Clear-cut forestry might make a profit, but local communities pay the price

Wednesday, 6 June 2018

OPINION: It's one thing to plant a billion trees; it's quite another do it well.

Recent floods in Tasman, and now the East Cape, signal what's at stake. Witness the logs piled up against Mangatokerau Bridge in Tolaga Bay. Or the hillsides scoured with slips in Golden Bay, left vulnerable to erosion by clear-felled forest lands. With extreme weather events expected to increase due to climate change, it is critical that we don't plant one billion of the wrong trees in the wrong place with the wrong management system.

Our future forests need to be financially viable, environmentally sustainable, and resilient. Crucially, we also need forests that people want to live with, to be nurtured and protected in future decades.

Last week, interesting news sprang from Ireland. The European Investment Bank (EIB) announced a €12.5 million (NZ$20.8m) investment into 'continuous cover forestry' projects, on the assumption of a 6 per cent internal rate of return. This is managed by the bank's Natural Capital Finance Facility, an instrument which, like New Zealand's forthcoming Green Investment Fund, provides tailored finance for biodiversity and climate-aligned outcomes.

A chopper rescued a family who had to get on the roof their Tolaga Bay home after severe flooding last weekend.

* Landowners to pursue legal opinion on damage accountability**

So what is continuous cover forestry? This is where forests are harvested incrementally, by removing individual trees or small blocks, but retaining permanent forest cover. It is common in central and northern Europe.

This is contrasted with clear-fell forestry, the system that dominates New Zealand's commercial forests, where entire forests are removed and restocked at the same time. This creates 'the window of vulnerability' where cleared forest-land is susceptible to erosion, sediment loss and loss of forest detritus, known as 'slash'.

Continuous cover forestry avoids this problem, because there is no point at which the trees are all removed, exposing the land to the elements. Root systems remain alive in the earth, fixing soils and sediments that would otherwise wash away. Forest carbon remains as a permanent stock, not a flow that comes and goes with rotation cycles.

What the Irish case shows, however, is that continuous forests aren't only attractive environmentally, but also as an investment proposition.

For a start, timber is higher in quality and price, because only the most valuable, mature trees are removed. Also, cash flows are brought forward because of heavier thinning in the early years. Moreover, because the forest is partly harvested every few years, continuous forests deliver a stable cash yield. This regular income stream reduces exposure to fluctuating timber prices. It also means a more regular flow of work for regional communities, rather than planting and waiting over a nearly 30-year rotation cycle.

Continuous forests make for a more resilient forest asset. This is important for investors who are highly sensitive to risk. Climate change is increasing the risk of drought and fire, pests and disease, and windthrow from storms. Continuous forests aren't immune to this, but these risks are mitigated by variety of ages, and potentially species, of trees. As any ecologist will tell you, the key to resilience is diversity.

Some folks tell me that continuous cover forestry isn't financially viable, because of higher management costs. Still, the modelling that underpinned the EIB's investment in Ireland, for a Sitka spruce-dominated plantation, predicted an internal rate of return of 6 per cent. That's not nothing. Sure, it isn't as high as the 8-9 per cent return you might expect from conventional clear-cut forestry in New Zealand, but if you factor in the costs being borne by local communities in Marlborough and the East Cape, that equation should shift.

Lyn Rombouts among the masses of tree waste on her Motueka property, after during heavy rain from ex-tropical cyclone Gita in February. In clear-fell forestry, a system favoured in New Zealand's commercial forests, entire forests are removed and restocked at the same time.

Crucially, those management costs are somewhat offset because continuous forests mostly seed themselves. Given that manual replanting can divert about 25 per cent of clear-fell revenue, this is a significant saving.

The NZ Farm Forestry Association recently received a Sustainable Farming Fund grant to explore continuous cover forestry for radiata pine, based on the system that Dr John Wardle used in Oxford, North Canterbury. Such research is vital, but we also need to take some calculated risks, based on what we already know.

Public money should support projects with the greatest public benefit. Experiments in continuous cover forestry could deliver the billion trees that New Zealanders actually want to live with.

Dr David Hall is a senior researcher at The Policy Observatory, AUT, and author of the 2016 Pure Advantage report, Our Forest Future, which called for 1.3 million hectares of new forest, and the 2018 Climate Finance Landscape report prepared for the Ministry for the Environment.