Trees worth more standing

OVER THE FENCE - BY JON MORGAN

OPINION: What do you know about the emissions trading scheme? You know there is one, right? You've seen the letters ETS bandied about by politicians and farming leaders.

Blue politicians: It's the least we can do to save the planet.

Red: We're not doing enough.

Green: We're subsidising industries and farmers.

Farmers: We shouldn't have one at all.

So, you read this and think, "I don't understand any of this; it's all too complicated." You turn the page and move on.

But if you're a farmer who has some land in trees, planted since 1990, or you have rough land that would be better in trees than pasture, you could be missing out on a great opportunity.

Trees soak up carbon, and under the Kyoto Protocol that ability is priced on the world market in carbon credits. Carbon-emitting industries and governments buy those credits to balance their emissions.

If you have trees planted since 1990, the baseline of the Kyoto Protocol, you may be able to make more money by leaving them in the ground rather than cutting them down for timber. That's the view of Wairarapa forestry consultant Stuart Orme. He says a tree's annual growth rate - measured by the rings we see when it is cut down - can bring in income that could be the difference between sinking or swimming in these straitened times.

He has just helped negotiate New Zealand's first "collated" sale of forestry carbon credits by bringing together 14 farmers with small tree lots - the smallest was less than 10ha - and selling their 2008 growth ring for an average of more than $600 a hectare.

That's $6000 for the farmer with 10ha, but for one on a big hill- country property with 300ha in trees and struggling to make a living from sheep and cattle in three years of drought that's a life-saving $180,000.

And the beauty of it is that this money can be made each year as the trees add growth rings.

This is the good news of the ETS, a story that has been overshadowed by political grandstanding, in Mr Orme's view. His description of farmers and their investment opportunities could apply to any industry. (He has a penchant for talking in colourful metaphors.)

"Look at any continuum, there's a heap at the right end who are entrepreneurial, looking for an opportunity. They're hell to live with, because they wake up in the middle of the night and go 'Hey, waddya reckon . . . ?' And there's some at the other end who struggle with the idea they've got to walk to the bathroom at night. But there's this big chunk in the middle that are actually quite bright, and as they come to understand things, they engage and learn. One of the tragedies of this whole thing is that it has been so political that those people in the middle have said it is just not worth their mental energy or time and they've got on with something else."

Because of this, New Zealand is late in entering what could be a lucrative international market - US$60 billion of credits were traded in 2007 and approaching double that in 2008.

Mr Orme points out that most of the 700,000ha of forestry outside the mainstream industry is owned by farmers or small investors.

"They planted with the intention of cutting them for timber, but when it comes time to cut they have to do the sums - what it will cost for roading, felling, trucking, paying the management company.

"If there's anything left over that's what they base their decisions on."

If they have sold the carbon credits, they have to add the cost of another transaction, buying back the credits.

"And if the price of carbon has doubled they will go broke. In that case, they can make more money by leaving the trees standing. It is an absolute sitter."

However, it is essential that the trees are on land that can't be used for food production.

"When the price of carbon collapses, because all markets do sooner or later, you want to be able to look at that hillside and say, 'Nah that was the best land use; it is still the right decision'.

"You've still got something to sell - the wood. And if I'm wrong and the suits are right, and the price of credits doubles, you keep on selling them."

The least farmers with trees should do is register with the Agriculture and Forestry Ministry, he says. "If you're registered you will be able to engage and understand it better. It's not for everybody; circumstances will differ."

- © Fairfax NZ News