A Guide to Forestry in the Emissions Trading Scheme
22 October 2009
ALERT - Proposed Changes to ETS Legislation and Pre-1990 Forest Land Allocation
Climate Change Response (Moderated Emissions Trading) Amendment Bill
On 24 September 2009 the Government tabled legislation to amend the Emissions Trading Scheme (ETS). The Climate Change Response (Moderated Emissions Trading) Amendment Bill includes changes to general provisions, and forestry sector provisions including the pre-1990 forest land allocation. Further details on the proposed changes are available in Sustainable Forestry Bulletin, Issue 8 at: www.maf.govt.nz/sustainable-forestry.
The Amendment Bill is currently being considered by the Finance and Expenditure Select Committee. It is planned that the Select Committee will report back on 16 November 2009, and that the legislation will be enacted in December 2009.
New consultation on the pre-1990 forest land allocation
As a result of the changes proposed by the Amendment Bill to the ETS, a new consultation document on details of the allocation of New Zealand Units (NZUs) to owners of pre-1990 forest land (Pre-1990 Forest Land Allocation Plan (Consultation Draft)) has been released. This Consultation Draft supersedes the Draft Forestry Allocation Plan released in October 2008. Where supported by the Government, options put forward in previous submissions have been included in the current proposed changes.
Further details on the aspects of the allocation plan being consulted on, and information on how to submit are available in Sustainable Forestry Bulletin, Issue 9 at: www.maf.govt.nz/sustainable-forestry.
However, current legislation and regulations continue to apply until proposed changes are passed into law by Parliament. Once this occurs, this guide will be updated.
1 Introduction and Key Concepts
About this Guide
This guide has been prepared to assist the forestry sector, other landowners and potential investors understand the operation of the Emissions Trading Scheme (ETS) for forestry.
The document provides a guide only and does not purport to give advice regarding specific circumstances in relation to the ETS, New Zealand’s climate change legislation in general, or the particular circumstances of individual land and forest owners.
The guide is designed to provide an overview of the ETS (Forestry) as it will be implemented. It explains:
- the ETS in general and why forestry is the first sector to enter the scheme;
- the definition of forest land and the different forest classifications within the ETS;
- the entitlements and obligations of ETS Participants who own:
- exotic or indigenous forests established after 31 December 1989 on non-forested land (“post-1989 forest land”); and/or
- forests established before 1 January 1990 that are predominantly exotic species (“pre-1990 forest land”);
- taxation implications for ETS Participants.
Additional Guides
MAF is progressively making available a series of guides that provide detailed information about the administration, rules and procedures that a Participant must follow in order to comply with the ETS and related legislation.
The following guides and standards are available at www.maf.govt.nz/sustainable-forestry:
- A Guide to Mapping Forest Land for the Emissions Trading Scheme and the Geospatial Information Mapping Standard: describe how to define an area of forest using either the online mapping tool or by submitting existing data in electronic form, for example, shapefiles.
- A Guide to Look-Up Tables for Forestry in the Emissions Trading Scheme: describes how to use tables to determine the amount of carbon (the “carbon stocks”) within a Participant’s forests.
Future guides will cover:
- A Guide to Classifying Forest Land for the Emissions Trading Scheme: gives practical guidance on how to determine whether an area of forest is pre-1990 or post-1989 forest land under the Act.
- A Guide to Field Measurement for Forestry in the Emissions Trading Scheme, and The Field Measurement Standard for Forestry: describes how to carry out standard forest inventory field measurements to provide data that can be used to assess forest carbon stocks using an online carbon calculator supplied by MAF.
- A Guide to the Carbon Calculator for Forestry in the Emissions Trading Scheme: describes how to calculate the carbon stocks and how these change over time within a Participant’s forests based on data obtained by field measurements.
The Legislation
The legal requirements relating to forestry in the ETS are set out in:
- The Climate Change Response Act 2002 (the Act), as amended by the Climate Change Response (Emissions Trading) Amendment Act 2008 and the Climate Change Response (Emissions Trading Forestry Sector) Amendment Act 2009;
- The Climate Change (Forestry Sector) Regulations 2008 (the Regulations).
These are available at www.legislation.govt.nz
Taxation Information
The taxation information included in this guide has been provided by Inland Revenue. Participants are advised to obtain specific advice in relation to their own tax circumstances.
