Another 1.7 million hectares or so is in forestry, down from 2 million hectares in 2002. Last year, about 22,000 hectares of farmland was converted to forestry. Reaching the One Billion Trees target by 2028 will require the planting of an estimated 43,000 hectares a year.

Collis says that even if Labour's plan was in force today, it would not have saved Tuscan Hills from forestry.

"When I had a look at the policy announcement from Labour, Tuscan Hills is classed as [soil classes] 6, 7 and 8, so that would not fit into that policy, yet it is one of the strongest farms in the community because it really was performing, was well-managed, with good infrastructure," she says.

She welcomes Labour's initiative, but says it will it not make the issue go away. "Forestry came very quickly. We had a significant number of properties sold over a very short, 12-month period.

"It happened very fast and it was hard for people to cope with that rate of change.

"It's an emotional concern, because once that land has gone to trees, it's not like it can be taken out easily."

As well as concern about the loss of pastoral farms, Collis says there are also worries about fire risk from forestry, and the problem of "slash" - unwanted wood clogging up waterways after big floods.

"Once that land has gone to trees, it's not like it can be taken out easily," says Tararua District mayor Tracey Collis. Photo / NZME

She likens the current situation to the rapid expansion of dairy in the early 2000s, which sparked debate over land use.

Collis talks of the wider economic impact of forestry on communities and feels the issue is not well understood in urban New Zealand. "These farms are continually spending money on goods and services," she says. "When farms go into forestry, suddenly the economics of running support businesses become more strained."

But she concedes it's a challenging issue to tackle, "because you also have these things called property rights".

Councillor Shirley Hull lays the rise and rise of forestry at NZ First's door: "If you throw money at something, you will soon get an impact."

Collis is more circumspect: "There are other factors there, but the price of carbon is a certainly one of them."

Further south, the pressure group 50 Shades Of Green arose after Austrian aristocrat Countess Veronika Leeb-Goess-Saurau last year bought the 1727 hectare Hadleigh Station, near Masterton, for tree planting.

As it stands, New Zealand encourages overseas investment in forestry and offers streamlined ways to achieve this.

Generally, overseas investors buying lass than 1000 hectares of forestry rights per year are exempt from having to get consent. Overseas investors can apply to the Overseas Investment Office for consent to buy or lease land that is in forestry, or land to be used for forestry, or to buy forestry rights.

Fifty Shades spokesman Andy Scott says he is "quietly optimistic" that Labour's plan is a step in the right direction. But he says there is some quite good class 6 land and he would be happy if forestry was restricted to classes 7 or 8.

And Scott says the Government still needs to tighten up on Overseas Investment Office requirements for land intended for forestry.

He notes that carbon prices have surpassed $30 a tonne "and there's nothing to stop it hitting $50 a tonne".

Under the emissions trading scheme (ETS), the primary unit of trade is the New Zealand Unit (NZU), also called a carbon credit. One NZU represents 1 tonne of carbon dioxide. Carbon emitters can go to the market to buy carbon credits to offset their emissions, and forest owners can sell them.

Year-old trees on the Tuscan Hills farm, east of Pahiatua. Photo / NZME

Federated Farmers vice-president Andrew Hoggard's concern is that the price signals coming from the ETS are driving the push into forestry. For him, emissions trading smacks of "greenwashing", and he likens it to some kind of extreme, old-school religion.

"We know we have done wrong, so we flagellate ourselves rather than knuckle down and ask, how do we do air travel without aviation gas, how do we do energy without coal, and how we get cracking on things like cold fusion, or whatever the solution might be?"

Carbon prices

Having grown up near Kaikōura, Nigel Brunel has sympathy for those who fear losing their rural lifestyles to forestry. But as head of institutional commodities at OM Financial - which runs the carbon trading platform - he says carbon prices can only go up.

All of a sudden, forestry is offering a better return on land than other activities.

Raising sheep and beef might return only 2 per cent a year, whereas rates of 5 to 15 per cent are not uncommon for carbon, he says.

"Carbon prices are going to continue to go up, in my view, so this pressure [on land use] is going to remain," says Brunel. "So I think there needs to be some sort of self-managed solution to all of this - not regulation.

"Part of it is that you don't need to plant everywhere.

"If some Queen St farmer wants to buy some land and carpet it with trees, maybe there does need to be some resource consent around that.

"But the government of the day also has an obligation under the Paris agreement to reduce emissions to 30 per cent of 2005 levels by 2030. The only way that that can be done domestically is by planting lots and lots of trees."

In theory, the price of carbon will at some point get so high that emitters will be forced to use more sustainable energy sources.

Two-way traffic

It hasn't always been one-way traffic with trees.

From 2009 to 2014 there was deforestation and the afforestation that's going on now is not as extensive as it has been in previous years.

Emissions trading has become like an old-time religion, rather than addressing the real problem, says Federated Farmers' Andrew Hoggard. Photo / NZME

And tree planting can take different forms. There is the permanent - carbon sink - style of "no cut" forestry and then there is plantation forestry, where the trees are eventually harvested. For both types, pinus radiata is the tree of choice.

Brunel says the pastoral vs forests debate is another example of tension between potential land uses. "It's come down to the simple premise that if someone owns some land, what do they run or put on that land for a return?"

"They can run sheep or beef, and it can make them a return, but that's ongoing. Or they can plant trees permanently and get a stream of carbon credits for 25 years."

While he expects the carbon price to rise, Brunel doesn't see it racing away like some share prices. "This is not the price of Apple shares or Pushpay.

