Planting for the planet – The case for carbon forests

As the Climate Change Response (Emissions Trading Scheme – Forestry Conversion) Amendment Bill moves through Parliament, opposition to carbon forestry is reaching a crescendo. It is timely to take stock of why carbon forests exist and the broader benefits they provide.

Carbon forestry refers to planting trees to sequester carbon dioxide from the atmosphere as a public-good service, with an end-goal of slowing climate change. Carbon sequestered by forests plays an important role in helping New Zealand to meet its international obligations under the Paris Agreement. It can also be sold through the Emissions Trading Scheme (ETS), which functions as a market-based mechanism to reduce emissions by pricing carbon.

Most carbon forests use exotic tree species, particularly Pinus Radiata due to its superior growth rate and capacity to store more carbon in a shorter time frame than most other species, especially natives. This is about creating a tool in the climate response toolkit that works quickly and efficiently.

Many carbon forests are dual purpose

Importantly, growing trees for carbon sequestration and growing trees for timber production are not mutually exclusive as commonly believed. While there is limited hard data, anecdotal evidence suggests much of the recent planting is for bothcarbon income and eventual harvest. That dual purpose is both practical and strategic. The carbon market is a policy construct vulnerable to political whim. Production forestry on the other hand, is a long-term commodity investment. Relying solely on carbon revenue would be risky.  Instead, the income offered through carbon provides critical, early cashflow for tending of a forest to maximise harvest value and support management activities.

In other words, for many foresters carbon income is not the cake, it’s the icing.

Establishment of new carbon forests is rapidly slowing

There has been a marked increase in carbon forestry since 2018. Whole-farm conversions have accounted for most of the expansion, with significant involvement of corporates and overseas investment. This has caused a degree of angst in the rural sector – although it needs to be noted that the total area of exotic forest is not that much greater now than way back in 2002.

If we look at the figures from the latest Orme and Associates report, by 2024 whole-farm conversions had decreased by over 50 percent from peak conversion in 2022, and are continuing to trend down in 2025. Conversions are now at the lowest rate we’ve seen in six years.

Farmers have had a lobbying win

The Bill currently before Parliament is a lobbying win for farmers. It proposes to restrict what land can be registered in the ETS. Landowners would be permitted to plant up to 25 percent of their Land Use Class 1 – 6 land in forest for ETS purposes. Whole-farm conversions would face a complete moratorium on Class 1 – 5 land (i.e., cropping and better-quality pastoral land) and a hard cap of 15,000 ha per year of new planting on Class 6 land (good-to-average pastoral land), with some serious issues around how this quota would be allocated. Class 7 and 8 land – poorer quality pastoral land and steeper “tiger country” respectively – remain unrestricted.

Even so, some farming groups are still not satisfied. They want the moratorium extended to include Class 6 land as well. This would effectively push any future expansion of corporate forestry that wishes to register in the ETS onto Class 7 – land which is marginal even for production forestry. Such a move severely constrains the viability, let alone expansion, of a sector that has grown to become New Zealand’s fifth largest export earner. Needless to say, the corporate side of town is not happy.

Gross versus net emissions debate

There is a broader philosophical debate here. Should we focus on reducing gross emissions – cutting what we put into the atmosphere? Or on net emissions, which factors in removals via carbon sinks like forests?

Some environmental voices insist on a primary focus on gross reductions, especially from fossil fuels. In the short-term this ignores political and economic reality. Changing consumption patterns in free-market economies built on fossil fuels is a slow process. It is increasingly recognised that removals will be an inescapable part of the equation if we are to meet our targets, especially in the short-to-medium term.

And in terms of impact on global warming, the source of the reduction doesn’t matter. A tonne of carbon is a tonne of carbon – regardless of whether it comes from lowered emissions or increased sequestration.

Nature-based removals include methods such as afforestation and reforestation, wetland and peatland preservation, adoption of farming methods that increase soil carbon, and protecting coastal ecosystems that trap carbon in underwater biomass.

Of these, forestry is a proven, cost-effective and immediately scalable option. We can plant a forest today and it will begin sequestering carbon from the atmosphere tomorrow.

There is also the prospect of engineered removals, such as direct air capture and underground storage of carbon dioxide – but these techniques are still in the early stages of development, and likely to be expensive.

