"Sacrificing the potential of New Zealand's wood processing industry and its associated 65,000 jobs while the U.S. and other non-Kyoto countries go about 'business as usual' is not fair and it's not smart," NZ Forest Industry Council said. Following a United Nations meeting in Bonn in July, New Zealand set a target of ratifying the Kyoto pact on fighting climate change and reducing greenhouse gases by September next year.

The Bonn deal was a last-minute compromise after U.S. President George W. Bush rejected the 1997 Kyoto treaty.

Under the proposed Kyoto regime some plantation forests on land not previously used for forests and planted after 1990 will be eligible for carbon credits for the amount of carbon they "sequester" or lock up.

"While it has been widely assumed that climate change policies will be positive for the sector given the carbon sequestration benefits associated with forests, our analysis indicates negative consequences for the industry," the report, carried out by private research house NZ Institute of Economic Research, said.

Wood available from New Zealand's plantation forests is expected to increase by as much as 58 percent to 28.6 million cubic metres a year by 2003, according to the NZ government.

The Forestry Industry Council said the report pointed to the following implications for the New Zealand forestry sector:

* Higher NZ energy and transport costs.

* Investment of NZ$3-NZ$6 billion to process increased harvest might be re-directed into developing countries in Asia and South America.

* The NZ government intends to take without compensation the commercial vale of carbon stored in privately-owned trees planted before 1990, affecting two-thirds of those trees.

* The Kyoto protocol creates subsidies for new plantings in countries which are not signatories to Kyoto.

"The report confirms our fears about the potential negative impacts of climate change policies on the economy," said Jay Goodenbour, chief operating officer of New Zealand's largest forests products company Carter Holt Harvey Ltd .