Financial comparison of afforestation using redwood and radiata pine under carbon regimes within New Zealand

Abstract

The accurate regional characterisation of the quantity and value of carbon for key plantation species is important for both forest owners and governments. New Zealand is committed to reaching carbon net zero by 2050 and forests are currently dominated by the fast growing species radiata pine (Pinus radiata) which comprises 90% of all plantations. However, coast redwood (Sequoia sempervirens) is a promising alternative species, that is particularly suited to permanent carbon regimes, as the species is capable of rapid growth over hundreds of years. Recent increases in the carbon price have stimulated afforestation rates within New Zealand and permanent forests now comprise almost one-quarter of new plantings. Using growth models to predict carbon over a 100 year period, the objective of this study was to regionally compare carbon yields and net present value (NPV) for radiata pine and redwood carbon regimes.Model predictions show that by age 100 years, total carbon for redwood exceeded that of radiata pine within eight of the nine regions within New Zealand. Gains were greatest in the North Island, where redwood carbon exceeded that of radiata pine by on average 74%, with differences reaching up to 85% (5,203 vs. 2,808 tonnes CO2/ha at age 100 years). Under a flat baseline real carbon price of $80/tonne CO2, the NPV for redwood was very similar to that of radiata pine within four of the five North Island regions. This similarity between species was maintained across the examined carbon price range which included 26 real carbon values ranging from $35 to $160/tonne CO2. However, NPV for radiata pine exceeded that of redwood within all South Island regions as growth rates for radiata pine were greater over the first 50 years and these earlier returns have higher weighting in discounted cashflow analysis. There was marked divergence in NPV between species across all four South Island regions with increasing carbon price. The establishment of a large permanent redwood resource over the next few decades in the North Island could greatly assist New Zealand to meet its carbon obligations over both the medium to long term.