By Lucy Craymer
Pongaroa, Sept 21 (Reuters) – At the start of lambing season, Fiona Ramsden’s farm near the New Zealand village of Pongaroa is a picture of rural life: newborn lambs trailing their mothers across steep pasture, fields dotted with spiky native palm trees, and a pretty white homestead that dates back about a century.
But pine trees are closing in.
On neighboring land once grazed by sheep and cattle, young Monterey pines — also known as radiata pines — carpet the hills, planted to earn carbon credits under the country’s emissions trading scheme.
“You’re connected to the land and that’s why it’s quite depressing to see good farmland — and to sheep and beef, good country — going into pine trees,” Ramsden said.
For almost 20 years, New Zealand has pioneered one of the world’s most ambitious tree-planting programs, approving nearly 9,000 square kilometers of carbon-credit forest. That’s about 11 times the land area of New York City. The emissions trading scheme (ETS) has turned forestry into a potentially more lucrative long-term investment than livestock farming, the traditional mainstay of the rural economy.
Under the ETS, owners of forests established after 1989 can earn carbon credits for greenhouse gases as their trees grow. Forest owners — companies, indigenous tribal organizations and family farmers with a small slice of land in trees — can sell those carbon credits to companies that need them to offset emissions, creating an income stream long before the forest is harvested.
Yet the boom in carbon forestry — and tradable carbon credits — has also driven competition for sheep and beef farming land. The rapid expansion of forest land in traditional beef and sheep country is straining rural communities and prompting the government’s climate advisers to warn that New Zealand is avoiding harder cuts elsewhere in the economy and risks missing its emissions targets.
The government counters that forestry remains only one part of its emissions-reduction strategy.
Ramsden, 50, returned to take over the family farm in 2012 after a career in fashion and interior design in the capital, Wellington, and elsewhere.
From her 1,215-hectare property, the tradeoffs of carbon farming feel personal. Pine forests surround her from all sides, barring one block of land. Bright yellow gorse bushes — an invasive plant in New Zealand — tumble toward the fences.
Feral goats dart from the forest and onto pasture intended for her 3,500 sheep and 350 cows. Wild pigs tear up patches of ground, problems she says have grown as forest owners do little to control the population. She pointed out a power pole leaning into the pines, noting that she is experiencing more frequent power cuts as trees encroach on powerlines.
WHY TREES BEAT SHEEP
Just over half of New Zealand’s greenhouse gas emissions come from agriculture, mainly methane and nitrous oxide. Agricultural emissions are excluded from the ETS, which primarily targets carbon dioxide and emissions from heavy industry.
Farmers say that, even so, the ETS has transformed rural land markets. Forestry investors, buoyed by carbon-credit revenue, have been able to outbid sheep and beef producers for grazing land, raising concerns from farm industry groups about the future of traditional beef and sheep farming.
Since 2017, about 3,300 square kilometers of sheep and beef farmland have been sold for conversion to forestry, according to industry group Beef + Lamb New Zealand. That’s enough land to feed more than 2 million sheep, equivalent to nearly 9% of the country’s flock.
As forestry investors chased carbon credits, grazing land prices rose 9.7%, according to Real Estate Institute of New Zealand data.
Dairy land, because it’s generally more expensive, has largely escaped forestry conversion and seen price rises of just 3.7%.
Foreign investors have acquired more than 1,000 square kilometers of farmland for conversion to forestry since 2017, according to data from the government’s Overseas Investment Office. Ingka Investments, the investment arm of the company that operates most IKEA stores worldwide, owns 430 square kilometers of forest in New Zealand, some of which is in the ETS.
Ingka says its rationale is long-term timber, not carbon-credit income. “The heart of our core investment is more in the timber,” said Dylan Foster, forestland operations manager at Ingka Investments.
CHEAP CREDITS, HARDER EMISSIONS CUTS
Supporters of the ETS say forestry is essential to reaching New Zealand’s climate targets. Climate Change Minister Simon Watts called it a “cost-effective way” to reduce net emissions, because of the country’s established forestry sector and favorable growing conditions.
