Article One: Native forestry - The On-Farm Carbon Opportunity

Do you have native trees naturally regenerating on your property? You might have an excellent opportunity to regenerate indigenous forests, sequester carbon over a long period and generate additional lucrative annual cashflow.

The AgriBusiness Group is running a three-part article series on carbon farming in New Zealand to educate hill country farmers about the carbon farming opportunities that enable them to unlock the full economic and environmental potential of their farm systems. Through our research as farm consultants, we have recognised the underlying opportunity that carbon forestry presents to substantially support the modern-day farm system. Farmers undertaking or allowing forestry restoration, regeneration or new application are in an excellent position to capitalise on the economic, environmental, and ecological values carbon farming brings. 

In this series we cover three fundamental forestry types: exotic hardwoods, radiata pine and indigenous natives which are discussed in this article, specifically how to identify which natives are eligible, our assessment process, and a case study example.  

Indigenous native forest

Establishing new native forests on larger scales can be a difficult task due to the typically diminishing return on investment and lengthy process. They’re highly susceptible to death and/or poor growth that, due to the wide range of obnoxious exotic weeds and feral animals, they have to compete with. However, when a natural seed source from native forest species that have a competitive advantage is present, regenerating native forest land provides perhaps the greatest opportunity for the New Zealand carbon farmer. We encourage the planting of new native areas, particularly around areas of ecologial significance, such as waterways, but we must take advantage of existing native seed stocks and develop these areas to accelerate the growth of the future native forest areas.

Regenerating Indigenous Native Forests

Key Points:

• Slow sequestration rate (50-year carbon period as of current) in comparison to exotic species 

• 1 year cash payback period (no capital investment) 

• Lucrative annual cashflow 

• High environmental, ecological and biodiversity values 

Determining Eligible Native Forest Land 

Figure 1: MPI’s ‘forest land definition’

Native forest land on your property will be eligible to enter the ETS if meets MPI’s ‘forest land definition’ as per Figure 1. 

MPI’s ‘forest land definition’ states that forests must reach:

• At least 1ha in area 

• At least 30m average width 

• Have species that can grow 5m high 

• Potential to reach 30% canopy cover 

• Meets the above as of 1st Jan 1990 or after 

An important factor is that all forest areas are only eligible if they meet MPI’s ‘forest land defintion’ post-1989. Forests that meet this defintion pre-1990 are not elgibile, therefore we are only assessing forests that exist as of 1st Jan 1990.  

The images above illustrate native regenerating areas that are post-1989 forest land. If you have similar looking regenerating areas on farm, then you’re likely to have an excellent carbon farming opportunity present.

A natural seed source must be present with conditions that favour native growth over competing exotics. Certain species, such as manuka and kanuka, are more aggressive dispersers. Any native species can be included for this assessment that have the potential to reach 5m in height.

When entering the Emissions Trading Scheme (ETS), it is important to understand that once you are entered, you must maintain that definition. It is crucial you have an annual management plan for your native or regenerating native forest land in place is crucial (e.g. pest control and livestock management).

Another important factor to note is that carbon income is mandatorily claimed every 5 years during the mandatory emissions return period. The current period started in 2018 and finishes in 2022. During this period, farmers can claim carbon annually if they wish, but they may also wait until the 5th year to claim (for which it is compulsory). As carbon price is set by the market (a bit like share trading) it is up to the farmer how they wish to trade carbon over that 5-year period. This highlights the importance for farmers entering the ETS as of 2021, as carbon can be claimed back to 2018 for the likes of native regenerating forests, however, once 2022 passes, that carbon income will be lost.

Our assessment process

The biggest challenge for farmers is assessing the forest land areas in terms of the ‘forest land definition’ and prove a case with MPI, which is where we come into play. We ground truth forest areas with support from cutting edge drone technology and forestry modelling spatial intelligence. We can use this data to identify, track and monitor ‘forest land definition’ efficiently and accurately.

Our assessment includes: 

• Identifying pre-1990 areas 

• Gathering farm data and model forest areas (age, species, survival) 

• Completing post-1989 mapping assessment  

• Identifying carbon farming opportunities (economic and environmental) 

• Registering with MPI 

• Managing forest land area for 50-year survival period 

Case study example

Location: Banks Peninsula, Canterbury
Area: 250ha
Stock: 1,105 stock units (sheep)
Land Use: Extensive farm system of sheep and native reverting bush

Carbon farming assessment summary 

• Total forest area: 140ha 

• Pre-1990 forest land: 57ha 

• Post-1989 forest land: 83ha 

Our assessment showed that the land area had 83ha of forest land that had regenerated since the year 1990, with a forest age of approximately 30 years. Forest species were predominantly kanuka, manuka, and mixed podocarps.  

Figure 2: Annual cashflow of the current sheep farming operation and carbon farming over the forest’s life of 50 years (starting age at 1990).

Figure 3: Cumulative cash flow of the sheep farming operation and carbon farming over the forest’s life (50 years).

Economic Analysis (current carbon price $39/tonne/NZU) 
Combined sheep and carbon farming 

• Over 20 years (2021-2040), $3,835/ha cashflow generated 

• Average of $192/ha/yr 

Without carbon farming 

• $1,793/ha cashflow generated over 20 years 

• Average of $90/ha/yr 

Net benefit of carbon farming 

• +$2,042/ha over 20 years ($510,500 over total farm area) cashflow generated 

• Average of +$102/ha/yr 

• Average of +$25,500/yr 

Carbon Footprint Analysis

Table 1: Carbon Footprint Analysis (based on these carbon farming calculations)

Any comments or questions? Leave them in the comment box below or contact Sam directly. If you are considering integrating native forests into your farm system and would like more information check out this page and get in contact with Sam via email or phone.

Article written by Sam Mander