Information document: New Zealand Emissions Trading Scheme Draft Forestry Allocation Plan and Deforestation Exemption Policies for Pre-1990 Forest Land
Choosing an Allocation or an exemption
If you own pre-1990 forest land, one of the key decisions you need to make in the next six months is whether to:
• apply for an allocation of NZUs free of charge; or
• if you are eligible, apply to have your land permanently exempt from the NZ ETS (under the “50 ha threshold exemption” or the “tree weed exemption”).
You are not obliged to apply for either an allocation of NZUs or an exemption but it may be in your financial interests to do so. The Government expects most, if not all, eligible landowners to apply for one of the two options (deadlines are discussed later in this document).
The following text box illustrates the value of applying for either an exemption or allocation:
Example of the value of an exemption
Deforestation of more than 2 ha of any pre-1990 forest land between 1 January 2008 and 31 December 2012 (and any subsequent 5 year period) is automatically subject to the NZ ETS, unless an exemption is obtained. By way of example, a typical hectare of mature Pinus radiata forest contains around 800 tonnes of carbon dioxide2. An exemption from the NZ ETS of, say, 40 ha of such pre-1990 forest land that the owner wishes to deforest, will save the landowner up to $800,000 in NZ ETS deforestation liabilities (assuming a price of carbon of $25 per tonne). The value of this to the landowner is the total profit they would make on deforesting the 40 ha, without charge, less the benefit they forego by not applying for an allocation of units.
Examples of the value of an allocation
A successful applicant for an allocation of NZUs who bought their land after October 2002 would receive 39 NZUs per hectare. If that applicant owned 500 ha of eligible land they would receive 19,500 NZUs (worth $487,500 assuming an average price of $25 per unit).
An owner that bought the same area of eligible land prior to 1 November 2002 would receive a considerably higher number of units. The actual number of units per hectare is not certain at this stage (see section ‘Quantity of NZUs to be Allocated to Each Landowner’), but is estimated to be in the order of 60 units per hectare (equivalent to 30,000 units with a value of $750,000).
If you wish to apply, you must choose between the two options - you cannot receive both an allocation of NZUs and an exemption for the same area of land. However, in some instances you will be able to apply for an exemption for parts of your land holdings and a free allocation for other parts. For example:
• If you have bought land that is eligible for the 50 ha exemption after 1 September 2007 and also own other forest land, you can apply for the eligible parts of your forest landholdings to be exempt and apply for the remaining parts to receive an allocation; or
• If you own land that is eligible for the 50 ha exemption, you can apply for part of it to be exempt and part of it to receive an allocation.
You have a limited time to make this decision and submit the relevant application. Applications for an exemption under the 50 ha threshold must be submitted by 30 June 2009 and applications for an allocation (once called for) are likely to be required by (tentatively) 31 July 2009. You will only be able to submit a late exemption application at the discretion of the Director-General of MAF.
You will not have another chance to apply for the 50 ha threshold exemption after 30 June 2009 or an allocation after (tentatively) 31 July 2009. You will also be unable to change your mind at a later date about which option you want to apply for. This applies also for the tree weed exemption.
Applications for tree weed exemptions will be subject to a tender process, announced via public notice. The process is currently being developed and further information will be posted on MAF’s website later in the year.
Given the financial importance of this decision for most owners of pre-1990 forest land, and the deadlines that have been set, the Government is encouraging all pre-1990 landowners to carefully consider their decision as soon as possible.
2 Actual deforestation liabilities will differ depending on the region in which a forest is located, the tree species and the age of the trees. You can determine the actual deforestation liability you would face if you deforested your land by referring to the Climate Change (Forestry Sector) Regulations 2008 available from MAF and on MAF’s website at www.maf.govt.nz/sustainable-forestry.
Contact for Enquiries
Emissions Trading Scheme
Ministry of Agriculture and Forestry
PO Box 1127
Wellington
Or call us on 0800 CLIMATE (254 628)
