The Government looks set to reverse one of its signature policies from 2018.
The policy is an exemption it granted overseas investors to invest in forestry as part of its campaign to plant one billion trees.
But along with pressure from an explosion in the price of Emissions Trading Units the foreign investment exemption has seen huge acreages of formerly productive farmland planted in pine trees.
Federated Farmers Meat and Wool president, William Beetham, himself a Wairarapa hill country sheepfarmer told POLITIK yesterday that pressure on conversions was now so intense that there was a three year wait for new forests to be planted.
And on the North Island east coast — where the forestry conversions are at their most intense — farmers were seeing the destruction of local communities.
Once the trees were planted, workers were not neeed to regularly service them as is the case with a sheepfarm.
The new forests are called “carbon farms” because their income comes from Emissions Trdaing Scheme credits.
“The rugby club, there’s the school , there’s the hall and the hall and then there’s all the local supply services,” he said.
“There’s just not the same the communities.
“There’ll be no community around carbon farming because now people are making money while the trees are just sitting on the ground.”
But carbon farming not only helps New Zealand meet its emission targets but it is becoming increasingly more profitable; much more so than livestock farming in many parts of New Zealand.
In 2018, shortly after it was elected, the Labour Government moved to tighten up the Overseas Investment Act to limit the ability of foreigners to buy New Zealand land.
But it allowed an exemption if the land was less than 1000 ha and was either an existing forest or was to be purchased for forestry.
In 2018 the Government had set itself a target of planting one billion trees over the next ten years.
In its Regulatory Impact Statement, Treasury said that forestry stakeholders “ provided strong feedback that the current regime is time consuming, uncertain and costly to comply with, and, due to the nature of investments in existing commercial forests, can be difficult for an overseas investor to demonstrate the benefit to New Zealand that is likely to be “substantial and identifiable”, which is necessary to obtain OIA consent.”
But National saw other forces behind the proposal to relax the investment criteria.
MP David Carter told the House when the legislation was introduced that the Government had introduced the legislation restricting foreign ownership of land at the same time Shane Jones was trying to push his tree programme.
“If you’re a foreigner, it’s easy to buy a thousand hectares, provided you’re putting it into trees. And consequently, we’ve seen good farmland coming out of sheep and beef production, going into trees supported by a subsidy to plant those trees, all because the Hon Shane Jones went around at the last election with his mate the Rt Hon Winston Peters talking about a billion trees,” said Carter..
Jones defended the change.
“If you’re bringing a proposal to expand the size of the New Zealand lung, then that type of investment—subject to a suitable level of scrutiny—is very positive for the provinces<” he said.
Ironically, as provincial protest, particularly in the Wairarapa under the umbrella of the “50 Shades of Green” movement began to intensify, Joanes backed off his support.
By the end of 2019 he was voicing the same concerns that Beetham is now talking about and said “If there are things that I need to do, either through mitigation or other sorts of interventions, then I want people to know I’m up for the challenge.”
But Covid and the election stalled any more movement. Jones lost his seat and the matter has only recently resurfaced as Federated Farmers have begun to apply pressure to Ministers, Stuart Nash (Forestry); Damien O’Connor (Agriculture) and David Parker (Associate Finance) to end the 100 hectare exemption
The recent explosion in the ETS unit price has made carbon farming even more prolfitable.
Farmers get carbon credits if they plant a forest and let it grow so the trees become fully developed. They can then harvest it but to retain their credits they must replant.
Speaking at the Carbon Forestry 2021 conference in June, Tess Keough, the Climate Change team Leader at Te Uru Rakau (the NZ Forest Service), said it was expected that pinus radiate seedling planting would increase by nearly nine per cent last year and estimated another 35,000 ha would go into forestry over the coming two years.
She said 20 ha of forest could generate $16,000 of carbon credits after 28 years but that estimate was made when the carbon price was in the low $30s; yesterday it was touching $80.
Beetham said the impact has been substantial; overseas buyers are not just buying farms to plant trees on but are also buying existing forests..
“I think just over half of those purchases have been foreign investors purchasing already existing forests<” he said.
“And then there’s a proportion purchasing farmland to convert to forests.
“Our concern is that the special forestry test is allowing foreign ownership a backdoor effectively into accessing New Zealand’s lucrative carbon market.
“And that is driving land values up and driving conversions.
“And that is a real concern for rural communities.”
But Federated Farmers is on potentitally dangerous ground opposion the foreign investment exemption. After all, it is generally farmers who are selling the land to the foreigners and earlier proposals to possibly use planning legislation to control which land might be used for forests ran into farmers’ traditional opposition to “being told how to farm.”
“ We’ve been very clear we don’t oppose production forestry or the right of a landowner to make a decision to try to decide what they want to use their land for,” he said.
“We just believe that there are certain government regulations that are skewing the market and that’s having a big impact on New Zealand communities.”
It seems the message is getting to the Beehive and David Parker who steered the original legislation through Parliament is now ready to repeal it.
In a statement yesterday, he said: “The Overseas Investment Act 2005 Forestry Review is underway and is under active consideration.
“The Forestry Review is considering the operation and effectiveness of the 2018 forestry changes to the Overseas Investment Act, which included the introduction of the special forestry test.
“ I intend to take a paper to Cabinet later this month on proposed policy options.”
Federated Farmers claim that Parker has told them privately that he supports a change.
But any change raises questions about whether it will get the support of Climate Change Minister, James Shaw, who needs every carboin credit he can lay his hands on to meet New Zealand’s 2050 net zero emissions targets.
He told POLITIK yesterday that in principle had no problems with it but hje stressed that he would want ad vice on its implicaitons before making a final decision.
It will be a brave political move by the Government; to reverse one of its own policies.
But the future of hill country farming oin the Noprth Island east coast may depend on it.