Buying Forestry Land for Carbon: Risks and Realities

Buying land primarily for carbon income has become increasingly common in New Zealand. While carbon can improve returns, carbon led forestry carries specific risks which investors need to understand.

This page outlines the realities behind carbon focused forestry investment.

Why carbon attracts investors

Carbon income:

  • Arrives earlier than timber income

  • Is relatively simple to monetise

  • Can improve project viability on marginal land

These features have driven strong demand for carbon eligible land.

“Carbon improves early cashflow in an otherwise long-term investment.”

Carbon is tied to land and trees

Carbon income depends on:

  • Land eligibility

  • Ongoing forest cover

  • Long term compliance with ETS rules

Forests must be maintained or replanted to avoid liabilities.

“Carbon income creates long term obligations, not just short term returns.”

Price and policy risk

Carbon prices can move sharply due to:

  • Policy announcements

  • Auction outcomes

  • Market sentiment

Future policy changes may affect eligibility, pricing, or compliance costs.

“Carbon returns are exposed to political and regulatory decisions.”

Liquidity and exit risk

Carbon focused land may:

  • Be harder to sell

  • Appeal to a narrower buyer pool

  • Be constrained by land use rules

Exit strategies should be considered upfront.

“Who will buy this land in 10 or 20 years?”

Carbon vs forestry fundamentals

Forests planted only for carbon still face:

  • Fire risk

  • Wind risk

  • Establishment risk

  • Management costs

Ignoring forestry fundamentals increases downside risk.

Forest Leaders’ view

Forests planted only for carbon still face: fire risk, wind risk, establishment risk and management costs

Ignoring forestry fundamentals increases downside risk.

Carbon should complement good forestry, not replace it.