Greenplan investors hail payouts
Investors in the Greenplan forestry partnerships have welcomed a scheme devised to let them draw some profit from the carbon market.
But the scheme, which will see them able to profit from just one in 10 carbon credits their forestry blocks earns, has had an extraordinarily long gestation thanks to changing government carbon-market policy.
The potential windfall from carbon credits which was dangled enticingly before forest owners with the creation of emissions trading schemes in many developed economies around the world has taken a battering with the collapse of carbon prices.
But the regulatory uncertainty in New Zealand, which did not sign up to a second Kyoto commitment period in November, has been extreme, adding to the tax and accounting headaches associated with Greenplan's attempts to release carbon proceeds to tree owners.
Indeed, investors have been warned that if there are any more "material change in the ETS" that impact the proposal, Greenplan can suspend the scheme at its "complete discretion" until it considers it viable again.
Greenplan director Matthew Barton, said it had taken more than four years to get to the point where some of the carbon credits earned by the growing trees, which each year sequester carbon from the atmosphere, can be converted into profit.
It had been an expensive and frustrating experience during which the carbon price collapsed, but the company felt duty-bound to go down that path, Barton said.
Under the scheme 10 per cent of the carbon credits earned by each of the forest partnerships will be sold and the cash distributed to investors, except for investors with their own carbon credit accounts who can have their credits passed into their ownership.
That 10 per cent will be sold off over five years, said Barton, a strategy devised to spread the risk of price spikes and slumps.
The other 90 per cent of carbon credits remain with Greenplan, though it does not expect to make any profit out of them. The reason for that is that in most forestry partnerships, Greenplan owns the land under the trees. When the trees are harvested, carbon credits have to be surrendered to reflect the carbon released. And the credits must be surrendered by the landowner, meaning Greenplan has to hold them in order to be sure that it can cover the liability.
For the investors, the carbon is a small, added bonus they did not expect when investing in trees, said Barton, and Greenplan felt obligated to try to release some value from it, though it did not expect it to prove so hard.
Each investor will probably receive the value of between 6 and 21 credits. However, the carbon price has crashed from over $20 to about $3 - thanks to a number of factors including a crash in demand for credits from European countries and New Zealand's policy of allowing big carbon emitters here to buy credits of dubious quality not accepted in other emissions trading schemes.
"This is really just a bonus, though it is not much of a bonus at $3," Barton said.
The return could improve if carbon prices recover.
There is the chance of a little more. If rules are brought in to recognise that even harvested timber continues to sequester some carbon, there may be the opportunity to release a little more value to investors, said Barton.
"If things change and we can do something better, then yes, definitely," he said.
- Sunday Star Times