JOINT COMMITTEE ON CLIMATE CHANGE AND ENERGY SECURITY debate -
Wednesday, 13 May 2009

Carbon Sequestration: Discussion.

Chairman

I welcome Mr. Gerry Egan, director of corporate affairs, Mr. Tim Crowley and Mr. Ciaran Black from Coillte. It is kind of them to address the committee. I am interested in some of the statistics that came to light as a result of our invitation to Coillte and COFORD. The rate of afforestation in the 2008-12 period will be approximately 35% below the national climate change strategy assumption of 14,000 hectares per annum and some 55% below the national forestry strategy target. It proves this country is first class at setting targets but that achieving them is another issue.

This committee is in the process of scrutinising the EU proposals for 2012-20 and those members who met colleagues in Brussels stressed the need to include afforestation in the agreement as part and parcel of our efforts to achieve targets. It is frightening that we are so far behind the targets and we will do anything we can to assist Coillte to dramatically improve those figures. Members of this committee have, on many occasions, inquired into the area of afforestation as a way of achieving our targets for CO2 emissions.

Mr. Gerry Egan

First we will set the context for today's discussion by giving a short overview of Coillte, what we are and what we do now as opposed to what we are traditionally perceived as doing. Second, we will specify how we can contribute to the national climate change and energy security agendas by talking about our contribution to afforestation, what we are doing in respect of renewable energy and the potential of sustainable wood products to contribute towards energy efficiency and the reduction of carbon emissions. We also want to talk about the economics of carbon and some of the issues that arise for forest owners in respect of the ownership, recognition and value of the carbon. We will then draw some brief conclusions.

I will give the overview and my colleagues will deal with afforestation and renewable energy issues. As members will see, Coillte is the State forestry company but over the past 20 years Coillte has changed significantly, to the extent that we now have a number of significant businesses. We have a substantial panel products business which probably produces most of the wood products in this room. We also have a significant land management business and carry out significant transactions in land which contribute to local and national infrastructure. For example, there are almost 300 mast sites on Coillte land, which is a major contributor to the national communications infrastructure.

The fact that our business has evolved as it has done has caused us to look at Coillte's core purpose. We have reinvented ourselves and, in line with the work of this committee, we now see Coillte's purpose as being about the innovative and sustainable management of natural resources, rather than simply forestry. Our roots, however, are in forestry and Coillte can be described as the anchor tenant of the forest products sector in the country. As the Chairman said, Ireland still has a low level of forestry at 10% compared with the EU average of 45%. It is also a quiet industry because its employees tend to work in rural areas in relatively small numbers. However, the sector employs approximately 16,000 people with an annual economic value in excess of €1.65 billion, making it a significant, if somewhat understated, industry.

The sector now comprises mostly indigenous businesses. A number of international companies once operated in the sector but they have increasingly come into Irish ownership. The shape of the sector has also changed significantly in recent times. Our colleagues from the IFA are in the Visitors' Gallery and will know that, in the past 20 years, we have gone from a situation where there was very little private forest ownership to one where there is upwards of 12,000 private owners of forests in the country. That brings significant challenges for accessing those resources and bringing them to market, particularly in the emerging energy sector. Apart from the economic benefits, forests deliver a wide range of environmental benefits, from climate change abatement to recreation and habitat restoration.

Coillte has evolved into a forestry and forest products company and we have three core divisions. Our Coillte forestry business manages the forestry business. The Coillte enterprise business is concerned with land added value and, as my colleague, Mr. Ciaran Black, will show with some interesting data, focuses on renewable energy opportunities. The Coillte panel products business comprises two businesses. SmartPly in Waterford manufactures a structural timber product known as "oriented strand board" and Medite in Clonmel manufactures medium density fibre board, MDF, which is probably the core product used in the furniture in this room.

The group is an international business and 53% of our total sales are in export markets, largely in the UK and near Europe. That figure is reflected in the staff number of 1,200 who are based in Ireland, the UK and the Netherlands. Coillte is the State forestry company, but it is also an international business with operations in a number of countries and a wide range of business activities. Like every business that feeds into the construction sector, Coillte is encountering fairly serious difficulties, but because of the diversity of its activities it will be positioned quite well to take advantage of the economic upturn that we are hoping for.

I mentioned that Coillte had looked recently at its core purpose and has revisited its corporate strategy which is focused on four areas. First, Coillte is expanding its forestry business, of which afforestation is a key part. Second, land management, as Coillte owns 7% of the national territory and there are many projects where it is uniquely positioned to assist in the delivery of major infrastructure projects, for example, the rural broadband scheme which is currently being rolled out. Coillte is dealing with BT to see where it has sites that would be suitable to support the putting in place of infrastructure. BT will require up to another 300 mast sites at various locations around the country in order to deliver wireless broadband. Again because of the patchwork of properties that Coillte has, it is well positioned to do that. Third, renewable energy, which I will deal with in detail later. Fourth, Coillte has two panel products businesses,where traceability is critical and the raw material used to make those boards is certified as coming from sustainable managed forests. This is a significant market advantage in the UK market, but it also needs to be reflected in Government policy. I will elaborate on that point later when I outline the conclusions.

Our colleagues in COFORD will deal with the impact of afforestation on climate change, some of the science behind it and why it is so important. I will hand over to my colleague, Mr. Tim Crowley, who will address Coillte's role in afforestation and some of the issues with which it currently contends to increase the level of afforestation to the levels to which the Chairman referred in his introduction.

Mr. Tim Crowley

Afforestation is important because it provides the raw material for sustainable timber products. This industry is worth in the region of €1.9 billion. All Coillte forest outputs are used to produce sustainable products in the area of timber, lumber, panel products, stakes, lifestyle furniture and so forth. Coillte forests have been certified to FSC standards since 2001. About 85% of the panel products and 60% of the output of sawmills is exported to the UK and certification is a key issue as regards entry into the markets in these areas. Afforestation is very important as it contributes to climate change mitigation. It has the potential to substitute for fossil fuels. The wood processing sector is the largest user of wood for energy in the drying capacity and combined heat for power plant chip, CHP. Wood is being used for the emerging energy markets and that is increasing year on year. My colleague, Mr. Ciaran Black, will deal with that area.

Coillte has planted about 60,000 hectares since 1990. This is estimated to sequester 2.8 million tonnes of CO2 during the Kyoto Protocol period. Coillte produces about 87% of the total wood used in Ireland, 2.6 million logs, and about 400,000 logs are from private sources and recyclable timber accounts for approximately 150,000 logs. This is based on a study carried out by COFORD. This is all from forests that have been planted in the past two to three decades. The timber industry is totally interdependent. Every single part of the tree is used.

Deputy Simon Coveney

Will Mr. Crowley explain the figures in the slide on all-Ireland wood flow?

Mr. Tim Crowley

The figures are the number of logs.

Deputy Simon Coveney

Mr. Crowley mentioned percentages.

Mr. Tim Crowley

Coillte produces 2.6 million cu. m of logs, the private sector produces 400,000 cu. m and 150,000 cu. m are recycled. The logs go to the primary processing sector which are the sawmills. Of the 3 million cu. m of logs about 2.2 million cu. m go into the sawmills sector, which includes sawmills, pellet mills and stake mills and of that, approximately half is a residue which comes out as chips and sawdust. That product is moved into the panelboard mills, and a certain amount, about 10% of the overall volume, is used for energy by the sawmills. A certain amount is used as horticulture bark, animal bedding and a small amount is exported. Every part of the tree is used, and about 10% is used for energy. This timber comes from forests that were planted before 1990.

The trees that have been planted since 1990 will become available and we will have a forecast on that. The next slide is a graph of the planting by the different players since 1990. The year 1996 was the peak year for planting when approximately 24,000 hectares were planted. Coillte planting is represented by the colour yellow and the private element is represented by green. After 1996 Coillte became ineligible for the premiums and as a result became uncompetitive in the market. The fall-off in afforestation has been dramatic since 2004 and is now well below a suitable level and this will cause problems for the processing industry and from a carbon trading point of view. Dr. Eugene Hendrick from COFORD will deal with the climate change issue, which is serious.

Coillte is heavily involved in promoting afforestation. It has a farm partnership scheme, where it partners with farmers and pays them an up-front payment and manages the plantation for them. Coillte and the farmers share in the profits. There are approximately 12,000 hectares in use under this scheme. Coillte and Bord na Móna are involved in a joint venture where it will establish 5,000 hectares between now and 2012 on cut-over peatland. This is based on research work that has been ongoing for the past seven or eight years. Coillte provides servicers to landowners and has 20% of the market share in planting and managing plantations.

The main reason that Coillte is not investing in forestry is that it is not economic for it to do so. It is not economic for us to buy land and plant it in trees because of our ineligibility for premia. That is the main reason. I am aware that representatives of the IFA are present. The main obstacles to farmers increasing afforestation include competing land use schemes, of which there is a variety, and there are also long-term implications for afforestation from the point of view of the commitment of the land to forestry. Issues also arise about the obligation to replant and the liquidity of the land following planting.

We need to create incentives to broaden the investor base in afforestation. We need also to link afforestation incentives to climate change targets to attract other landowners and financial investors into that market so that the graph I showed on afforestation is turned and begins to climb up to a sustainable 10,000 hectares to 15,000 hectares per year.

Chairman

Will Mr. Crowley explain why Coillte became ineligible for premia?

Mr. Gerry Egan

Coillte became ineligible for premia because it is a State company. In a decision that was subsequently upheld by the European Court of Justice, the European Commission concluded that public undertakings were not eligible for the premium scheme because it was a loss of income scheme mainly targeted at farmers. We entered into any afforestation at that time in good faith on the basis that we were eligible for premia and we received premia for approximately four years before we were deemed to be ineligible.

Chairman

Does Coillte still have much land available for planting?

Mr. Tim Crowley

No, that is land that Coillte would purchase.

Chairman

Does Coillte not have any land bank as such?

Mr. Tim Crowley

No. We replant the entire area we harvest on an annual basis. That is totally renewable on an annual basis. Up to 1996 we purchased land and planted it.

Chairman

Is Coillte now totally dependent on the private sector, as such, to plant trees?

Mr. Gerry Egan

Yes, as the incentives are structured with current land prices.

Deputy Bobby Aylward

It is the case that what Coillte cuts out it replants. The land still belongs to it.

Chairman

That is reafforestation after harvesting.

Mr. Gerry Egan

That is not additional and it does not contribute additional benefits from a climate change point of view or from a timber supply point of view.

Deputy Simon Coveney

On the ineligibility for premia, I presume the determination made was that the State was essentially paying itself because it was paying a State company premia. Is the company not, essentially, still doing that? Coillte is now in partnership with farmers and landowners and it is sharing in the profits of that endeavour. The farmer and the landowner access the premia. We can talk later about the fact that the premia have been reduced to farmers and landowners. Essentially, Coillte is still making money out of premia if it is sharing in the profits made by farmers, presumably on the back of premia if they plant trees.

Mr. Tim Crowley

The farmer gets all of the premia payments. Coillte does not get anything. The payment we get from sharing the profits is from the management of the plantation through its cycle and harvesting and marketing it afterwards.

