Financial Comparison of Afforestation Using Redwood and Radiata Pine within New Zealand for Regimes That Derive Value from Timber and Carbon

Carbon sequestration has become an important source of supplementary revenue from forest plantations. Although there are many financial comparisons of species based on timber revenue, there have been few regional comparisons that integrate revenue from carbon. Within New Zealand, radiata pine is the most widely planted species, but there has been a recent upsurge in planting rates for coast redwood. Under New Zealand's Emissions Trading Scheme, areas that are newly afforested under clear-fell rotational forestry receive carbon payments up to a set age, intended to represent the long-term average under successive rotations. Using growth models for both species, the objectives of this research were to regionally quantify (i) how the rotation length and the carbon averaging age influenced the profitability of growing redwood and (ii) compare carbon, timber yields, and profitability between radiata pine and redwood. The results showed the legislated carbon averaging age of 22 years for redwood underestimated the actual mid-points of carbon accumulation, which averaged 26, 28, and 31 years across rotation lengths of 40, 45, and 50 years, respectively. The optimal rotation length for redwood varied markedly by region and carbon price but was most often 40 years, increasing to 50 years at higher carbon prices, particularly for southern regions. Under regimes where revenue was only derived from timber, the redwood internal rate of return (IRR) exceeded that of radiata pine for eight of the nine New Zealand regions. When revenue was received from carbon and timber, redwood had a higher IRR than radiata pine up to carbon prices ranging from 29 to 50 NZD/tonne CO2 for the North Island and 23 to 34 NZD/tonne CO2 in all South Island regions apart from Otago. The IRR of radiata pine exceeded that of redwood at carbon prices above these values for the eight regions and at all carbon prices within the cold, dry Otago region.