The Emissions Trading Scheme (ETS) enacted in New Zealand in 2008 allows forest growers to claim units for carbon sequestered by new forests. As afforestation is an important contributor to New Zealand meeting net emission targets there is interest in forecasting the rate of afforestation, particularly how it will vary with the price of carbon in the ETS. Consequently a model is developed to estimate afforestation rate from the Land Expectation Value (LEV) of ‘traditional’ forestry (i.e., revenues only from log sales), the LEV from the carbon trading opportunity that the ETS creates, and land value.
Initially the relationship between afforestation rate and A grade log price during the period 1988 and 2008 is considered. Then the relationship between afforestation rate and LEV is evaluated. Initially the period up to 2008 is considered to evaluate the impact of ‘traditional’ forest profitability on the afforestation rate. Then the period from 2009 to 2015 is included and the impact of carbon is introduced. Finally the cost of land is introduced into the model.
The land affordability model developed allows the future afforestation rate to be forecast from carbon price, log price and land value.