Perverse consequences of forestry subsidies

Homepaddock

Keith Woodford writes about the unexpected consequences of the government’s forestry subsidies:

Most of New Zealand’s forests have foreign owners. With current policy settings for ownership of forestry land, this foreign ownership will increase further. Here is the reason why.

For big foreign entities, the notion of having within their portfolios some New Zealand forests for carbon farming looks very attractive.  As part of a balanced portfolio, any risks can be managed. In relation to the low returns on equities that can be earned elsewhere in the global economy, the returns look truly stunning.

An overseas entity can buy the land, plant it in trees, receive some Government subsidies, and then sit back and take the stream of income from carbon credits over the next 28 years. And then write off the original investment in the same way that a spent mine is written off.

If I were advising…

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