MAF Contact Details
Ministry of Agriculture and Forestry
Te Manatu Ahuwhenua, Ngaherehere
Pastoral House
25 The Terrace
PO Box 2526
Wellington 6140
New Zealand
www.maf.govt.nz
0800 CLIMATE (254 628)
Overview of the ETS and the Role of Forests
The Emissions Trading Scheme (ETS) was created by the Climate Change Response Act 2002 (the Act). The ETS is designed to eventually cover all significant greenhouse gases (covered by the Kyoto Protocol) and involve all sectors in New Zealand.
The objective of the ETS is to support global efforts to reduce greenhouse gas emissions by helping New Zealand to:
- reduce net emissions below business-as-usual levels;
- comply with our international obligations, including our Kyoto Protocol obligations.
Emissions trading has been preferred because:
- there is broad consensus that it is an effective and economically efficient approach;
- it is the most flexible option;
- it provides an incentive for industry and private individuals to improve their resource use;
- it is consistent with the principles of the Kyoto Protocol.
Greenhouse Gases
The impetus behind the ETS is to reduce total greenhouse gas emissions. These are the gases in the earth’s atmosphere that trap the sun’s heat (hence the term, “greenhouse”). The main greenhouse gases, apart from water vapour, are carbon dioxide (CO2), methane (CH4) and nitrous oxide (N2O).
The gases are emitted naturally but also occur as a result of human activity (for example, burning coal, deforestation, driving cars). The problem we are facing is rapidly growing levels of these gases in the earth’s atmosphere. As these levels grow, they are expected to increase global temperatures and affect the climate system. With even quite modest temperature increases, changes in climate are expected to negatively impact on many of the world’s inhabitants, and both natural and managed ecosystems.
Greenhouse gases can be removed from the atmosphere by “sinks”. Forests and other woody vegetation can be “carbon sinks”, as they remove atmospheric CO2 through photosynthesis and store it as carbon in biomass (that is, in wood, leaves and woody litter). For more details about carbon sequestration, see Carbon Sequestration and Determining Carbon Stocks section of this guide.
Deforestation and harvesting, in effect, turns forests into sources of greenhouse gases, as most of the wood removed from a forest eventually breaks down and is returned to the atmosphere as CO2.
Natural forests that are not actively managed, or are in a steady state of management, are generally considered neutral in terms of CO2 since, over time and across the whole forest, the carbon lost from harvesting, decay or fire is generally equivalent to the carbon stored through photosynthesis.
The Kyoto Protocol
To reduce greenhouse gas emissions, the international community has signed two agreements: the United Nations Framework Convention on Climate Change (UNFCCC), adopted in 1992; and the more widely known Kyoto Protocol, ratified by New Zealand in December 2002.Kyoto, Japan. The UNFCCC is the overarching agreement, under which sits the Protocol.
For developed countries, the Kyoto Protocol sets target levels for reducing greenhouse gas emissions. Either the targets are achieved by 2012, or countries must take responsibility for emissions above their target. These obligations are binding and there are penalties if obligations are not met. Rules and commitments for further emissions reductions to apply in a second commitment period (expected to commence in 2013) are now being negotiated.
How the ETS Works
The ETS essentially puts a price on the emission of greenhouse gases and provides incentives that will encourage sectors to search for the most efficient paths to lower net emissions across the economy.
Participants in the ETS will have three core obligations:
- monitor the emissions they are responsible for;
- report these each year to the Government;
- surrender emissions units to cover their reported emissions.
The Government will issue a number of emissions units for forest carbon sinks (that meet the required criteria) and these may be held, or bought and sold (that is, traded), within New Zealand. The primary unit of trade in the ETS is the New Zealand Unit (NZU). One NZU represents one tonne of carbon dioxide (CO2) either released to the atmosphere (emissions) or removed from the atmosphere (removals).
The ETS is linked to the international Kyoto Protocol market. NZUs will be generally interchangeable with New Zealand Assigned Amount Units (AAUs), held by New Zealand under the Kyoto Protocol. AAUs can be used by any country to meet any of their obligations under the Kyoto Protocol. They are not, however, automatically allowed into all countries’ domestic emissions trading schemes. For example, the European Union (EU) currently does not allow New Zealand AAUs to be used by companies with obligations under the EU Emissions Trading Scheme.
