Carbon Offset Schemes

Investment in Teak

Teak Plantations

consumers are China, the United States and Europe.

Projections:

In order to calculate projections from investment in teak, one has to take into account how plantations work: normally, 1,100 trees are planted per hectare and these are gradually thinned to make way for growth of the best trees. The trees removed are used to make young timber, that has an acceptable price on the world market, although not as high as mature teak.

If we plant 100 teak saplings, we would expect 15 to die in the first year; 25 trees would be extracted in the first “thinning” at 7 years; 18 would be cut at 10 years; 15 at 13 years; 10 at 17 years; 6 at 21 years and 11 would be left for the final harvest at 25 years. These thinnings are done to allow space for tree growth and to select the best trees.

Using a 6% annual growth rate (9.7% has been the average rate for the last 18 years), at the end of 7 years, each tree would be worth £36.50; at 17 years, each tree would be valued at  £1,082.50; and at 25 years, each tree is worth £3,451. Thus the cumulative value of 100 trees is £59,342 after deducting harvesting and sales costs or, £593.42 for every £10 invested

.£10,000 invested by a company or a parent, would provide a nest-egg of nearly £600,000 at the end of 25 years. Profits are taken from thinnings from year 7 onwards, where, for instance, 250 trees would produce £91,250.

Gains from investment in forestry do not pay capital gains or inheritance tax which makes for an attractive way to leave money to your children. Companies investing in the scheme would benefit from being able to show the value on their balance sheet as a long-term investment that can be sold off at any time.

 

What are the Risks:

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