September 2007
Welcome to the fifth and final issue of the PFSI Bulletin. Following the announcement on 20 September of an Emissions Trading Scheme (ETS) for forestry, information about the PFSI will now be included in communications about the wider ETS.
In this final issue, you can find out more about:
Latest Updates to the PFSI
The PFSI consultation document was released earlier this year. Follow-up meetings and workshops were held with submitters and stakeholders. A ministerial briefing paper was subsequently prepared that addressed the key issues raised. Ministers considered this paper and approved a number of significant changes to the PFSI. These changes address many of the issues raised by submitters; other changes were necessary to provide consistency with the recently announced New Zealand Emissions Trading Scheme (ETS).
The following changes to the PFSI were approved:
• Tradable Kyoto Protocol Assigned Amount Units (AAUs) will be issued to participants for the period 2008 to 2012. These AAUs can be claimed and transferred throughout the period 2008 to 2012 once the carbon accounting methodology is finalised and established under regulations (this is expected to be completed by mid-2008). AAUs can be banked for use in subsequent Kyoto commitment periods after 2012 or they can be sold.
• The proposed cost recovery regime will be changed to ensure consistency with the cost recovery regime proposed for the ETS. These changes will significantly lower the costs for landowners in the PFSI as only the direct costs of processing applications, carbon assessments and auditing will be cost recovered. The annual levy charges for indirect administration and PFSI development costs will be removed. Revised charges will be notified on the MAF website
in due course.
• The requirement to adjust carbon sequestration for leakage will be removed.
• PFSI participants will be allowed to exit the PFSI and enter the ETS within 18 months of the ETS legislation being passed.
• PFSI participants will be allowed to terminate their covenants after 50 years if they choose to. However, all units issued are to be repaid, and any associated liabilities or costs are to be met.
• All eligible post-1989 forests will be allowed to participate rather than post-2002 Kyoto forests only, for consistency with the ETS.
• The proposed 5 percent retention of credits will be removed from the covenant.
Additional information on entering the PFSI will be posted on the MAF website.
Operational Start-up – 1 December 2007
MAF has set 1 December 2007 as the target operational start-up date for the PFSI. Applications can be formally considered following this date. Some carbon accounting details will need to be finalised after this date.
The Government’s announcements of the forestry component of the ETS and the Afforestation Grant Scheme (see the overview below) provide additional options for landowners wanting to establish forests. Landowners will be able to choose which scheme or combination of schemes best suits their circumstances.
PFSI Carbon Accounting
The PFSI carbon accounting methodology and assessment tools are still being developed. It is proposed that the same methodology will be used for the forestry component of the ETS. A team of specialists engaged by MAF has been working on this over the past eight months. A draft carbon accounting design report will be available on the MAF website. This will undergo peer review in October with a group of wider experts and stakeholders to discuss the proposed methodology prior to implementation.
A carbon calculator will be developed to apply the carbon accounting methodology. This is expected to be available for use by mid-2008. Participants will be able to use the calculator to interpolate the starting carbon content of their forest as at January 2008 or to process measurements taken at the start of the first commitment period in 2008.
Registered Carbon Certifiers
Both the PFSI and the ETS will require independent registered carbon certifiers to verify carbon assessments submitted to MAF. Carbon certifiers must be forestry consultants registered with the New Zealand Institute of Forestry, or the equivalent, and they must be proficient in inventory and carbon assessment and acceptable to MAF. Registration standards for carbon certifiers and training material are under development. MAF will release more details and a timeline for applications in the coming months.
Website Restructure
MAF is in the process of updating the PFSI website to incorporate all the new announcements. New information, bulletins and guidelines will be added as they come to hand. This will be completed by March 2008.
The revamped website will include:
• the latest PFSI Bulletin;
• PFSI costs;
• information on carbon certifiers;
• updated questions and answers;
• a glossary;
• an updated edition of PFSI: A Guide to Eligible Land;
• the standard forest sink covenant;
• the carbon accounting project report;
• a carbon calculator;
• the PFSI application and management plan forms.
There will also be links to:
• the legislation website;
• aerial photo indexes and sources;
• the New Zealand Emission Unit Register (NZEUR);
• all other forestry initiatives administered by MAF.
Key Features of the Suite of Forestry Initiatives
• Permanent Forest Sink Initiative (PFSI):
• receive tradable credits that comply with the Kyoto Protocol (AAUs) under continuous cover forestry;
• covenant registered against land title;
• option to exit after 50 years provided all units issued are “repaid”;
• limited harvesting;
• participant is responsible for liabilities;
• eligible for grants under the East Coast Forestry Project (ECFP).
• Emissions Trading Scheme (ETS):
• devolution of forest sink credits (in the form of New Zealand units) tradable within the New Zealand ETS and convertible to AAUs (with some limits);
• participant is responsible for liabilities;
• no harvesting restriction;
• option to exit at any time provided all units issued are “repaid”;
• allowed to enter the ECFP but at a reduced grant rate.
• Afforestation Grants Scheme (AGS):
• government grant for new forest establishment;
• government retains credits generated and associated liabilities;
• no harvesting restriction;
• not eligible for ECFP grants.
• East Coast Forestry Project (ECFP):
• cash grant for soil conservation purposes on the East Coast;
• eligible for the PFSI;
• eligible for the ETS but at a reduced grant rate for new forests.
ETS Announcement
On 20 September, the Government announced the New Zealand Emissions Trading Scheme (ETS) and the Afforestation Grants Scheme (AGS). Further information is available from:
• http://www.climatechange.govt.nz/
• http://www.maf.govt.nz/climatechange/
The PFSI is complementary to the ETS. The Government is proceeding with the PFSI because the PFSI legislation is already in place and investors have been making decisions on the basis of past PFSI announcements. Landowners may want to consider options under the ETS and the AGS. However, landowners and/or purchasers of units may prefer the PFSI to the ETS because:
• the PFSI will be operational before the ETS;
• it offers Kyoto units (AAUs) as opposed to New Zealand units;
• the Government is considering making a special provision for people with the PFSI to sell their AAUs internationally by maintaining a purpose-built buffer in the registry to protect these unit holders from restrictions related to the commitment period reserve;
• it offers units derived from permanent forests that can be marketed as delivering multiple environmental benefits in New Zealand (these attributes are perceived by some as potentially offering PFSI credits more value in the market place than other forest sink credits).
Contact for Enquiries
Indigenous Forestry Unit
Ministry of Agriculture and Forestry
14 Sir William Pickering Drive
PO Box 20 280
Bishopdale
Christchurch 8053
NEW ZEALAND
Tel: 64 3 943 3700
Fax: 64 3 943 3701
Te Papa Tipu Innovation Park
99 Sala Street
PO Box 1340
Rotorua
NEW ZEALAND
Tel: 64 7 921 3400
Fax: 64 7 921 3401
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