I will provide members with a flavour of the type of companies that are active in the private sector. There are many more companies like Imperative Energy, many more sawmillers and private forest management companies and nurseries and this delegation is a representative sample of activity within the private sector. I will make up time with a quick potted history, as members will be familiar with most of it. The history of forestry in Ireland is very much dominated by State involvement right up to the 1980s, during which time forestry pretty much was a land use of last resort. Consequently, it tended to be planted on bogs, hills and areas that were not considered useful for mainstream agriculture. The annual State afforestation fell away from an average of 10,000 hectares per annum between 1969 and 1984, to approximately 5,500 hectares per annum between 1985 and 1989. Since then, farmer afforestation, which has been encouraged since 1989, has predominated and as members are aware Coillte was established in 1989. The graph now being shown to members shows afforestation activity from 1990 to 2009, based on hectares. The blue bars represent the State while the green bars represent the private sector. Members will note that even after Coillte's afforestation activity fell away completely, for three years between 2000 and 2002, the private sector alone planted on average in excess of 15,000 hectares per annum. Consequently, it is quite clear that the private sector has the machinery to sustain a 15,000 hectare per annum planting programme.
Coillte moved out of afforestation in 1996 approximately and as its own annual report noted, this was especially due to alternative land use grant schemes such as REPS, the designation of large areas as natural heritage sites and increased planting restrictions. Obviously however, such measures did not merely have an impact on Coillte as they also affected private forestry activity. For example, County Donegal had an average planting of approximately 2,000 hectares per annum, which fell away to 200 hectares per annum because of the restrictions that affected Coillte and the private sector. Notwithstanding this, the private sector obviously responded to the challenge and then managed to hit 15,000 hectares per annum for a three-year period.
In addition to the aforementioned restrictions, the national forest strategy, Growing for the Future, placed a 20% broadleaf target on all new afforestation schemes that subsequently has been increased to 30%. The private sector is significantly surpassing that target in that native species now account for approximately 40% of total planting, with obvious non-wood benefits for landscape and biodiversity. Over the past 15 years, more broad-leaved trees have been planted by farmers than were planted over the entire century of State planting, which constitutes quite an achievement by the private forestry sector. As has been touched on, in the past 20 years, the private sector, mostly farmers, have planted just shy of 250,000 hectares. Obviously much of that was supported as the afforestation grants were in place to support the actual planting but it is a permanent commitment of that land. Consequently, if one attempts to place a value on the aforementioned 250,000 hectares of land, a €2 billion valuation probably would be conservative. This represents the commitment the farming sector has made to forestry in Ireland. It should not be under estimated because it is a permanent land use change and is locked in there in perpetuity, which obviously has certain carbon benefits.
Without wishing to bamboozle members with statistics, I propose to set out a number of comparative metrics between 2010 and 2020. The forest area hopefully is set to increase by a further 70,000 hectares, so the increase in the percentage of land covered by forest will rise from 10% to approximately 11%. At present, employment is approximately 16,000 and we expect this to increase to 19,000, based on a sustained planting programme. The increase in log production obviously follows the same planting trend. The output value of the sector will surpass €2.3 billion and obviously the amount of carbon sequestered will also rise significantly over that period. To give an indication of current demand, I will take Green Belt Limited as an example of one company active in this area. It has seen the applications it has made on behalf of its clients rise by 20% in 2009 from the previous year, and this year to date there has been a further 20% increase. As total applications submitted to the forest service for this planting programme exceeds 20,000 hectares, it is quite clear that the demand exists and that the private sector has the capacity to deliver it. As the IFA representatives mentioned previously, there now are more than 16,000 private woodland owners, most of whom are farmers.
A key part of the joint committee's brief is to consider carbon sequestration as part of a climate change issue. The Kyoto-compliant forests in Ireland will contribute 2.8 million tonnes of carbon dioxide per annum over the first commitment period running between 2008 and 2012. This will rise to more than 4 million tonnes by 2020, which constitutes a highly significant saving to taxpayers because without this contribution, it is clear the State would be obliged to buy additional carbon credits from overseas. If one considers the carbon sequestration rate by ownership, back in 1991, the contribution of carbon sequestration from of those Kyoto-compliant forests was drawn approximately equally between the State and the private sector. At present, it is running at approximately 81% to 91% in favour of the latter and by 2020, approximately 90% of carbon sequestration will be from privately owned woodlands, which obviously is a significant contribution.
