Modeling the impact of Carbon Farming on a New Zealand landscape

Policies that create the opportunity for private landowners to receive carbon credits from reforestation, or “carbon farming,” will change the relative value of land uses for landowners, potentially having an impact on land-use decisions and the character of landscapes. We constructed a spatial model to evaluate the potential scale and location of carbon farming in a New Zealand landscape, the potential size of resulting carbon stocks, the economic trade-offs for landowners considering carbon farming, the effect of other policies on the attractiveness of carbon farming, and the level and timing at which certain sequestration activities become economically viable.

We modeled the carbon accumulation, economic value, and potential uptake of a carbon farming management system, in which landowners utilized a least-cost approach by encouraging native forest regeneration on set-aside land. For the study area, the Gisborne District of New Zealand, we found that the unassisted regrowth of native species on estimated Kyoto-eligible marginal pasture has the potential to store 121.7 Mt CO2-e over 70 years. We examined several price scenarios for carbon and found the potential economic revenues from carbon for the area could be around NZ$590m during the 70 years of regeneration. However, comparing a baseline projection of carbon revenue to expected values of grazing on eligible land shows that reforestation could out-compete grazing on only about 40,000 ha in the study area, bringing an increase in net present value of NZ$18M to the region. Sensitivity analysis using several price trajectories shows that the scientific uncertainty about the scale and rate of carbon sequestration can have a sizeable effect on the profitability of carbon forestry, but potential profits are more strongly affected by the uncertainty of the future value of carbon credits and the continuing existence of a carbon market.