"This is a price on fossil fuel usage. As the price of carbon escalates, the pressure on emitters escalates to seek energy alternatives.

Contrived market

"It's a politically created market to put a price on fossil fuels, to move the world from a fossil fuel economy to a renewable energy economy, so there needs to be a price put on fossil fuels.

"The implementation of that can mean unintended consequences.

"If carbon prices go higher, you are going to get some good land planted in trees, there is no doubt about that.

"I get the Fifty Shades Of Green argument," says Brunel. "Having been born in a small community, I know what that will mean.

"Ideally, permanent forests should really be on marginal land, but people should have the right to do what they like with their property."

Carbon on the rise

Con Williams, head of investment research at farm syndicator MyFarm, says that as the price of carbon rises, the relative economics of forestry and carbon farming will be further enhanced, compared with more traditional land uses.

"It depends on your time horizon and your long-run views around what New Zealand's competitive advantages are, from a broad perspective.

"For a sheep and beef farmer, you are saying that we are very competitive - our farming systems are good farming systems that should be used to produce food and fibre.

"The flip side is that there is this issue of climate change and New Zealand has signed up to reduce its emissions.

"The livestock sector is part of that in terms of current accounting rules and one of the easiest and lowest-cost ways for New Zealand - in the short run - to meet its Paris Accord targets is to plant trees and sequester carbon that way.

"The Government is moving a whole range of policy settings to encourage that.

"The fear in the sheep and beef sector is that once you plant that in forestry, that's a 25-year commitment at least."

The question then becomes: does that land ever return to farming, and what are the effects on the rural community?

"The other tension is that if we look at the foreign investment rules, the Government wants to get going as soon as possible with their billion trees aims, so they have to let some foreign capital into the market as well, so we have seen quite a lot of debate, which is not going to go away in a hurry," says WIlliams.

"That's another fear - that these foreign entities are going to pump up that land, claim the carbon credits, and walk away.

"If you been a long-running, intergenerational sheep and beef business, there has been a lot of attachment and affinity with the land and in making sure that it is being used productively and employing New Zealanders.

"My view is that there is some sheep and beef land that is probably better off planted in trees, but I don't think it's a blanket policy, so it's just about optimal land use.

"The really smart people are buying blocks of land and planting the shitty areas and subdividing the other bits to sell to the next door neighbours, or forming smaller, standalone blocks."

Ideal world

"In an ideal world, if you had a full, globally interlinked emissions scheme, we would be planting trees in other parts of the world - not in New Zealand," says Williams.

"The flip side is that we have had net deforestation in New Zealand in recent years and we need to get planting.

"Ideally, we would have domestic capital doing this and New Zealand farmers doing this, but they are not."

And while the pastoral vs forestry argument continues, carbon prices keep rising.

"As the carbon price goes up, the incentive to plant trees is going to be greater," Williams says. "There are not too many ifs or buts about it."

Farming carbon

New Zealand Carbon Farming, the latest owner of Tuscan Hills, is the largest provider of carbon credits in Australasia and has been in operation since 2010, according to its website.

The Herald was unable to make contact with NZ Carbon Farming, but the site says it is headed by Kiwis Matt Walsh and Bruce Miller, and is wholly New Zealand-owned.

The website says NZ Carbon Farming plans to deliver 20 per cent of New Zealand's 2030 Paris climate commitment and that its activities have so far taken more than 20 million tonnes of carbon out of the atmosphere.

The company says it has so far paid $73 million to its forest owner partners.

"By planting new forests and never harvesting, we are actively contributing to climate change mitigation," it says.

"We will make a significant contribution towards the world's ambition to limit global temperature rise to a maximum of 1.5 degrees."

The company says it has 81,338 hectares of forest lands owned or leased and has 60 million trees under management for absorbing carbon.

Market returns

Consultancy PwC says permanent carbon forestry can offer comparable returns to plantation forestry - and both can offer superior returns to sheep and beef farming.

PwC notes the current resurgence in planting has raised concerns among sheep and beef farmers about reducing rural employment and the quality of rural life.

"Because of the impacts on rural communities and the sheep and beef sector, questions have also been raised about afforestation's impact on New Zealand's economy as a whole," PwC says in an economic impact assessment.

Plantation forestry is typically pinus radiata, planted with the intention of being harvested after 28 years. Permanent carbon forests, on the other hand, are planted with the intention of generating carbon units, not to be harvested.

In a 27-page report, PwC concludes that a simple financial comparison of the relative attractiveness of plantation forestry, permanent carbon forestry and sheep and beef farming suggests that for some land types - in this case hard hill country - "forestry generally offers greater returns when enhanced by carbon unit revenue".

"Within this analysis, plantation forestry and permanent carbon forestry offer comparable returns over the long term, but significantly different economic impacts, with permanent carbon forestry having comparatively low impacts, compared to sheep and beef farming and plantation forestry," it says.

"The split of the value between returns to capital and returns to labour is also shifted almost completely in favour of capital: almost no employment impacts are generated from permanent carbon forestry, by comparison to sheep and beef and plantation forestry.

"Overall, this analysis suggests that, with carbon unit prices at or in the range of NZ$25, permanent carbon forestry can offer comparable returns to plantation forestry, and both can offer superior returns to sheep and beef," PwC says.

The wide impacts, however, were "materially different".

"A move from plantation to permanent carbon forestry significantly reduces the GDP impacts, and reduces employment impacts to negligible.

"This is the natural effect of converting land to a use that is not economically productive."