The state-owned Landcorp Farming was showing the way. When releasing its 2011/12 annual report, chief executive Chris Kelly said Landcorp developments include enlargement of existing dairy complexes as opportunities arise. Plans included further conversions from forestry on Wairakei Estate, where the company already has 4500ha in dairy production.
The economic driver behind the new conversions was the rock-bottom price of carbon credits. International credits could be bought for $3-$4/tonne, making it cost-effective to buy credits to offset deforesting. Wairakei Pastoral, Landcorp’s partner, accordingly had decided to push ahead with farm development over clear-felled forest land.
This development had been stalled late in 2010 after the Kyoto Protocol on Climate Change took effect, leading to New Zealand introducing the emissions trading scheme.
At the time the ETS was launched the price of carbon credits was more than $20/tonne.
The big change to the ETS legislation, from a farming perspective, was that the start date for surrender obligations for biological emissions from agriculture is no longer specified in the legislation.
The Government has decided biological emissions from agriculture will have surrender obligations under the scheme only if there are economically viable and practical technologies for farmers to reduce emissions and our trading partners make more progress on tackling their emissions in general.
The Government proposes to review the progress towards these conditions in 2015.
Foresters, on the other hand, failed to persuade the government to limit the extent to which emitters can use imported units at bargain-basement prices to meet their obligations under the ETS. They had expected to benefit from earnings from carbon sequestered in existing and new forests.
Those expectations were dashed by the Government’s refusal to limit the quantity of cheap credits NZ emitters and industry can import to offset their carbon footprint.
Some commentators predict no new forest planting will occur because there will be no support from carbon unit income (with long-term consequences for the supply of wood).