Regulations have failed to keep pace with the expansion of carbon farming, a lawyer specialising in forestry says.
Dan Williams, a lawyer with Anderson Lloyd, says carbon farming is an emerging market where demand and interest is exceeding legislative control.
“Regulations are a bit behind where they should be and some people are doing things not everyone wants them to do, but it (carbon farming) is not going away,” Williams said.
Some fear recent forestry expansion is gutting rural communities of people and services, but the growth of carbon farming, where trees are kept to sequester carbon and never managed or harvested, has added to that anxiety.
He says some carbon farmers have not managed their blocks as communities would like, but he says legislation will catch up.
The price of New Zealand Units (NZU), as determined by the NZ Emissions Trading Scheme (ETS), has breached the $50 a tonne, which is still well short of Europe where it is $100/tonne.
The futures market estimates the NZU price will hit $57 in April 2026.
He says the current carbon or NZU price was marginal in determining what forestry companies paid for land, well behind factors such as timber or log returns, access to ports and roading.
“It makes a bit of a difference but it is not the real focus,” he said.
“To be honest, companies barely talk about the carbon price.”
The view of forestry investors, according to Williams, is that the NZ price needs to rise further to underpin expansion of plantations as carbon sinks.
“Everyone thinks the NZU price has got a way to go to make it more attractive in terms of carbon projects,” he said.
New forest plantings are concentrated on marginal country and Williams, who acts for a number of forestry companies, says attitudes towards managing commercial forests have changed and they are looking at how to structure plantations for the environmental and carbon purposes.
Many are planting natives in sensitive areas such as alongside waterways, marginal and unstable hillsides.
They are also working with industries such as honey producers to enhance biodiversity and prevent slash washing into waterways during heavy rain events.
Companies use a mix of fast-growing exotics and natives to benefit the environment, but to also generate some carbon revenue, with the exotics generating carbon revenue earlier than slow-growing natives.
Anderson Lloyd recently helped negotiate a 90-year partnership with Aratu Forests to plant native trees on otherwise unusable land on parts of its 33,000ha of exotic forestry.
“Ten to 15 years ago, our client may have just left the unusable forestry land. But now we can help our clients realise value that’s more than just economic,” he said.
“There is a lot of value in engaging in practices promoting activities that will have positive environmental, social and ecological benefits to the area in which they’re operating.”
The rising carbon price is providing opportunities for farmers to plant trees or establish carbon projects on marginal land.
“We are also seeing growing enquiry around native tree regeneration projects, which use non-traditional ways of financing themselves, including using carbon credits,” he said.
“We have worked on projects for a range of clients, including large-scale emitters, iwi groups and conservation trusts, looking at using carbon credits to help at least offset some of the costs.”
New forest investors are aware of their responsibilities and seek professional advice to ensure their investment was correctly structured and that they met their environmental obligations.
“As a bare minimum, good industry practice means weed and pest control, (and) wilding pine control,” he said.
Once farmers start considering claiming carbon credits for native vegetation on their farms, Williams says traversing the ETS can be fraught with legal and regulatory requirements.
From a forestry perspective, he says work is required in the type of vegetation being considered as a carbon sink and the soil type.