A number of sawmilling sector issues arise - I now intend to turn to these issues and will then suggest how they might be addressed. As alluded to previously, Irish standing timber prices are approximately 100% higher than in the United Kingdom. Obviously, this presents certain challenges for the sawmilling sector. Mr. Glennon alluded to the current overcapacity in the sawmilling sector. There obviously are highly significant issues to be faced by people operating in that sector. I will refer to something closer to my heart, which is the role that biomass has to play in renewable energy targets. Obviously, the Food Harvest 2020 report alluded to this to a considerable extent. Ireland has a significant biomass opportunity. It is one of the core competitive advantages we have. We are back to trying to stick to the knitting as we seek to stimulate economic activity. It is clear the bio-energy sector has massive employment potential here. Biomass yields in Ireland are higher than those in many other jurisdictions in Europe. We have a strong agricultural heritage. Agriculture is one area we know about. We know how to manage land and take product to market. That applies to even those of us who have not been on a farm for a while. It is in our DNA and it is a knowledge that has readily followed through from agriculture to forestry. The real challenge is how to cost-effectively seize this opportunity without going to the national Exchequer for grant aid given that there are not as much funds available as there used to be.
We have been lobbying for two policy initiatives that could be implemented at no cost to the State, which would allow us to spend much more of our €30 million equity on Irish projects rather than having to use the money we fought hard to raise in the UK but now find we have to spend in the UK. We would much prefer to allocate it to projects here. Part of the issue relates to market access. We cannot get an exact figure for the expenditure of public bodies on imported fossil fuels to heat public buildings because nobody has the exact figure but, conservatively, the figure is €150 million a year. We do not want grant aid for our biomass systems, we just want an opportunity to compete for that market. We are not looking for this to be teed up but this is a market worth €150 million a year and we would like a procurement process that would allow us to compete for that. We would like public bodies to tender for renewable heat or low carbon heat on a long-term contractual basis, then we could compete with other people in the biomass sector, with those involved in the geothermal and solar energy sector and, arguably, even with people who want to supply oil systems if they are willing to offset the carbon impact. That would be a smarter way of procuring energy in the public sector and this would then cascade into the private sector.
The second issue is related to the lack of district heating networks here, which obviously creates local heat markets. It is strange that we continue to spend, through a semi-State company, a State-owned company, a great deal of money building gas distribution networks. We would like all those heat networks, which is essentially what they are, future proofed. We would like them to put in hot water systems now. We could still run them on gas while gas is cheap, but at least we would have a future proof network which could then take biomass, geothermal systems and solar systems and so on. In that way we could start to build up a portfolio of renewable projects. The benefits from those policy instruments are obvious to everybody.
I thank the members for their patience. We want to emphasise the interdependency between all links in the supply chain in the forestry industry. We appeal to the committee to do everything in its power to ensure the continuity of the 15,000 hectares per annum programme, which we believe is critical. It is a common theme across all the companies represented here.
It is worth emphasising that the private sector is significantly exceeding the species diversification and native broadleaf targets. We would encourage the Department to revisit the issue of co-funding under the next rural development plan, which would be a way of securing some EU funds for the afforestation programme. That would be on the back of the targets for the species diversification and for the number of native broadleaf trees. An application for co-funding is one to which attention would be paid.
It is clear that the private sector has a proven capacity to deliver a 15,000 hectares per annum planting programme but it must also be innovative enough to find markets for that material as it comes on stream, whether through the sawmilling sector or wood energy companies like ourselves. I re-emphasise the over-capacity in the sawmilling sector, which is a key issue. Unfortunately, the volume in this sector is not coming to market quick enough to deal with that over-capacity issue. This is something that needs to be addressed.
The contribution of the carbon benefit from forests has been discussed at this and previous meetings. It is clear from our point of view that this benefit needs to be realised, valued and clearly credited back to the afforestation programme. Various models are being discussed by other people. John O'Reilly from Green Belt and I had a meeting with the Department of Finance. We thought it took place two years ago but, on checking, it was four years ago when we meet with some of the Minister's advisers to discuss monetising the carbon benefit from forests and we managed to trade some carbon credits from forests through voluntary transactions. We did that four years ago so there is nothing new in the concept. The State needs to consider if it is a zero sum game as to whether the carbon offsets - the €2.8 million - are accounted for, as currently happens, and the money saved in not buying credits is used to continue to fund the afforestation programme through the existing schemes. We suggest that whatever would be the most cost effective way of dealing with that issue should be pursued.
We would like the world energy sector to be developed but not through grant aid or any artificial supports around funding capital equipment; we just want market access and then we would happy to stand toe to toe and compete. The competitiveness that we have developed and our ability to go to the UK and box way above our weight against fairly large competitors in the UK has come about by us being lean and mean and competing in this sector here. We are increasingly exposed to global markets, as is the sawmilling sector, and John O'Reilly mentioned his company is active in Panama and Scotland and is seeking to be active in other jurisdictions.
Coillte's dominant position in the forest sector needs to be addressed, but that is probably a discussion for another forum. I thank the members for their patience and we are quite happy to deal with any questions or comments they may have.