The Climate Change Commission, an independent advisory body, expects ETS forests to deliver a quarter of the emissions reductions needed for New Zealand’s 2026-2030 target, and nearly half of those needed for its 2031-2035 target.
But critics say the scheme relies too heavily on offsets, rather than direct emissions cuts. Because planting and maintaining forests is relatively cheap, they say polluters can buy credits rather than make the costlier investments required to transition to cleaner fuels or technology.
Climate Change Commission chief executive Jo Hendy said the ETS is essentially “functioning as an offsetting scheme.”
The government says New Zealand is on track to meet its near-term climate goals.
“Forestry is not the whole plan,” Watts said in response to emailed questions from Reuters.
Late last year, the government tightened the ETS rules for non-native species, including pine, on more productive land.
Preliminary data released by Beef + Lamb New Zealand last month showed purchases for wholesale conversions had slowed to nearly 160 square kilometers, less than half of the total the year before. However, the industry group said the total could rise once data is finalized.
FEWER ANIMALS, FEWER JOBS, THINNER COMMUNITIES
For farmer David Buick, high prices for lands suitable for forestry conversion in 2020 offered a chance to trade up to a better farm in the Pongaroa area.
“We’ve had to work for every cent we’ve got and so for me it was a good decision to sell that on a forestry high,” he said, while acknowledging the issues of blanket planting of pine trees.
But the effects on those left behind ripple beyond the paddock gates.
Farmer Alex Renner, who lives a 10-minute drive from Pongaroa, said five neighboring farms had been converted to forestry over the last decade.
As more land moved into trees, young families disappeared. The rugby club folded in 2022, after they couldn’t find enough players to field a team. The community-run daycare closed in 2023, in part due to falling enrollment.
The population of Owahanga, the rural area that includes Pongaroa, has fallen an estimated 2.6% over the past decade, according to Statistics New Zealand, deepening a decades-long decline driven by reduced demand for rural workers.
“We’ve lost a lot of those young families,” Renner said. “It’s people that make a community.”
At a Hawke’s Bay shearing shed, Brandon Coombe-Gray sees the changes one lamb at a time.
When farms are planted in pine, fewer ewes mean fewer lambs — and less work for shearers, truck drivers, stock agents and rural contractors.
A shearing station that once carried about 10,000 ewes is now planted entirely in pine, he said. “Not one single ewe is there to be seen.”
Forestry industry representatives reject the suggestion that the industry hollows out rural regions. The sector provides jobs, supports key industries and generates about NZ$6.5 billion (US$3.7 billion) in annual export earnings, said Elizabeth Heeg, chief executive of the New Zealand Forest Owners Association. Red meat exports generate around NZ$12 billion (US$6.9 billion) in revenue.
‘ONE LESS FARM THAT CAN BE BOUGHT’
For some farmers who border forest blocks, downsides include difficulty coordinating with absentee farmers on pest control and damage from goats, deer, pigs and possums moving onto their land. Heeg said that forestry managers “absolutely had active management” of their properties.
In 2023, Cyclone Gabrielle — the costliest storm on record in New Zealand — washed forestry debris down waterways in some areas, damaging infrastructure and property.
In parts of Hawke’s Bay and Wairarapa, farmers also worry that expanding forest could increase wildfire risks during hot, dry summers.
Nateva, one of the largest carbon forest operators in New Zealand, said it runs extensive pest-control and wildfire-prevention programs, removing fire-prone grasses and vegetation from roadsides and tracks.
For sheep shearer Axle Reid, the shift to forestry feels like a door closing. The 37-year-old said he had once hoped to save enough from shearing to eventually buy his own place. As more land was converted to forestry and prices rose, he said he felt he’d been pushed out of the market.
Watching farmland convert to forestry “feels like a kick in the teeth,” Reid said. “Once they go into forestry, it’s one less farm that can be bought.”
(Reporting by Lucy Craymer in Pongaroa. Additional reporting by Hollie Adams and Cordelia Hsu in Pongaroa and Peter Hobson in Canberra. Editing by Suzanne Goldenberg)
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