New Zealand farmers have opted to embrace the government's carbon trading program because of the financial rewards. The decision, though, was based on a weak understanding of the risks of converting pasture land into forest.

Don Nicolson, president of Federated Farmers of New Zealand Inc., said farmers have not considered the risks such as forest fires or diseases or cancellation of the program. He added communities that rely heavily on livestock farming would be greatly affected because jobs for shearers, mechanics, and veterinarians will be lost. Nicolson estimates 20 percent or 2,800 sheep and beef farms could be affected by the carbon trading program.

Carbon trading began in New Zealand in 2008. Under the program, government expects 30,000 hectares converted each year. Farmers would undoubtedly find the package to be very attractive because it may give them NZ$600 a year for each hectare converted into forests.

Nicolson emphasized that the carbon credit system will not only hurt its 25,000 members. The Wellington-based group opposed the program after it became evident that New Zealand would be the only country outside of Europe to adopt the policy. Australia recently ditched a carbon trading plan.

OM Financial futures trading head Nigel Brunel said they will stop participating in the carbon trading if New Zealand implements the program alone by the end of 2012. The Auckland-based firm currently acts as broker for carbon trading.