25 August 2011

A review of four MAF-administered afforestation schemes recommends they should be continued in a modified form, but with greater clarity of purpose, better cost control and greater consistency between regions. It also says regional councils should use “less carrot and more stick” with land owners who continue unsustainable activities on erosion-prone land.  

Two of the schemes -̵̵  the Permanent Forest Sink Initiative (PFSI) and the Afforestation Grant Scheme (AGS) -̵̵  were developed as part of the government’s climate change policies. The other two -̵̵  the East Coast Forestry Project (ECFP) and the Sustainable Land Management (Hill Country Erosion) Programme (HCEP) -̵̵  were sustainable land use initiatives.

The review process began following the release of the Review of MAF Afforestation Schemes discussion document which attracted  52 public submissions, which the panel followed up with consultation meetings and telephone conference calls.

 In its report, the panel identifies both pragmatic and ideal conclusions. These differ because of uncertainty about the international rules that will apply following the end of the first Kyoto commitment period in December 2012 and the fiscal constraints faced by the government in the wakes of the Christchurch earthquakes.

 Pragmatic conclusions

PFSI

The PFSI has a single purpose of enabling land owners to access the value of carbon sequestration. It does not involve government grant funding and is not a time bound scheme.

 It delivers co-benefits to the Crown, local authorities and land owners in terms of biodiversity, water, soil and carbon values and contributes to sustainable land use.

Because it has been in operation for only three years, iIt is premature to draw definitive conclusions about its success at this stage.

As of March 2011, 31 PFSI covenants covering 7141 hectares were registered. Of these 7141 ha, 4355 ha are exotic forests (61% ) and 2787 ha are indigenous forests (39%).

While not specifically identified, there are more than 1000 ha of what can be appropriately termed new forests either registered under the PFSI or with applications being processed.

The panel recommends maintaining separate legislation for the PFSI and the ETS until the post-2012 situation becomes clear. Because the ETS is likely to be subject to continual modification, the merging of the two schemes would downgrade the tradable value of the PFSI-generated units by increasing the uncertainty about their enduring worth.

The contractual nature of the PFSI differs from the legislative structure of the ETS, and is seen by submitters to be less subject to modification by political whim. The Forests Act 1949 generates less public controversy than the Climate Change Response Act 2002, and therefore the PFSI – enshrined as it is in the former – is believed to be more robust.

AGS

The AGS has carbon sequestration and sustainable land use objectives. It is also an important mechanism for implementing farm plans under the HCEP. It began in 2008/09, operating through a tendered public grant pool and a fixed regional grant pool, with funding ending in 2012/13.

Some 3279 ha were planted in the first two years of operation, and a further 6380 ha have been, or are expected to be, approved for planting in 2010/11 and 2011/12. A high proportion of approved planting has been planted to date.

Average grant rates have been $1700/ha for the public pool and $2,100/ha for the regional pool.  The regional pool has had a strong focus on the mitigation of soil erosion with about 46% of the area established being on land use capability class 7e land, compared to 26% for the public pool.

The AGS was established with funding for six years, but government expenditure reviews reduced the annual grant funding and the length of the programme to five years. In that period $23.5 million has been allocated to grants.

The AGS has been discontinued by the government with the final tender round for the public pool closing on 30 April 2011. A total of 82 tenders were received for funding for forest establishment in 2012.

Regional councils use AGS funding, in addition to funding from ratepayers and from individuals, to undertake erosion-control programmes in their regions. Therefore, evaluating this programme entirely on the basis of carbon value-for-money, would put and end to much of the nation’s work in prevention of erosion.

The panel therefore recommends that the 50% of AGS funds currently earmarked for the  regional pool be allocated to a soil erosion fund, for use in priority catchments identified by the regional councils. The use of these funds would not be evaluated on on the basis of carbon sequestration.

This money would be used solely for costs of afforestation and would be separate from the existing HCEP funding which is administered differently and which can be used for erosion prevention not directly involving afforestation.

The AGS is a mechanism to purchase carbon in advance of sequestration. This is an activity which may be better provided by the private sector, although it may be useful for strategic reasons for the New Zealand Government to have a domestic source of carbon credits.

Therefore the panel recommends that funds for the public pool of the AGS should be provided solely by the private sector wherever possible. The government could assist the AGS by promoting, administering and policing the scheme on a cost recovery basis (through receipt of some carbon credits).

The AGS should not be limited to any specific timeframe (e.g. 10 years) and should be flexible as regards species, regions and regimes. Funds could be paid on the best (MAF sanctioned) estimates of the actual carbon sequestered for the contractual period, with a true-up near the end of the period.

The panel notes that the current inflexibility of categories is creating an anomaly (e.g. applicants in the “fast-growing” AGS pool have a high proportion of Douglas-fir growers who are assessed at the rate of radiata pine, but who sequester considerably less carbon).

 ECFP

The ECFP is a grant scheme that was established in 1992. It has a goal of targeting the worst 60,000 ha of eroding land in the Gisborne District, and has government endorsement and approved funding to 2020. Targeting of land is supported by rules in Gisborne District’s regional and district plans.

