They worry that a world market already oversupplied with softwood will face a glut of fibre from trees planted for the carbon credits.
They worry that New Zealand's ability to attract investment to process its burgeoning harvest of trees will be impaired by higher energy and transport costs compared with competitors such as Chile, Malaysia and Indonesia, none of which is undertaking any obligations under the Kyoto treaty.
And the owners of forests planted before 1990 face a double whammy. Not only are they ineligible for forest sink credits, but they will also need to acquire such credits to cover the carbon content of trees they harvest, unless they replant them.
"It's a bit like telling a Southland sheep farmer he has got to pay a tax if he converts to dairying," says Bruce Chapman, of Carter Holt Harvey.
"It's a very significant barrier to exit.
"A lot of the central North Island was planted at the time when the soils were 'bush sick'. That was before they discovered it was cobalt and selenium deficiency.
"There is no reason a lot of that land couldn't be converted to reasonably intensive beef or dairy country now and arguably make a better return on the land."
About 30 per cent of the national plantation forest estate is post-1990, "Kyoto" forest.
James Griffiths, chief executive of the Forest Industries Council, estimates that between 20 and 25 per cent of it is owned by corporates such as Carter Holt, Fletcher Forests, Ernslaw One and Rayonier.
Most of the rest is owned by forestry syndicates, with farm foresters accounting for a small slice.
Kyoto is a windfall for them, but the normal arguments about the distorting effects of subsidy apply.
Mr Chapman argues that because of the world oversupply of softwood, the subsidy is more likely to impoverish those who do not receive it than enrich those who do.
The price will fall to the point where the latter receive a normal rate of return, he says.
"Which means that existing foresters who are struggling to earn a normal rate of return already on an unsubsidised basis will potentially be forced out of business."
The Bonn conference last month that salvaged the Kyoto Protocol put a limit on how far countries can meet their obligations by planting forests in other countries.
But Mr Griffiths says the limit could still boost the international log supply by 10 times New Zealand's annual production.
"We see it taking place in countries which already have plantation technology, land, low environmental regulations and costs, and which can grow trees at least as quickly as we can."
Chile, for instance.
"The Chileans have developed a carbon bond - a financial instrument designed to capture [Kyoto] money to get their afforestation programme going again. We are talking about countries which are at least as sophisticated as we are when it comes to plantation forestry."
This is a longer-term effect, Mr Chapman says. "But in terms of making decisions today about whether it is worth replanting or about further investment in plants like Kinleith, it is significant."
In addition to the prospect of more competition and depressed prices in wood fibre markets, the protocol will make it harder to attract investment to New Zealand for processing the huge increase in the tree harvest due over the next few years.
In pulp and paper production, about a third of the ex-mill price represents energy costs, says Mr Griffiths. For building panels, especially medium-density fibreboard, it would be between a quarter and a third.
Then there is the energy required to get the product to market.
How much difference the protocol will make to energy prices is a highly moot point.
The United Nations Inter-governmental Panel on Climate Change estimates that an international price of "carbon" for the first commitment period, 2008 to 2012, will add 3c or 4c a litre to the price of petrol at the pump.
Because such modelling was done before the United States pulled out and before the agreement was watered down at Bonn, such an estimate may be on the high side.
But modelling of a carbon credits market that does not yet exist, which will cover at most half of the world's greenhouse gas emissions and which has to cope with such imponderables as economic growth rates and the take-up of new technologies, is uncertainty cubed.
"What we do know," says Mr Griffiths, "is that whatever the increase in energy and transport costs, they are increases that will not be faced by countries like Malaysia, Indonesia or Chile, competing with us for the international investment dollar."
By the protocol's first commitment period, New Zealand's gross emissions will be about 7 million tonnes a year of carbon dioxide, or the equivalent in other greenhouse gases, over its agreed cap. That would be covered three or four times over by the amount of carbon being taken up by its Kyoto forests.
Mr Griffiths says the Government has therefore assumed for years that New Zealand as a whole would be a winner from the protocol.
"That's an assumption the forestry industry has never shared."
The wood processing strategy being developed by a partnership of industry and Government is about at least doubling forest products exports, from $3.5 billion a year now, over the next 10 years.
The numbers involved dwarf any plausible national benefit form being a net seller into the carbon market.
But they depend on being able to attract investment in processing.
"Our analysis to date is that because of the Kyoto Protocol, the business case for investing here isn't improving and the case for investing elsewhere is," says Mr Griffiths.
"For years we have been asking ministers and officials, 'Where is the national cost-benefit analysis which underpins the position you are taking internationally?' "
The Government intends to negotiate greenhouse agreements with major industrial emitters.
Mr Griffiths says the industry is seeking recognition of the positive contribution it makes, both through the carbon cycle and as a result of business decisions.
"Since 1990 the forest industry has managed to reduce emissions by 3500 tonnes of carbon per annum, despite a 65 per cent increase in the annual harvest and a 45 per cent increase in processed product. Energy efficiency and a greater use of biofuels and recycled wood fibre have been responsible for this."
www.nzherald.co.nz/climate
Intergovernmental Panel on Climate Change (IPCC)
United Nations Environment Program
World Meteorological Organisation
Framework Convention on Climate Change
Executive summary: Climate change impacts on NZ
IPCC Summary: Climate Change 2001