Ownership of NZUs is recorded in a central registry (www.eur.govt.nz). NZUs are transferred between registry accounts when they are surrendered or sold. Participants wishing to sell NZUs can instruct the registry (the New Zealand Emissions Unit Registry, NZEUR) to transfer them from their account to another account.
Similarly, Participants who are required to surrender emissions units for compliance purposes can do so by instructing the NZEUR to transfer units from their account to a “surrender account” in the registry. If a Participant does not have sufficient units in their account, they will be required to buy sufficient units to cover the shortfall and then surrender them.
Emissions Trading Internationally
A similar scheme to the ETS has been underway in Europe for a number of years, beginning with the energy sector and bringing in other sectors on a phase-in basis. Many other countries are now also developing emissions trading schemes, tailored to their respective national emissions profiles. For example, EU countries have a large proportion of emissions from energy generation and industry, and thus they have opted to introduce these sectors first.
The New Zealand ETS covers all significant gases and all sectors but there will be a phase-in period with different sectors entering at different stages. New Zealand is the first country to begin its emissions trading with forestry. This is due to the fact that forestry plays a key role in national emissions reduction.
Forestry in the ETS
New Zealand’s forests play a critical role in meeting the country’s climate change objectives. The forest estate is already a significant store of carbon and there is potential for this to expand further with both farm and larger-scale plantings. For this reason, it was the first sector to enter the ETS – effective 1 January 2008.
The introduction of forestry to the ETS was also aimed at creating accurate price signals for deforestation – the conversion of forest land to other land uses. Deforestation is the second largest source of human-induced greenhouse gas emissions globally. Consequently, deforestation is included in the Kyoto Protocol. When deforestation occurs, it creates liabilities under the Protocol.
In the following sections, the obligations of, and opportunities for, pre-1990 and post-1989 forest landowners are explained.
Note that indigenous forests established before 1 January 1990 are not included in the ETS. Owners of these indigenous forests have no obligations under the ETS, even if they deforest. Equally, they do not have any entitlements under the ETS.
Participation in the ETS (Forestry)
Owners of forests become Participants in the ETS in two ways:
Compulsorily – when pre-1990 forest land is deforested (unless exempt).
Voluntarily – when owners of post-1989 forest land choose to bring it into the ETS.
Who is a Participant?
A Participant is a person who has obligations and/or obtains entitlements under the ETS. Various persons can be the Participant depending on whether the land involved is pre-1990 or post-1989 forest land. The Participant is not necessarily the owner of the forest land if another party has control over the forest (see the table below).
| If pre-1990 forest land is deforested (compulsory inclusion in ETS), then the Participant is the: | If post-1989 forest land is voluntarily brought into the ETS, then the Participant is the: |
|---|---|
landowner; or |
landowner; or |
Post-1989 Forest Land in Summary
Post-1989 forest land is exotic or indigenous forest that is established after 31 December 1989 on land that was not forest land on 31 December 1989 (that is, it was non-forest land on 31 December 1989):
- Owners of post-1989 forest land may voluntarily join the ETS, and in doing so become Participants who are entitled to receive NZUs for the increase in carbon stored in their forests as they grow. Those NZUs can be sold in New Zealand or converted and sold internationally.
- Participants also have the following legal obligations for the forest area registered under the ETS:
- to report at least once every five years on the carbon stocks in their registered forest area using methods, and to a timeline, specified in the Climate Change (Forestry Sector) Regulations 2008 (the Regulations);
- to surrender emissions units if the carbon stocks in their registered forest area fall below a previously reported level (for example, due to harvesting or fire). However, liabilities will not exceed the emissions units transferred for the area of forest;
- to notify the Government if any part of the forest area registered in the ETS is sold or withdrawn, and, if required, to surrender any emissions units transferred for that area of forest.
- Participants in the ETS may choose to register part or all of their post-1989 forest land, at their discretion. Additional forest areas can be added at any time.
- Landowners have until the end of 2012 (the end of the First Commitment Period) to decide whether to register for that period. If they do, all carbon sequestered since 1 January 2008 would earn NZUs. After 2012, they can still register, but only carbon sequestered from 1 January 2013 will earn NZUs.
- No NZUs are earned for carbon sequestered before 2008.
