Changing the New Zealand Emissions Trading Scheme (ETS) will cause a shortfall of plantations and make meeting the country’s 2050 emissions target impossible, according to the New Zealand Institute of Foresters President James Treadwell.
It comes as Mr Treadwell said in an open letter that changes to the Emissions Trading Scheme (ETS), which could see restrictions placed on how many forestry units companies could purchase to offset emissions, had already led to a reduced price for government units.
Now, Treadwell says the absence of consultation with the industry, coupled with a lack of coordination among government entities, has given rise to investor concerns, leading to a detrimental flight of capital from the
“Of particular concern is the government’s disregard for the advice provided by the Climate Change Commission (CCC), impacting the carbon market.”
“The CCC’s current draft advice to restrict new planting is concerning, and the National Party has further emphasised it, while the Labour Party has introduced measures to limit new planting through local council control.”
Treadwell says that the Ministry for the Environment (MfE) has released a consultation document suggesting a complete overhaul of the ETS, with the possibility of decoupling forestry.
“Forestry’s inclusion in the ETS is the only effective measure currently in place to address climate change commitments, offering a ray of hope in meeting our targets,” Treadwell says.
“Slowing down or halting this progress would only harm every New Zealander but also hinder future generations’ ability to fulfil the Industry Transformation Plan, which includes investments in processing, such as biofuels and the growth of the bio-economy.”
“These policies are politically driven and lack scientific or economic backing. Even if immediate actions are taken to improve investor sentiment in the forestry sector, it will take years to rebuild trust in stable government policies,” he says.
FICA chief executive Prue Younger says the workforce FICA represents is already dire.
“Forestry contractors are already at breaking point with an unsustainable model,” Younger says.
“We’ve had a tough three years, and pressure is compounding with increased operational costs, staffing and employment issues, market instability, and contractual challenges. We see a widespread reduction of harvest targets and cancelled contracts.”
Younger says the proposed policy changes will add to the industry’s burden and see businesses cease to exist, meaning the workforce will be out of jobs.
“Not many can survive in this ongoing uncertainty with dire market conditions. A substantial number of jobs are at stake, threatening the livelihoods of 20-40% of the workforce,” she says.
According to NZFOA President Grant Dodson, it’s important to realise that both the 2030 and 2050 targets are net emission targets, and that’s what matters.
“Gross emissions have flatlined for the past decade, but the net is what counts in the end and that is where the forestry is the contributor,” Dodson said.
NZFOA: NZ won’t reach net zero targets without forestry
Last month, Dobson spoke to Early Edition’s Newstalk ZB Host, Kate Hawkesby.
“Forestry gives you both a gross and net emission reduction; it is the only thing on track regarding NZ emission reductions.”
In the interview, which can be downloaded here, Dobson said forestry needs to be left alone.
“Concerns about mass plantations taking over farmland are just unfounded.”
As it stands, more than half of New Zealand’s carbon emissions are reabsorbed by plantation forests.
“They are an essential element in most if not all, viable projections in carbon accounting; even more so if agricultural emissions are addressed in some way.”
“If gross emission costs are to be completely removed from forest incentives, New Zealand will fail to meet its climate targets.”
The proposed changes to the ETS market
On Monday, the New Zealand government released four options for reforming the future ETS market. These include:
- Use existing levers to strengthen incentives for net emissions reductions, for example, reducing the number of NZUs sold through auction.
- Increase the demand for emissions units by allowing the Government and/or overseas buyers to purchase them.
- Strengthen the incentives for gross emission reductions by changing the incentives for removals.
- Create separate incentives for gross emission reductions and removals.
Wood Central reports that the most likely outcome will be splitting the ETS market into two – with a market for emissions reductions and another for removing emissions from the atmosphere like tree planting.
According to Dobson, this is a bad idea.
“One of the proposals included in the reform options talks about having a forestry generated NZU at a lower value than an emission reduction NZU.”
“Deeming forestry generated NZUs to be of a lower or differential value to an emissions reduction NZU will only compound an already complicated ETS framework and its implementation.”
For Dobson, an NZU is an NZU, just like a dollar is a dollar.
“The uncertainty of the ETS framework has already seen the market for forest NZUs diminish,” Dobson said. “Who will buy NZUs knowing they may be made worthless by the government?”
Reforms will lead to a surge in international carbon credits at a time when NZ’s carbon market is projected to skyrocket
The NZ ETS is one of many emissions trading schemes in operation worldwide.
