Australia's forestry firms are poised for major growth from emissions trading plans that could give the sector a multi-million dollar boost when it becomes the first to kick off a nationwide scheme to cut carbon pollution. Big polluters such as power generators and smelters are keen to hedge future emissions liabilities, and forestry firms, as one of their best options, are already pulling investment ahead of the sector's inclusion in emissions trading from July 1, 2010.

Growing carbon-absorbing forests is seen an as alternative way to meet future emissions caps and that allure will only increase as governments restrain polluting industries, driving carbon costs higher.

But the Australian sector's early advantage rests on a hostile Senate passing emissions trading laws in coming weeks.

"Forestry's great attraction at the moment is that it's the only activity that can give an emitter price certainty," said Andrew Grant, chief executive officer of CO2 Australia, which grows forests purely to soak up carbon dioxide for many decades.

"If you're committing to a major project now and you're trying to hedge your carbon position, forestry plays a really important role," he said.

Domestic forestry offsets in the voluntary market are now worth around €8 a tonne of carbon dioxide (CO2), less than the estimated €11 to €16 initial market price for domestic pollution permits under national emissions trading.

If lawmakers approve the laws, forestry will be the first sector to earn these potentially more valuable permits, or Australian Emissions Units. AEUs will represent a tonne of carbon dioxide and big polluters can use these to offset emissions.

"Companies with very large liabilities could put in place strategies to secure a long-term pipeline of credits from domestic forests," said Emma Herd, director, emissions and environment, for Westpac Banking Corp.

Mr Grant, whose firm manages 12,000 hectares of eucalypt plantations to yield long-term carbon credits, said there had been an increase in business queries since the early start for forestry was confirmed this month.

"What we're finding is that there is an interim position that some companies are taking and that they can't afford to wait for certainty. They have to form a carbon view now because they are committing to major projects."

The government triggered alarm this month by pushing back the scheme a year, until July 2011, followed by 12 months of a fixed carbon permit price of A$10 to help businesses adjust.