Options for allocation of emission units derived from sinks
As stated above, the Government previously agreed that some proportion of the benefit from emission units derived from sinks should accrue to 'those undertaking sink activities.' Those undertaking sink activities are either forestry rights owners or owners of the underlying land on which Kyoto forests are planted.
The Forestry Rights Registration Act 1983 provides for the creation and registration of rights to establish, maintain and harvest trees. However, that Act does not provide the necessary framework for the sequestration capability of trees to be identified, registered and traded. This would need to be established under new legislation.
There are several options regarding who would be the principal "responsible party" and the initial legal owners of emission units derived from sinks e.g.:
- Option 1: The Government could retain all emission units and related responsibilities from Kyoto forests; or
- Option 2: The Government could devolve a proportion of the emission units and related obligations to land/forestry rights owners and retain a proportion to hold or sell; or
- Option 3: Land/forestry rights owners could receive all emission units and related obligations.
Any decision on the proportion of emission units to be held by the Government can only be made following decisions on the nature of the system to be implemented. This decision would need to consider the desirability of incentives to protect and enhance sinks and reservoirs, plant new sinks, and participate in a sink scheme that would also impose obligations. While most forest planting occurs because of the potential value of the timber, the Protocol can provide for additional incentives through the realisation of the carbon value in forests.
It is accepted that forestry rights owners and landowners have a direct incentive to make decisions regarding the future of their forests. Establishing forestry rights owners or landowners as the principal owners of emission units would provide the strongest additional incentives to protect and enhance sinks, plant new sinks, and participate in a sink scheme that would also impose obligations. This additional incentive would be reduced if a portion is withheld and would be absent if all emission units were retained by the Government.
In determining the proportion of benefit to apportion to those undertaking sink activities, the Government must also consider its role and responsibilities as a signatory to the Kyoto Protocol. The Government could, for example, use emission units:
- to meet verification /auditing costs;
- to cover liabilities for some/all eligible forestry emissions;
- to manage risks arising from fire/biosecurity damage in Kyoto forests; and
- for other "public good" reasons.
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