According to the NZ Ministry of Environment, the government sets and reduces the number of units supplied into the scheme over time. This limits the quantity emitters can emit, in line with New Zealand’s emission reduction targets.
Businesses buy and sell units from each other under the model. The price for units reflects supply and demand in the scheme. This price signal allows businesses to make economically efficient choices about reducing emissions.
The schemes operate at a range of levels, including Supra-national (1), Country (8), State & Province (19) and City level (6).
Forestry, Waste, Aviation, Transport, Buildings, Industry and Power are the sectors with ‘upstream’ coverage in the scheme.
The proposal, which involves taking forestry out of the main market, will have disastrous consequences for plantation investment.
“Planting programmes are in disarray and very little planting will occur after 2023,” Dobson said.
“Further actions from the Climate Change Commission, or the government, to reduce tree planting and in turn, reduce the supply of forestry credits, will knock all confidence in forest investment, setting New Zealand on a clear path of failure to meet its climate targets of net zero.”
In April 2023, the NZ Herald reported that NZ’s carbon bill could reach NZD 24 billion, assuming that greenhouse gasses are not reduced and the international price for carbon increases.
The report Ngā Kōrero Āhuarangi Me Te Ōhanga: Climate Economic and Fiscal Assessment 2023 were prepared by officials at Treasury and the Ministry for the Environment to collate the various future economic and fiscal implications of climate change for New Zealand.
At the lower end, carbon prices could lead to an NZD 3 billion carbon bill – with credits lost in NZ forestry being replaced by overseas credits.
“The result will be billions of dollars of taxpayer money spent on overseas carbon credits, instead of government solving the problem collaboratively, with New Zealand’s domestic forestry industry,” according to Dobson.
NZ Government’s empty promises have destroyed investment
The NZFOA reports that investor confidence has been hammered by the myriad of proposed changes of late, including this latest announcement and once destroyed, it will be a difficult and lengthy process to restore it.
“We don’t have that sort of time to play with,” Dobson said.
“Ministers keep reiterating a continuing need to incentivise forestry and have just stated that current climate change policy settings require between 0.97 million hectares and 1.44 million hectares of new forests by 2050 to meet climate change targets.”
“Proposals in this latest ETS announcement aim to achieve the opposite.”
“This is an issue far too important to play politics with. By the time politicians discover they have put forestry into reverse, it will be too late. Climate change will not wait for us to catch up,” he said.
Māori could be the big ‘loser’ in the ETS review
Yesterday, Wood Central reported that Māori are the biggest loser in the reforms.
Māori are major plantation forest owners – owning about a third of plantation forestry, which will tip to over 40 percent as more Treaty of Waitangi settlements are completed – but holdings are often on marginal land, which can be difficult to make money from.
Some Māori see selling units on the ETS – carbon farming – as a major opportunity.
Te Taumata chairperson Chris Insley said the reforms could be incredibly prejudicial to Māori, jeopardising huge amounts of possible ETS revenue.
“[It] will eliminate $10 billion development opportunity for Māori off marginal land,” Insley said.
“Who’s the loser in all this? It will be Māori.”
Te Taumata chairperson Chris Insley on Monday.
In May 2022, Māori landowners launched legal action against the government to stop proposed changes to the emissions trading scheme.
About 1.6 million hectares of the country remain in Māori hands, most of it the remaining slithers of a century of confiscation, reclassification, sales and land grabs.
According to Te Kapunga Dewes, head of the Māori Forestry Association, the state, yet again, dictating Māori land use.
“It told my great grandfather that we should be clearing all the natives and putting them into farmland; that’s the way to go.
“Fast forward, and we were told, ‘no no, actually clearing land was a very unclever idea, Māori, you fullas need to plant trees and boy have we got a tree for you and it’s called a pine tree’.
“Now, the Government is saying, ‘Oh actually, Māori, pine trees are not good’.”
Māori leader: Green Party idealism that exotic forestry is evil
Dewes says he had seen some drafts in April under a non-disclosure agreement when he was given a weekend to give feedback on a 170-page document.
What he says has emerged yesterday is a political document which shows how much New Zealand is falling behind by not including farming emissions and not planting more trees – which is where Maori can help if they are allowed.
“Forestry is a great option for our fantastic land that was left, that’s in high hill country, erosion-prone areas and things like that, yet the Government seems to be driving or perhaps it’s simply the Green Party seems to be driving this idealism that exotic foresty is the root of all evil,” Mr Dewes says.
The consultation will run until 11 August 2023, and changes could be implemented by early 2025.
- For more information, visit the NZ ETS Review website.