New Zealand has a competitive advantage

We have a natural competitive advantage in carbon forestry. Our hill country, much of it lower-productivity farmland, is well-suited to trees. Forestry is generally more profitable than sheep and beef on this country. And many of these landscapes were once forested and would benefit environmentally from reforestation. We also have fast-growing exotics like Pinus radiata and a well-developed forestry sector.

Forestry is a “get-out-of-jail-free” card in our climate change mitigation deck – something other countries can only dream of.

Natives, preferred by many, are much slower growing and far more expensive to establish. Having evolved without any browsing pressure, they tend to be more susceptible to pest damage too, particularly from possums and deer. Exotics not only offer a rapid and proven solution – under the right conditions they have the potential to act as a nurse crop for native regeneration.

Time value of carbon

Given the urgency of the global warming issue, the value to society of carbon removed from (or not released into) the atmosphere today is much greater than carbon removed or not released at some time in the future.

Possible future actions always carry a degree of uncertainty. More importantly, global warming is accelerating as feedback loops kick in. Less heat reflected back into space as Arctic sea ice melts, release of greenhouse gases into the atmosphere as permafrost thaws, and reduced ability of warming oceans to absorb carbon dioxide all add to the urgency.

Carbon emissions and removals can and perhaps should be assessed in the same way that we account for the time value of money when appraising the financial merits of an investment.

Applying a time value to carbon would positively weight the benefit of near-term actions. Forestry would come out a winner. Not only is it highly cost-effective, it also delivers real, bankable reductions when we need them most.

Carbon forestry, foreign exchange and food security

To the critics that argue carbon forestry threatens export earnings – it is equally likely to have the opposite impact. Remember, that on top of carbon income, a reasonable proportion of carbon forest will be harvested and exported as logs and lumber. Or be used as biofuel, substituting for imported fossil fuels. This switch is already starting to happen in the likes of Fonterra’s processing plants.

Moreover, if New Zealand fails to meet its international commitments, we will need to buy carbon credits offshore, spending foreign exchange in the process. Backing out of these commitments would come at a serious cost given that recent trade agreements with the EU and UK directly link climate compliance to market access.  Longer-term, should we develop a carbon surplus at national level, we can sell this on the international market.

The argument that carbon forestry threatens food security, going against the general intent of the Paris Agreement, is also commonly cited. Yes, increased forest planting displaces food production. But this is almost entirely high-value red meat production that is sold into affluent, food secure and well-nourished (even over-nourished) markets.  In reality, the marginal impact of carbon forestry is unlikely to make any difference to food security, nationally or internationally.

The focus of the debate needs to shift

Carbon forestry should be viewed more as an opportunity than a threat – an economically rational addition to our land-use story that comes with co-benefits for climate, biodiversity and soil conservation. It is a legitimate land-use, and it is entirely appropriate that forest owners should be rewarded financially for these benefits.

Changing land use is an integral part of a functioning market economy. In New Zealand, land use has been evolving for well over a century. In my own small hill country farming community, we have seen sawmills, a small seeds industry and smallholder dairying come and go over the past 125 years. Properties have been progressively amalgamated into larger economic units. The rural labour force has declined dramatically as capital has substituted for labour. The local store has closed, our local primary school is no more and the church has been deconsecrated. Times change.

Rightly or wrongly, the proposed legislation tilts the playing field in farmers’ favour at the expense of corporate forestry. It leaves the door wide open for farmers to participate in the ETS; and to establish on-farm forestry sinks that can help meet the carbon-neutral demands of our dairy and meat export trade, or to provide insurance for the day they are held to account for on-farm emissions.

Hopefully this will create some clear air for more rational discussion on the merits and practicalities of carbon forestry as a climate change mitigation tool, and its role in the ETS.

The debate needs to focus less on whether carbon forestry is good or bad and more on how we reward those who deliver the environmental services it provides and how to manage adverse impacts.

One thing is clear: we need carbon forestry and we need to get the settings right.

Richard Holloway is an agricultural economist and farm-forester with 280ha of mixed species production forest registered in the ETS.

Richard Holloway is Chaired August’s Carbon Forestry 2025 event.