Thursday, April 25, 2024

FROM THE RIDGE: Carbon prices drive land-use change

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Last week BakerAg released its report commissioned by Beef + Lamb NZ. It had a good look into sheep and beef farmland being converted into forestry and confirmed what many of us within the sector have been claiming in recent years. It is a significant amount of land that is going into forestry and the carbon market is driving this land-use change.
Lewis Tucker general manager Colin Jacobs says forestry buys the country’s emitters and policy makers a bit of time to get to a low-carbon economy.
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Last week BakerAg released its report commissioned by Beef + Lamb NZ. It had a good look into sheep and beef farmland being converted into forestry and confirmed what many of us within the sector have been claiming in recent years.

It is a significant amount of land that is going into forestry and the carbon market is driving this land-use change. It’s not surprising because it is a compelling business case. And it becomes more compelling as the price of carbon increases. But as we know, particularly those areas that are seeing it happen within their own districts, it is having a profound impact upon the social fabric of these communities and on a wider scale will reduce our sector’s food-producing ability.

The Paris Accord explicitly emphasised that actions in “response to the threat of climate change” do not threaten food production. This is for good reason. The global population is forecast to rise by more than two billion people by 2050. Food producers everywhere will need to produce more food in the next 50 years than we produced in the previous 500 years.

For most of us, the ETS is complex and bloody difficult to understand. It also keeps changing; it continues to be tweaked, as in each version it hasn’t necessarily driven the objective of reducing emissions. 

Until the reforms in 2020, emitters could buy NZ Units from the Government at a fixed price of $25, so instead of capping emissions it merely acted as a carbon tax on those emissions.

That fixed price of $25 also meant that those sequestering carbon by growing trees weren’t getting anymore than this amount should they choose to sell their units. It was $25 per tonne in April last year before the reforms came in and the auction system began, then $39/t in April this year and currently sits at $48/t. A land valuer has told me that that first increase of $10/t in the price of carbon meant that companies contemplating land purchases on suitable forestry land were paying up to $3000/ha more. That might indicate a massive ability to continue to pay far more than farming can compete as the carbon price increases. Good if you are the seller but not good if you are trying to keep a community intact or wishing to grow quality food to feed discerning diners.

These are the drivers of what the report has highlighted in terms of land-use change.

In 2017, 4000ha of whole sheep and beef farms went into forestry; in 2018 there was 20,000ha; 2019 37,000ha; and 2020 17,000ha, which may have dropped because of the covid-19 disruptions. And there is plenty more in the pipeline being planted right now and still to be planted. The report found that about two-thirds of these plantings are on reasonable quality farmland.

This 78,000ha of whole farms being planted into forestry doesn’t include the areas that our sector is rightly planting on the more unproductive parts of our farms. This is a more preferable and sensible approach to sequestering carbon for offsetting to meet our commitments than wide-scale planting across productive land. 

The report shows that in the same period, 47,000ha has been planted on farms under various schemes and there will be much more being done by individuals not picked up by the data.

B+LNZ estimates that this area planted on total farm conversions already will see a drop in 700,000 stock units, which also sees processing companies and supplying services affected.

This report highlights the pace and scale that is seeing whole farms suddenly change to forestry.

The Government, as a result of the inevitable fall in the polls from historic heights and pushback from many quarters at the pace of change, is showing healthy signs of listening and maybe considering more pragmatic ways of moving forward.

This independent report gives B+LNZ and others some factual proof about what is happening out there and helps build an argument to find solutions that help us meet our commitments without gutting the sheep and beef sector.

Let’s hope so.

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