Deputy Bobby Aylward

Did Coillte get premia for four years? That means Coillte is not getting any premia for the reafforestation that is taking place.

Mr. Tim Crowley

There is no grant for reafforestation.

Deputy Bobby Aylward

Does Coillte not get any premia now?

Mr. Tim Crowley

No.

Deputy Bobby Aylward

We can talk about the 8% cut later. Do the Coillte representatives consider that will have an effect on afforestation in the future?

Mr. Tim Crowley

It certainly will affect the confidence of farmers in planting their land in the future if they are uncertain of what the premia might be over their 20-year life cycle.

Deputy Bobby Aylward

Like other members I have had representations from constituents and they are angry that their contract for a 20-year period has been reduced by 8%. They maintain that is a breach of contract. What is the view of the Coillte representatives on the matter?

Mr. Tim Crowley

If that is what they feel, that is what they feel. From an industry point of view, in terms of planting it is a major decision for an individual to plant his or her land. As the law is structured currently, the commitment is forever because there is a replanting obligation. First, it is a major challenge to make that decision. Second, the proposed reduction is a negative rather than a positive for the forestry system.

Deputy Simon Coveney

With respect, the question is whether it is illegal. It is a major decision for a farmer to commit land to forestry for a lifetime, especially if the land was used for other purposes. Once one decides to plant, that is it, unless one is interested in short coppice rotation, for example. The contract farmers enter into involves a 20-year commitment for premia. For many farmers, a third of the way through that cycle, they are having their premia dramatically cut back. Coillte is managing 20% of those plantations.

Mr. Tim Crowley

From a planting point of view, Coillte is involved up to year four.

Deputy Simon Coveney

In terms of forestry services to landowners, is Coillte, as a State company, reducing its fees to farmers by 8% since their premia are reducing by 8% as a result of a Government decision?

Mr. Gerry Egan

A couple of things need to be clarified. The first is that Coillte has no involvement in the administration of the grants or premia schemes.

Deputy Simon Coveney

I accept that.

Mr. Gerry Egan

That is a ministerial function. In fairness, Deputy Coveney's first question on the legality or otherwise of the decision to reduce the premia is best directed to the Minister. We are not in a position to answer that.

Deputy Simon Coveney

Mr. Egan knows much more about forestry than I do. I presume Coillte's clients, who are paying it for planting and forestry management and maintenance are inquiring of it about whether a legal issue arises. This asset that was worth X is now worth X-8 but the costs in terms of maintenance remain the same. There is an obligation on Coillte as an organisation in the same way that there is an obligation on other State organisations involved with other sectors of industry to give advice to farmers on where they stand. I consider the reduction in premia as a breach of contract. That is something on which Coillte will need to advise farmers.

Deputy Bobby Aylward

As I understand it, Coillte is involved in 20% of the forestry in this country. It has a contract with a farmer for so many years for maintenance and it has a share in the profit. Is that not the way it is done? It does not affect the premium. The premium is paid by the Department and the contract with Coillte has nothing to do with that.

Mr. Tim Crowley

Absolutely. The service we provide is that we plant the land for a farmer and we maintain it for four years. The planting grant covers that. There has been no reduction in the planting grant. All of our costs remain the same. We have 20% of the market. That is totally separate from the premium issue. Therefore, the service that we provide concerns planting and maintaining it to year four, to which the planting grant is covered. There has been no reduction in the planting grant available. The premium is what the landowner will get for loss of income from year one to year 20, until an income starts coming from that. That is separate from the planting grant. The premium, which is income to the farmer over that 20-year period, has been reduced by 8%.

Deputy Simon Coveney

The grant pays for planting while the premium for maintenance and what is left over is profit for the farmer.

Mr. Tim Crowley

The main element of the maintenance is in year one to year four.

Deputy Simon Coveney

Yes.

Mr. Tim Crowley

That is the main thing and the planting grant covers it.

Deputy Bobby Aylward

The premium is compensation for loss of land——

Mr. Tim Crowley

For loss of earnings.

Deputy Bobby Aylward

——for other uses, until the forestry matures at 20 years.

Mr. Tim Crowley

Exactly.

Chairman

We can come back to questions afterwards. I now call on Mr. Black.

Mr. Ciaran Black

As Mr. Egan outlined, I will present a few slides on renewable energy activities, primarily wind and biomass. As regards wind energy, Mr. Egan mentioned that we have a large landbank, 7% of Ireland, and within that we have good wind regimes. Sites that have high elevation have good prospects from a wind development perspective. Our approach to wind is mainly on three areas. One is to look at opportunities based around wind farm developments that are on 100% Coillte land. We examine developing those in a particular way. Another section is where developers look to include some portion of Coillte lands within their overall development, so it is a subset of that development. The third approach is to examine ways of facilitating the development of these wind farms through the provision of rights of way and wayleaves.

In the slide, the green boxes show how we approach developments concerning 100% Coillte land. We have a strategy to examine our own developments whereby we try to pursue them ourselves. We also have a series of joint ventures with various partners within the industry. In total, in combination both with the gate 2 allocation of grid connections, and gate 3, we have approximately 550 MW worth of projects within that work stream.

In the second work stream, we have some sales that are already identified both in gates 2 and 3. We also have a work stream concerning some other projects within gate 3. Some of those may ultimately turn into sales or some miscellaneous transactions, namely, rights of way. We are in the process of going through that.

The currently identified volume, in which we would have some involvement in terms of selling land to facilitate the development of those projects, is in excess of 400 MW. Because of the extent of our land-holdings, the vast majority of projects in miscellaneous transactions, which are rights of way and wayleaves, come across our lands in some way, either through connecting onto the grid or accessing the site, so we have a significant involvement in them.

Outside that, in the yellow box, we also have a series of opportunities that are outside the current gate allocation process. If the current targets are not met with the list of projects that are being offered with gate connections, we are well placed to move some of those projects into a development or sales opportunity. To date, approximately 20% of the current installed wind capacity in Ireland is on former Coillte land, mainly by way of sales but also by way of some land leases.

In the round, Coillte is directly involved — either through our own development or through sales of land — in the delivery of about 1,200 MW of Ireland's onshore capacity. That represents around 20% to 25% of what we need to install to meet the 2020 target, so it is a significant demand. In addition, we facilitate the delivery of a high proportion of the remaining projects that need to get built by giving rights of way and wayleaves to those other projects. We have a significant involvement therefore in the wind sector and have had since the start of the industry in Ireland.

One interesting fact is that the types of land that are typically good for wind farm developments are poor from a forestry perspective. They are quite high elevations and have pretty poor yields from a forestry perspective, so there is a nice synergy in that respect.

As regards our next steps and our current activities, we already have construction under way on our first wind farm, which is a joint venture project. We expect to have it completed by Q1 next year. We are already progressing well on a second project, which will go into construction in the middle of next year. We are currently beefing up our in-house management expertise, structures and capabilities. In addition, we are beginning a procurement process to fill out the range of services we will need to pursue these opportunities.

As regards current activity on workstreams 1 and 2, in terms of our own developments and joint ventures, we are pushing forward to secure planning permission on those. That job of work is being actively pursued at this moment. We are also project planning on every single perspective of sales and miscellaneous transactions on workstreams 3 and 4.

As regards the remaining projects in gate 3, where those projects are occurring we have overlaid that on our estate map to assess the involvement of each of those projects and what their level of interaction would be with Coillte, in order to pursue those opportunities and facilitate their delivery as well as possible. We are also monitoring the longer term development of projects that are outside gate 3. That is our approach on the wind farm aspect.

Turning to biomass activity, the chart shows that over the next number of years there will be growth in supply of the type of material that is suitable for using biomass in the energy sector. This is focusing on pulpwood. I have done quite a conservative portrayal of this in the graph, but it would accelerate much more if the market develops more quickly, prices are firm and there is more market certainty in terms of how this energy sector will evolve. In short, the current supply and demand situation is met by traditional processing facilities for the output of this type of wood, the pulpwood class of material. Over the near term, however, we are seeing pretty rapid growth coming primarily from the private forestry sector. This will mean that in the coming years, 300,000 to 400,000 cu. m — which is probably a conservative estimate — will become available. That is either going to be taken up by a step up in the current processing capability or, more likely, it will be by new applications in the energy sector. We are already seeing the shoots of that beginning to grow. As the picture changes, we will see that there is more and more material available to go into the energy sector.

As regards the underlying economics and pricing associated with biomass, the two biggest costs in the sector are wood and haulage — the cost of transporting it around the country. On wood costs, the key element that needs to be managed as well as possible is harvesting and extraction, which must be done efficiently. Typically, this is the lower value material that is coming off the site, so it must be done at an efficient level and scale is extremely important in that regard. There are some challenges because when material comes from the private sector there are typically smaller scoop sizes. There are approaches to co-ordinate some of the activity in order to minimise the scale disadvantages. Our approach is to look at regional depots, rather than large central installations to take this material. We do not want to have high transport costs associated with bringing this material to its end use. We are currently examining establishing regional depots that would have a catchment area with a radius of about 80 km.

Chairman

Is it near railways?

Mr. Ciaran Black

Yes. It is a combination of where the prospective customer base will be and where the supply is coming from. There are two dynamics which need to be matched when looking at the logistics of it, namely, matching the demand and supply parameters. The key is to minimise the delivery costs into the depot, which comes in from the forestry base, and the delivery out to the end customer.

In the current marketplace, only the traded sector — those within the ETS scheme — is facing carbon taxes and charges associated with carbon. If a carbon tax or levy was introduced, it would obviously have a significant impact on the development of the biomass sector within Ireland.

In terms of our approach, we are doing an in-depth review of the market. We met virtually all the stakeholders in the market and approached a range of potential customers to try to understand their needs. When switching from a conventional source to a biomass source, there are many logistical issues, in terms of the amount of deliveries and volumes that would need to roll into a facility regularly. Many such considerations have to be understood. One key thing is to have prospective customers comfortable that there will be continuity of supply over a long period. If they are to make a bold move across to a biomass facility they need to be sure the supply is there. That is one of the key aspects of the market that has to be sorted out.

It is also key to understand the dynamic of pricing in the marketplace. Mr. Crowley, from a forestry perspective, would typically look at prices from a euro per cubic metre basis. Haulage and those selling this material might look at price per tonne at a certain moisture content and the energy user might look at a price per kilowatt. There are challenges along the supply chain to try to ensure all of those meet together, and the economics of the supply chain are integrated well, to ensure there are efficiencies all the way through.

We are also looking at trying to dip our toe in the water and get real, hard-edged experience, in terms of rolling out some of these depots and pushing forward, so that we can try to understand the supply chain issues and challenges associated with trying to start to bring significant volumes into the market.

We are trying to do it with as much use of leading edge technology as possible and to have as future-proof an approach to the market as possible so that we can monitor things such as the impact of moisture content going into the facility so that we can adjust the supply chain to ensure we are constantly bringing higher quality material to customers.

