Farmers making Carbon Profits from Trees in New Zealand

In an article published by Bloomberg.com, farmers in New Zealand have started growing more trees in order to earn more profit rather than selling the sheep wool which is not a much profitable business.

Carben trading tree

Carbon credit trading combats global warming by putting a cost on polluting the air. Tradable "carbon credits" were created by international treaty (the Kyoto Protocol) that aims to lower global greenhouse gas (GHG) levels, by setting county-specific limits for GHG emissions. Countries (and companies in them) that emit high levels of GHGs must either lower their emissions to the required limits, or they can offset them by buying carbon credits. One source of carbon credits is from conservation ("GHG reduction") projects that mitigate climate change by sequestering carbon.

Forests planted for carbon credits may increase to 30,000 hectares a year compared with 3,500 hectares in 2009, the government estimates. The system is a welcome alternative for sheep farmers who’ve struggled for decades from a combination of slumping wool prices, drought and competition for land from the dairy and lumber industries, says Neil Walker, a forester in the Taranaki region of New Zealand’s North Island.

The nation’s carbon-trading project was expanded in July to require energy producers to pay for their emissions. By 2015, the system will include agriculture, forcing farmers to pay for emissions their cows and sheep make through belching.

Spot prices for carbon credits were NZ$18.45 per metric ton on Aug. 16. The market remains in limbo until more credits are available and the deadline for offsetting emissions comes closer, Brunel said.

Until December 2012, there’s a transition period in which companies in the system have the option to pay a carbon tax on emissions capped at NZ$25 per ton, or buy carbon credits backed by forestry. They also need to offset only one ton of emissions for every two they produce.

Not all farmers are happy with the trend.

Federated Farmers’ Nicolson estimates 20 percent, or 2,800, sheep and beef farms could be replaced by carbon forests, harming communities that rely on livestock farming for jobs as shearers, mechanics and vets.

He said farmers are being sold on the profit in carbon farming without understanding the risks, such as losing trees to fires or disease, or the government cancelling the program.

“You can’t blame farmers who’ve had their profitability tested from taking a punt on their marginal land,” Nicolson said in a telephone interview. “The trouble is, it comes with massive risk and that’s not what’s being talked about.”

Many hill farmers are already struggling and rural depopulation from loss of jobs is already taking place.

Read complete story on http://www.bloomberg.com/news/2010-08-18/carbon-cash-accelerates-cull-of-new-zealand-sheep-as-farmers-turn-to-trees.html

Hitesh Anand

I am a post graduate from Newcastle University, UK. I like studying and analyzing economic data and financial health of world.

You may also like...

Grab this FREE Forex Trading eBook
and much more..
We respect your privacy.
%d bloggers like this: