18 July 2011
The Australian Government's carbon price scheme is failing to increase investor interest in forestry properties. Industry players were hoping a price on carbon would increase the value of plantations.
Major swathes of timber plantations remain on the market and there is a steady build-up, the receivers of the failed Willmott Forests having pushed more than 50,000 hectares of radiata and oak to sale in the past fortnight, according to the Stock & Land newspaper.The oversupply of forestry assets has put pressure on prices, and cuts of up to 40 per cent of book value are being realised, starting with Hancock Natural Resources' purchase of the Queensland government's plantation for $600 million last year.
Many industry players were hoping a carbon price would provide an incentive for investors to plant trees, which would push up demand for forestry properties.
However, the exclusion of many forestry assets from the federal government's plan and the low price per tonne of carbon of $23 is proving to be a disincentive for investors.
In the three days after the carbon price was announced, the share price of CO2 Group – a listed company which establishes carbon sinks – lost 25 per cent of its value.
The Australian Forest Products Association has also criticised the government's carbon price.
"Despite being in the business of actively removing carbon from the atmosphere, Australia's only carbon-positive industry – forestry – has been snubbed by the government's Clean Energy Future announcements," it said.
The association's chief executive, Allan Hansard, said it was disappointing that tree plantations grown for wood as well as carbon were excluded from the much-lauded Carbon Farming Initiative.
Source: Matthew Cranston, Australian Financial Review, writing in Stock & Land