A significant volume of work needs to be done to optimise the location of the depots. This will all ultimately come together to develop a business plan which will show how these depots would be rolled out in combination with the likely locations where supply will be and where there are concentrations of demand. That is the approach we are taking.

The role of private forests is crucial to the development of the energy sector. Virtually all the new growth is coming from the private sector, but there are challenges in bringing that to market. The typical small forest size in the private sector throws up challenges, in terms of having efficient scale to harvesting extraction and transport. There is also perhaps a lack of knowledge and experience in terms of forest management.

The private forest, without an agency such as Coillte which can probably provide a greater continuity of supply, has a risk of intermittent and sporadic output within particular catchment areas that might curtail the comfort factor prospective users might have that would give them the confidence to switch to using biomass.

Coillte can provide a key role in facilitating this to create a robust supply chain which will allow these markets to develop. It is very important that what we do with this is done in combination with how the private supply comes to market. There is a key role for Coillte to support and rely on a consistent supply chain.

Chairman

Is the delegation not deeply concerned that we are now totally dependent on the private sector? There are other opportunities for the use of land in the future. It is a major step to go down the road of biomass. One is totally dependent, in terms of location, viability and all that sort of thing.

Mr. Ciaran Black

It is a very serious concern. One thing that helps is the ability of Coillte, because of the extent of the estate, to effectively swap material, so one does not have to have the private material supply coming into the catchment area where one is trying to sell it. If Coillte needs material to go into the traditional sector, and if there is private supply coming from there, it will free up Coillte material elsewhere in the country, which can then be used in the energy sector.

We have a very important role to try to smooth out this supply curve into the emerging energy sector. That is one of the key factors we can bring to it. There are key concerns about ensuring we have the correct structures in place that allow the private sector to bring this material to market and ensure everything is in place to allow that to come out to the maximum.

Deputy Simon Coveney

Regarding the business model, I am interested in hearing the views of the delegation on how it sees that working. I strongly support trying to significantly ramp up the use of biomass as a fuel source. As we phase out peat we need to replace it with biomass. That will not happen overnight. I know the delegation speaks to Bord Na Móna on a regular basis, but that is what is happening. We are not opening new blanket bogs and are finishing out the ones we have. There is another 15 or 20 years left in them. However, we have new peat power stations which will require dual fuel for the moment, and which, presumably, will be almost entirely fuelled by biomass at some stage in the future.

The supply of that will come primarily from farmers who have decided to put forestry on their land. Is the delegation looking at a model similar to the sugar factory model which was used in the past, whereby contracts would be given to farmers each year to grow X tonnage of biomass, whether from thinnings, faster growing coppice or timber, or will it buy as it needs to from farmers? Will there be annual contracts, whereby the delegation gives a set tonnage and a quota system to farmers who want to work through it as a wholesaler? That is what is happening.

Will there be an annual negotiation on price, such as the retail value of the biomass, minus a certain percentage as a margin to Coillte? I am interested to see what is planned, because it is important for farmers to have certainty if they are to buy into this type of development. There are few enough incentives to drive farmers into forestry in terms of the direction in which premiums are going.

Farmers would be very interested in such a scheme if they knew there would be guaranteed pricing on an annual basis, through negotiation and contracts, to provide biomass as they develop their own forestry. They will have to thin out the forestry as it grows, so they will want a market for that biomass. It is a very long question, but given that farmers' representatives are here, it is something we need to look at.

Mr. Ciaran Black

We are at a very early stage in the sector. It is evolving and we are open to a whole range of approaches as to how we might do it. The way it will evolve in the immediate term is that we will try to assess what is becoming available within particular areas. We will try to secure contracts with customers and understand what kind of supply we can guarantee them. We hope to initially have it on the demand side and give some certainty to that. As the market developers we will try to increase the volume coming through those depots and create a market that allows farmers to view the energy sector as being a reliable place to put that material. We will create price stability through long-term contracts with prospective customers and use that as the way to ensure that there is market certainty.

Deputy Simon Coveney

The danger for the producer is that without a forestry management contract with Coillte he or she does not have an outlet for the biomass. For farmers there is a potential monopoly in the biomass market.

It will become almost impossible for the rest of the forestry industry, that is, the private forestry management companies which are also working with farmers, to compete with Coillte because of the scale under which Coillte operates and because of the depot that it will develop for biomass. People trying to operate in difficult circumstances within the forestry management industry expressed concern to me about how will they compete with this company that dwarfs them in every way and which will start linking a new biomass market that is developing with customers who only deal with it. Coillte is a State company after all. This is not just about cornering the market. It is also about ensuring that there is a good forestry industry in Ireland that has independent players as well as Coillte, and we need to be careful of that.

Mr. Ciaran Black

Our focus is on customers with large-scale installations that would need a high volume of material. Our entire operation is geared towards large-scale operations into a small number of customers such as in how we approach the saw-milling sector. It is difficult for such installations to move across to a biomass solution on the basis of a private supply, which would not give the level of certainty in terms of the continuity of supply. Coillte would have a difficulty trying to go into the smaller scale operations because they would be difficult for us to administer.

This is the way I would see that working. Coillte has an essential role for the high-volume type customers but building such a base in the sector allows enough space for the private sector to look at the smaller scale installations, through the depot operations that will have one stream going off into the industrial sector and another stream going off into the smaller scale installations. Our view is that such would be more of a wholesale activity in which Coillte would not get involved directly. In that way the market would not be cornered for a small scale grower. One could either produce for sale directly into smaller scale facilities such as hotels or leisure centres, but large installations are probably not the market which they would be able to approach in any case.

Our role is to develop a good energy sector that allows multiply players to be involved. If we do not get the private forests on side, we do not have anything to sell to the large scale biomass users. Therefore, we must co-exist. It is essential that the kind of models and business approaches we are developing really incorporate that and do not shut out any particular market. We are very conscious of that. Especially at this stage, our role is as a catalyst to try to bring confidence into the market.

Deputy Bobby Aylward

From a farmer's point of view, it is profitability that will decide where a farmer or landowner goes with the end product. Whether thinnings or a full mature tree, it is profitability that will decide it. Whether one is a large-scale or small-scale producer makes no difference at the end of the day. Whether one buys timber by the tonne or by the cubic metre, it is the profit one makes which at the end of day dictates where farmers or landowners will go with their product.

Mr. Ciaran Black

Currently, there is not a significant energy sector in place. If that grows, then that is another market into which that farmer can sell.

Deputy Bobby Aylward

One needs competition to have a choice. Whether it is toward biomass or wherever that they go with their end product, if they have choice they can go to A, B or C. They will go where the profit dictates. That is the way I as a farmer see it.

Mr. Ciaran Black

Whether it is into the energy sector or elsewhere.

Deputy Bobby Aylward

Yes, the choice should be there and it is optional.

Mr. Ciaran Black

Therefore, it is up to the energy sector to provide price stability to make it attractive for a farmer.

Deputy Bobby Aylward

We need long-term guarantees that biomass will work. One can see already a question over the guarantee. This year there was an 8% cut in the premium alone. How can one give a guarantee on what will happen to market forces in five or ten years' time? We cannot see that far ahead and there is no such thing as a guarantee. It will be an open market and the price will dictate what will be paid in the current market.

Chairman

Is Mr. Black's presentation finished?

Mr. Ciaran Black

Mr. Egan will take it up.

Mr. Gerry Egan

On that latter issue, it is important to emphasise that it is early days. We are trying to approach this from the point of view that Coillte currently controls the existing biomass resource and there is a way of moving this forward that brings mutual benefits for everybody involved. We are conscious of our leadership role in that. There is a significant level of mutual dependence between all of the forest owners to co-operate to take advantage of the opportunity.

Chairman

I apologise for interrupting. I fully understand that Coillte is progressing and doing its business. Given the committee's role in energy efficiency, supply and climate change targets, the questioning we might have would be to ensure continuity and to promote biomass as an alternative source of energy. Issues that would prevent that are matters such as uncertainty of supply in the future. That is why there is questioning on how we can guarantee ongoing supply to make this a viable product. What is worrying is the drop off in forestry at a time when we need massive growth.

I found Coillte's contribution stimulating, although I do not profess to be an expert on forestry. It opens up a list of questions as to how we will go about meeting these targets. Before Mr. Egan finishes, I would ask him to give us his thoughts on how this committee can do its work in ensuring that there will be growth in forestry, how he sees it and how he can see us promoting the opportunity of alternative sources of energy.

Mr. Gerry Egan

We will come back to that at the conclusion. There are two other issues on which we want to touch briefly. First, we alluded to three potential contributions that forest and wood make in this area. The first is related to afforestation as a carbon sink. The second, Coillte's contribution, relates to renewable energy. The other piece has to do with the fact that wood products are inherently sustainable and inherently energy efficient. As recently as Friday last, there was a Government announcement that all new homes are to be carbon neutral by 2020. The use of sustainable energy-efficient building materials is critical to the achievement of that, as is moving away from less efficient products like concrete and steel.

The "Sustainable Wood Products" slide in the PowerPoint presentation shows Coillte's successful marketing campaign in its panel products business called "It's Time to Choose", where we have been talking to builders' providers, and so on, across the UK and in the Benelux countries about the idea of promoting sustainable products and, specifically, about promoting wood products from sources that are certified as being sustainable. The essential point we want to make here is that if sustainable materials are key to the achievement of energy efficiency objectives, then we believe we need a Government policy that all products should be certified as coming from sustainable sources. As it stands, it is a matter for each local authority to determine its own policy on the sustainability of the resources. For example, in some local authority housing, uncertified plywood from China or South America has been used even though a local alternative is available with lower embedded energy costs, lower transport costs and which is sustainable in every sense. This should be an integral consideration of Government procurement policy. Something specific we might agree to take away from this meeting is a recommendation to develop some type of policy in this area.

Deputy Simon Coveney

Is Mr. Egan referring to some type of traceability mechanism similar to the cattle identification system? Very high standards prevail in this State when compared with cattle from Brazil and Argentina. Does Mr. Egan envisage something similar for wood products?

Mr. Gerry Egan

Yes, that is a direct analogy.

Deputy Simon Coveney

Instead of animal husbandry and hormones, the concern would be the sustainability of wood products.

Mr. Gerry Egan

Yes, sustainable forest management is the equivalent.

Deputy Simon Coveney

Is anything like that currently in place?

Mr. Gerry Egan

Since 2001, all Coillte's forests have been certified by the Forest Stewardship Council as sustainably managed. Alternative schemes are in operation elsewhere, such as that of the Programme for the Endorsement of Forest Certification, PEFC, Council, which is very strong among farm foresters in countries such as Finland. Therefore, there are traceability and chain of custody mechanisms which allow one to trace the product back to the forest and to demonstrate that all the activities in the chain are sustainable. In the context of the green agenda, sustainable development and so on, this is another dimension which could be incorporated into policy in that area. Moreover, it would offer a competitive advantage to Irish products which would be of significant benefit in the current economic climate.

In the agenda for the meeting, the Chairman asked us specifically to deal with the issue of carbon offsetting, offset products and so on. My colleague, Mr. Ciaran Black, will explain how forestry is dealt with within the Kyoto process and the work that can be done in that area.

