Impact of carbon price on the relative profitability of production forestry and permanent forestry for New Zealand plantations

Manley, Bruce

doi:10.1016/j.forpol.2023.103057

Cited by 8 publications

(6 citation statements)

References 11 publications

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“…This behaviour was observed as revenue from carbon for a given region did not vary between rotation lengths, and the higher revenues derived from timber for longer rotations did not compensate for the longer discounting period. This finding was consistent with [61], which shows the optimal rotation length for radiata pine is invariant to carbon price when an averaging age of 16 years is used as the earned carbon is fixed regardless of the rotation age. In contrast, for the scenarios that were averaged to the mid-point, the optimal rotation length for redwood was more dynamic and shifted from 40 years at low carbon values toward 50 years at a carbon value of 160 NZD/tonne, with the transition point occurring earlier in lower-productivity regions.…”

Section: Discussionsupporting

confidence: 88%

“…A recent Climate Change Commission report indicated that the carbon price may be more constrained than previously thought due to a potential carbon oversupply in New Zealand during the 2030s, which could result in a reduction in carbon price in the next decade [30]. Although there is currently a floor price in the ETS of 35 NZD/tonne CO 2 , the carbon price has mostly ranged from 5 to 25 NZD/tonne CO 2 between 2008 and 2020 and has only exceeded this floor price since 2020 [61]. Carbon prices are very sensitive to government intervention around policy settings within the ETS, and there is a current review of the ETS underway that may impact settings [61].…”

Section: Discussionmentioning

confidence: 99%

“…Although there is currently a floor price in the ETS of 35 NZD/tonne CO 2 , the carbon price has mostly ranged from 5 to 25 NZD/tonne CO 2 between 2008 and 2020 and has only exceeded this floor price since 2020 [61]. Carbon prices are very sensitive to government intervention around policy settings within the ETS, and there is a current review of the ETS underway that may impact settings [61]. Consequently, the establishment of redwood may provide a conservative afforestation option that mitigates the risk of sustained low values for carbon.…”

Section: Discussionmentioning

confidence: 99%

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Financial Comparison of Afforestation Using Redwood and Radiata Pine within New Zealand for Regimes That Derive Value from Timber and Carbon

Watt,

Kimberley

2023

Forests

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Carbon sequestration has become an important source of supplementary revenue from forest plantations. Although there are many financial comparisons of species based on timber revenue, there have been few regional comparisons that integrate revenue from carbon. Within New Zealand, radiata pine is the most widely planted species, but there has been a recent upsurge in planting rates for coast redwood. Under New Zealand’s Emissions Trading Scheme, areas that are newly afforested under clear-fell rotational forestry receive carbon payments up to a set age, intended to represent the long-term average under successive rotations. Using growth models for both species, the objectives of this research were to regionally quantify (i) how the rotation length and the carbon averaging age influenced the profitability of growing redwood and (ii) compare carbon, timber yields, and profitability between radiata pine and redwood. The results showed the legislated carbon averaging age of 22 years for redwood underestimated the actual mid-points of carbon accumulation, which averaged 26, 28, and 31 years across rotation lengths of 40, 45, and 50 years, respectively. The optimal rotation length for redwood varied markedly by region and carbon price but was most often 40 years, increasing to 50 years at higher carbon prices, particularly for southern regions. Under regimes where revenue was only derived from timber, the redwood internal rate of return (IRR) exceeded that of radiata pine for eight of the nine New Zealand regions. When revenue was received from carbon and timber, redwood had a higher IRR than radiata pine up to carbon prices ranging from 29 to 50 NZD/tonne CO2 for the North Island and 23 to 34 NZD/tonne CO2 in all South Island regions apart from Otago. The IRR of radiata pine exceeded that of redwood at carbon prices above these values for the eight regions and at all carbon prices within the cold, dry Otago region.

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Section: Discussionsupporting

confidence: 88%

Section: Discussionmentioning

confidence: 99%

Section: Discussionmentioning

confidence: 99%

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Financial Comparison of Afforestation Using Redwood and Radiata Pine within New Zealand for Regimes That Derive Value from Timber and Carbon

Watt,

Kimberley

2023

Forests

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“…Carbon is also now a significant revenue stream to forest growers [36][37][38] and the New Zealand Emissions Trading Scheme (ETS) is relatively unique from a global perspective in that it includes the forestry sector [39]. Forest growers registered in the ETS receive a unit of carbon for each tonne of CO 2 sequestered, which are known as New Zealand Units (NZUs).…”

Section: Introductionmentioning

confidence: 99%

“…Stands that are permanently established or managed under a CCF system are able to claim changes in carbon over the life of the stand, under the carbon stock-change method [36]. Under this payment system, forest owners can choose not to extract timber or alternatively harvest trees down to a prescribed minimum level of canopy cover, with these systems hereafter termed permanent carbon forest (PCF) and CCF regimes, respectively.…”

Section: Introductionmentioning

confidence: 99%

Financial Comparison of Continuous-Cover Forestry, Rotational Forest Management and Permanent Carbon Forest Regimes for Redwood within New Zealand

Bown,

Watt

2024

Forests

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Continuous-cover forestry (CCF), which maintains a relatively intact forest cover through selective harvesting, has emerged over the last few decades as a popular alternative to rotational forest management (RFM). Coast redwood, which is native to the western United States, grows rapidly in New Zealand and is well suited to CCF as it has high shade tolerance, an ability to coppice from the cut stem, and resistance to pests, diseases, wind and fire. A forest estate model was used to compare the carbon sequestration, timber production and profitability of redwood CCF, RFM and permanent carbon forestry (PCF) regimes at a regional level within New Zealand. Through linear programming, this model optimised carbon accumulation and harvesting decisions across a large forest to meet a series of constraints associated with each regime. All three regimes represented good investment decisions, but CCF had the highest soil expectation value (SEV) within most North Island regions while PCF had a slightly higher SEV within the South Island regions. Under the transitional CCF (CCFt), revenue from carbon initially increased before levelling out at 40 years, after which time a sustainable harvest of high-value timber commenced in perpetuity without additional revenue from carbon. The CCFt regime transitioned to a steady-state condition, with a uniform age class distribution from year 150 onwards (CCFs), after which time a very high SEV was attained that exceeded that of CCFt by four-fold in the North Island (NZD 136,126/ha vs. NZD 34,430/ha) and seven-fold (NZD 44,714 vs. NZD 6267/ha) in the South Island. This study highlights the profitability of managing redwood under CCF and how initial carbon revenue can be used to finance the transition of the forest to a steady-state condition that produces a stream of valuable timber with a very high rate of return.

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The role of price incentives in enhancing carbon sequestration in the forestry sector of Hungary

Szajkó,

Rácz,

Kis

2024

Forest Policy and Economics

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Impact of carbon price on the relative profitability of production forestry and permanent forestry for New Zealand plantations

Cited by 8 publications

References 11 publications

Financial Comparison of Afforestation Using Redwood and Radiata Pine within New Zealand for Regimes That Derive Value from Timber and Carbon

Financial Comparison of Afforestation Using Redwood and Radiata Pine within New Zealand for Regimes That Derive Value from Timber and Carbon

Financial Comparison of Continuous-Cover Forestry, Rotational Forest Management and Permanent Carbon Forest Regimes for Redwood within New Zealand

The role of price incentives in enhancing carbon sequestration in the forestry sector of Hungary

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