Source: GreenXperts Limited Imagery 2023
As 2024 begins, it is timely to update our assessment of Carbon Forest Land Values for those in the market and those considering joining the market in New Zealand.
Carbon Forest Land values are related primarily to carbon credit content in trees (how much and how fast carbon dioxide is absorbed by the species of tree) and the price of carbon credits on the New Zealand market. The quarterly Government auctions of credits is the 'primary market' and carbon credit trading between parties domestically is the 'secondary market'.
In the first three auctions of 2023 the 'floor' (auction reserve) price was set by the Government to $33.06, when $60 was recommended by the Climate Change Commission. No credits were sold in these three auctions because the reserve price was not met. Late last year a High Court decision required the Government to auction credits from December 2023 onward using the price recommendations of the Climate Change Commission, shown below.
Source: Climate Change Commission 2023
The floor price set for the December 2023 auction was $60. No credits were sold, resulting in a year's supply of 15 million carbon credits being cancelled (withdrawn from the market) by the Government.
The floor price for 2024 auctions is expected to be $64. Secondary market prices tend to follow the floor and actual auction purchase prices. For example, in the second half of 2023 they achieved sale values in the range of +70%-250% of the floor price ($33.06). Notice that the floor price is set to rise and credit supply drop over the next four years, putting more upward price pressure on credit value.
Against this background prices paid for Carbon Forest land in Pinus radiata (pine) trees in 2023 peaked at around $25,000 per hectare. Sheep and beef were at $7000 per hectare, and dairy $15,000 per hectare (Beef & Lamb 2024). In 2021 Colliers reported purchase prices of up to $16,000 per hectare for easy production forestry sites near port facilities at a time of historically high prices. Since then there has been a marked drop in log prices. Current forest sale listings appear to be mostly mixed production and carbon forests with asking prices from $10,000 per hectare upward depending on the dual use (timber/carbon) and management quality of the block.
Our February 2024 assessment of Registered New Zealand Emissions Trading Scheme Carbon Forest Land Value for high quality pine carbon forest is $25,000 per hectare, starting from a minimum of $10,000 per hectare for lower quality forest. High quality native carbon forest in the right age group is from $8,750 per hectare. Voluntary Vintage Carbon Credits® from Pre-1990 native forests also have value, but these values are very site-specific.
This February 2024 assessment of Carbon Forest Land Value is only presented in the broadest terms as a starting point for discussion. GreenXperts Limited are not registered land valuers. Specific carbon property values would need to be formally assessed on site using suitable measures and carbon yield modelling with advice from a registered land valuer.
Our next article "Carbon credits essential right through into the 22nd Century" will address the reasons why we consider demand for carbon forestry will remain strong in New Zealand.
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