 The ECFP has resulted in 35 552 ha being treated through afforestation, reversion or pole planting, of which about 24,000 ha are target land. Between 2007 and 2010 some 1559 ha of forest and poles and 1313 ha of reversion were established (a combined average of 718 ha/year). In 2010 approvals were made for a further 5745 ha of forest planting (in the next three years), 498 ha of reversion and 451 ha of pole planting.

The ECFP receives $4.5 million a year in Crown funding but has struggled to use this and deliver significant areas of afforestation, reversion and pole planting. Grant rates for afforestation range from $1,476 to $2,280/ha (depending on distance to port), $1,512/ha per hectare for reversion, and 70% of actual and reasonable costs for pole planting.

The panel recommends replacing the requirement for covenants with agreements similar to those used for the AGS and abolishing the policy that post-2007 grantees may have their grants reduced if they join the ETS (Forestry).

Funding should be provided to 2028 to cover the thinning costs associated with new planting from 2013 to 2020, to 2025 to cover payments for forest reversion initiated between 2016 and 2020, and to 2023 for pole planting undertaken between 2018 and 2020.

Both forestry and pole planting should receive 70% of the approved grant following completion of successful establishment, and the subsequent 30% for forests up to year eight for thinning and for poles in the third year after establishment.

HCEP

The HCEP was set up in 2007/08 and is focused on the mitigation of soil erosion on the hill country of the mid and lower North Island through changes in land management. Farm plans are a key component.

The HCEP is MAF base-line funded with $2.4 million allocated per year, of which $2.2 million is available for partnership funding of regional council initiatives and $200,000 is available for catchment facilitation groups.

In the absence of government stated goals and/or objectives, and with three of the four regional councils having completed only one year of eight year programmes, the panel says observations about achievements are more appropriate than conclusions.

The bulk of the HCEP funding ($13.4 million) has been to Horizons Regional Council. For the four years to 2009/10 their target for non-retirement land work to be completed was 5560 ha, with 1386 ha achieved. For the completion of retirement land work, the target was 4760 ha with 3218 ha achieved.

Greater Wellington, Hawke’s Bay and Taranaki Regional Councils have received a total of $2.2 million. The Willow and Poplar Research Collective was allocated $653,000 to support a willow and poplar breeding programme.

The panel says the partnership approach with central government, regional government and landowners working together to address soil erosion is excellent. It recommends that the scheme should be integrated with implementation strategies from the ECFP to form a national Soil Erosion Forestry Initiative, with new funding for soil conservation through afforestation, reversion and pole planting (essentially continuing the role of the current AGS regional pool.

 Ideal situation

In an ideal world, there should be total separation of payments for carbon and for other services provided by forestry (erosion control, water quality, biodiversity, etc).

“Separate services merit separate – and additional – payments. Multiple payments ensure that projects which meet multiple objectives are more likely to be approved.

PFSI

The PFSI should be a subset of the ETS, under the same Act of Parliament. This would make it easier to explain and promote the scheme, and it would also minimise administrative costs. The PFSI would be solely for carbon, and – while being fiscally neutral to the Crown – would serve the Government’s inferred purpose of enhancing carbon sequestration and mitigating anthropogenic climate change.

AGS

The AGS would be solely to promote carbon sequestration by providing money up-front for those (mainly smaller growers) with cash flow difficulties. It would be administered entirely through the public pool, by fixed grant (not tender), and be available in full regardless of income from other schemes for non-carbon environmental services.

It would be limited to areas 5-̵̵ 300 ha in size, because very small areas are expensive to administer compared to the small benefit they provide, and because tree growers with larger areas can normally overcome cash flow difficulties by other means.

There would be no low sequestration category of AGS funding aimed at indigenous plantings, as the discounted value of carbon sequestration from this source is too low to provide any realistic incentive. If encouraging the regeneration of indigenous forest, is a real objective (rather than carbon) this goal is best achieved by targeted incentives, or mechanisms such as ‘biodiversity credits’.

HCEP

“Those continuing to cause pollution by allowing erosion-prone land uses are eligible for incentives to discontinue their activities or – at most – face gentle persuasion to change. Despite landowner resistance, the taxpayer would be better served by placing more emphasis on the “polluter pays” principle and enforcing the Resource Management Act 1991,” says the report.

 The upper limit of five hectares for HCEP money was designed to avoid overlap with the AGS range of areas, but if the AGS was operated as a separate carbon scheme this rationale would no longer exist. In the ideal situation, there is no case for an upper limit of any magnitude.

There is no reason (specific to erosion prevention) why the East Coast should be singled out for special treatment, with its own scheme. In the ideal situation, there would be a single nationwide programme charged with the task of erosion prevention.

This programme would incorporate the best features of both the HCEP and the ECFP and should operate independently of carbon. In other words, the grant should not be reduced merely because the trees will generate carbon as a by-product.

Source: Ministry of Agriculture & Forestry website. The full report is available here.