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New Zealand has a unique greenhouse gas emissions profile in that nearly 50% of its emissions are from the digestive systems of farmed animals, mainly in the form of methane with some nitrous oxide.  While there is a considerable research effort being undertaken currently to look at means of reducing the methane emissions, a solution is probably a long way off and may be uneconomic.  In the meantime, mitigation is the only way to counter these emissions and that is where trees play a major part.

The science of carbon sequestration goes back to basic plant biology and the process of photosynthesis whereby plants take in carbon dioxide during the daylight hours and emit oxygen and do the opposite in the hours of darkness. (Ever wondered why flowers are (or used to be) taken out hospital bedrooms at night, especially when a patient has breathing difficulties?)

During the growing phase of any plant, it retains more CO₂ than it emits, hence its ability to grow, by retaining the carbon.  Each kilogram of carbon requires the uptake of 3.67kg of CO₂ (this is a simple atomic weight calculation). 

As trees are the largest plants on the planet, they are are important part of carbon sequestration.  That is why they needed to be taken into account in the global "carbon stock-take" as at 1 January 1990.  It is also why there needed to be a disincentive for deforestation. However the problem is that the "emerging economies" such as Brazil, Indonesian, China, the whole of Africa and India had no obligations under Kyoto. [The world's largest GHG direct emitter, the USA, has never ratified Kyoto.  China argues that much of its emissions are in fact USA emissions by proxy - not an argument that is easy to dispute.]

In the NZ climate change legislation enacted in September 2008, there was a distinction between land on which trees capable of growing to a height of 5m with at least 30% crown cover existed on 1 January 1990 (pre-1990 forested land) and other land.  The later is capable of being designated post-1989 forested land or as Kyoto Forests (obviously only if it is planted with compliant trees).

Opportunities?

There is a theoretical opportunity to benefit from planting trees to sell carbon credits during the growing phase in the first instance and then harvesting those trees.  The problem with this is that if sequestered carbon is sold, the commitment is to retain that sequestered carbon (or an equivalent) "for ever". In anyone's language, that is a very long time! 

At any time in the future, if the trees  die because of disease, are destroyed in a weather related event or by fire or are harvested, there is deemed emissions.  To the extent that the related carbon has been sold, these emissions must be covered by either the purchase or surrender of carbon credits. If the price of these credits reached $100, for example, the liability (or opportunity cost) could be around $80,000 per hectare. If the risks were insured, the premium may be up to 0.75% (of the value however insurance is unavailable for pests or disease related losses).  This could equate to insurance premiums alone of $600 per hectare per year well after there is any meaningful sequestration revenue.  This is clearly unaffordable.

In conclusion, no-one other than a major corporate or the Crown can afford the risk of establishing any large area of new forests and entering into carbon trading.  The current economics of forestry without the potential of carbon sales makes no economic sense.

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