The Vivid Economics report ‘Net Zero by 2050‘ lays bare the reality that New Zealand (NZ) can be a world leader in reducing net CO2 emissions in line with the goals of the Paris Agreement.
The report also makes clear that if NZ is to step up to the Net Zero challenge it will require a suite of actions targeting all sectors of our economy, but in particular, massive changes in agriculture and afforestation.
The report also highlights the necessity of a higher and steadily increasing price on carbon, toward as a minimum, $100 per tonne of CO2 by 2050, and ending the 100% tax-payer subsidies on emissions from livestock farming which currently account for almost half of NZ’s emissions.
The final analysis all depends on major land use change; agriculture shifting from emission-intensive livestock farming toward more energy efficient horticulture and cropping and the reduction of livestock numbers. The Vivid report’s Net Zero by 2050 scenario, although yet to be explored in depth, also indicates the need for 2.3 million hectares of farmland to be converted to carbon sequestering forests.
How a land use transformation of this scale could be handled is the question. It would be enormously disruptive to the rural sector requiring about a third of all sheep and beef farms to be sold and converted to forest. It could greatly increase potential for foreign land ownership, and replace vast areas of rural pastoral landscape with pine monocultures, with attendant biosecurity and rural fire risks. There could also be adverse effects for tourism, our largest foreign exchange earner.
Conversely, in my opinion, the required land use changes could be managed so as to deliver considerable economic, environmental and social co-benefits for the country as a whole and for the rural sector in particular.
The first step to minimising disruptive effects is to achieve the necessary quantum of sequestration with a much-reduced area of land. This is indeed possible. The Vivid 2.3 million hectare afforestation scenario assumes 1.6 million hectares of short rotation plantations (50% radiata, 40% Douglas-fir, and 10% eucalypts), and 0.7 million hectares of native forest regeneration. It is a very underpowered model, applying ‘business as usual’ timber forest regimes, and natural regeneration regimes. The plantations modelled by Vivid are timber forest ‘grow and mow’ regimes. The sequestration capacity or carbon density of these regimes is very low, about 350 tonnes CO2 per hectare, equivalent to the biomass of an adolescent 15-year-old forest in the case of radiata.
If one is serious about maximising carbon capture in biomass of forests you do not assume cutting them down when they are young, you allow them to grow long term to maturity. The difference is huge as the figure below depicts: long-lived planted forests can sequester more than three times as much carbon per hectare in 50 years as timber plantations under short rotation timber harvest regimes, i.e. the averaging approach. On this basis, if long rotation and high carbon density forest regimes were used only about half the land area would be required to sequester the same amount of carbon by 2050.
The Vivid Report assumptions about using 0.75 million hectares of native forest regeneration to sequester carbon are misguided. Native regeneration is slow growing and an expensive and biologically inefficient way to sequester carbon. The rate of sequestration is critical to the urgent task of arresting GHG emissions. Sequestration rates of natives during the first decades of growth are typically only 10 to 20 percent of the sequestration rates of fast growing introduced species. Furthermore, if natives are planted to ‘kick start’ their growth the costs of establishment are typically 5 times higher per hectare than for introduced trees. Not surprisingly the cost of sequestering a tonne of carbon with natives may be 10-20 times higher than with fast growing introduced tree species. It makes zero economic sense to sequester carbon at $200/tonne CO2 when it can be sequestered at $20/tonne. Therefore one must question the wisdom of assuming landowners might use 750,000 hectares of native regeneration for carbon sequestration.
Another weakness in the Vivid Report’s afforestation modelling is the assumption that 500,000 hectares of Douglas-fir might be planted in the South Island. The reality is it is not possible to obtain RMA consent for Douglas fir plantings where it grows well, in the moist hill and high country, because of wilding tree and landscape issues, and the opposition of environmental NGO’s, Regional Councils, and Department of Conservation (DoC).
The good news is the sequestration level required for Net Zero by 2050 can be achieved by afforesting half the land area scoped by Vivid, providing they are established with fast growing introduced species grown as long-lived or permanent forests.
The other good news is the land area required for high carbon density forests, about 1 million hectares, corresponds with New Zealand’s most problematic farmland, land prone to severe erosion. In other words, the land types in greatest need of planting occur within our sheep and beef hill country farms, and if established in forest can serve to build resilience, sustainability, and higher profitability into farming enterprises.
The economics of growing forests primarily for the purpose of carbon sequestration is not widely understood. Suffice to say growing forests for carbon sequestration could become highly profitable for landowners, providing they utilise low-value land types within their properties, and carbon pricing approximates Treasury’s modelling with pricing steadily increasing to $50/tonne by 2030, and then, as modelled by Vivid, increasing ) out to $100/tonne by 2050.
Commitment by Government to regulate an increasing ETS price of carbon within a narrow bandwidth (floor and cap) is essential to provide investor confidence. There cannot be repeats of unregulated booms and busts. The Vivid Report rightly recommends an independent Climate Commission, which could take responsibility for regulating the pricing bandwidth for carbon.
High cost of land is a major hurdle which could stop outside investment. Assuming a steady and gradually increasing price on carbon the most profitable place to target carbon forestry investments is marginal, environmentally problematic and least economic land types within farms.
Farmers, unlike outside buyers, have an opportunity to value land within their properties on the basis of the contribution of each hectare of land to their farms’ overall profitability. For example, the average land value of a sheep and beef farm may be $5000 per hectare, but the better land may carry double the average stocking, and the poorest and most problematic land, half the average stocking. In this context, it could be reasonable to assign a land value for marginal land at a value around 50% of the average for the whole farm.
Farmers, therefore, have the first opportunity to the ‘low hanging fruit’ of high investment returns on their marginal or environmentally problematic land.
With a sufficient price on carbon, there is an opportunity to integrate carbon forestry into the weft and weave of our rural landscapes, making farming enterprises more resilient and more profitable, rather than seeing the sale of farms and their conversion from boundary to boundary to plantations, as has been the pattern in the past. This is not a criticism of plantation forestry, which in many respects is a very good land use both environmentally and economically. It is more a question of “what where?”, and “when is enough, enough?”. Currently, timber plantations cover almost 12.5% of NZ’s productive land, and the Vivid Report scenario envisaging conversion of 1.6 million hectares of farmland to timber plantations would raise plantation cover toward one-quarter of our productive land bank.
The Vivid Report is high level and only provides a starting point from which to strategize and progress. The challenge lies in the detail of finding routes forward that are economically and environmentally and politically acceptable.