Carbon offsetting forestry is encroaching on pastoral land, or pricing it out of the reach of young farmers. Photo / Bevan Conley
Investors are increasingly buying land to plant forests for carbon offsets in a move that puts New Zealand’s pastoral farming sector and significant export earnings at risk. It’s a trend that could have devastating consequences for rural jobs and the communities who depend on them.
Beef+Lamb New Zealand CEO Sam McIvor says in 2021, 63,000ha of land was purchased for large scale carbon offset forestry and taken out of pastoral production. Over the past five years some 200,000ha of land previously used for sheep and beef farming has been converted to forestry. Because as many as 40 per cent of the buyers are from overseas, there are more land sales in the pipeline awaiting approval from the Overseas Investment Office (OIO).
McIvor fears the Government’s recently announced goal of moving to 100 per cent renewable electricity by 2030 could accelerate the rate at which pastoral land is converted to forestry.
“At the moment, the way that the Emissions Trading Scheme is working, it does not motivate gross reductions in carbon. Instead, it motivates offsetting. Carbon emitters can offset 100 per cent of their emissions and the price is okay, because so much tree planting is happening.”
New Zealand is unusual in that, unlike most other countries, it allows 100 per cent offsetting.
McIvor says the impact of land sales is showing up in livestock numbers.
Statistics New Zealand’s 2022 Ag Census data showed the national sheep flock was 25.3 million in June 2022. That’s a drop of 400,000 from the previous year or around 2 per cent of the total. He expects flock numbers to fall further as more land is taken out of production.
The problem is not restricted to pastoral farming. Mānuka honey-producing land is also being converted to carbon-offset forestry.
Beef+Lamb New Zealand commissioned Orme & Associates, a consulting firm, to produce a report so the organisation could better understand the implications of land sales. McIvor says: “We now have 200,000ha of farmland sold to be converted from sheep or beef production. We estimate that this will be equal to losing $337 million a year in export receipts and over a 15-year period that would be $5.05 billion in lost export revenue.”
This has a huge flow-on effect on rural jobs. Beef+Lamb New Zealand says over 30 years 100ha of land used for red meat production equates to the equivalent of around 52 full-time roles. This drops to 17 if forested land is harvested and just seven jobs when the land is used for carbon offsets. If 20,000ha is taken out of red meat production and converted to carbon offset forestry, it means close to 9000 fewer jobs.
To put this in context, there are areas like Wairoa where the local community and economy revolves around a meat processing plant. as forestry continues to displace pastoral farming, the amount of stock moving through the plant will drop below a critical number. At that point, the plant closes and so do all the associated support services.
This underlines the complex economic problem with converting productive pastoral land to carbon offset forest.
Another aspect is tourism. Planting hundreds of thousands of hectares of Radiata pine will change New Zealand’s landscape. It sits at the heart of what our tourism offers overseas visitors. Tourism is another important source of export earnings that could suffer from a surfeit of carbon offset forestry.
There’s a specific case when it comes to Māori landowners.
In many cases when land was returned to Māori it was in poor condition. McIvor says Māori farmers are capital-constrained. “Banks can’t take security over their land because it can never be sold. That means developing the land is challenging. For them, offsetting can be very attractive. It means their land can start to earn revenue.”
Some Māori are interested in carbon forests that eventually convert to native forests.
The idea is to start by planting an exotic forest, then after 50 years or so the pine trees start to fall over. They are selectively harvested while native trees that grow underneath can emerge.
For older farmers looking forward to retirement, the prospect of selling a farm that may not have been hugely profitable over the years for a premium price to carbon offset investors will be attractive.
There are some who may consider a partial sale to invest the proceeds in the more productive parts of the farm.
Yet the flip side of this equation is that it prices pastoral farming out of reach for younger farmers looking to enter the sector. They can’t compete.
Carbon offset forestry is not the first competitor for land red meat producers have faced. Decades ago, many pastoral farms were converted to dairy. McIvor says the difference is that decisions to convert to dairy were driven by clear market signals. The land could be used more profitably, but it continued to produce food. “This is an important distinction at a time when we are talking about domestic food security and the world faces international food production challenges.”
Land Use Capability is a way New Zealand’s land is classified. The best land is LUC class one.
Marginal land barely capable of producing anything is rated eight. In many cases, there are covenants and other restrictions that mean that class eight land can’t be converted to forestry. Classes one to four are suitable for arable farming: classes from one through to seven are suitable for both pastoral farming and forestry.
Investors are now buying land classes five and six for carbon offset projects. That concerns McIvor who explains it is the “heart of our breeding country” for lamb production.
“There are breeders who sit on hill country and while they finish lambs for themselves, they also are the nursery for all the lambs and the beef cattle that other farmers then finish and supply to the world.
“When you take that land out of the equation, you face a problem. Our farmers are world-class, there is demand for their product, but using that land for forestry has a knock-on effect right through the sector.”
McIvor acknowledges that offsetting is a useful tool when it comes to managing carbon. There are farms where trees are integrated with livestock.
“Production forestry, in combination with carbon forestry, can often be integrated into sheep and beef farms without loss of food production.”
He says offsetting is something that should be used, “but it adds no economic value. A carbon offset farm is essentially a spray, plant and walkaway business.”
In comparison commercial forestry is an important export industry that creates jobs and wealth.
We could be missing an opportunity with the current approach. McIvor says there are many pastoral farmers, especially those on hill country farms, who have class seven and eight land. “They could plant trees on maybe 5 or 10 per cent of the farm. They could get carbon revenue, while, at the same time, maintaining food production. There is a sweet spot to be found here.”
Beef+Lamb New Zealand is preparing a submission on the proposed ETS changes which proposes the Government works with the agricultural sector to set and implement limits on the amount of carbon offsetting and the amount of land taken out of production.
OPINION: Tensions are likely to become more evident next year.