ANALYSIS OF THE TREELORDS DEAL          
               
        Reported terms:  (light coloured cells can be changed)          
        million (estimated)          
                   
        million (from the Bill)          
               
        million          
               
        Unreported - The deforestation liability for pre-1990 forests          
        Background          
        The proposed Climate Change legislation makes a distinction between pre-1990 and post 1989 exotic forests.  The draft regulations provide tables detailing the deemed CO2 emissions from deforestation of trees planted prior to 1 January 1990 after a specified number of years growing. [This is on the basis agreed at Kyoto that a harvested tree will result in 100% of its sequestered carbon returning to the atmosphere as CO2.]          
                 
                 
                 
                 
        What this means that if a landowner wants to change land use after harvesting a pre-1990 forest, carbon credits have to be purchased to cover the deemed emissions. [Replanting or regeneration are the only ways of avoiding the deforestation liability.]          
                 
                 
        The key figures for the Treelords deal are (i) the deemed emissions as at 1 July 2009 (proposed settlement date with an average age of 20 years) and (ii) the deemed emissions at harvest time, say year 28 of the last rotation. These figures are 518 tonnes and 709 tonnes respectively. However the land is leased for this rotation and the next so the deforestation liability would occur, under the proposed legislation, in around 38 years time.          
                 
                 
                 
                 
        As a concession to pre-1990 Treaty Settlement forests, the Government is offering an allocation of 18 carbon credits per hectare.          
                 
        Treelord Calculations          
        Base assumptions            
        Land area ha          
                 
        Deforestation potential = ha          
                 
        CC Allocation tonnes          
                 
        CC price            $ Price growth pa              
                 
        Liability @ 01/07/09 tonnes of CO2/ha (ave age 20 years)            
                 
        Liability @ yr 28 tonnes of CO2/ha                
        Conclusion