With the recent dramatic fall in the price of carbon credits in New Zealand there are more dairy farm conversions and less pine trees being planted. With the New Zealand market being flooded with cheap carbon credits from overseas the price has dropped from $25 per tonne to $3. Therefore it is not economical for farmers/landowners to plant forests as a price of around $15 is required to make it worthwhile.
In 1990 about 500,000 hectares of forests were planted and they are due for harvesting in 2020. There is a need to sustain the industry and for ongoing plantings but under the current Emissions Trading Scheme in New Zealand it is hard to see anything happening. With the Global Financial Crisis there has been a surplus of carbon credits especially in Europe and with an over supply and weak demand the price has been downwards.
One of the major reasons for this low price in New Zealand is that no other country in the world allows 100% of low quality carbon units into their emissions trading scheme. Australia, China, USA, the European Union, Japan and Korea either ban these low quality units or permit them in very low numbers. As a result of this there is little faith in planting. 20,000 hectares of new tree planting is required each year to meet New Zealand’s emissions targets and to counter the harvest of mature trees.
The EU’s Emissions Trading Scheme has displayed an oversupply of carbon permits. In March this year the price of carbon permits plummeted to a record low after data suggested that Europe had produced a smaller amount of polluting emissions last year than had been thought. Below is quite an informative video explaining how the system works.