The tax breaks associated with forestry aren’t to be sneezed at either, there is no income tax or CGT payable and once forestry investments have been owned for over two years they are free of inheritance tax liability.

While yields can be somewhat volatile, due to the nature of the product the investment can be stored on the stump until the market value goes back up. This is the advantage with forestry plantations as opposed to other crops as once the trees are mature they can be left to increase in value.  In 2007 forestry saw a 31.6% total annual return, this fell in 2008 to 7% but that was still well ahead of the commercial and residential property sectors and the stock market.

However, this is a long term investment, it can take anywhere between six to ten years to harvest a plantation, during which time there’s no income. This type of investment would suit those looking to add to their pension fund or those that already have a steady stream of income coming in.

Forestry Update is sponsored by Greenwood Management. For more information on investing in Forestry please click here

Despite this there are still concerns over the environmental integrity over existing investment portfolios and forest schemes have yet to be accepted in compliance markets.

In advance of the climate conference in Cancun, Mexico, the forest carbon sector is one of the few expected to benefit from an early global agreement. As was the case at the climate conference in Copenhagen last year the one shining light was the progress reached on the REDD scheme.

The findings from Eco-securities reflect the advances in negotiations on the monitoring, reporting, verification and sustainability of forest offset projects. It is these issues along with the number of stakeholders involved that have held back the expansion of REDD crediting schemes in the voluntary market.

Over 200 global, multinational and regional firms who bought a total of 7.9 million tonnes of CO2 equivalent of carbon offsets in 2009, including three million from forestry were surveyed by the report. This figure represents 57% of the total voluntary forestry carbon offset market in 2008.

Nearly 80% of those surveyed had a ‘positive’ or ‘very positive’ outlook on forest offsets, whereas last year that figure was only 58%. Most notably there was a sharp increase in Europe participants from 36% to 84%. This is reflected by the fact that more European firms are adding forest offsets to their overall offset portfolio, up from 13% to 54%.

Voluntary offset buyers have shown the most interest in this market, however there is an increasing number of buyers falling under regulatory schemes, particularly in North America and Australasia.

Even so, pricing varies depending on finance arrangements and offset schemes, ranging from $5-10/tCO2e. This is well below current levels of €13/tCO2e for international offsets under the UN Clean Development Mechanism. However, European buyers are willing to pay more than those in the US or Australia.

For those wishing to buy forest credits 89% said that certification under a recognised standard was important although not all firms considered lack of widely recognised certification a deal breaker. Up to 27% said it depended on the projects. The other three main factors were the location (84%), the ability of schemes to generate wider community benefits (83%) and project type (80%).

The biggest constraint however on forest carbon credit markets is that the EU emissions trading scheme does not yet accept forest carbon offsets. This survey confirms that as of 2013 most buyers want to see forestry activities included in a new global climate agreement.

Forestry Update is sponsored by Greenwood Management. For more information on investing in Forestry please click here

Last week Tony Burke the Minister for Agriculture, Fisheries and Forestry announced what offers were under the Government’s Forest Industries Climate Change Research Fund. To date, twenty projects have been offered support under the research fund. The research fund was an election commitment designed to address knowledge gaps about the impact of climate change in Australia’s forestry and forest industries.

Of the funding available RIRDC has been offered a grant of $248,700 to assess how new bioenergy agroforestry crops could be established and to examine biomass harvesting in planted forests.

A further grant of $420,000 was offered to CSIRO to create a pathway for developing sustainable regional biofuel industries as well as assessing environmental economic opportunities for biofuel production from forest biomass resources in two regions of Australia.

The Department of Industry and Investment NSW received a grant of $250,000 to examine how soil carbon dynamics are affected by growing pine plantations on agricultural land and if they can potentially enhance soil quality and greenhouse reporting processes.

Lastly Private Forests Tasmania was given $255,671 in order to help farmers and regional communities understand how to invest in, grow and manage plantations as part of their own climate change management practices.

According to Tony Burke Minister for Agriculture, Fisheries and Forestry the Australian forest industries plays a significant role in supporting regional jobs and the economy.

“Australia’s forestry and forest products industries turns over around $23 billion annually and supports an estimated 120,000 jobs,” Mr Burke said.

Forestry Update is sponsored by Greenwood Management. For more information on investing in Forestry please click here