Carbon calculator crunches farm credits and debits

August 2008
In June this year, charitable trust The Carbon Farming Group (CFG) launched an easy to use, online calculator, which estimates a farms potential carbon liability using data averaged across New Zealand conditions. This will give farmers a head-start on what carbon costs they may incur in the future and also an idea of the worth of carbon credits.

Implementation of emission reducing processes and systems takes time, but may increase productivity and profitability, says Carbon Farming Group trustee, Clayton Wallwork.

The CFG plans to regularly update its website to include the latest information on carbon farming and will also publish a regular newsletter. To access the CFG website, go to

The New Zealand Emissions Trading Scheme (ETS) is a carbon market that will account for all Kyoto emissions and reductions within New Zealand. Those who absorb greenhouse gases will be paid by those who emit greenhouse gases. Each sector will be brought into the ETS in a staged manner, with forestry first and agriculture last.

Agriculture accounts for around half of New Zealands greenhouse gas emissions. Agricultural greenhouse gas emissions in many developed countries are going down, while New Zealands are rising at 1%/annum.

The Carbon Farming Group

Established with funding from the Tindall Foundation, the Carbon Farming

Group is focused on ensuring the agricultural sector is fully informed about all aspects of Governments Emissions Trading Scheme (ETS), prior to 2013 when the sector will start paying for emissions.

Farmers generally dont know much about the likely impacts of the ETS on agriculture, says Wallwork. They are tending to wait until details of the scheme become clear before taking an interest. Yet, this is the time to have some input into the shape of the ETS for agriculture, which will mean starting to think now about whats proposed.

Peter Graham of 1400ha Banks Peninsula sheep and beef farm, Ahuriri, admits that he is a typical farmer, waiting for more information before he takes a real interest in the likely impact of carbon debits and credits on his bottom line.

Carbon trading; is it a load of rubbish?

There is a lot of cynicism about the Kyoto Protocol and carbon trading, Clayton admits.

But I would have to say, its a reality whether you believe in it or not. It will have impacts on farming, not only through the costs imposed for carbon emissions but also in the attitude of markets that we supply.

The ETS and agriculture

In 2013 farmers will have to account for any increase in emissions exceeding 90% of 2005 levels. From 2018 farmers start to pay for more of their liability being fully accountable for 100% of their emissions by 2030. For most farms, this will result in a small cost gradually increasing to full liability. This is demonstrated in the graph below for a farm with 7000 sheep and 250 beef cattle, at a price of $25 per emission unit (NZU). The ETS cost starts at $6,800 in 2013 and reaches $68,000 in 2030.

The ETS and forestry

Under the ETS there are two types of forest; those existing before 1990, called pre-Kyoto forests and those established after 1990, called Kyoto forests. Opportunities for emission credits exist under the ETS for Kyoto forests (post 1990).

The forests at Ahuriri are all eligible for claiming carbon credits under the ETS being aged six, 10 and 11-years old, and established on country which was previously bare or gorse-covered. Three separate plantations are owned in two separate joint venture partnerships.

The joint ventures are with Warren Forestry, which has invested in 34 plantations on hill country meat and wool farms in Canterbury and Marlborough.

The land is provided by the farmers and we find investors then oversee the establishment, management and tending of the forests, says Warren Forestry managing director and part-owner, Charles Etherington.

For carbon credits to be claimed by Ahuriri, the agreement of all shareholders would be required. Shares in these credits would be negotiated. The company is waiting until Kyoto legislation is clear, before making any decisions on how carbon credits will be managed.

Charles Etherington anticipates the day when the value of carbon credits for forestry could make it more profitable to leave trees in the ground than to harvest.

The calculator

The idea of the carbon calculator is to put some tangible parameters around what the ETS will mean for individual farms. By inputting basic information about stock types, numbers and forestry planted, farmers can come up with projected emissions liabilities or credits at 2030.

Most farms will be in a debit situation, says Clayton. However, examples on the website show that it is possible to be in a neutral or credit position, by balancing debits with credits from forestry plantings or native forest regeneration. The 7200 hectare Puketoro Station on the East Coast of the North Island for example has carbon emissions from its sheep and cattle balanced by credits from pine forests (see table below).

Carbon units are valued at $25, the level being talked about by Treasury, and debits are based on emission factors that came out of the NZ Greehouse Gas Inventory in 2007.

However, the current international value of emission units is currently much higher and rising, being listed at around $NZ60 in Europe.

Different growth rates are factored in for tree species, based on a report prepared by SCION (previously the Forest Research Institute) for the Ministry of Agriculture and Fisheries.

Clayton hopes that once they have a feel for the likely cost of the ETS to their property, farmers will start looking at solutions, especially the planting of trees. Other technologies may come out of research, such as methane inhibitors for livestock.

In early July 2008, the Carbon Farming Groups website calculator had recorded around 25,000 hits.

Ahuriri Farm

Ahuriri is a 1400ha, 8000 stock unit sheep and cattle farm on Banks Peninsular between Tai Tapu and Motukarara farmed by Peter and Anne Graham. The farm is a mixture of loess and basaltic soils and has an average rainfall of 700mm rainfall. It has several stands of radiata on it, as well as a significant stand of native bush that has a QE II covenant.

Number of sheep; approx. 7000

Number of cattle; approx. 250 beef breed

Area of forestry plantations;150ha of radiata pine

Area of indigenous covenenant; 60ha

Nature of forestry joint venture; The Grahams own the land where several forestry blocks have been planted, in a joint venture with shareholder Warren Forestry, will get one third of the value of the forest when it is milled.


Type Numbers Emission Reduction

Sheep 7000 2310 -

Beef cattle 250 428 -

Radiata Pine 150ha - 3300*

Existing Native 60ha - -**

Total 2738 3300

Balance - 563

*The above calculation assumes that the Grahams have the rights to 100% of the carbon sequestered by the forest under the terms of the forestry right.

**Under the rules of the ETS existing forests (pre 1990) do not qualify to earn greenhouse gas emission units.

Issues to be aware of

Clayton suggests that farmers use the five years until their industry starts paying for carbon emissions, to research implications and lobby Government for a workable scheme.

A big issue is point of obligation; the level at which carbon liabilities will be carried. This could be at farmer level which each individual personally calculating carbon debits and credits, similar to accounting for GST. Or, it could be imposed at industry level with meat processors and dairy companies for example paying liabilities on every animal killed or kilogram of milk sold.

While carbon accounting on trees is done at a landowner level, this may not be the case with livestock.

Other issues could include creating differential values for livestock according to factors such as breed and climate, and whether 1990 rather than 2005, is the base year with which changes in livestock emissions are compared.

The applicability of ETS to New Zealand soils and pasture is being researched and discussed.

Awareness raising

Clayton Wallwork is available to speak about the implications of the ETS for agriculture at farm field days and other rural events.