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Opportunities for regenerative forestry in the Emissions Trading Scheme (ETS)

Updated: Apr 21, 2023

New Zealand’s emissions trading scheme (ETS) has been referred to by Dame Anne Salmond as ‘a spreadsheet designed in a silo’. There is an ever-growing sentiment that the scheme provides far too much incentive for planting plantations of pine trees, while not providing enough incentive for native forest planting.

Despite these challenges, it’s important to maintain perspective. The ETS may not be the only tool we need to solve climate change, or to encourage more native forest planting, but it is a hugely positive step in the right direction. Because when you put a price on carbon, emissions go down. And without a drastic reduction in emissions to slow down climate change, we stand to lose everything.

What’s wrong with pine trees?

Pinus Radiata (the main pine species used in forestry) is cheap to plant, extremely fast-growing and exceptionally good at sucking up carbon dioxide. If we have any chance of reaching net-zero emissions by 2050, it will likely be because pine trees help us get there, offsetting emissions in other areas. At the same time, many are concerned about the amount of land being switched from farming to forestry, the problem of wilding pines spreading across the landscape, and the debris left behind when pine forests are chopped down.

Native forests, on the other hand, provide far more biodiversity than pine forests but can be expensive to establish and don’t grow anywhere near as quickly as exotic trees like Pine, Eucalyptus and Redwoods. Because of that, they draw down far less CO2 than exotic tree species.

Simulated growth rates for planting densities of 800 trees per hectare. Exotic profiles originate from an article provided by Farm Forestry NZ. Native profiles were calculated using Tane’s Tree Trust carbon calculator with (i) 3200 stems / 25% trees, and (ii) 800 stems / 100% trees.

Over the long term, native forests are ideal. But the climate crisis is happening now, and we need urgent emissions reductions to have any chance of reaching net-zero by 2050.

One of the issues we see with the current public dialogue is that it largely presents only two choices. Pine plantations vs entirely native forests. In reality, there are other options.

Look a little deeper…

Even in its current form, the ETS presents huge opportunities beyond radiata pine plantations. Solutions that draw down large amounts of carbon, while also increasing biodiversity and environmental resilience.

In this article, we explain one such approach our research has uncovered. It all starts with the ETS entry criteria:

Requirements to register your land in the ETS.

To enter your land (or part of it) into the Emissions Trading Scheme and earn carbon credits, your parcel of trees needs to fit the following criteria:

  • At least 1 hectare in size (= 10,000 sqm or 2.5 acres)

  • Be planted with trees that are capable of growing to 5m or more

  • Wasn’t already forest land on Dec 31st 1989

  • Has an average width of 30 metres

  • Be planted with trees able to achieve 30% canopy cover

Take special notice of that last bullet point. It’s the key to this article.

Please note: This is an abbreviated description of the criteria. Visit the MPI website for more detail.

A closer look at 30% canopy cover

When most people think of forests that earn carbon credits, they think of a landscape covered in pine trees. But it appears that is not how the ETS was designed. Sure, the blanket approach of fast-growing pines on massive blocks of land (over 100 ha) might allow you to maximise carbon income, but there are other options: Strategies that allow you to earn carbon credits, while concurrently adopting other initiatives within the same block of land. Approaches that are potentially possible under the 30% canopy cover rule include silviculture, agroforestry, mixed species forestry, native regeneration and more.

What does this look like in practice?

Imagine rolling landscapes occasionally punctuated by majestic tall carbon-storing trees.

As an example, mature Redwood trees (used in the graphic above) can grow to have a crown diameter of 17-18 metres. If we scale that back and use 10 metres for this exercise, then to have the potential to achieve 30% canopy cover would require only 38 trees per hectare. That’s one tree every 263 square metres.

Not all trees survive or thrive, so if we assume we need to plant 100 trees per hectare to be safe, then that’s one tree every 100 sqm. That still leaves a lot of room for other activities.

One tree every 100 sqm doesn’t block the sun, so the grass (or whatever else you plant) will still be growing below these monarch trees. You could plant crops like quinoa or buckwheat, establish an orchard, or graze animals (once the trees are established). If you wanted to graze animals right from the start it may be possible to smartly arrange your tree seedlings and use temporary electric fencing to protect them until they get established (2-3 years).