- If landowners do not register, the gains or losses in carbon stocks in their forests are retained by the Crown.
Details of the process for registering post-1989 forest land, and information on obligations and entitlements can be found in the Participant Obligations section of this guide.
Many of the terms used later in the guide have defined meanings under the Act. Careful reading of the key concepts and the terminology section in this guide (Key Concepts and Terminology) is recommended.
Pre-1990 Forest Land in Summary
Pre-1990 forest land is an area that was forest land on 31 December 1989, and that on 31 December 2007 is still forest land and is covered by predominantly exotic forest species. For these forests:
- Forest landowners can:
- harvest, and replant or regenerate their forests without joining the ETS or incurring liabilities (no reporting is required);
- apply for an allocation of NZUs when a Forestry Allocation Plan is issued;
- if the forest area is small, apply for an exemption from the ETS (as explained below).
- No NZUs are earned for forest growth.
- If an area of more than 2 hectares is deforested in any five year period from 1 January 2008, the forest landowner automatically becomes a Participant in the ETS unless the area deforested is exempt land. They must notify the deforestation activity, and then submit an emissions return.
- If a forest landowner becomes a Participant in the ETS as a result of deforestation, they must surrender emissions units equal to the amount of CO2 emissions calculated as resulting from the deforestation.
- A pre-1990 forest landowner may apply for an exemption from ETS obligations in two situations:
- the total area owned by the person who owned the land as at 1 September 2007 (with any associated persons) was less than 50 hectares; or
- deforestation involves trees designated as weeds.
Note that until a final Forestry Allocation Plan has been issued, exemption under the “less than 50 hectares” category is only available for areas of pre-1990 forest that have already been deforested.
- Pre-1990 forest landowners have no obligations under the ETS unless the land is deforested – that is, unless they clear non-exempt forest and convert the area to another land use (for example, to dairy farming) or it otherwise ceases to be forest land.
Further information on entitlements and obligations for landowners with pre-1990 forests and details about applying for an exemption from the ETS can be found in the Pre-1990 Exemptions from the ETS section of this guide.
Pre-1990 Forest Land and the Forestry Allocation Plan
Under the Act, where a Forestry Allocation Plan is issued owners of pre-1990 forest land that is not exempt land may be entitled to receive an allocation of NZUs. An allocation in this case would be made to recognise that the ETS imposes some constraints on land-use change that in some circumstances may affect land values.
Landowners are not required to join the ETS to participate in any allocation process: it is entirely separate. Nor would those receiving allocated NZUs through such a process have to join the ETS in order to trade their NZUs. However, they would have to make an application to obtain an allocation of NZUs, and supply verifiable information about the forest on their land as part of that application.
A special Select Committee of Parliament has been reviewing the ETS. The Minister for Climate Change Issues is not expected to recommend the issue of a Forestry Allocation Plan until after the ETS Review has been completed.
Further information about the forestry allocation plan process under the Act can be found at: http://www.maf.govt.nz/sustainable-forestry/ets/allocation.htm.
An overview of the proposed allocation process can be found in the Allocation of NZUs Under the Forestry Allocation Plan section of this guide.
Key Concepts and Terminology
Under the Act, forest is classified in a particular way, according to definitions aligned with the requirements of the Kyoto Protocol. Approaches to determining the amount of carbon stored in a forest (the forest carbon stocks) also follow international carbon accounting conventions. In this section we introduce key concepts and terminology to help potential Participants:
- determine whether their land and forest meets the criteria under the ETS;
- classify their forest area as pre-1990 or post-1989 forest land;
- describe the area of their forest land;
- determine the carbon stocks in their forest, and use the prescribed methods available to
estimate these; - decide whether an activity that has affected their forest’s carbon stocks must be reported.
What are Forest Species?
Forest species are tree species capable of reaching at least 5 metres in height at maturity in the place they are growing.
How is Forest Land Defined?
Forest land is an area of land of at least 1 hectare with forest species that have, or are likely to have at maturity:
- a crown-cover of more than 30 percent on each hectare; and
- an average crown-cover width of at least 30 metres.
Note that:
- If an area of land of 1 hectare or more is not likely to have a crown cover of more than 30 percent from forest species at maturity it is not considered forest land under the ETS. For forest established after 31 December 1989 to be eligible as post-1989 forest land under the ETS, it must be established on land that was non-forest land at 31 December 1989. If pre-1990 forest land is deforested, it becomes non-forest land. Post-1989 forest land established on such land is eligible to enter the ETS once any deforestation liability for the pre-1990 forest land has been met.
