Let’s get the ETS right before making it law

26 Jun 2008

A report highlighting the costs of delaying an emissions trading scheme (ETS) greatly understates the benefits of planting more trees, say forest owners.

“The trouble is, there are still major flaws in the proposed scheme which make large-scale new plantings unlikely,” says NZ Forest Owners Association climate change spokesperson Peter Clark.

“Rushing the ETS legislation to meet an artificial deadline imposed by the pending General Election seems foolhardy. On the other hand, the decision of the National Party not to engage in the process may result in poorly-framed legislation and costly delays until it is put right.”

He says if New Zealand gets its Kyoto policies right, forestry has a huge potential role to play in helping the country adapt to a low-carbon economy. Even with no new plantings, forestry will be responsible for most of New Zealand’s emission credits for the next decade.

A report from the NZ Business Council for Sustainable Development issued (NZBCSD) yesterday argued that there were compelling benefits from making the ETS law sooner rather than later. Forestry was one of the many industries it said would benefit.

Mr Clark says the NZBCSD is correct to identify forest biofuel & biochar as ETS opportunities, but it grossly underestimates the benefits of lifting afforestation to 20,000 ha/year.

“It attributes only 400,000 tonnes of reduced emissions to new forests because it bases its calculations on the first year of planting only. The actual benefits in the second Kyoto commitment period (CP2) are closer to 24 million tonnes of CO2 from 2012-2019 .

“Forestry is a long-term game for long-term gains. Those 20,000 hectares – and indeed tens of thousands of additional hectares if the policy mix is right – will keep storing carbon right through CP2 and beyond.”

Mr Clark says forest owners are reasonably happy with the government’s ETS forest policy as it relates to post-1989 forests, apart from the need to fix an anomaly relating to forests that were at mid-rotation on 1 January 2008 when the scheme started.

“Our major concerns relate to the treatment of different classes of land owner. If you are a farmer, the taxpayer will be looking after your emission liabilities for several more years. If you are the owner of a pre-1990 forest, your assets have been devalued by the new tax on land-use change and you are part of a scheme you cannot benefit from.

“The generous treatment of farmers means forest owners are unable to compete with them for land for large-scale tree planting. This is particularly true for owners of pre-1990 forests who have just been stripped of a large part of their equity.”

He says if pre-1990 forest owners are to be made part of the ETS, they must be fairly compensated, including the ability to ‘offset’ – to replant harvested forests in another location. Also the artificial division of pre-Kyoto forests around a date in late 2002 must be dropped.

Alternatively, the government could assume full responsibility for land use change, as is proposed in Australia. This has the key advantage that wood supply to processors won’t be interrupted by vagaries in a future carbon market.

Mr Clark says the ETS should be made law as soon as “the bumps have been ironed out”. But to do that will require the National Party to re-engage with the legislation so that the development of the scheme is not unduly disrupted by the election.

“At the moment the government is haggling with the minor parties to cobble together a majority in parliament before the election. It’s hardly the way to develop a durable policy which has such major ramifications for New Zealand’s long-term future.”