27 March 2013

A cloud hangs over the future of the Permanent Forest Sink Initiative (PFSI), one of the NZ Government's flagship NZETS policies.

Under the policy, land owners entered into a covenant with the Crown to establish and maintain a forest on their land in perpetuity. Land owners received one Kyoto-compliant carbon unit known as an Assigned Amount Unit (AAU) for every one tonne of carbon absorbed by their eligible forest.

The covenants were described as perpetual and "could only be terminated by either party in special circumstances specified in the covenant". The government could however change the type of units earned by participants after 2012.

In November the government announced it would not be making a commitment under the Kyoto Protocol for the second commitment period (2013-2020). This means that from 1 January 2013, PFSI forests have ceased to generate Kyoto units. 

Also triggered is a clause in the covenants that gives land owners and the government the option to quit the initiative with 180 days of a goverment withdrawal from Kyoto.  If this happens, land owners have to pay back the AAUs they have earned since they entered the initiative.

After 180 days the right to withdraw lapses and both parties resume full liability for their obligations under the covenant. On 31 March, 90 of those 180 days will have ticked by. Meanwhile the government has yet to decide whether to allocate land owners a different type of unit or whether to abandon the scheme altogether.

"We appreciate that this information has created uncertainty for some participants," says MPI. [We] will continue to engage with land owners while this matter is being resolved and will consult with all participants, once options on the type of units to be allocated in the future have been developed. This is likely to be before the end of June. If MPI is unable to meet the June timeframe it will investigate options to extend the termination deadline.

"Finally, this issue does not impact on the allocation of units under CP1, nor does it alter the requirement for PFSI participants to lodge a mandatory emissions return by the
31 March 2013."

For more information, contact Glenn Sutton, North Island Regional Operations Manager, email This email address is being protected from spambots. You need JavaScript enabled to view it. or Tel 029 921 3411.

Source: MPI Sustainable Forestry Bulletin 42 and FOA reporting