A New Zealand firm is offering investors an opportunity to earn carbon credits, and profit, through private timberland ownership. Roger Dickie New Zealand Ltd.’s carbon credit forestry investment will eventually allow individuals to purchase shares in Onslow Carbon Forest, an established Douglas-fir forest east of the township of Roxburgh. The company is currently working on registering the prospectus, and once it is properly registered with the New Zealand Companies Office they plan to offer shares at NZ$25,000 ($15,445 USD). In the meantime the forest can be bought in its entirety for NZ$2,200,000 ($1.36 million USD).
“Forests, in a nutshell, are the lungs of the world,” Roger Dickie marketing manager Richard Bourne says. “On average over the last decade, the world has been losing approximately 15 million hectares (37 million acres) of forest per year. While deforestation is responsible for emissions, too much emphasis has been placed on reducing deforestation and not enough on reforestation. Reforestation can play a significant role in offsetting emissions.”
Bourne says the Kyoto Protocol, which seeks to reduce greenhouse gases in 37 industrialized countries and the European community, makes timberland investment particularly advantageous since forests sequester carbon.
Under the Protocol, participating countries have agreed to slash their collective emissions, with the goal of reducing greenhouse gases by 5.2 percent between 2008 and 2012 as compared to 1990 levels. Though countries must predominantly meet these goals through national measures, they may also tap market-based mechanisms such as emissions trading.
In the emissions trading market, companies or other organizations are given emissions permits allowing them to hold a specific amount of carbon credits, which in turn represent the right to a certain amount of emissions. One carbon credit is equal to a ton of carbon. Since these credits tie a monetary value to pollution, they essentially create a market for greenhouse emission reduction.
“New Zealand ratified the protocol and introduced legislation to allow timberland owners to register their forests to earn certified Carbon Credits,” Bourne says. The Onslow Carbon Forest itself was registered under legislation known as the Permanent Forest Sink Initiative, or PFSI, which promotes the establishment of permanent forests on land that has been previously unforested.
Green – In More Ways Than One
Roger Dickie is among a slate of other companies offering carbon credit forestry investment opportunities, both in New Zealand and around the globe. The practice is not simply considered ecologically responsible, but economically savvy.
“For the first time forest owners have an opportunity to receive income from their forest as it grows rather than having to wait until harvest,” Bourne says. “This early income dramatically changes the dynamics of timberland investment due to the time value of money.”
Roger Dickie, a figure in the New Zealand timberland investment sphere for several years, has established and managed 84 forests totaling 28,000 hectares (69,189 acres) worldwide. The Onslow Carbon Forest is a 370.5 hectare (916 acres) forest located on 722.7 hectares (1,786 acres) of freehold land. It was planted in 2003 and then replanted in 2006.
Forest consultants PF Olsen Ltd. forecasts investor returns of NZ $20.5 million ($12.65 million USD) on an investment of NZ $2.14 million ($1.32 million USD) throughout the life of the project. Additionally, harvest returns of NZ $33.08 million ($20.42 million USD) are expected at the project’s end.
Bourne says there has been significant interest in the offering’s early days. “Interest is not only coming from individual families who are looking for a long-term conservative intergenerational investment, but also from small to medium companies that wish to promote themselves as ‘green’ or ‘environmentally responsible,’” he says. “More and more, they are looking to forestry as their source of carbon credits to offset their emissions.”
Investing in real assets such as land and trees, according to Bourne, is seen by some investors as a means of gaining carbon credits rather than purchasing them on the open market: “The forest ownership gives them another string to the bow – timber – and the investment is secured by land ownership.”
The carbon market is fast-expanding, with British analyst New Carbon Finance projecting more than 27 percent growth this year to a value of $150 billion. This comes on the heels of 2008’s expansion of 82 percent, bringing the carbon-market’s value last year to $118 billion. In 2004, the size of the carbon market was just $1 billion.
The carbon market has not been without its critics, with some pondering the complexity of establishing a meaningful emissions offset project. Others, though, maintain that the marketplace is at the very least a step in the right direction.
“While one may want to debate climate change, the carbon market is a reality and this presents opportunities to get into the market early, especially with the USA now addressing the issue in a positive manner,” Bourne says.
He also believes investor risk is limited in terms of the Onslow Carbon Forest, since it is already established and has been growing for six years: “The investor owns the land and trees; it is their forest in a politically and economically stable country, and the offer is made by a company with a proven track record, having been operating in the business of forest establishment and management over many years.”
With portfolio diversification often a concern, Bourne says carbon forests offer a unique investment opportunity. “(It) is a great way to diversify,” he says. “It is an investment in a real asset in a stable country. Growing your own credits is a very cost-effective way of entering the market; credits can be accumulated each year and sold when the price is right.”
Moreover, Bourne believes a forest by its very nature provides unique real estate investment advantages: “By natural growth Mother Nature contributes to the growing value of the asset,” he says, “and you never have a tenant problem.”