ETS changes don’t address carbon flood

2 July 2012

Forest owners say the government appears to be unconcerned about the tide of European carbon credits flooding onto the New Zealand market.

“Their decision to honour the commitment to pay compensation to owners of pre-1990 forests for the liabilities they will face if they ever change their land-use is very welcome. But today’s announcements will not stimulate the new carbon-absorbing forestry planting the country needs,” says FOA chief executive David Rhodes.

“The government is making sure the carbon price doesn’t get too high, in order to protect jobs and exports at a time of global economic turmoil. But what about those who invest in low carbon technologies or plant carbon forests? They need protection from the price getting too low.”

Mr Rhodes says carbon markets exist only because governments see them as being effective tools for bringing about change. Left to their own devices the NZETS and other national carbon markets would fail.

“Getting the balance right between encouraging change and protecting emitters is tricky, but it isn’t all about finding the least cost short-term fix. The reason China, Korea, Japan and others are developing carbon markets is partly about saving the planet, and partly about future-proofing their industries so they can thrive in tomorrow’s green growth, carbon-constrained world.”

He says controlling both the supply and demand for carbon credits is important whether through auctioning or other mechanisms. Australia and the EU recognise the importance of restricting the supply of international carbon units and have struck a balance between what mitigation they will allow to be done offshore and what they expect to be done on-shore. Given New Zealand’s wish to align itself with these markets, we will eventually need to do the same.

“We are confident the government recognises the importance of forestry in offsetting national emissions. But we do not believe the NZETS in the form in which it exists is likely to deliver new forest investment, even taking into account the changes announced today.”

Mr Rhodes says the compensation paid to owners of pre-1990 forests is for the liability they face should they ever change their land-use. These people have no opportunity to earn carbon credits and while they can relocate their forests after harvest, the deforestation liability stays with them forever and reduces the value of their land.

“Honouring this commitment will help restore the confidence of forest owners that if the government limits their right to manage their land responsibly in the interests of their business, they will be compensated.”

For more information, please ring David Rhodes, Tel 0274 955 525