Key facts
- New Zealand's emissions trading scheme allows forest owners to earn carbon credits for growing trees.
- The scheme has made forestry a more lucrative investment than livestock farming for some landowners.
- About 3,300 square kilometers of sheep and beef farmland have been converted to forestry since 2017.
- Grazing land prices have increased by 9.7% due to demand for carbon credits.
- Rural communities are experiencing fewer young families, leading to the closure of local amenities like rugby clubs and daycares.
- The forestry sector generates about NZ$6.5 billion (US$3.7 billion) in annual export earnings.
New Zealand's ambitious emissions trading scheme (ETS) has turned forestry into a lucrative investment, leading to a significant conversion of sheep and beef farmland into pine plantations. This shift, while helping the country earn carbon credits, is straining rural communities and impacting traditional farming practices.
Under the ETS, landowners can earn credits for trees planted after 1989 as they grow, which can be sold to companies needing to offset emissions. This income stream often surpasses that from livestock farming, prompting landowners to sell their grazing land. Since 2017, approximately 3,300 square kilometers of sheep and beef farmland have been converted to forestry, according to Beef + Lamb New Zealand. This has led to a 9.7% rise in grazing land prices, while dairy land has seen a smaller 3.7% increase.
Foreign investors have also acquired substantial farmland for forestry, with Ingka Investments, the investment arm of IKEA, owning 430 square kilometers. While Ingka states its primary interest is timber, the broader trend is driven by carbon credit revenue.
Supporters of the ETS, like Climate Change Minister Simon Watts, view it as a cost-effective method for emissions reduction. The Climate Change Commission anticipates ETS forests will contribute significantly to New Zealand's climate targets. However, critics argue the scheme encourages offsets rather than direct emissions cuts, allowing polluters to buy credits instead of investing in cleaner technologies.
The impact on rural communities is profound. Farmers report issues with invasive species and encroaching trees affecting infrastructure. The conversion of farms has led to fewer jobs for shearers, truck drivers, and rural contractors. In areas like Pongaroa, the decline in farming has contributed to the closure of local amenities, including a rugby club and a daycare, and a decrease in population as young families leave.