Forestry in a New Zealand Emissions Trading Scheme
Introduction
Emissions trading is a core component of the Government’s initiatives to tackle climate change and transform the economy in a sustainable manner. The Government has agreed in principle to introduce an emissions trading scheme (ETS) covering all greenhouse gases in New Zealand. ‘In principle’ means the Government would need compelling evidence to adopt a different policy approach. The various sectors of the economy will be brought into the ETS at different times (see 'Key features of the New Zealand ETS'). Forestry will be the first sector to enter the ETS.
This publication provides details of how forestry will enter the ETS. It is complementary to The Framework for a New Zealand Emissions Trading Scheme, which explains the ETS and includes an indicative timetable for the entry of the various sectors into the ETS.
Forestry is a key sector from a climate change perspective. As trees grow, they absorb carbon dioxide from the atmosphere and store it as wood. Forests can:
- help reduce climate change by removing carbon dioxide from the atmosphere;
- provide sustainable products and ‘carbon-neutral’ sources of energy;
- help adapt to climate change by protecting soils and rivers from storms and erosion.
Establishment of new forests on previously bare land is known as afforestation.
The removal of forests and their conversion to another land use is known as deforestation. When trees are harvested, the stored carbon dioxide is released back into the atmosphere. In this way deforestation can be a major source of greenhouse gases. Globally, it is second only to stationary energy (for example, power generation and industrial energy processes) as a source of greenhouse gas emissions.
Deforestation is included in the Kyoto Protocol as a key greenhouse gas-emitting activity. Because deforestation is such a important source of emissions, it is likely to remain part of any future climate change regime globally and in New Zealand.
The treatment of forestry in the ETS will depend on when the forest was planted. This reflects the rules for determining the Government’s credits and liabilities under the Kyoto Protocol. Forests established after 31 December 1989 are ‘Kyoto forests’ and are referred to in this document as ‘post-1989 forests’. Post-1989 forests can earn ‘credits’, which come with associated liabilities.
Forests that already existed as at 31 December 1989 are ‘non-Kyoto forests’ and are referred to in this document as ‘pre-1990 forests’. Pre-1990 forests do not earn credits, but equally, if they are harvested and allowed to regrow (whether through replanting or natural regeneration) they do not incur any liabilities.
In December 2006, the Government released the discussion document Sustainable Land Management and Climate Change: Options for a Plan of Action. It highlighted options to manage deforestation and encourage afforestation. Consultation on the plan was carried out around the country with stakeholders and Māori.
The Government has considered the feedback from this consultation and incorporated it into the design of the forestry elements of the ETS. The challenge of how different sectors will adapt to climate change or take advantage of the business opportunities that may arise from it will be addressed in Sustainable Land Management and Climate Change: Preferred Plan of Action. The Plan of Action will also address the need for complementary measures (such as research and technology transfer) to support the sustainable development of the sectors over the medium to long term.
Of the options put out for consultation with stakeholders and Māori in December 2006, the Tradable Deforestation Permit Regime Option can be most easily adapted to fit within an economy-wide ETS. While overall there was strong opposition to all options put forward to manage deforestation, this option was the most preferred of those consulted upon.
On afforestation, stakeholders and Māori expressed a strong desire to receive credits and their associated liabilities for all forests planted since 1990. Now that the Government has agreed in principle to the ETS – which will essentially devolve Kyoto Protocol responsibilities and costs throughout the economy – there is a much stronger case for also devolving the opportunities and benefits that arise from Kyoto, including the forest sink credits.
Stakeholders and Māori also strongly supported having the choice of either receiving the credits and their associated liabilities or an up front cash grant under an Afforestation Grant Scheme (AGS). The AGS was seen as having particular value to smaller forest growers for whom the costs of entering the ETS might be significant.
The existing Permanent Forest Sink Initiative (PFSI) will remain an opportunity to earn credits in addition to the ETS.
Engagement process
This publication gives details on how the Government intends in principle to bring forestry into the ETS.
Where the Government has made in-principle decisions, stakeholders and Māori will have two opportunities to comment. First, there will be a series of regional meetings and hui at which general themes and comments will be captured and reported to Ministers before final decisions are made in early November 2007. Details of these events will be advertised in September through sector outlets and on government websites, including www.climatechange.govt.nz and the Ministry of Agriculture and Forestry (MAF) website, www.maf.govt.nz/climatechange.
Second, there will be an opportunity to make submissions to a government select committee that will consider the legislation needed to implement the ETS.
Please note that generally the Government is not seeking submissions or responses to this publication, which exists to provide information on the development of government policy on forestry and the ETS.
One area where the Government has not yet expressed a preferred position is on the inclusion or otherwise into the ETS of deforestation of pre-1990 indigenous forests. The Government welcomes specific feedback on this issue. Forms will be available at www.maf.govt.nz/climatechange, and the regional meetings and hui.
Many forest owners have brought forward their deforestation decisions and activities in the period leading up to the start of the first commitment period on 1 January 2008. To prevent the creation of large unpaid emission liabilities during the first commitment period, the Government has agreed in principle that forestry should enter the ETS from 1 January 2008. This will be provided for in legislation.
Layout of the document and terms used
Deforestation of pre-1990 forest will be automatically incorporated in the ETS as a greenhouse gas emission activity. New forests established after 1989 on Kyoto-compliant land (see ‘Key definitions’) will have the opportunity to enter the ETS and to receive credits and associated liabilities.
The layout of this paper reflects these points, covering in sequence:
- issues specific to the deforestation of pre-1990 forests;
- issues specific to receiving credits and associated liabilities from post-1989 forests;
- issues generic to pre-1990 and post-1989 forests;
- the Afforestation Grant Scheme (AGS);
- administering the ETS and AGS.
Points of detail relating to implementation are covered in the ‘Forestry in an Emissions Trading Scheme’ section.
To date the titles ‘Kyoto forest’ (post-1989) and ‘non-Kyoto Forest’ (pre-1990) have been used publicly. For the purposes of this paper, however, and for all future forestry documentation on the ETS, the terms ‘post-1989 forest’ and ‘pre-1990 forest’ are used instead.
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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