Forestry in a New Zealand Emissions Trading Scheme
Executive Summary
Forestry is a core component of the Government’s plans to ensure New Zealand’s sustainable economic development.
The environmental policies now being developed are consistent with international obligations, notably those under the Kyoto Protocol. This requires developed country signatories (of which New Zealand is one) to collectively reduce greenhouse gas emissions to five percent below 1990 levels.
The Government has decided in principle that it will use a New Zealand emissions trading scheme (ETS) as the main price-based means of reducing greenhouse gas emissions and encouraging forest carbon sinks.
Forestry emissions trading is scheduled to come into operation on 1 January 2008.
In line with the provisions of the Kyoto Protocol, ETS rules will vary according to when a particular forest was planted.
Under the ETS, forestry landowners will gain credits and associated liabilities for post-1989 forest that leads to the removal from the atmosphere of the main greenhouse gas, carbon dioxide. Landowners with pre-1990 forest will incur liabilities for the release of carbon dioxide from deforestation. Emissions trading will be based on New Zealand Units (NZUs) allocated by gifting to pre-1990 forest landowners. Post-1989 forest owners who choose to join the ETS will receive units in proportion to the carbon dioxide stored in their forests. But if carbon storage falls through, for example, harvesting, such owners will face the associated liabilities. Participants will have to give up to the Government one emission unit for every metric tonne of emissions in a particular period, usually a calendar year.
Pre-1990 forest
Forest that already existed before the end of 1989 (pre-1990 forest) will not earn credits, but if it is deforested (the land converted to another use like agriculture) after 1 January 2008 its owners will be liable for the carbon dioxide emitted. However, if the forest is harvested then replanted it will not incur any liabilities.
The Government will assist owners of pre-1990 forest who are affected by these provisions by issuing them with free NZUs.
All owners of pre-1990 forests will be automatically in the ETS, but some can apply to be exempted. Owners of pre-1990 forests of less than 50 hectares can apply not to take part in the ETS.
For the period 2008–12, there will be an exemption from the ETS for anyone who deforests less than two hectares of their total pre-1990 forest land.
Exemptions are also available for the purposes of removing weed trees such as wilding pines. Owners of pre-1990 forest will need to report annually about any area that has been deforested. Where there has been deforestation, liability for emissions will be calculated according to one of several methodologies.
It has not yet been decided if indigenous (native) forests established before 1990 should be included in the ETS. If they do come in, owners will receive emission units, though at a lower rate than that for exotic forests. The Government is keen to receive feedback on this question. Otherwise, feedback to the forestry ETS proposals outlined in this publication can be given at a series of regional meetings and hui in the later part of 2007, and to the select committee considering the ETS legislation.
Post-1989 forest
Owners of land that became forest after the beginning of 1990 (post-1989 forest) can join the ETS if they wish, and will gain credits and incur liabilities if they do so. They will also need to report on carbon stock changes to the administering agency.
Participants will be entitled to receive one NZU for each tonne of carbon dioxide stored in their forests.
Obligations for liabilities will rest with the landowner or, where a forestry right or registered lease is involved, with the holder of that right or lease. Changes of ownership will need to be clearly notified by the purchaser or transferee to the administering agency so that NZU allocations can be made.
Owners will have 18 months from the passing of ETS legislation to decide to join. Anyone wanting to join after that time will have to wait until after 2012 to do so.
The Government recognises that, for a variety of reasons, participation in the scheme may not be attractive to all post-1989 forest owners.
Those with post-1989 forest who choose to join the ETS will have to submit a carbon stock assessment at the end of the period 2008–12 and any periods post-2012 or, alternatively, at shorter intervals of not less than one year. Various methodologies for assessing carbon stock will be made available by the administering agency and paid for by the landowner.
Methodologies will be conservative and reflect sampling uncertainties. The more accurate (and generally expensive) the methodology chosen by the forest owner, the higher the potential allocation of units.
Māori and forestry in the ETS
As with non-Māori owners, there will be opportunities under the ETS to receive units and associated liabilities for post-1989 forests already established (see ‘Existing forestry measures and the ETS’ below). Alternatively an Afforestation Grant Scheme (AGS) will provide a cash grant for the planting of new forest on Kyoto-compliant land.
The 21 million unit assistance package that is proposed for pre-1990 forest during the period 2008–12 will ensure that landowners, regardless of the type of tenure involved, will receive an equal allocation of units per hectare for their pre-1990 forest. This will help address a concern raised by Māori about the fairness of access to units.
If the Government includes pre-1990 indigenous forest in the ETS, landowners (many of whom are likely to be Māori) could receive a one-off financial gain if they do not wish to deforest.
It is possible that deforestation for the purposes of Māori housing (papakainga) may be exempted from the ETS. This will be a matter for further consultation.
The Government intends that its broad Sustainable Land Management Plan of Action, including the ETS, will be developed in partnership with Māori.
Trading of units
Once NZUs have been allocated they will be able to be bought and sold within New Zealand.
For the period 2008–12, the ETS will be linked to the international Kyoto Protocol market, in which NZUs will be generally interchangeable with Kyoto Protocol Assigned Amount Units.
The number of New Zealand Kyoto units that can be transferred overseas at any time will be limited to 10 percent of New Zealand’s assigned amount (five times 1990 emission levels), net of purchases.
Existing forestry measures and the ETS
Two existing forestry measures – the Permanent Forest Sink Initiative (PFSI) and the East Coast Forestry Project (ECFP) will complement the ETS. Of these, the ECFP has been in full operation for some years, while the PFSI is still in its final development stages.
The PFSI will put a covenant in place between the Crown and the landowner that will restrict harvesting and so will offer landowners an opportunity to earn Kyoto Units.
The ECFP currently offers East Coast landowners a cash grant for soil conservation. New ECFP grantees will be able to participate in the ETS and so earn both timber and carbon income.
Another forestry programme, Sustainable Land Management (Hill Country Erosion) is currently being developed.
The Afforestation Grant Scheme (AGS)
The AGS is a new policy flagged at the end of 2006. It will allow foresters to receive a government grant for the planting of new forests on previously unforested land. Participants will own the new forests and earn income from the timber, while the Crown will retain the sink credits and take responsibility for meeting all harvesting and deforestation liabilities. This initiative is likely to appeal mainly to owners of small forests.
The AGS is expected to apply to both exotic and planted indigenous forests, and assisted indigenous reversion.
Administration of the ETS and AGS
The day-to-day administration of the forestry components of the ETS is likely to be administered by MAF. However, overall responsibility for administration of the ETS will rest with one central agency that is yet to be agreed.
The direct costs associated with administering the voluntary participation of post-1989 forests will be recovered from their owners. The owners of pre-1990 forests will not have to meet any application or administration costs.
Forest areas will be determined according to either geographic information system data or survey plans.
Carbon stock assessments will be carried out by Registered Carbon Certifiers, most of whom will be registered forestry consultants.
To help monitor compliance, government agencies will measure forest harvesting and deforestation annually using satellite data and other methods, including site visits.
Contact for Enquiries
Sustainable Land Management and Climate Change
MAF
Pastoral House
25 The Terrace
PO Box 2526, Wellington
Tel: 0800 CLIMATE (254 628)
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