- If an area of forest temporarily does not contain forest species capable of meeting the height and crown-cover thresholds because of human actions or natural events (for example, it may have just been harvested, thinned, or trees may have been blown over by strong winds), but it is likely to again meet the tests, then it is referred to as being “temporarily unstocked” but is still considered to be forest land.
How is Deforestation Defined?
Generally, deforestation is forest clearance, followed by a change to another land use (for example, to grazing). After deforestation, the deforested area is classified as non-forest land.
Note that:
- Deforestation of pre-1990 forest land always incurs a liability to surrender NZUs, unless the deforested area is either 2 hectares or less of pre-1990 forest (in any five year period from 1 January 2008) or occurs on exempt land. Deforestation of participating post-1989 forest land also incurs a liability to surrender any NZUs transferred in relation to the land.
- Deforestation may in some circumstances be deemed to have occurred after harvesting, if the re-planted or regenerated forest does not meet criteria for minimum stocking (stems per hectares) and/or crown cover – see the Related Information section of this guide for details.
Classifying Forest Land
An initial assessment is needed to establish whether an area of forest meets the definition of forest land, and if so, whether it is pre-1990 or post-1989 forest land. Evidence of the basis for this assessment will need to be provided with any relevant applications that confirms, for example, the year of the forest establishment.
If registration of a post-1989 forest is proposed, then information to demonstrate the forest was established on non-forest land is also required. If sufficient information is not provided to establish whether a proposed area of post-1989 forest land is established on non-forest land, it will be assumed that it was already forest land on 31 December 1989.
Information from aerial or oblique photographs (appropriately dated), planting records, or receipts for payments to forestry contractors may determine the date of establishment of planted forest. Age determined from tree-ring counts, or based on age/stem-diameter relationships, may also be required if other records are not available. For naturally regenerated forests, direct information about forest age eg from tree rings, or information that demonstrates forest establishment is related to a change in land management practice or land-use, will usually be required to confirm whether the forest land is pre-1990 or post-1989. Historical maps, photographs (aerial or oblique appropriately dated), or satellite imagery may be useful to demonstrate that land management/use has changed over time. Farm records, livestock sale receipts, invoices for payments to fencing or scrub-cutting contractors, or similar information, may also be helpful.
For post-1989 forest land information similar to that used to determine the age of establishment of naturally regenerating forests (for example, historical maps, photos etc) will be useful to demonstrate that the forest was established on non-forest land. This will usually only be required if there is any doubt the area was other than pasture land when the forest was first established.
Detailed information about determining the status of forest land will be available in: A Guide to Classifying Forest Land for the Emissions Trading Scheme at http://www.maf.govt.nz/sustainable-forestry/.
Determining the Year of Establishment of Planted Forest
Most owners of forests that were planted (as opposed to naturally regenerated) will know the year in which their forest was established. However, there may be some smaller forests where the planting date is not known with certainty. If this is the case, forest owners will need to gather evidence of when the forest was planted.
To confirm that any proposed forest is eligible to join the ETS as post-1989 forest land, Participants will also need to provide information to show that:
- the forested area was grassland without any woody species on 31 December 1989; or
- if woody species were present on 31 December 1989, they were not forest species; or
- if forest species were present on 31 December 1989, then under the management regime for the land at the time it was unlikely that sufficient numbers of trees (that are forest species) would establish such that a crown cover of more than 30 percent at maturity would be achieved (for example, because of regular clearance or grazing, or other forms of land management – see also the examples in the next section relating to naturally regenerated forest); or
- if the land was formerly pre-1990 or exempt forested land that had been deforested (and any liabilities from deforestation had been met).
Determining the Year of Establishment of Naturally Regenerated Forest
The year of establishment of naturally regenerated forest species may be difficult to determine exactly if the transition from grassland to forest land is progressive. If the forest land does not clearly fall into a pre-1990 or post-1989 category (see further examples below), it may be necessary to fell a small sample of trees so that the average age can be determined by ring-counting.
