Newsletter - December 2006

The Latest Climate Change Policy Implications For You Are... None!

You may have heard various 'sound-bites' of news this week relating to land use and the government's climate change policy. You may have also heard angry comment from some forest owners who are upset about it.

Well, you need not worry. I have read most of the policy's 96 pages and can't find anything to worry about from the point of view of forest owners such as you. This is because it does not apply to forests planted on pastureland after 1989 and before next year.

The new policies apply to 'non-Kyoto forests' (1989 plantings and older) and future 'Kyoto forests' (farmland plantings) from 2008.

Briefly, there are two key policy proposals:

  1. Conversion of non-Kyoto forests (e.g. Central North Island, Balmoral & Eyrewell Forests) to pasture will incur a hefty carbon tax or be severely restricted.
  2. New planting of pastureland may qualify for either an initial grant, or carbon credits which can be sold.

That second proposal is progress indeed and may encourage some new forest investment. Until the government had sets its face against any devolution of carbon credits to growers.

The unhappy people are those who planted from 1990 to 2006 expecting carbon credits (e.g. Roger Dickie) and those who have old forests on easy country they want to convert to rye grass.

Other (unrelated) good news is that log prices have been rising strongly this year due to rapidly increasing demand from Asia, particularly China. So even with our high dollar and still high shipping costs, harvest returns are now rising nicely. That also should encourage new planting.

So I wish you a carbon neutral Christmas and a carbon negative New Year!

Regards
Charles Etherington

Warren Forestry Ltd, New Zealand forestry investment provider
Warren Forestry Ltd, New Zealand forestry investment providerWarren Forestry Ltd, New Zealand forestry investment providerWarren Forestry Ltd, New Zealand forestry investment provider