Dodgy Kyoto deal creates forest mess

12 May 2008

Parliament’s finance and expenditure select committee has been told that the emission trading scheme has created a mess in the forest industry and investor confidence has been hit hard.

Representatives of the Forest Owners Association said there was general agreement that Kyoto rules for forestry are neither fair nor equitable. But New Zealand still signed up to them and the industry is now paying for the government’s folly.

“The government didn’t sign up to do forest owners a favour – it did it in the national interest,” said chief executive David Rhodes. “Yet forestry is the only section of society that will be required to meet all its Kyoto costs, including charges for emissions that exist only in the unreal world of Kyoto.”

He said Kyoto rules have little to do with what happens in the atmosphere. Forests planted before 1990 have stored – and continue to store – millions of tonnes of carbon, but these don’t count unless you convert the land to another use. In which case, everything counts as an emission – even emissions that haven’t been made – and the owner has to pay a carbon tax of $20,000 a hectare or more.

“You are liable for more carbon than is actually emitted. The carbon which remains in the soil is ignored, as is the carbon in wood products which can have a useful life of up to hundreds of years,” said Mr Rhodes.

“If you harvest and replant in the same place, that’s OK. If you replant somewhere else – perhaps somewhere better suited to trees, or where trees are needed for erosion control, you still get a bill for $20,000. It’s a complete nonsense.”

He said New Zealand can choose how and when it implements Kyoto.

“That’s evident when you look at how the government is treating the farming sector. It doesn’t come into the scheme until 2013, and then only has to meet a small proportion of its emissions. In the meantime it gets off, scot-free.

“By treating two sectors that compete for the same land so differently, the Emissions Trading Scheme fails its own equity test. It also means the scheme won’t succeed in reducing New Zealand’s carbon emissions any time soon.”

PF Olsen chief executive Peter Clark said the prospect of paying a new tax for changing land use has stripped about $3 billion from the value of the pre-1990 forests that make up about 65% of the country’s plantation forest estate.

“Even if we ignore how unfair this is, it makes no sense to strip equity from these people. They are the people who are most likely to plant the forests New Zealand needs to meet its commitments in the second Kyoto commitment period from 2013,” he said.

“Also, from an environmental point of view why would you want to severely disadvantage the forestry sector, which at worst is carbon neutral, in order to shield major emitting industries from facing their emission costs?

“It appears that the government is solely interested in off-loading the costs of signing a dodgy agreement, regardless of the long-term consequences for the environment, the economy or New Zealand’s reputation as a safe place to invest.”

Mr Clark said the industry had little confidence that the deforestation tax would be dropped now that National had reversed its promise to oppose it. He called for the government to double the size of its proposed compensation package and to apply it equally across all pre-1990 forests. The industry also objects to rules that would disadvantage large forest owners as against owners of smaller forests, as well as barriers to offsetting – replanting a harvested forest in another place.

“The atmosphere sees no difference when a forest is replanted on another site – it is carbon neutral. It’s also in the interests of the economy for land-use to change in response to economic signals. Retention of land use flexibility was recommended by the Treasury in its 2005 review of climate change policies.”

Mr Clark described the government’s target of 250,000 ha of new planting by 2020 (roughly 20,000 ha a year) as “modest” in comparison to the 60,000-plus ha planted during the forestry boom of the early 1990s. The latter, he said, could easily be achieved under a policy that required polluters to pay for their emissions.

“In contrast, under current policy settings, even the more modest target is unlikely to be reached. The main reason is that even eroding rough pasture land is unlikely to be made available for forestry while the pastoral farmers don’t have to account for their carbon or nitrogen emissions, nor for their stream and lake sedimentation or nutrient run-off pollution,” he said.

“Putting in place policy that effectively locks pre-1990 forests into a single land use forever adds a significant investment risk that will discourage new planting.

“A policy that is based on a clearly wrong notion that forestry results in net emissions, while protecting land uses that clearly do emit greenhouse gases, is not good for the environment or for New Zealand’s international credibility.”

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for more information, contact David Rhodes tel 0274 955 525