The Emissions Trading Scheme (ETS) will present unique opportunities for many rural landowners in New Zealand.

Carbon forestry will allow rural landowners to use the ETS to their advantage and gain a new income stream.

Marginal farmland throughout the country will be able to be converted into forestry and as long as any conversions are undertaken in an informed manner, landowners will potentially have a lot to gain.

Forests will be able to offset farm emissions and improve overall farm profitability. About five years after planting, carbon forestry will provide an annual stream of carbon credits in the form of New Zealand units (NZUs), which will be able to be sold on the open market, kept in the bank, or used to meet potential onsite emission obligations associated with farming at some point in the future.

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It is estimated that there are about two million hectares of such land in New Zealand - land that is suited more to forestry than agricultural farming, but has not yet been planted.

In addition, forestry provides additional benefits for farms, such as erosion control and biodiversity and, eventually, a potential alternative income source.

The forestry industry has been operating under the ETS since January 1, 2008, despite the scheme having numerous downsides for forestry owners. For example, any forests planted before 1990 - ie, before New Zealand signed the Kyoto Protocol - are not eligible for carbon credits, but are eligible for liabilities if the forest area is cleared without replanting.

A limited level of units, set at about 5 per cent of projected emissions liabilities, is proposed as compensation - ie, enough carbon credits to cover, at most, 13 per cent (the average is less than 7 per cent) of the liabilities incurred.

Forests store carbon. Therefore, those who own them can take part in the "trading" part of the ETS and sell the credits earned as the forest grows.

When the trees are harvested, about 75 per cent of the credits earned have to be returned to the Government.

This is because about 25 per cent of the carbon from the trees, in the form of stumps, roots and other plant material, remains with the land until the new crop becomes established.

To offset the liabilities incurred when plantations are harvested, large forest owners ensure they have a mix of harvest dates and species. As some plantations are due for harvest, others generate carbon credits. Farmers also could maximise their opportunities this way. By working together under expert advice, farmer groups could aggregate their forests to share and/or trade the credits and offset the liabilities. In this way, they could generate credits and become traders rather than just emitters.

Carbon forestry, like all investments, has associated risks and opportunities that need to be carefully considered.

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But there is now research information available for landowners wanting to make an informed decision.

Another reason for farmers to get into forestry is the significant range of additional benefits that flow out of planting, apart from carbon and carbon credits.

Forestry, as part of an integrated rural land use with farming, can provide erosion control, shelter and increased biodiversity.

Those landowners who don't want to risk any sho
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