Chairman

If Mr. Black does not object, I propose that we first deal with any questions relating to the issues covered thus far. I will begin. If Coillte were to sell some of its shareholding to the private sector, would it then qualify for a premium?

Mr. Gerry Egan

The reason we do not qualify for a premium is that we are deemed to be a public undertaking. I am not sure what the threshold might be in terms of losing that status.

Deputy Bobby Aylward

If Coillte were privatised, would it be entitled to draw down a premium?

Mr. Gerry Egan

Yes, if Coillte were a private company, it would be eligible for premia, albeit at a different level from those available to farmers. There are different levels of premia attaching to different categories of landowners.

Chairman

I am not suggesting that Coillte must be fully privatised to benefit from premia. I am merely throwing out the question. Coillte is a vital player in our attempts to achieve the targets we have set ourselves. It is a shame that its development and advancement in this area should be obstructed because of a decision made. I cannot see how we can achieve our targets in this area without a major involvement by organisations such as Coillte. We can talk about targets and objectives for 2020 and so on, but will it merely be another example of setting targets that are not realistic? In that eventuality, the whole endeavour falls into disrepute and becomes risible.

I am interested in how Coillte can be restored as a major player in the development of afforestation efforts. I am merely posing the question regarding privatisation.

Deputy Bobby Aylward

The greatest problem is that Coillte can no longer purchase land because it is too costly.

Chairman

It may no longer cost as much as it did in the recent past.

Deputy Simon Coveney

I asked some questions as the delegates made their presentation, but I have several more. The first relates to the management of natural resources. If I have a problem with energy prices in the State, I will put pressure on the ESB because it is my job as a public representative to do so. We have a major problem in regard to our afforestation efforts. As the largest player in this area, what does Coillte propose to do to reverse the slide in afforestation since 1996? In that year, close to 24,000 hectares of afforestation was undertaken by Coillte and the private sector. Currently, however, just over 6,000 hectares are being planted. If we continue in this direction, we are likely to level off at some 4,000 hectares or even less, yet we are setting targets of 20,000 hectares per year. Not only are we nowhere near achieving this objective, we are rapidly moving in the wrong direction. It is not unreasonable to expect some initiative from a body such as Coillte which has at its disposal the pre-eminent forestry experts in the State and which owns 7% of the land in the State. It should offer proposals on how we can purchase land in a cost-efficient manner to plant trees. However, all I am hearing from the delegates is that this cannot be done because they can no longer afford to buy land in the absence of premia. That is not good enough. As a policymaker, I am obliged to find solutions and, to that end, I need advice from the delegates. We must find ways of quadrupling the hectarage being planted on an annual basis to meet the targets we have set ourselves. As the Chairman remarked, we miss targets such as these all the time and there are no consequences other than the setting of a new target. That is not good enough.

There was a period when there was a genuine drive to enhance afforestation. I will not go into the politics of it. I cannot recall the name of the policy document that was issued but it had a significant impact. I accept there was an advantage at that time in terms of premia and so on. Nevertheless, similar efforts are required now.

Chairman

The policy document to which the Deputy referred was entitled Growing for the Future.

Deputy Simon Coveney

Yes. It was brought forward by a person who is now a pundit. A similar initiative must be taken now and companies such as Coillte must tell us how best to achieve our aims. Coillte totally dominates the forestry sector in the State. I do not have all the answers but I expect the delegates to have some of them.

In regard to the other industries being developed on Coillte's land, I would like to hear more in regard to tourism and recreation. Deputy McManus spoke to me earlier about her concerns regarding access to Coillte land for pony trails, walks, cycles and so on. There is a major recreation industry in land management, from cross-country motor racing, cycling, walking trails and so on. This represents a great opportunity for Coillte. I understand it is undertaking some activity in this regard and I ask the delegates to explain that. While the issue is not strictly related to climate change, it involves land use from which Coillte can make money that could, I hope, be invested in the afforestation programme.

On renewable energy sources, specifically the promotion of wind projects on Coillte land, a substantial amount of the company's forests are located at the base of uplands, with forestry belts located on the low-lying areas. It is difficult, however, to grow anything on the uplands which are perfect locations for wind turbines. How does Coillte's charging system for accessing its land work? I have heard a number of complaints suggesting it is difficult to negotiate a reasonable price for connecting a wind farm with the electricity grid through Coillte land. Some projects have been held up for many months by tough negotiations between Coillte and potential wind farm developers. Given the policy of promoting wind turbines and Coillte's status as a not-for-profit State company, it is necessary to streamline current procedures in this area to accelerate the process of wind farm construction.

Almost every second wind farm built here will have a Coillte element to it, whether this involves having a connection to the grid through Coillte land or the construction of wind turbines on the company's land. These are good developments but the process must be fast-tracked because wind turbines need to be built.

I was impressed by the contribution on biomass, which is a positive development. I want Ireland to move in this direction. The Fine Gael Party has made a controversial proposal to merge Coillte with Bord na Móna and COFORD with a view to developing a powerful biomass, forestry and biofuels company which could compete with other large energy companies in an ambitious manner. I am interested in hearing the views of the delegation on this proposal, although I accept our guests may not wish to express an opinion on the issue. There are many parallels between the work of Coillte and Bord na Móna, with the latter moving from peat into energy and the former, to use an Americanism, moving into the same space — energy.

I was encouraged to note the supply emerging for biomass. The supply curve for biomass may be much steeper if people switch materials in the manner the Minister hopes. Is the delegation satisfied Coillte has the capacity to deliver in this area given the reduction in year-on-year planting? What are the key years for a forest in terms of biomass? I presume one would not use high quality wood in a peat power station. Will Coillte plant fast-growing coppice and willow plantations on wetlands, use thinnings in years 5, 6 or 7 in existing forestry or use the waste material derived from trees which have been felled at maturity? Alternatively, will it use a combination of these three approaches? At some point, we will be overtaken by events if we do not plant more than 4,000 to 6,000 hectares per annum. I have asked a series of questions because I will not have another opportunity to put them to the delegation.

Deputy Bobby Aylward

I am a traditional farmer and while I accept the need for greater afforestation and also that 10% forestry cover is low in comparison with other European Union countries, I am concerned about the afforestation target of 44% of land cover, which is the norm in other European countries. As a country which produces milk products, beef and other animal products, I am worried we will move too far in the direction of afforestation and use up good land to do so. Our main products are grass, silage and hay and our climate facilitates keeping cattle outdoors through grass. I am concerned that we will focus on increasing afforestation levels from 10% to 44%, which is an excessive target. We need to strike a balance and seek perhaps to achieve 20% forestry cover. I am familiar with the role of afforestation in establishing carbon sinks and reducing CO2 emissions and the feasibility of doubling afforestation to 20%, I would not accept having 44% of the land mass of the country covered in trees. It would be preferable to use this land for grass and corn products.

I have been informed several times by people in the business that cutbacks and redundancies have reduced forestry maintenance to the extent that as much as 20% of the trees Coillte replants are lost each year. The lack of maintenance and spraying has resulted in saplings being choked by weeds. Like every business, Coillte is pruning its staff and reducing numbers on the ground. Will the delegation comment on that observation?

Mr. Gerry Egan

I propose to deal with the questions in three blocks. I will address the general questions asked about Coillte's role in recreation, after which Mr. Crowley will address forestry issues and Mr. Black will discuss renewable issues.

I wish to correct a slight misconception arising from Deputy Coveney's comment that Coillte is a not-for-profit organisation. Coillte is a commercial State company and, as such, every decision it makes is informed by commercial considerations. While we consider our role to be one of providing leadership, we are not a development agency. It is important to note, therefore, that the decisions we make, whether in renewable energy or afforestation, are driven by commercial considerations.

Deputy Simon Coveney

To clarify, while the purpose of Coillte is to operate in a commercial environment, as is the case with other companies such as the ESB or Bord Gáis, its purpose is to perform for its shareholder, the State, rather than to maximise profits. It is, therefore, different from a private company.

Mr. Gerry Egan

I take the Deputy's point.

Deputy Liz McManus

It still works for the shareholder, which happens to be the State. Surely the activity is the same in that Coillte must still try to ensure it remains commercially viable.

Mr. Gerry Egan

Yes, absolutely.

Deputy Simon Coveney

Having a strategic remit for the State is different from the remit of a private company.

Mr. Gerry Egan

The Oireachtas decided that Coillte was to be established to manage State forests on a commercial basis. That is the remit we follow and while other roles we play as part of that remit are relevant, our core activity is to create value for the shareholder while having due regard to wider economic interests.

Recreation is not a core element of Coillte's activity but it is a significant area of activity which I will briefly address. The most recent independent work done in this area, a report by the Irish Sports Council published three years ago, indicates that Coillte forests have between 18 million and 30 million visitors each year. This creates a direct economic value to visitors of the order of €97 million per annum. Coillte seriously examined its recreation policy about four years ago because until that point the forests were open and visitors could use them as they wished. We have become much more proactive in this area in recent times. I will cite a couple of examples of what we have done. We recently completed a major investment programme, supported by Fáilte Ireland, through which we invested €3.5 million in upgrading facilities at a range of locations. For the first time ever we have world-class mountain biking facilities at three locations, Wicklow, Ballyhoura in Cork, and Connemara, in which there is very significant interest. Such a legal facility was not available in the country previously and it has been a huge breakthrough. We also have a partnership with the Irish Sports Council under which they fund four regional recreation officers. Our ongoing work involves looking at the national way-marked ways, upgrading them and linking them across the land of another landowner who may be between two blocks of Coillte land with a view to opening up those facilities. Coillte facilities are 100% open 100% of the time. That covers the access issue raised.

Close to Dublin, another significant initiative opened before Christmas. We have established the Dublin Mountains Partnership with the local authorities in South Dublin County Council, Dún Laoghaire-Rathdown County Council, Dublin City Council, National Parks and Wildlife Service and local recreation interests. It has a comprehensive strategy for improving the recreation facilities in the Dublin mountains including the opening of an east-west trail. All the present trails run North-South. An east-west trail would take one from the Dún Laoghaire direction to Tallaght and beyond. Much work is being done in terms of capital investment and the attention being paid to upgrading and promoting such facilities.

I invite members of the committee to visit in cyber space Coillteoutdoors.ie, a dedicated recreation website, which allows people to plan their recreation on Coillte lands and on others. It is a website for which we got much praise in so far as it is the first outdoor recreation planning that people can do on line. While the forests have not changed the recreation experience has changed dramatically during the past three years. Some of what we are doing now will significantly enhance that experience over the next couple of years.

I invite Mr. Tim Crowley to deal with what we can do in regard to afforestation, which is a critical point.

Mr. Tim Crowley

I agree with Deputy Coveney that the level of afforestation needs to increase by a multiple of its present rate. The timber industry is vibrant and needs to continue growing to a scale that makes it very efficient. The other area is obviously the benefits around the climate change agenda, such as carbon sequestration and the biomass and replacement of fossil fuels. The Deputy said Coillte is the biggest player in afforestation. We are not a player in afforestation other than by providing services to landowners who want to buy or plant land and through farm partnerships. Those are the areas in which Coillte is involved. We are not buying land and planting it because it is not economically viable for us to do so. We are always looking at areas to try to stimulate that.