Another approach would be to follow this sparse planting strategy and let the rest of the land revert to native bush. You could speed this process up by planting long-lived, carbon-storing natives like Totara in between your Redwoods.

How much of a difference could this approach make?

As a nation, we use 41% of our landmass to farm animals. That’s 11 million hectares. If we planted one additional tree on that land every 100 sqm, then we could add 1.1 billion trees. Enough to soak up millions of tons of CO2 every year.

Why not just plant natives?

One shortcoming (or strength) of the ETS, depending on how you look at it, is that if your land is under 100 hectares then you must follow their standard growth tables to estimate your carbon returns. This means it doesn’t matter how fast or slow your trees grow, you simply earn a set amount of NZU (NZ units = carbon credits) determined by whichever species is dominant in your ‘forest’.

For example, if you plant more Redwoods than anything else, and they are capable of achieving 30% canopy cover, then you earn the standard return outlined in the ‘Exotic Softwood’ category.

If you plant Eucalypt trees, then you earn the standard return under the Exotic Hardwood category, which, notably, provides a better return than planting pine trees for the first 17 years, although the income stops after 35 years.

Sadly, the standard returns for planting native trees are comparatively very low. This is likely because the growth rates prescribed may be based on naturally regenerating native bush, a process that takes a long time!

Thankfully, the ETS provides a solid workaround here, where you can earn credits from relatively fast-growing, long-lived, non-invasive species like Redwoods, while fostering your own native regeneration.

An ode to Redwoods

If you haven’t heard much about Redwoods before (except that they grow in California) then a quick segue is in order.

It turns out Coast Redwoods (Sequoia Sempervirens) grow exceptionally well in certain parts of New Zealand. Our mild, temperate climate with regular rainfall mimics their native northern West-coast USA habitat. They can live for thousands of years, are the tallest trees on earth, growing up to 110 - 120 metres tall, and once they get going, they draw down more carbon than any other tree on earth. They are also fire-resistant, and beautiful to look at.

Redwoods are nature’s very best carbon removal invention. Far better than any tech-based strategy humans have come up with to date.

On top of that, they are a non-invasive species, so they don’t come with many of the inherent problems of pine trees. And since they are long-lived, we can leave them growing for thousands of years without cutting them down, so there is less need to worry about slash and debris filling up our rivers and coastlines, which has been a massive problem with clearfell radiata pine forestry.

There is a growing Redwood industry in NZ with a number of nurseries providing seedlings for landowners. The most notable of them is the NZ Redwood company which can provide seedlings at scale, along with expert advice on planting, site selection, silviculture opportunities and forest management.

Is my land suitable for Redwoods?

Redwood is a fast-growing giant softwood, native to California and extensively planted in New Zealand. It prefers moist, deep soils and will tolerate some frosts. It coppices (regrows from its stump), and develops an extensive root system making it suited for erosion control on lower slopes. On good sites, it will grow for more than 1,000 years and reach over 100 metres high. It prefers altitudes of less than 500 metres and dislikes persistent or salt-laden winds.

My fellow director at Carbon Critical, Jamie Heather, has produced a ‘heat map’ identifying areas around NZ that may be suitable for growing redwoods. This is based on the ideal climate conditions for Redwoods, which are notably prevalent in the King Country region.

Source: Analysis of Niwa's national climate maps.

The lighter the colour, the more suitable the land may be for growing Redwoods.

Not on the map? No sweat…

There are other options, you could consider planting one of the many varieties of Eucalyptus trees that successfully grow in New Zealand. There are many other choices too like Poplars, Silverbirch and more. It’s highly likely there will be a species that fits your situation. The New Zealand Farm Forestry Association website is a great place to start researching different options.

One final, very important note.

The rules of the ETS can change and the standard table returns may change in future. There is growing concern amongst the public regarding the proliferation of radiata pine monoculture forests, and there is always the possibility this could lead to changes in the way exotic trees are accounted for in the ETS. Any sort of tree planting at scale is inherently a big undertaking, so please seek appropriate advice from industry experts before going ahead.

Here to help…

We love talking trees! If you have feedback or thoughts on this topic, please get in touch.

At Carbon Critical, we work on positive solutions to climate change. We are interested in smart approaches to carbon forestry which increase biodiversity while maximising carbon sequestration and are currently working with landowners and investors to launch innovative solutions in this space.

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