Every year from 2019 to 2022 the government approved, on average, 18 land sales to foreigners of existing commercial forest blocks and farms for conversion to forestry.
Changes introduced last year that replaced the permissive special forestry test for foreign land buyers are expected to curb the pace of conversion of farmland to commercial forestry, according to explanatory notes from the Overseas Investment Office (OIO) attached to its December overseas investment decisions.
But Beef + Lamb New Zealand (BLNZ) is not convinced.
Its policy and advocacy manager, Dave Harrison, said while the threshold has lifted slightly, the financial incentive to generate income from carbon sequestration remains.
In 2018, the government introduced the special forestry test, which lowered the threshold and streamlined the process for foreign investors wanting to buy land to plant commercial forests or to buy existing commercial forests.
It accelerated interest.
There were 29 applications granted to foreign investors for 21,700ha from 2011 to 2019. The easing of regulations swelled approved sales to 72 from 2019 to 2022, covering 66,500ha.
The busiest year was 2022, when 31 sales to foreign investors were approved for 26,261ha.
The special forestry test required applicants to satisfy the government that purchases were not of residential land or land that could become residential.
It decreed that the land must be replanted following harvest and any existing arrangements for public access, protection of habitat for indigenous plants and animals, and historic places must be maintained.
By meeting those standards, applicants were exempt from having to satisfy the tougher “benefits to New Zealand” test.
That test was reinstated for foreign land buyers in August 2022.
“This measures an investment against factors such as how it benefits the economy and natural environment, plus gives decision-makers discretion to consider factors including the land’s environmental features and how productive it is,” the OIO notes explain.
An overseas buyer purchasing farmland of more than 5ha for conversion to permanent forestry must also meet the farmland benefit test.
This additional threshold requires that the sale provide substantial benefits to NZ and either economic benefits or oversight or participation by New Zealanders.
Foreign applications to convert farmland to permanent forestry from which carbon credits can be earned must meet the farmland benefit test.
That test requires applicants to demonstrate that the benefits are significantly higher than those coming from the land in its current state.
Harrison said the changes may mean a foreign purchaser will take longer to get approval, but the incentive of income from emitters offsetting all their emissions by buying forestry-based carbon credits makes that extended process worthwhile.
“It’s not really moved the dial much at all,” he said.
“So long as the emissions trading scheme sets a carbon price, it will provide a windfall gain.”
Harrison said BLNZ wants the government to stop allowing emitters to offset all their emissions, saying NZ is one of only two countries in the world where that is allowed.
The other is Kazakhstan.
“It effectively allows people to buy their way out of reducing carbon emissions.
“The focus should be more on reducing carbon emissions rather than planting their way out of the problem.”
