Investment fund looks for backing to develop carbon sinks

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A new fund to develop carbon sinks on less productive agricultural land is being launched today.

The CQuest Forestation and Carbon Investment Fund, is seeking $15.2 million to buy up 1500 hectares of land to plant pine trees. Photo: 123RF

Carbon sinks are anything that absorbs more carbon from the atmosphere than it releases, like plants.

The fund, known as the CQuest Forestation and Carbon Investment Fund, is seeking $15.2 million to buy up 1500 hectares of land to plant pine trees, and aims to give wholesale investors an opportunity to farm carbon credits.

It’s being managed by MyFarm Investments, which said it would also look at opening to retail investment in the future.

MyFarm chief executive Andrew Watters said the plan was to do two things.

“In 20-25 years we will harvest those trees for timber and other products. But in the meantime, we’re doing this really important job of taking carbon out of the atmosphere and putting it into the wood product.

“The benefit from an investment perspective is, we can generate those credits and then sell those credits through the New Zealand Emissions Trading Scheme.”

Watters said there would be good cash-flow returns from year five or six, through to year 15 or 16.

He said the project would look to avoid the controversial practice of using productive land for planting.

“We’re operating on the margin with our activities. We’ll be careful with the properties we select and make sure they’re the lower quality properties,” he said.

Watters said demand for carbon credits was high and expected a good return for investors.

At the most recent auction in the government’s Emission’s Trading Scheme, the government set aside nearly 5 million units, with a price ceiling of $50 each.

But strong demand saw prices hit $53.85 per unit, forcing the government to release its reserve of 7 million extra units in a failed bid to keep prices in line.

MyFarm said it would initially invest in a 465 ha former sheep and beef property in the Tararua district, in the North Island.

It envisaged sequestering (removing) 480 tonnes of carbon per hectare from the atmosphere, generating carbon credits at a cost of between $20-25 per tonne.

As the trees grow to maturity, it aims to sell the credits on the secondary market, where carbon credits have recently been trading as high as $60 per tonne.

Initial property planting is expected for next year.