If the forest was established well before 31 December 1989 – and already clearly met the definition of forest land at that date – it is classified as either: pre-1990 forest land (if exotic species are predominant); or forest land established before 31 December 1989 if indigenous species are predominant. For example, pine forest planted in 1980 will be pre-1990 forest.
If there were no forest species present on an area of land at 31 December 1989 – and actions to promote natural regeneration of such species only took place after that date – the forest is clearly post-1989 forest. For example, if livestock numbers were maintained at sufficient levels to suppress naturally regenerating forest species from before 1 January 1990 until 1993, and a decision was then made to remove the livestock and let the land revert to forest to control erosion, the year of forest establishment is likely to be 1993 or later. The resultant forest would be a post-1989 forest.
The status of an area of land – which on 31 December 1989 included regenerating forest species that had not yet reached more than 30 percent crown cover – depends on the usual land management practices undertaken on the land at the time:
- If the practices would not normally have prevented the regenerating forest species from reaching more than 30 percent crown cover at maturity, the area would be considered to be forest land on that date.
- Conversely, if land management practices (for example, grazing) normally suppressed regeneration, so that the crown cover threshold was not normally reached by the time of maturity, the area would be considered to be non-forest land on that date. If a decision was made after 31 December 1989 to change the land management so that natural regeneration of the forest species was no longer suppressed, the year of forest establishment would be the year that land management change occurred (or a later date if adequate regeneration to meet the forest land definition did not occur that year). The forest would be a post-1989 forest.
Defining Forest Land Holdings
The area of forest land must be defined when the forest owner:
- registers with MAF that they wish to include post-1989 forest in the ETS; or
- files an emissions return to MAF on the forest landowner’s liability after pre-1990 forest land is deforested; or
- applies to MAF for an exemption for their pre-1990 forest land under the ETS; or
- applies to MAF for an allocation of NZUs for their pre-1990 forest land (when a final Forestry Allocation Plan is issued under the Act).
It is important to record the accurate boundaries of the post-1989 forest land because:
- A person/persons cannot claim NZUs for forest areas that are not either owned by them, or to which they do not have rights, and therefore the proposed forest boundaries must be checked against the boundaries of the land title associated with registration or application.
- If the registrant/applicant over- or under-states the area of their forest land, the resulting carbon assessment could be incorrect.
The mechanism for defining the area of forest land involves the use of shapefiles – electronic files that contain data delineating the boundary of the forest land so that it can be related to cadastral information (such as title boundaries) and to satellite or aerial imagery. Shapefiles can be created online, or, if an owner already has their own shapefile, they may submit that file provided it complies with the content and format prescribed in the Geospatial Mapping Information Standard.
Further information about shapefile specifications is included in A Guide to Mapping Forest Land for the Emissions Trading Scheme, available at: http://www.maf.govt.nz/sustainable-forestry/ets-mapping-guide.pdf.
The mechanism for tracking NZUs issued and surrendered, and net emissions liabilities for an area of post-1989 forest land over time, is the Carbon Accounting Area (CAA). CAAs are defined by the Participant and are described more completely later in the Participant Obligations section.
Carbon Sequestration and Determining Carbon Stocks
Carbon Sequestration
Carbon sequestration is the process by which carbon dioxide is absorbed during photosynthesis, and stored as carbon in biomass (trunks, branches, foliage, and roots). To determine the total carbon sequestered in a forest at any given time (the forest carbon stocks) it is necessary to work out how much carbon is in:
- The above-ground live biomass, which includes the stem, branches, and leaves or needles.
- The below-ground live biomass, which is the root system of the tree. Once the tree is harvested this usually decays slowly over time.
- The coarse woody debris, which includes all larger woody material left on the forest floor after any pruning, thinning or harvesting operations, or due to natural mortality. This coarse woody debris decays slowly over time.
- The fine litter, which is composed of decaying leaves or needles, and small branches and twigs. This usually increases slowly over time, until a balance between average annual litter inputs and decay is reached.
Forest biomass consists of about 50 percent carbon and over time most of the change in forest carbon stocks comes from changes in the biomass of the four biomass “pools” listed above. Changes in the amount of carbon stored in forest soils also occur over time, but these are small and difficult to measure at reasonable cost. Participants will therefore not be required to measure changes in soil carbon under the ETS.
