The identification of unproductive hill country for planting carbon farmed vegetation and the economics of doing so : a thesis presented in partial fulfilment of the requirements for the degree of Master of Science in Agricultural Science, School of Agriculture and Environment, Massey University, Manawatu, New Zealand

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The Emissions Trading Scheme (ETS) is New Zealand’s main legislative tool for ensuring the domestic and international greenhouse gas reduction commitments are met. Tradeable ‘Carbon Credits’ (NZUs) are awarded to forestry owners for the carbon storage capabilities of their forests. Afforested areas under 100 hectares in size are subject to carbon storage estimation through the use of default ‘carbon look-up tables’. Recent mass land use change on New Zealand hill country from pastoral production to blanket planted exotic trees is divergent to government policy, which promotes the integration of native trees into the landscape. A pilot study tests whether ‘carbon look-up tables’ for Indigenous Forest are aligned with actual carbon sequestration of Leptospermum Scoparium (Manuka). This work aims to determine whether mass land use change is a consequence of the ETS in its current form. This is achieved through the economic modelling of exotic Pinus radiata (Pines) and Manuka on different slope classes of a typical New Zealand hill country farm. Allometric equations used on Manuka stands identified by random grid sampling showed that carbon sequestration of regenerating bush may be underestimated by over 82%. Economic modelling highlights the large earnings associated with blanket planted fast-growing Pines (peaking at $2,915/ha in Year 7) compared to the existing pastoral system ($242/ha/yr). Net Present Value (NPV) and sensitivity analysis results parallel findings at different inflation rates and market prices. Pines outperform natural regeneration of Manuka in every model from an economic perspective, although preferential income revenues like honey are not accounted for. Targeted plantings are not cost effective due to (a) increased fencing costs and (b) exclusion from the ETS. Recommendations made to align the impacts of the ETS with government policy include: (a) collecting carbon sequestration data for specific native species in different environments; (b) removing spatial constraints associated with the ETS’ definition of a forest; and (c) assigning a monetary incentive to promote certain forest values; such as biodiversity. Silvopastoral systems where pastoral and forest species spatially coexist are a potential solution. Areas requiring research in a New Zealand hill country context are identified using a recently improved framework.