Over the past five years, large areas of plantations in Australia have been destroyed by fires and impacted by flooding. These events combined with recent storms in New Zealand have highlighted the challenges of managing plantation investments within the context of a changing climate. The impact of climate change on the biological asset (the tree crop) is an active area of research. While climate change is impacting plantation forests globally, this article focuses on New Zealand and Australian forest industries.
In New Zealand’s plantation forests, wind has historically been the most common disturbance agent. It is believed that climate change is likely to increase tree productivity, leading to notably taller and slenderer trees, alongside a moderate increase in the frequency of extreme wind events, overall resulting in an increase in the susceptibility of plantation forests to the wind (Moore and Watt, 2015). In New Zealand, shifts in pest distributions are likely to be one of the more significant impacts of climate change on plantation forests. Reduced instances of frosts and consistent warming will result in range shifts for a number of insects. This has already been observed through research which observed poleward boundary shifts averaging 40 km over the past 60 years in 279 studied species (Parmesan and Yohe, 2003). There are many insect pests that could significantly damage New Zealand’s plantations should they enter the country, and a climate matching study has indicated that several North American species including Dendroctonus valens (red turpentine beetle) and Ips calligraphus (bark beetle) could thrive if introduced (Lantschner et al., 2017). All pine growing areas of New Zealand have climate suitable for the pine processionary moth (Watt et al., 2019). The current thinking is that climate change may lead to a reduction in foliar pathogens in the north of the country but an increase of them in the south. New Zealand has historically had a low-level of wildfire, however with climate change it is expected that the wildfire risk profile will increase significantly in certain areas.
In Australia, forest fire is the most well documented impact of climate change on plantation forests. With the catastrophic 2019/20 Black Summer bushfires in Australia, Margules Groome has observed an increase in fire risk perception amongst growers, investors, and insurance providers. Margules Groome now includes a risk adjustment factor in all our valuations in an attempt to qualify the value impact of fire risk in plantation asset value in Australia. While the impact of forest fire in Australia is well covered in the literature, the impact of recent flooding in New South Wales (NSW) on plantation forests is less well documented. Increased temperatures and drier conditions in Australian plantation growing regions will likely increase tree stress making them more susceptible to insect pests (Pinkard et al., 2014). Battaglia et al. (2009) and ABARES (2011) modelled the impact of climate change on Australia’s plantation forest productivity, although contradictory results were produced for some regions, their results agree that there will be a reduction in growth in NSW and south-west Western Australia.
While research continues into the biological impact of climate change there seems little on the impact on plantation forest infrastructure such as roads and bridges. Cyclone Gabrielle earlier this year caused significant damage to main public roads and bridges in the areas of Northland, Coromandel Peninsula, East Coast, and Hawke’s Bay. While fixing the public infrastructural damage in this region has become a priority for the New Zealand Government, the impact on the in-forest infrastructure is publicly unknown at this stage. At least one forest company Margules Groome has talked to has indicated the damage to their roads and culverts is substantial. In 2022, a large storm in the Nelson region caused both significant damage to the in-forest infrastructure as well as to the public road network. State Highway 6, the main link between Nelson and Blenheim closed for seven weeks, meaning that all logs transported between the Nelson and Marlborough regions needed to travel an extra 100 plus kilometres. Margules Groome knows of at least one forest plantation owner in Australia who is reviewing their roading infrastructure requirements, particularly stream and river crossing sizing, as a result of the recent flooding in New South Wales. Building future in-forest infrastructure designed to withstand increases in severe weather brought on by climate change will come at a cost.
Integrating the random nature of forest fires and storm events into forest appraisals is challenging. Going forward, Margules Groome believes there is a need to start looking into how infrastructure costs used in forest appraisal models will be adjusted to consider increased storm and forest fire frequency. Margules Groome continues to research the impacts of climate change on plantation forestry assets. As part of this research, we continue to investigate methods for including these impacts into our plantation forest appraisal modelling. Margules Groome has carried out a research project in South Africa using statistical modelling of fire risk and incorporating those models into a linear programming-based valuation model. An overview of this project will be published soon.
ABARES. 2011. Potential effects of climate change on forests and forestry in Australia. Canberra: Australian Bureau of Agricultural and Resource Economics and Sciences.
Battaglia M, Bruce J, Brack C, Baker T. 2009. Climate change and Australia’s plantation estate: analysis of vulnerability and preliminary investigation of adaptation options. Melbourne: Forest and Wood Products Australia/CSIRO. Project No. PNC068–0709 report.
Lantschner, M.V., Atkinson, T.H., Corley, J.C. and Liebhold, A.M. 2017 Predicting North American Scolytinae invasions in the Southern Hemisphere. Ecol. Appl. 27, 66–77.
Parmesan, C. and Yohe, G. 2003 A globally coherent fingerprint of climate change impacts across natural systems. Nature 421, 37–42.
Pinkard L, Bruce J, Battaglia M, Matthews S, Drew D, Downes G, Crawford D, Ottenschlaeger M. 2014. Adaptation strategies to manage risk in Australia’s plantations. Melbourne: Forest and Wood Products Australia. Project No: PNC228-1011 report.
Moore, J.R. and Watt, M.S. 2015 Modelling the influence of predicted future climate change on the risk of wind damage within New Zealand’s planted forests. Glob Change Biol 21, 3021–3035.