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New Zealand Farmers Harvest Carbon Credits

External Reference/Copyright
Issue date: 
August 26, 2010
Publisher Name: 
Business Week
Stuart Biggs
Author e-Mail: 
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In New Zealand, where the sheep outnumber humans 9 to 1 and National Lamb Day is celebrated every Feb. 15, a carbon emission trading system that kicked off in July is upending the economics of sheep farming, a once crucial sector of the economy. Sheep farmers are walking away from the business of selling wool and lamb chops and are converting their grazing lands into tree farms that could prove valuable when the country's agricultural sector is forced to pay for greenhouse gas emissions starting in 2015.

Home to alpine glaciers, massive mountain ranges, and rolling green farmland, New Zealand would seem the last place on earth with a greenhouse gas problem. (The country actually ranks 51st in such emissions with only 0.2 percent of the world total, according to the U.N.) Yet sheep and other livestock do have carbon foot (or hoof) prints. Sheep emit methane when they belch and nitrous oxide through their waste.

Prime Minister John Key's government in Wellington has said a carbon trading regime probably won't have a big impact on the country's greenhouse gas emissions, yet will boost the country's green credentials and clout in global climate talks. The government's carbon program is also a welcome opportunity for some sheep farmers, struggling against slumping wool prices, drought, and competition for land from the dairy and lumber industries, to diversify, says Neil Walker, a forester in the Taranaki region of New Zealand's North Island.

Although New Zealand was the world's largest sheep meat exporter last year, the number of sheep have fallen from a 1982 peak of 70 million to about 40 million, official data show. New Zealand's carbon trading system requires polluting industries to buy credits that allow them to emit certain amounts of greenhouse gases, while businesses that reduce emissions can earn credits and sell them to polluters.

Farmers who convert their land from sheep grazing to planting trees could add $172 per acre in value each year to their land holdings, says David Evison, a senior lecturer at the University of Canterbury's New Zealand School of Forestry. Forests planted for carbon credits may increase to 74,000 acres, or about 0.27 percent of all pasture and grass land a year, compared with about 8,650 acres in 2009, the government estimates. "It turns forestry into a cash-flow business," says Evison.

Some New Zealanders aren't convinced carbon farming is a wise move. Communities that rely on the farm economy are losing jobs once held by shearers, mechanics, and veterinarians. Farmers may not understand the risks involved in forestry, says Don Nicolson, president of Federated Farmers of New Zealand. And while the loss of sheep farms is likely permanent, the carbon trading program may only be temporary, and its benefits illusory, Nicolson says.

Nicolson estimates carbon forests could replace 20 percent, or 2,800, sheep and beef farms and put the economy in danger. He says farmers are being sold on carbon trading without understanding that they could lose trees to fire or disease or that the government might cancel the program at any time. "The trouble is, it comes with massive risk, and that's not what's being talked about," says Nicolson.

Edwyn Kight, a farmer on New Zealand's North Island, sees the upside from the shift to forestry. He says carbon farming could improve the profitability of hill country property if converted to tree farms. "That land is not marginally economic for raising sheep and cattle, it's totally uneconomic," Kight says from his nearly 8,900-acre Akitio Station. He's planted about 1,500 acres of forest since carbon trading began and plans almost 2,000 more.

The bottom line: New Zealand sheep farmers are converting pasture land to forests, driven by a carbon-trading plan whose benefits some doubt.


Extpub | by Dr. Radut