Carbon credit crash could force land sales

A crash in the price of carbon credits could force landowners who invested in new forests to sell their land, an analyst says.

The Government's permanent forest sink initiative allows landowners who establish forests on previously unforested land to earn credits for the carbon sequestered by their trees.

But the price of New Zealand carbon units has dropped from about $20 a tonne in the first year of the scheme to about $3 a tonne.

The forestry sector has called for limits to cheap offshore carbon imports to help stop the falling prices, but the Government has rejected that call in a bill that would amend the Emissions Trading Scheme.

Now forestry analyst Ollie Belton, of Christchurch consultancy Permanent Forests, is warning that up to a quarter of people who invested in the scheme may have to sell their land.

"If the carbon price remains low for another 24 months without any sort of hope in the near future, then it would be over for quite a few of those parties," he told Radio New Zealand.

Some people had bought farms with mortgages on the basis that the price of carbon was between $15 and $20, he said.

Mr Belton said landowners were encouraged into the permanent forest sink initiative only to see it gutted by the Government along with the Emissions Trading Scheme.

One farmer who entered half of his farm into the scheme for 50 years told Radio New Zealand it seemed like a good idea two years ago.

He could sell the carbon credits for some $200,000 then, but with the carbon price now under $3 a tonne, his profit this year was only $30,000.

The farmer said he had little choice but to sell his farm because he had a mortgage to service and no way to make up for the drop in income.