Forestry in a New Zealand Emissions Trading Scheme
Afforestation Grant Scheme (AGS)
The Afforestation Grant Scheme (AGS) is a new policy initiative that was first flagged in Sustainable Land Management and Climate Change: Options for a Plan of Action, released in December 2006.
Under the AGS, foresters can receive a government grant for the planting of new forests on previously unforested (‘Kyoto compliant’) 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.
The AGS is expected to appeal more to small forest owners, especially those with single age-class forest stands, because participation and transaction costs are expected to be lower than in the ETS. It will create additional sink credits for the Government and can deliver other environmental benefits such as erosion reduction, water quality improvements and better biodiversity outcomes. However, it will not be available for the same areas of land that have entered the ETS, ECFP or the PFSI.
It is proposed that AGS grants be available for the afforestation of Kyoto-compliant land under the following two categories:
Category 1 – exotic forests;
Category 2 – planted indigenous forests and assisted indigenous reversion.12
Because there is currently not enough technical information on which to base a scale of grant payments in relation to carbon sequestration, AGS grants will generally13 be made through a competitive tendering process. This will allow the Government to establish the level of financial assistance landholders require and allocate funds efficiently. Maximum grant rates will be determined for both grant categories. These will reflect sequestration rates and allow for the risks of carbon ownership, which remains with the Crown under the AGS.
The Government is open to the possibility that, after a number of initial tender rounds, there could be a move from a tender-based system to a fixed grants system.
Two tender rounds are proposed for each category, each year. The tender rounds will close on 30 June and 31 December. Acceptance of tenders will be notified within three months of the closing dates.
MAF is investigating the possibility of giving higher priority to applications that will assist with adaptation to the expected impacts of climate change, for example, by providing other environmental benefits such as reduction of soil erosion and flooding. Available funds will be allocated beginning with the lowest tender, but may be weighted to reflect these other factors.
Successful applicants will enter into a contract with the Crown for 10 years. Under the terms of the contract:
- if the grant land is deforested during the term, or if encouraged natural reversion is unsuccessful for reasons beyond the grantee’s control, the grant will be repayable with interest;
- if the grantee transfers the grant forest (by sale or other means), the grantee will be obliged to transfer the contract to the transferee;
- the scheme administrator, who will also administer the forestry components of the ETS, will have the right to access the land for measurement purposes.
Depending on approvals, the scheme could begin with a tender round closing in December 2007 for planting in winter 2008. This would also depend on the quantity of planting stock in nurseries in 2007. The term of the scheme will be five years, with a review at the start of year four.
The final design details of the AGS will be determined after engagement with stakeholders and Māori. Regional councils, especially, may wish to promote and provide input into the scheme to ensure it will assist their farm-scale sustainable land management plans and the Government’s Sustainable Land Management (Hill Country Erosion) programme.
12 Assisted indigenous reversion could include the establishment of exotic trees as a nurse crop in a transition to indigenous forest.
13 The Gisborne District may be an exception to support the complementary operation of the AGS and ECFP.
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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