Recently we introduced a farm partnership scheme where we pay a farmer €1,000 up front to encourage him to plant his land. We plant it for the grant and manage it through its rotation. That we put our money up front for that purpose attracts a certain level of interest. Unfortunately, we are not involved in buying and planting land or working with other investors. It is an area that needs to be looked at as to how one can attract in other investors, be it Coillte, pension funds or some other investor because that is the way to incentivise and increase the level of forestation in the country. The forestation target of approximately 17% of Ireland, as stated in Growing for the Future, is only 50% of the European average.

The second point relates to the critical ages. The critical years in forestation are around 18 to 20 years when these plantations are first thinned. That is the type of timber that will go into the biomass industry. All the plantations are available for harvesting and thinning after 18 to 20 years depending on their growing cycle. There will be residue from all of the processing, and there will be chips and sawdust. Some 50% of all the timber that goes through sawmills is residues which either go to the panel industry or the energy sector. The energy sector has access to a huge volume, from what is planted now and from what is being processed, but it will fall off and the investment will not come in unless afforestation increases so that the cycle is maintained. That is where the difficulty lies.

Deputy Aylward asked about maintenance and so on. Obviously, we maintain our forests and invest heavily in them to the tune of €30 million to €32 million each year. That is capital investment that we put back into forests every year from the sale of timber. That just covers replanting the areas we have felled, which renews them again, and building roads to access those forests. Every year we reinvest €30 million to €35 million depending on the area. The Deputy can be assured that we ensure we get a return on that investment. We do that by maintaining our forests and ensuring these areas will feed back into the timber forecast of the timber being replaced. Our timber forecasts are based on the growing rate of these plantations that are replaced.

Deputy Bobby Aylward

Is it a myth then that 20% is lost?

Mr. Tim Crowley

I take the Deputy's point. Certainly we maintain our forests and spend a huge amount of money on them.

Deputy Bobby Aylward

Would a certain percentage be lost naturally, irrespective of maintenance?

Mr. Tim Crowley

There should not be a loss in the sense that each hectare we replant should produce at its maximum capability. Perhaps there is a misunderstanding; 15% of our land area is allocated to biodiversity and it is not for timber production. We are not planting 100% of our area because we are managing 15% for biodiversity which is best practice and it is also looking after the whole environmental area. Maybe there is a misconception in that regard.

Mr. Ciaran Black

On the question of our ability to ensure we can get a supply of biomass material to come to market, I should say that is a private supply that is coming through. Its coming into the market is a function of price and market stability. Our role is to be a catalyst to ensure the development of a sustainable and viable energy market. If we can create that, the potential material is there and will come to the market.

The Chairman raised concerns about how much we need to support a biomass energy market. It should not be underestimated that the amount planted already is significant. If the market structures are there, that will come to the market. Significant planting is already done that can come to the market. The key is to get it out. As Mr. Crowley said the second aspect is to ensure that we maintain some high levels of afforestation. The combination of all those things will guarantee a brighter future. If we can establish a viable market the amount that has already been planted can come into that market and make a big difference.

Another question was related to wind and the charging systems for rights of way and wayleaves. We negotiate on the basis of industry norms with private developers who want to establish wind farms. We might take into consideration how a plan dovetails with existing forestry operations and some aspects of a development might determine routes and so on. In virtually all cases the process is resolved and we have no major problems in dealing with private developers.

Chairman

I thank the delegates for their contribution, which was very informative. We will call on them again if we need to revisit some of the more important points they made.

I am pleased to welcome Dr. Eugene Hendrick and Dr. Kevin Black of COFORD.

Dr. Eugene Hendrick

I thank the Chairman for the invitation to speak to the Joint Committee on Climate Change and Energy Security. I am the director of COFORD, the State research and development agency for forestry. Since 2001 I have been a member of the Irish delegation in the UN Framework Convention on Climate Change dealing with forestry issues.

Dr. Kevin Black

I am a forestry ecologist and run COFORD's research programme which looks at forestry issues relating to climate change. We deal with mitigation and adaptation issues in forestry.

Dr. Eugene Hendrick

I will give members a brief introduction to forest sequestration, what it means and how it operates from a biological point of view. I will deal with the global issue of land use change and deforestation because it is important to put Irish land use and the afforestation programme in a global context. We will look at the climate change mitigation potential offered by the forestry sector in Ireland and, specifically, how afforestation can be the key to harnessing land use potential with a view to mitigating climate change. Finally, we will look at realising and sustaining the climate change potential of forestry at a national level and consider the way forward in that regard.

The process is a biological one and certain issues are important at a conceptual level. These will be outlined by Dr. Black.

Dr. Kevin Black

Reporting on carbon cycling in forest systems is not easy because it is controlled by numerous factors in the biological system. It is a slow process as carbon is stored over a very long period but that carbon can be lost very quickly with perturbation such as a harvest. Carbon is taken up by photosynthesis and stored in forest biomass products over a long time and there is a transfer of the carbon to the soil, which also accumulates carbon. If there is a disturbance, there is a rapid loss of carbon by respiration. A fine balance has to be struck and it is important to consider the anthropogenic influence on forests.

Dr. Eugene Hendrick

This slide looks complicated but it captures two key concepts. It is useful to bear in mind that afforestation and carbon sinks represent a step-up increase on previous land use, whether that was pasture or land used for another purpose. We are increasing the long-term carbon stock on the land and the slide shows increases and decreases over time as harvests occur. A finite amount of carbon is taken and stored in sequestration in addition to what already exists and this can be measured. As well as increasing the stock on the land we also create an energy resource and this is a key issue in the mitigation effect forests can give us. In addition to the incremental step up, the forest can take in carbon which can be used to generate renewable energy in perpetuity, as long as the forest is maintained. The benefits from afforestation are derived not just in the form of increases in carbon on the land but from the potential energy use of the material grown on the land. It is not a fossil fuel and is fully renewable.

Global deforestation is one of the major sources of greenhouse gas emissions, accounting for between 17% and 18% or between 5 billion and 8 billion tonnes of CO2 per year. That is 100 times the total annual greenhouse gas emissions in Ireland. Deforestation is a huge driver of climate change and the negotiations to which I referred are trying to arrest the trend. Members will see the contribution of different sectors to global greenhouse gas emissions, of which deforestation accounts for 17.4% of the total. The data come from the fourth assessment report of the Intergovernmental Panel on Climate Change in 2007.

As well as the effect on deforestation, forestry has huge potential to contribute to mitigating climate change. It can reduce emission sources with renewable energy products and can increase sinks — the stock of carbon on the land. The intergovernmental panel assessment report states that forestry plays a key role in addressing the climate change problem in the broader context of global change and sustainable development.

The intergovernmental panel has identified five main areas where the forestry sector contributes to climate change mitigation. From an Irish perspective, the two key areas are afforestation and reforestation — increasing the area of land devoted to forest. Forest management essentially involves increasing the stock of carbon in existing forests. I have spoken about the need to reduce the level of deforestation. Another way of mitigating climate change is to increase the use of wood products and thereby extend the forest carbon stock out into the built environment. Forestry products can also be used for bioenergy, thereby replacing the use of fossil fuels. I have mentioned five recognised ways in which forestry can help to mitigate climate change.

While it is simple to explain it at a conceptual level, the actual rules tend to be quite complicated. I will not mention all the rules because I do not think it would be useful to do so. I will speak about compliance, however. The amount of carbon in the new forests we have planted since 1990 helps us to comply with our greenhouse gas emission reduction targets. The gross uptake we experience in our forests is measured on an annual basis by the CARBWARE project, which is run by Dr. Kevin Black. We estimate that approximately 6 million tonnes of carbon dioxide is taken up by our forests on an annual basis. Approximately 2.6 million tonnes of carbon dioxide is taken away in the harvest. That does not come into the compliance space. It may come into the compliance space when the new rules that are being negotiated are agreed at the end of this year, but we are not certain about that. All the new forests that have been created and planted in Ireland since 1990 are Kyoto-eligible. They take approximately 2 million tonnes of carbon dioxide out of the atmosphere. That is depicted in the bottom left-hand corner of the diagram I am showing the committee.

Deputy Simon Coveney

When Dr. Hendrick refers to forests that are "Kyoto-eligible", or not "Kyoto-eligible", is he talking about forests that were planted before and after 1990?

Dr. Eugene Hendrick

Yes. Kyoto eligibility is set out in Article 3.3 of the Kyoto Protocol. New forests that were planted after 1990 are eligible. The protocol does not cover the reforestation of forests that have been felled, for example by Coillte. It relates to new forests. It is prescribed in Article 3.3 of the protocol. There has been a great deal of uptake on the part of forests that are not in the Kyoto compliance space. That uptake is not credited. It may be credited in the future. That will depend on the rules that will be set at the end of this year, when the negotiations are finalised.

Deputy Bobby Aylward

Why is it excluded? The same principle is at stake. When trees grow, they take in carbon.

Dr. Eugene Hendrick

Article 3.3 of the international agreement that was signed at Kyoto specifies that post-1990 afforestation may form part of the compliance regime. Forests that were planted before 1990 can become part of compliance if they meet certain eligibility criteria. There are rules that limit, or cap, the compliance amounts that come out of the older, pre-1990 forests. Many countries have very large pre-1990 forests. Like New Zealand and some other developed countries, Ireland has a large afforestation programme. The committee has been reminded that just 10% of Ireland is covered by forestry. Some countries, such as Sweden and Finland, have very large forests. If they were to allowed to claim eligibility in respect of the full amount of sequestration that occurs in their pre-1990 forests, it would be a very big number in comparison with their reduction commitments. Certain rules limit the extent of the use of pre-1990 forests for these purposes.

Deputy Liz McManus

I would like clarification on the Kyoto Protocol requirements and the EU negotiations. The committee examined these matters and produced a report on them. At the time, forestry was not included in the EU requirements. Since then, we have received a presentation from the Department of the Environment, Heritage and Local Government. The presentation made it clear that there had been some easing in terms of the negotiations. Can Dr. Hendrick inform us whether that has been finalised? Do we know exactly what the new arrangements are?

Dr. Eugene Hendrick

Under the first Kyoto Protocol commitment period, which extends from 2008 to 2012, all post-1990 afforestation is fully eligible for compliance purposes. The 2 million tonnes that we are sequestering at the moment is fully compliant. The rules governing whether certain forests may or may not be part of the compliance regime in the period after 2012 are being negotiated. The arrangements for the post-2012 period are not yet certain. For the purposes of the first Kyoto Protocol commitment period, which will continue until 2012, all afforestation since 1990 is fully eligible for Kyoto Protocol compliance.