Gains in forest carbon stocks through growth and sequestration will reach a maximum level over time, and are eventually offset by carbon losses through harvesting, thinning, and natural decay. An emissions return filed with MAF is used to account for the change in forest carbon stocks (which may be positive or negative) over a predetermined period.
Determining Carbon Stocks
It is expected that under the ETS there will be two methods available for determining forest carbon stocks: the Look-Up Table approach and the Field Measurement approach.
The Look-Up Table approach is a simple tables-based approach that allows carbon stocks to be assessed from pre-calculated values by forest age, and allows emissions returns to be completed without the expense of acquiring field-measured data. Details of the Field Measurement approach have yet to be finalised. However, it is expected the approach will closely follow industry-standard approaches to forest inventory based on a network of sample plots.
At present, look-up tables provide the only way of calculating carbon stocks for an emissions return, whether the return is voluntary or mandatory. However, once a field measurement approach to inventory of carbon stocks is available, it is anticipated that look-up tables will only be able to be used for smaller post-1989 forests if making a mandatory emissions return.
Each approach is explained briefly below.
The Look-Up Table Approach
The Look-Up Table approach (for both pre-1990 and post-1989 forest land) uses well-established growth modelling techniques to predict the growth, and hence the increase in carbon stocks with age, of trees of a particular forest type. Tables are available for five forest types: pinus radiata, Douglas fir, exotic hardwoods, exotic softwoods, and indigenous forests. Sufficient data were available to generate look-up tables for pinus radiata on a regionally-averaged basis, but only on a nationally-averaged basis for the other forest types.
The Look-Up Tables are accurate at a regional or national level, but do not reflect variations in growth rates due to variation in local site factors such as fertility or soil moisture. The main advantage of the Look-Up Table approach is that an assessment of carbon stocks, and change over time, can be made without the expense and complexity of having to perform field measurements. It is therefore much less costly, and substantially simpler, than a Field Measurement approach. The Look-Up Tables are included in the Regulations and provide total carbon stocks expressed in tonnes of carbon dioxide per hectare by forest age. More accurate Look-Up Tables for naturally regenerated indigenous forests are still under development and, until this work is completed, a uniform sequestration rate of three tonnes CO2 per hectare per year is being used. When available, updated tables for indigenous forests will be introduced through an amendment to the Regulations.
The Guide to Look-Up Tables for Forestry in the Emissions Trading Scheme explains in detail how to use the Look-Up Tables for calculating carbon stocks in growing forests, and for determining emissions associated with harvesting and deforestation. The Guide also covers topics such as how to determine the age and predominant species of your forest, and includes the carbon stock look-up tables given in the Regulations. It is available at http://www.maf.govt.nz/sustainable-forestry/ets/guide/lookup-table-guide.pdf.
The Field Measurement Approach
Field measurement is a more complex but more accurate method than the Look-Up-Table approach. It is expected to involve measuring the height and diameter of a random sample of trees in the forest to calculate total stem volume, and from that total carbon stocks in above- and below-ground live biomass are estimated. The approach will be based on standard forest inventory procedures which have been used in New Zealand for many years to assess the expected volume of wood that can be extracted from a forest at harvest.
Once the overall design of the Field Measurement approach has been completed, and the principles of operation confirmed following public consultation, it is anticipated that the approach will be introduced through an amendment to the Regulations. It is expected that the simpler Look-Up Table approach will continue to be used for smaller forests, and for voluntary (for example, annual) reporting for larger forests. However, because larger forests involve larger changes in carbon stocks, and a more accurate assessment approach is needed for these to minimise under- or over-reporting, use of the Field Measurement approach is expected to be mandatory at least once every five years for larger forests. The size of forest at which field measurement should become mandatory will be one of the elements proposed as part of public consultation.
Keeping Proper Records of ETS Activities
Participants in the ETS are required to keep for 20 years records of transactions, measurements, calculations and other information sufficient to allow an auditor to establish the validity of any registration of post-1989 or notification of deforestation of pre-1990 forest land; any calculation of forest carbon stocks on that land; or any emissions return.
A person receiving an allocation of NZUs under a pre-1990 Forestry Allocation Plan is likely to have to keep records for at least seven years.
Contact for Enquiries
Emissions Trading Scheme
Ministry of Agriculture and Forestry
PO Box 1127
Wellington
Or call us on 0800 CLIMATE (254 628)
