NZ Forest owners are furious about new charges for forestry registered in the Emissions Trading Scheme.
It comes as the Labour NZ Government revealed its ‘climate manifesto’ yesterday, promising to set separate targets for gross emissions and carbon removals, develop a voluntary carbon market framework, and limit exotic afforestation.
In recent months, the NZ ETS has been the subject of discussion with the NZ Government, tweaking the ETS price settings and looking to establish a whole new ETS market for planting.
And less than three weeks out from the NZ election, the ETS and NZ’s Net Zero Act have emerged as one of the key battlegrounds between the incumbent Labour Party and the National Party opposition.
On Friday, the Hipkins Labour Government announced a new $30.25 per hectare charge for forests and new fees for 22 services, such as changing the classification of exotic or indigenous areas and asking for more time to collect forest measurements.
The Ministry for Primary Industries (MPI) said the principle behind the charges is that those benefiting from having forests in the Emissions Trading Scheme (ETS) “should pay those charges rather than having them funded by the New Zealand taxpayer.”
As reported by the NZ-based Farmers Weekly on Friday, Lewis Tucker – a forest investment firm with 30,000 hectares in the NZ forest market – described the levy “as an indiscriminate tax on the entire forest industry” pushed through by NPI.
It is furious the levy was announced three weeks before the election whilst the government is supposedly reviewing ETS settings.
The changes would, according to communications representative Jonathon Hill, “add nearly NZ $1 million to Lewis Tucker’s annual costs.”
“Within the sector, there’s a high level of discomfort around what’s come out [this week].”
He alleges that the amount would equal or exceed that Lewis Tucker spent on pest control yearly.
“The fundamental concern we have is that layering this additional tax on the sector at such a high level will just encourage the exact behaviours that we’ve been trying to discourage, which encourages people to plant flat, highly productive farmland where they can maximise their financial return over a short period,” he said.
Lewis Tucker’s Managing Director, Will Leckie, agrees, claiming that the $30.25 per hectare “is a colossal number.”
Under production forestry, the average cycle for harvest is 30 years, but carbon credits, Mr Leckie said, could only be claimed for 16 years.
He said any move to change registered forest owners “should be tied to changes to the ETS as a whole” and that Lewis Tucker strongly believes in incentivising the correct behaviour through the ETS.
“We strongly believe in ensuring trees are put in the right place,” he said, “we think the current mechanisms around the ETS could be tweaked to encourage the planting of more marginal farmland.”
According to Mr Leckie, measures could include allowing a longer-term rotation option to encourage trees to be planted on hill country far from ports.
By contrast, the 16-year cycle encourages forest planting on flat, highly fertile, productive land.
Mr Hill has proposed a “user-pay” approach to recovering costs, “this is a flat, universal tax levied across all foresters.”
“I’m concerned about the precedent here,” he said, “if a government department can turn around and levy a significant new tax on a whole industry, in this case, forestry, where does that end, and what other sectors could this be applied to?”
“It’s a very, very poor practice.”
According to the NZ Forest Service, forestry participants in 2018 – 2022 received NZ $1.2 Billion in carbon credits in NZU – or credits that polluters can trade.
However, according to a forest expert, this is deceptive because an equivalent number of NZUs must be surrendered on harvest.
“The reality is that forestry participants get minimal ongoing benefit from the ETS beyond that derived by anyone else in the country.”
“Arguably, this means that the same annual charge needs to be imposed on all participants or, if separate classes are created, on all participants within those separate classes,” they said.
“But the new regulation doesn’t do this because it imposes a differential annual charge on all participants (depending on forest area) and doesn’t attempt to create separate classes.”
On Thursday, the NZ Forest Owners Association (NZFOA) hit back, saying the levy is another government disincentive to plant forests when needed.
NZFOA President Grant Dodson said it is a massive jump to a more than NZ $14m-a-year cost recovery, which is neither reasonable nor equitable.
“The ETS is for a public benefit. It has no basis for existing other than to store carbon from the atmosphere to combat climate change, which benefits all New Zealanders,” he said.
Mr Dodson said foresters had no say in setting up a needlessly complicated scheme.
NZ Farm Forestry Association president Neil Cullen said small-scale woodlot owners also face huge increases because of the new charges for 22 different ETS services.
“If someone transfers their ETS participation to someone else, they will be charged $990 just for entering a new name in the system. How much work will that take?”
Last month, the NZ Climate Change Minister reported that the Hipkins government wanted to incentivise forest establishment and plant 700,000 hectares of additional exotic and indigenous forests’ right now.’
The comments were made at the Carbon Forestry conference, with Minister James Shaw warning that NZ was “running out of time.”
Minister Shaw wants NZ to plant 300,000 hectares of permanent indigenous forest and 380,000 hectares in exotic plantation forests.
His comments were in the context of concerns by the carbon forestry sector that uncertainty caused by reviews of the Emissions Trading Scheme (ETS) and other related changes threaten a collapse in planting intentions.
“Our intention is not to reduce forestry,” Shaw said.
Yesterday’s ‘carbon manifesto’ will see the Hipkins Government invest NZ $300 million into green businesses. A Massey University professor and climate campaigner, Robert McLachlan, said Labour had produced “a comprehensive, detailed climate plan”.