Deputy Simon Coveney

I presume the Irish Government will have certain aims in the negotiations. I assume COFORD is advising the Government on that, to a certain extent. Will Ireland try to get all forestry included in the calculations that will apply to our pre-2020 reduction commitments? Depending on what happens next year, we may have to try to achieve a reduction of 20% or 30%. Will attempts be made to reconsider the base date of 1990? What is the Government's negotiating strategy? If all afforestation is allowed to be offset against targets, Scandinavian countries or Germany, for example, will not have to do anything else. They would have no more difficulties in trying to meet their commitments. What is the current status of the negotiations, which are quite important for Ireland?

Dr. Eugene Hendrick

The Deputy's point about the effects of the size of a country's sink on its compliance requirements is quite right, particularly in so far as it relates to some European countries. I will set out the current status of the negotiations. Ireland is trying to maintain the current treatment of post-1990 afforestation. We do not want the manner in which afforestation is calculated, in terms of compliance, to change after 2012. We are arguing that any additional afforestation should be treated as it is currently treated. It is currently fully compliant.

The important point we are making about additional afforestation is that fully additional expenditure is involved in storing additional carbon on the land. Its benefits can be directly attributed to the additional investment we are making. We are recommending that pre-1990 forests should also be included. We want climate change incentives to attach to all the forests in the country. We have recommended to the Departments of Agriculture, Fisheries and Food and the Environment, Heritage and Local Government that pre-1990 forests should also be included. The accounting rules currently restrict the amount of carbon in pre-1990 forests that can be used for the purposes of compliance with targets. Rightly, the emphasis in climate change policy is on reducing emissions. The forestry sector has a contribution to make. The principle being followed is that additional activity, such as afforestation, should be rewarded. We suggest that additional activity in large existing forests should also be rewarded. The objective is to encourage additional activities in this sector, thereby reducing the scale of the contribution of the pre-1990 forests.

Deputy Liz McManus

Ireland's position in this regard is unique in the sense that it is informed by certain problems in the agriculture sector. Will the outcome of the EU negotiations have to be standardised across the Union? Will we be able to argue that a particular agreement should apply to Ireland, on the grounds that it is under-forested and faces particular problems by virtue of its being a beef-producing country? Is that how it works? Will Ireland be able to deal specifically with its problems, rather than having to adhere to a standard that also applies to every other member state?

Dr. Eugene Hendrick

Those negotiations will take place after the international rules are agreed. The EU has stated that it will consider going from a 20% reduction target up to 30%. What level of afforestation units will be used in the step up from 20% to 30% has yet to be negotiated. It can only happen once the rules have been agreed and we know the amounts that can come into the compliance regime. The negotiation is on how much more above our 20% target will be agreed after the international rules are agreed, but we must know what the rules are on the amount of units that will come into compliance. Therefore, after the rules are agreed we must decide on what the level of step-up will be.

Deputy Liz McManus

Fine. I am sorry for interrupting.

Dr. Eugene Hendrick

The Kyoto-eligible Article 3.3 afforestation from 1990 is the main compliance method Ireland has. Since 1990, we have planted 260,000 hectares of forest. It is a big area, about 3.5% of the national land cover. The big issue is the decline in afforestation since 2002. From the forestry companies and colleagues in the forestry sector, I hear there is renewed interest in afforestation among farmers, but the constraint is the availability of funding. That is a big issue because we would be able to expand the level of afforestation considerably but it is constrained by funding. Afforestation is the critical issue in terms of compliance, climate change and use of forestry in Ireland.

With Dr. Black's project, we in COFORD do the national accounting calculations and we estimate that from 2008 to 2012 for the first commitment period of the Kyoto Protocol, Ireland's forests will take in about 11 megatonnes or 11 million tonnes of CO2. It is quite a considerable proportion, 22%, of the reduction measures outlined in the national climate change strategy. We estimate the Exchequer saving at around €220 million over the first commitment period from afforestation since 1990, on a carbon price of €20 per tonne. The graph shows the level of sequestrations increasing steeply because of the level of past afforestation. By 2020, we estimate that annual sequestration will rise to about 4 million tonnes of CO2 per annum from afforestation since 1990. Essentially therefore, between 2008 and 2020, the level of sequestration will double in the Kyoto-eligible forests.

Deputy Simon Coveney

Did Dr. Hendrick make an assumption of 10,000 hectares of afforestation per year?

Dr. Eugene Hendrick

Not really. Forests are slow to grow at the beginning but then accelerate and start to take in carbon much more rapidly, so most of the 4 million tonnes will be delivered from existing afforestation. If we do more, we will get more.

Deputy Liz McManus

Is it because of the age of the trees?

Dr. Eugene Hendrick

Yes. One can imagine that a small tree takes in very little carbon, but as it gets larger its ability to take in carbon increases rapidly.

Deputy Simon Coveney

The figures in the previous graph assume an afforestation of 10,000 hectares per year.

Dr. Eugene Hendrick

Yes, it assumes that but the addition we will get from the 15,000 hectares is small. It is included in the 4 megatonnes. Perhaps I could ask Dr. Black to comment on that.

Dr. Kevin Black

One must remember that it includes forests that were planted since 1990, so there is a massive buffer there. What will happen from now until 2012 will have a small contribution in addition to what is being done already. For example, if one looks at the curve in the illustration, one will see that we have different afforestation rates. We are at one point now and as we progress the amount sequestered in future will change. If one goes forward 20 years, the difference is small because of the small additional these new forests make to the overall sequestration, but the longer we go into the future the bigger the influence will be.

Deputy Bobby Aylward

Is Dr. Black saying that the more mature the tree, the more it absorbs?

Dr. Kevin Black

Yes, it is about this curvilinear plan.

Deputy Liz McManus

We have not been planting enough in recent years. The last big planting was in 1996, so it is likely to go down for a while, certainly proportionately.

Dr. Eugene Hendrick

That is exactly the point in the next slide. If we want to sustain the benefits from afforestation we need an even distribution of age classes over a 40-year time horizon, which is essential for the future. The black line shows that if we go down to that level of afforestation at 3,500 or even up to 7,500 we eventually get to the stage where forests become a source of emissions. It is therefore essential that we get afforestation back up to approximately 10,000 to 15,000 hectares per year. If we do not, it will come back eventually and the forests will become a source of emissions. That is the key point in this slide. The afforestation programme is critical to sustain that benefit.

Deputy Liz McManus

That is not happening now.

Dr. Eugene Hendrick

No, it is not. The committee asked what we are doing, and what we need to do, to ensure that the 4 megatonnes are available for compliance to 2020 and beyond. We want to make this point, that it is a longer time horizon. To answer the question, we need to get afforestation back up to a minimum of 15,000 hectares per annum. We also need reporting to international standards, which is a key point in the development of the national reporting system and the national forest inventory. We also need research because we need good, robust numbers. There is quite a rigorous international review process of our numbers, what we say we are sequestering in our forests. We need a good system therefore to show that we are taking this amount of carbon out of the atmosphere. I will briefly hand over to Dr. Black to explain how that process works.

Dr. Kevin Black

Many people think that because one has this forestry source, one can automatically claim these credits, but it is not so. The international panel for climate change has written rigorous rules. The reporting process is transparent and must be compliant. It must be reflected in national statistics also. In 2006, the first national forest inventory was completed. It is important that this is an ongoing process so that the forests can continuously be monitored. Otherwise, we cannot demonstrate in a verifiable way that we actually have got this sink.

Deputy Liz McManus

Who does Dr. Black think should do that?

Dr. Kevin Black

The forest service does that. However, given the times we are in, it is important that the national forest inventory, in particular, is not cut back because it will influence whether we have compliance, reporting and accounting. In addition, because it is a biological process, a great deal of background research must be undertaken to derive the numbers. Having the inventory gives us the skeleton information to fill in the bits on which we need background information, which is an ongoing thing. Environmental research is not answered in one day, so it is important that these processes are ongoing. This does not only support the UNFCC and Kyoto-compliance, it also provides policymakers with support in the negotiation process. In that way, we can do projections and help to make the right decisions when we are negotiating these issues.

Dr. Eugene Hendrick

Another key issue in ensuring that we get the compliance of 4 megatonnes of CO2 and more post-2020, is that we fully engage in the international negotiations and know exactly what we want to achieve there concerning the rules for land use, land use change and forestry post-2020. These rules should reflect the Irish situation. Afforestation is the main tool available to the Irish forestry sector to mitigate climate change. As we do not have a large forested area, we need to expand to get this benefit.

Other measures are also needed. We need to develop closer links between forestry and agriculture. It is obvious that the agriculture sector must deal with the emissions issue. After 2012, when we move from the emissions trading system to the European system, agriculture will become one of the main parts of Ireland's emissions profile. The agriculture industry might need to expand the dairying sector, for example. There are opportunities for win-win situations. If we leverage investment in the forestry sector, we will enable dairying enterprises and other farm enterprises to offset their emissions. We should seriously consider that at national level. It comes back to the point Coillte made — if we look at particular mechanisms, we will see opportunities for additional afforestation. It is obvious that we need to know the rules. When the rules are agreed at the end of this year, we should have a full national debate on this issue. It will be possible to find win-win solutions.

There are other measures in the land use sector in terms of soil carbon, how we manage grazing land and crop land. We could be in a position to increase the levels of soil carbon. They are also available in terms of compliance. We can use those amounts for compliance after 2012. I will give an example of what I mean. If tillage systems are altered so that there is no tillage or reduced tillage, the level of soil carbon can be increased. That is a potential way of generating compliance credits for Ireland. I would argue that there is the potential to make similar changes in the management of grazing land. The same thing applies to managed woodlands outside of forests in terms of the REP scheme. It might be possible to get credits from those measures. We should examine that seriously at national level. It is not just a matter for the forestry sector.

I accept that all of this costs money. Along with Dr. Kevin Black and some of my other colleagues, I recently did some work on the carbon dioxide abatement cost. If it is business as usual above the 15,000 per hectare target, we estimate that the cost of carbon dioxide from additional afforestation will be between €17 and €22 per tonne. We argue that this compares favourably with other abatement measures. The cost of onshore wind abatement measures, for example, is between €15 and €25 per tonne of carbon dioxide. We argue that afforestation is a cost-effective way of mitigating climate change. If we increase afforestation by 15,000 hectares per annum, an additional 20 million tonnes of carbon dioxide will be sequestered by 2030. The amount of carbon dioxide that can be sequestered by increasing afforestation levels is quite substantial.

On bioenergy, COFORD has been doing a great deal of work to increase awareness of the potential of wood energy. With our colleagues in Teagasc, we have organised many research and demonstration activities pertaining to the wood energy sector. As long as forests are managed sustainably, as they are in Ireland, wood is a fully renewable resource. According to our estimates, up to 3.3 million tonnes of carbon dioxide emissions will be replaced each year, by 2020, if the measures outlined in the White Paper on energy relating to the power generation, combined heat and power and domestic heat sectors are fully realised.

I will comment on the previous discussions. The significant potential of the combined heat and power sector, which is a large scale user of wood biomass, should be examined seriously. The large scale of this activity is important as it drives supply chains. The current feed-in tariff price, of €12 per kilowatt hour, is reasonable. Large players need to enter into the sector and support projects. The use of wood biomass energy by the combined heat and power sector should be examined seriously. The power generation sector is subject to the co-firing target. The domestic heat sector is also of relevance. The combined heat and power sector is in between those sectors. It is a good fit for the scale of the industry we have in Ireland.

Deputy Liz McManus

Does COFORD advise An Bord Pleanála, or have any contact with it, on that issue?

Dr. Eugene Hendrick

No, we do not.

Deputy Liz McManus

Is COFORD precluded from having such a role?

Dr. Eugene Hendrick

Essentially, our role is to identify the resource and to advise on the costs and the supply chain, and so on. We do not engage with developers on that level. Our main role is to try to incentivise people to get involved. We make it clear that there is a sustainable wood supply. We set out the costs associated with getting this fuel delivered. It is up to developers to decide whether this is a viable business.

Deputy Simon Coveney

Dr. Hendrick suggested that 3.3 million tonnes of carbon dioxide will be saved, potentially, by replacing fossil fuels with biomass. What percentage of that is in the traded sector and what percentage in the non-traded sector? I assume some of it will be used to supply peat power stations, which will be part of the traded sector after 2012, and will therefore have no impact on the targets this country has to meet. Has Dr. Hendrick thought about that? I imagine that it is about half and half.

Dr. Eugene Hendrick

I think it is about half and half. Large users of wood biomass help to drive the supply chain and to bring costs down. Costs have to come down if this sector is to become more efficient. I will speak again about the co-firing targets. We need large users. We will get incremental increases from the heat market. I refer to the use of wood pellets for domestic heating and for commercial heating in hotels, and so on. By their nature, it takes time for these things to develop. If large users help the wood biomass sector to develop, that will benefit not only the emissions trading sector but the no emissions trading sector. The growth of the sector will lead to improved supply chains and scales, increase knowledge of the sector and help to drive down costs. There is a real market in this area. The other markets will grow in the future, but they are slow in the beginning. I accept that much of that saving will be in the emissions trading sector. However, I argue that the development of large users will also have crossover benefits in the no emissions trading sector.

I wish to speak about forests as a source of bioenergy. Wood can bring about high greenhouse gas emissions savings, by comparison with other bio-fuels. Wood grows over a long period. The committee has heard that it can take 15 or 20 years for wood to be ready for use. It has low energy inputs. Compared with other fuels, including certain bio-fuels, it has low embodied energy. It attracts very good greenhouse gas savings, compared with first generation bio-fuels. It makes sense to pursue a policy of using land for forestry. The fuel one gets from forestry is associated with good greenhouse gas savings. The whole issue of the bioenergy component of forests is a strong support for rural development, and new and permanent jobs. We all need heat on a permanent basis and these are permanent jobs. It is a very good match in terms of investment and national policy for the bioenergy component of forests to develop that part of the sector.

The next graph points to the need to sustain afforestation. We make the argument that we must achieve approximately 500,000 hectares of forest established since 1990. Members will recall from a previous slide that there are approximately 250,000 hectares established. Our argument is that this amount must be doubled by getting back to 15,000 hectares per year afforestation. If not, we will experience a phenomenon called "peak wood", as opposed to peak oil, in two decades. If current afforestation rates prevail, we will be unable to sustain our production of wood fuel. It is quite simple. We have done the projections. We are able to project the harvest from the forest because we have good modelling facilities. The two bottom curves on the graph show that if there are only 500 to 5,000 hectares of afforestation per year, there is a really steep fall in two decades.

If we are agreed about developing indigenous fuel, the issue is sustainability of the source. If we do not continue the afforestation programme, there will be a rapid fall-off in two decades. What is equally important is the energy generation aspect of afforestation. We need to get back to at least 10,000 or 15,000 hectares per annum. That will sustain the fuel. As there is a 40 year rotation of forests in Ireland, we will have done 40 years of afforestation, so the younger forests will be coming back on stream again. This is about sustainability. The key message is that we must get back to the 15,000 hectare level to sustain our wood fuel production into the future on the island. If not, it will peak and then fall off quite rapidly.

I will hand over to my colleague, Dr. Kevin Black, to deal with the final slide and our research and development programme.

Dr. Kevin Black

In the previous slide I discussed the importance of research. The research is driven around reporting, carbware and the mitigation aspect. A point we did not touch, which is the last point on the slide, is conducting a climate change risk assessment on the forestry industry and how climate change might influence our future. This is something we must think about now because of the lengthy nature of forestry. The decisions we make now on the type of species we plant now and the management we apply will have an effect in the next 50 years. There will also be a climate effect in the next 50 years, so we have a project called Climadapt, which will be a web-based tool. It will drive that policy and let people make informed decisions about climate change in the future and forestry.

Deputy Liz McManus

I apologise for leaving the meeting earlier. I thank the representatives for their presentation. It is very pertinent to the work of the committee. It demonstrates that this is not new technology but something indigenous that is tried and trusted and has great potential. There is obviously plenty of expertise available on which we can rely to ensure the product will do what needs to be done in terms of climate change and job creation, which is a big issue now as a result of the economic crisis. The representatives have set out what must be done, but it is not being done. The committee will to have to pursue this further.

Dr. Hendrick spoke about getting back to a higher level of afforestation. What happened previously? Why was there a proper level of activity in the past? The country was much richer in recent years than in 1996. Is it the case that food production became more valuable? What changed the landscape, literally, in terms of afforestation? Is it a matter of simply giving grant aid to ensure that people start to plant forests? Ireland's new afforestation has reduced but what is the global picture? It seems extraordinary, given that there is such consciousness of climate change and the fact that it is not only a pressing challenge but will also cost us a great deal of money if we do not start to change our ways. Has the message been taken on board in other countries to the extent that globally afforestation is increasing? Ireland is out of step in that the rate here is not increasing.

With regard to Copenhagen, if the 20% target is increased to 30%, and nobody knows what the figure will be until it is decided, that presumably means Ireland will have to think bigger. Dr. Hendrick suggested 15,000 hectares. Does he put that forward with the 30% figure in mind? With regard to reporting, I accept the representatives are anxious to ensure that research is carried out, which is perfectly understandable. However, I would have thought reporting is not too difficult. I do not know what is involved but it is hard to miss a tree, so I would have considered reporting to be simple, straightforward and well established at this stage. The representatives can tell me if I am wrong.

Is the issue of off-setting between dairy and forestry just a question of money? If grant aid is provided, will it make a difference and is that the way to go? That does not mean we have the money but is that what is necessary? With regard to the rural environment protection scheme, REPS, and woodlands, is there a lower limit for the size of woodlands? What qualifies and does not qualify? The point about the large users of bioenergy is very important. There is an important role for planning in terms of whether planning permission is granted. We must examine that. There is also the issue of supports. Take the example of the domestic grants for the greener homes scheme. That scheme will clearly be shut down at some point. Certainly, money has been taken from it for the insulation scheme. Do the representatives believe this will have a negative impact or is the industry now well established in providing for the domestic householder and does not require that type of grant aid support?

Deputy Simon Coveney

I have some questions on the type of forestry we should promote in Ireland. From a climate change point of view, what is the difference between a conifer and a broadleaf? I am aware there is a different maturing period, if one can call it that, with regard to when they can be harvested. What is the climate change impact of fast growing coppice willow to produce wood biomass on a three year cycle? Have the representatives done work on that? I would be concerned if we took the route of growing conifer forests throughout Ireland without having a good broadleaf mix of tree species, even if they are not actually Irish in origin.

There is another issue I wish to clarify. I believe I understand it correctly but I wish to confirm that. With regard to what the representatives envisage as the target for the Irish Government to negotiate in the context of the targets we are signing up to for 2020, be it a 20% or 30% reduction, they are saying that all new forests or all afforestation after 2012 would count as a plus to counteract the negatives and that improved management of existing forests would also count as a plus but not as a forest in itself. Only the improvement figure would be counted in terms of the climate change management of forests. Is this assessment correct? Similarly and in terms of meeting our targets in grassland management, are we discussing direct drilling for arable farming? How can this management be measured? Is it done through fuel usage on the land, the cost of cultivation and so on?

Regarding the wood market for energy, how has the domestic wood pellet market progressed? There was much excitement about it two or three years ago, but it is not being discussed much anymore. Has it grown as anticipated from small CHP plants in houses and hotels or has it stagnated and now needs a kick start?

The key issue is planting more trees. What damage will reducing premiums do to that effort? I am not asking the witnesses to be political. Rather, I am trying to establish something. If the trend continues, the rate will fall to 2,000 or 2,500 hectares per year. The fall must be reversed, as the rate must be 15,000 or 20,000 hectares. What is Dr. Hendrick's perspective?

Deputy McManus asked a straightforward question, namely, whether it is simply a matter of grants or other forms of encouragement to plant trees. Many landbanks are not particularly productive in terms of food. Where intense grazing or arable competition is not an alternative and the land lies fallow, how can we persuade landowners and farmers with the land in question to plant trees? This is the nub of the challenge we are all facing.

Chairman

What has happened to the land that was used for growing beet? Was it not discussed that the land would become available for planting trees? Will Dr. Hendrick bring us up to date?

Deputy Simon Coveney

We discussed this matter before, but the figures would be helpful. According to the EPA, planting trees on peat releases more carbon than it removes from the atmosphere. Is it only when a bog has gone that trees are planted?

Chairman

No, I am referring to sugar beet.

Deputy Simon Coveney

I apologise. I mentioned peat because the Chairman reminded me of the peat question, which is linked with what Bord na Móna and Coillte are trying to do.

Dr. Eugene Hendrick

I will try to remember all of the questions, for which I thank members. Regarding Deputy McManus's questions on previous activity and why it has fallen off, Coillte stated in its presentation that, when it was in the afforestation business, it accounted for approximately 25% or 30% of the annual afforestation amount. Coillte leaving the business has had a significant impact on the level of afforestation.

There used to be a significant amount of investor-driven afforestation. However, as the price of land became more expensive in the past decade, the level of investment declined.

From the farmer's perspective, it is a question of confidence in a settled policy, which is key to whether farmers enter the forestry business. As the premium referred to by Deputy Coveney is a policy issue, I am not qualified to respond. Confidence is required. When someone enters the forestry business, he or she needs to know that the system will remain stable. Coillte has pointed out that changing land use to forestry is a considerable decision for farmers. Anything that does not make the landowner confident in his or her decision must be addressed. It is a matter of three issues, namely, investor-driven afforestation, Coillte's involvement and farmers' involvement, all of which used to be at higher levels than is currently the case.

Chairman

COFORD is the National Council for Forest Research and Development.

Dr. Eugene Hendrick

That is correct.

Chairman

Is COFORD consulted by the Department about the former's role in the development of the forestry?

Dr. Eugene Hendrick

Yes.

Chairman

Is it tabling proposals about the development to the Department?

Dr. Eugene Hendrick

Yes.

Chairman

Will Dr. Hendrick share some of them with the committee?

Dr. Eugene Hendrick

My comments on the afforestation programme relate to one of our proposals.

Chairman

Is COFORD tabling ideas as to how to address the issue of a fall-off in the volume of trees being planted? Am I correct in saying that COFORD is responsible for this area?

Dr. Eugene Hendrick

We are responsible for forest research and providing advice on development. I stated——

Chairman

Who does COFORD advise on development?

Dr. Eugene Hendrick

We advise the Government. To answer the Chairman's question on our advice, we have advised that we should seriously consider the issue of enabling increased afforestation on the basis that creating forests makes the country compliant in terms of carbon sequestration. When the rules are agreed, we should revisit this area to determine whether we can incentivise increased levels of afforestation nationally. The climate benefits from afforestation should incentivise increased levels of afforestation.

Deputy Liz McManus

When are the triggers likely to be completed?

Dr. Eugene Hendrick

At the end of this year in Copenhagen. Deputy McManus asked about the global picture of afforestation. Ireland is one of the few countries in the developed world with a high level of afforestation, although it is not as high as we would like. We are coming from a historically low base of forest cover. Only a few developed countries are in synch with Ireland in terms of having a vigorous afforestation programme, one of which is New Zealand. While its afforestation programme is large, it is smaller than it was previously because the dairy sector has become extremely profitable and land that would have gone to afforestation has gone to dairy instead. Since dairy prices are high in New Zealand, the level of afforestation has reduced. In Europe, Portugal, Spain and the UK are large afforestation countries, although the UK's levels are decreasing.

A small number of developed countries, including Ireland, have vigorous levels of afforestation. It is not a widespread occurrence in Europe because most European countries already have large levels of afforestation.

Copenhagen's outcomes in terms of deforestation comprise a key issue. Hopefully, the overall principles of reducing deforestation levels will be agreed in Copenhagen. The detailed rules are not likely to be agreed until next year because there are many specific issues.

This brings me to the next question on reporting and whether it is a simple matter, seeing as how a tree is a tree, takes in atmospheric carbon and so on. As it is not as simple as it might seem, I will hand over to Dr. Black, who will outline some of the issues.

Dr. Kevin Black

The manual is massive and does not just deal with trees. When agreements were reached in Kyoto, people were not sure how to measure or report them. They agreed on a concept before they knew how they could prove it. Since then there has been the scientific question of how to measure this. This is a very slow "in" process but a fast "out" process. Capturing this in space and time is very difficult and is not just a case of measuring it in a tree. There is the tree component, the soil component and the deadwood component as well as tracking what happens to harvested wood. There are issues of leakage. Tracking all of this is difficult.

There is also the matter of tracking land use change. The problem is that one must refer to a baseline and in the Kyoto agreement the baseline is 1990. The major issue is the lack of historical data. One is considering a biological process. With some certainty we understand biology better than how forests might be managed in the future. There is a socioeconomic issue as well as the tracking of land use, where there is a lack of data. It is like a librarian examining the stock coming into a library. There must be someone to examine the stock change. That is what the national forest inventory does. We must interpolate between time points. This is a complex procedure and is driven by climate. In accordance with IPCC guidelines there are three tiers or reporting mechanisms. The first is a simple default one, with national input data. It is in the national party's interest to increase in complexity because one could claim more and more as it gets more complex. Tier 1 is very basic and biased towards what one can claim. The more one invests, the more one gets back. I will not get into too much detail.

Deputy Liz McManus

Dr. Black has given us a flavour.

Dr. Eugene Hendrick

The next question concerned offsetting and dairy. Rules will be agreed and targets set at the end of this year. We need much discussion at national level. If dairy wants to expand its output, this will lead to more emissions. Forestry is an opportunity to offset these emissions. There could be a win-win situation but it needs teasing out and discussion at national level. There is potential. This could be done at the farmer level or co-operative level or higher. If a co-operative has a certain milk intake, it could be given a target for greenhouse gas emissions. This could be offset through afforestation. We need to know the rules before this discussion takes place.

Members referred to REPS and the lower size. The forest definition has a lower threshold, so if one does not plant trees above a certain area it does not satisfy the forest definition and does not qualify as forest.

Dr. Kevin Black

In recent years there has been the FEP scheme, which was limited to 8,000 hectares. This has been reduced to 5,000 hectares and there is policy to incentivise this. The area could be examined. There is a minimum forest area but it is much smaller than 5,000 hectares.

Dr. Eugene Hendrick

We dealt with planning permission and commented on the document produced by the Department of the Environment, Heritage and Local Government on planning permission for biomass. COFORD commented on that and I cannot say any more because we have not been involved in it.

Regarding the domestic side and the home insulation grants, we see the main use for wood materials. This relates to a question asked by Deputy Coveney about the domestic side and pellets. There is a large use of pellets in the domestic sector but there is potential for this to grow. We have two companies in the Republic of Ireland, as well as Balcas in Enniskillen, producing wood pellets. These are D Pellet Limited in County Kilkenny and Laois Sawmills. It is good to see two companies selling to this market. There is potential to grow.

We see significant potential for the use of wood chip as opposed to pellets, which are refined wood or sawdust and compressed into a dry pellet. Using wood chip from the forest with the right moisture content has significant potential in heating large institutions, such as hotels. This is a significant potential market. It has a good fit with the Irish forestry sector because while Irish forests are dispersed, as pointed out by Coillte, that is a benefit because there is potential for hotels and Government buildings to use this material. We have done much work in using wood chip from forests. The key issue is moisture content and drying the wood to an acceptable moisture content. Research in recent years has identified cost effective ways to do this in the forest or outside it. We would like to see emphasis on the policy side. It is very important that the current grants for the commercial side, using wood chip in boilers, are maintained. These are in place only for three or four years. Use is growing slowly and it is important to maintain the reheat scheme, which enables the commercial use of wood chips. It is a good link to the forest structure in Ireland. We can supply quality wood fuels into the market. There is potential to grow indigenous jobs.

Regarding the type of forests we are planting, such as conifers and broad leaves, I refer the committee to Dr. Black for the sequestration rates. We have a national target of 30% of afforestation with broad leaves. The key issue COFORD sees is matching the right tree to the site. We are meeting our 30% broad leaf target but all trees should also be planted in appropriate places so that they can grow well and perform well. This provides a service intended of them. For broadleaves, this may amount to biodiversity provision, a legitimate part of Government policy. The key issue is to plant trees that grow well and perform a service, whether this be producing wood for energy or structural use, providing biodiversity or for recreational purposes. That is the most important aspect.

Chairman

Does COFORD advise local authorities on the type of trees it plants at the side of roads, on verges, instead of having them lifting footpaths?

Dr. Eugene Hendrick

We do not do that. We have an excellent COFORD publication on species selection.

Chairman

Can Dr. Hendrick send it to local authorities?

Dr. Eugene Hendrick

It is on our website at www.coford.ie.

Dr. Kevin Black

We will have a website tool through which one can get information on the most suitable species for a specified soil type. It also takes future climates into account. The tool will be available for free to local authorities.

The recent national forest inventory has shown that approximately 20% of our forest estate is broadleaf. We are moving away from single species to mixed forests, which is positive from the point of view of carbon sequestration and biodiversity. As the biggest loss in terms of carbon sequestration occurs during harvesting, it is preferable to remove parts of forest at a time in order to avoid massive takes. Site type is important in regard to species suitability because some species cannot be grown on certain sites. Growth rates depend on climate and site types. Generally, however, conifers perform better. Sitka spruce provides the biggest step up in carbon sequestration, followed by fast growing broadleaf species such as ash while the shortest step species are short rotation crops. Product end use is also important.

Dr. Eugene Hendrick

We were asked about the step-up target and how forests will feature in that. In terms of negotiations, the key issue for Ireland is maintaining the treatment of afforestation which has applied since 1990 whereby all new forests are allowed for compliance purposes because this will permit us to internalise the climate benefits from forests. Most of the additional sequestration used for meeting our targets will come from these newly planted forests.

In terms of pre-1990 forests, we previously discussed the size of the contribution. Under the accounting rules, countries estimate the level of sequestration in pre-1990 forests at the national level and take away trees harvested to get a net figure for carbon stored on an annual basis during the compliance period. That level is heavily discounted and in Ireland's case the contribution from pre-1990 forests will be quite small. The question to be addressed is the level at which compliance will be set and how the rules will be applied. It is a highly technical issue but I can provide further information on it if members so desire. Essentially, the amounts of carbon we can expect to enter the compliance regime from pre-1990 forests will be small in terms of step up. The real issue is afforestation.

Dr. Kevin Black

Article 3.3 refers to afforestation, reforestation and deforestation. Large deforestation events are not favourable. Forests compete with other areas such as wind farms. In constructing a wind farm, one will have a deforestation event. They are not completely compatible, therefore.

Dr. Eugene Hendrick

Deputy Coveney asked about the land use sector. In respect of croplands, it is a matter of changing practices to reduce tillage. If tillage is reduced for crop growing, the level of carbon stock in forests will be increased. The amounts involved can be estimated using default levels in terms of the increase in soil carbon over time. Grazing and other land management could be related to reducing the intensity of agricultural use and riparian woodlands could be included in the accounting framework.

The Chairman raised the issue of peatlands.

Chairman

I referred to beet. Deputy Coveney confused the issue by mentioning peat.

Dr. Eugene Hendrick

I was asked whether the areas where beet was formerly grown have potential for short rotation forestry. Such crops need to be planted on good land to grow successfully and are not really an option for poor quality land. In regard to meeting targets on wood energy, we need an integrated national policy on the amount of fibre that forestry can provide versus short rotation. We will not be able to meet the White Paper's targets from forestry alone.

Deputy Liz McManus

We have heard presentations on the use of grass and seaweed for bioenergy. I take it Dr. Hendrick does not anticipate going that far. He is concentrating on short-term forestry.

Dr. Eugene Hendrick

I made the point in my presentation about greenhouse gas reduction measures. Forestry is a perennial crop that lasts for 40 to 50 years and requires little energy to grow. When it is used for energy generation, its carbon ratio is quite favourable. Other crops, such as first generation bio-fuels, do not have a similarly favourable ratio and this also applies to some of the other annual crops. In terms of a policy framework, I would favour forestry and short rotation coppicing.

Dr. Kevin Black

One of the major concerns with bio-crops is that they require low input systems. Putting a lot of nitrogen into a system to get biomass creates a massive emission of nitrous oxide, which has a warming potential of 310 times that of CO2. Low input systems such as forestry or miscanthus, which have a low nitrogen input but a high biomass return, are needed to abate greenhouse gases.

Chairman

I thank the witnesses. As a result of today's contributions it is obvious the joint committee will have to invite the Department of Agriculture, Fisheries and Food to outline what it proposes to do in regard to the targets that are being missed miserably. Since the abolition of the Department of Fisheries and Forestry both these areas have suffered considerably.

Deputy Liz McManus

I am very supportive of the Chairman's proposal. I wonder whether we could draft a preliminary document on climate change to present to the Department. I recognise that nothing will be finalised until the Copenhagen summit and perhaps we should take our time on the issue but it is important that we set out our concerns in writing because it can be frustrating when Departments go around the houses.

Chairman

From today's minutes alone.

Deputy Liz McManus

Absolutely.

Chairman

I thank the witnesses for their contributions.