NZ Gov Pushes for Major Reforms to ETS and Carbon Forestry

NZ Forestry at Crossroads with Māori the big ‘loser’ in the ETS review

Tue 20 Jun 23


The NZ government wants the public’s input on possible changes to forestry carbon farming, including imposing restrictions on pine trees.

Last week, Wood Central broke the news that the government will introduce new rules to tighten farm-to-forestry conversions, giving communities greater control of what is planted and where.

It comes in the wake of growing criticism that too much productive farmland was being converted into forestry to gain carbon credits.

“These changes are about getting the right tree in the right place by seeing fewer pine forests planted on farmland and more on less productive land,” Forestry Minister Peeni Henare said.

The redesign proposal was released yesterday, at the same time as a related review of the Emissions Trading Scheme (ETS).

The plan covers the permanent forestry category – trees planted to earn money from the ETS.

Exotic or indigenous forests can be registered in the permanent forest category if conditions are met. Another option suggested included only allowing exotic forests in limited circumstances.

For example, long-lived exotics like redwoods and pine on Māori owned land or small-scale exotic forests planted on farms.

On Sunday, Forest & Bird CEO Nicola Toki blasts NZ farming sector’s attitude to emissions tax. Footage courtesy of @newshubnz
The proposed amendments

The government released four ideas to reform the ETS. The four options include:

  1. Use existing levers to strengthen incentives for net emissions reductions, for example, reducing the number of NZUs sold through auction.
  2. Increase the demand for emissions units by allowing the Government and/or overseas buyers to purchase them.
  3. Strengthen the incentives for gross emission reductions by changing the incentives for removals.
  4. Create separate incentives for gross emission reductions and removals.

The biggest change, assessed by officials as the most likely to achieve what was wanted was establishing a whole new additional ETS market. There would be one scheme for emissions reductions and one for removing emissions from the atmosphere, like tree planting.

When it comes to the redesign of the permanent forest category, the government is asking for consultation on the following:

  1. What forests should be allowed in the permanent forest category
  2. How transition forests should be managed to ensure a successful transition best
  3. What rules will best maximise the benefits of permanent forests in the category?

The consultation will run until 11 August 2023, and changes could be implemented by early 2025.

Forestry has become a political issue after Cyclone Gabrielle

It comes after larger-than-forecast increases in pine planting for carbon farming caused an outcry in rural communities. Some see it as gobbling up land that could be used to farm or grow food and especially displaces sheep and beef farmers.

It is also currently cheaper for firms to buy carbon credits than invest in making cuts to actual emissions.

Forestry has been making news across New Zealand in the aftermath of Cyclone Gabrielle, with the spotlight firmly on how forest managers manage landscapes.

A government report titled “Outrage to Optimism,” led by ex-National Cabinet Minister Hekia Parata and collaborators Matthew McCloy and Dave Brash, provided several recommendations for the government to act upon.

According to Forestry Minister Peeni Henare, the NZ ETS must provide the necessary price for both gross emissions reductions while continuing to incentivise the planting of trees.

“Last year, the government consulted on proposals to restrict permanent exotic forests in the NZ ETS in response to concerns about the impacts on the environment and rural communities from these forests. The proposals generated wide interest, prompting the government to look further into the permanent forest category.”

It comes as National releases its agricultural emission plan.

The party’s agricultural spokesperson, Todd McClay, said National wanted to recognise on-farm sequestration and create an independent board to implement a pricing system for agricultural emissions by 2030, keeping the sector out of the ETS.

Footage courtesy of @StuffNewZealand
Māori could be the big ‘loser’ in the ETS review

A group representing Māori forest owners say they could be billions of dollars out of pocket under the review.

Māori are major forest owners, but holdings are often on marginal land and can be difficult to make money from.

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 represents a group of Māori foresters and 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.”

According to Te Taumata chairperson Chris Insley, the reofrms are prejudical against Māori. (Photo credit: RNZ)

Climate Minister James Shaw said the review would try to ensure that Māori had options for using their land.

Insley took unsuccessful legal action to stop the review’s release, with more to play out in the courts.

He has also applied with the Waitangi Tribunal and intends to complain to the UN body about indigenous peoples.

NZ Forest Owners’ Association says amendments to ETS removing forestry is a bad idea

In an interview with Early Edition’s Newstalk ZB host, Kate Hawkesby, NZ Forest Owners’ Association president Grant Dodson said the amendments were a bad idea.

“Forestry gives you both a gross and net emission reduction; it is the only thing on track regarding NZ emission reductions.”

According to Dobson, forestry needs to be left alone.

“Concerns about mass plantations taking over farmland are just unfounded.”

The forestry industry is sick of becoming the villain in reducing emissions.

“Forestry must be part of New Zealand’s carbon reduction solution, and the climate change commissions recognises this.”

The restrictions will temper the carbon market

Forestry Minister Peeni Henare said this projected loss was based on the previously hot prices of carbon units, which have since dropped.

However, many analysts lay the blame for the drop on the government.

As reported by RNZ this morning, in response to the spiralling cost-of-living crisis, Cabinet ignored advice from the Climate Change Commission that would allow the carbon price to rise.

Since then, the price has fallen steeply.

Changes to the ETS are crucial – it is the single largest tool to get the country to meet its climate obligations.

Its current settings make it cheaper for emitters to buy credits from planting trees than investing in cutting emissions.

It has prompted an uptick in pine being planted.

Shaw said if changes were not made it could cause a flood of credits from new forests in future years and a corresponding price crash.

“A collapse in the carbon price would also be catastrophic for landowners, particularly Māori land, who have invested heavily in forestry on the assumption of rising, or at least stable, carbon prices.”

How could a separate carbon market for forests work?

Dr Christina Hood from climate consultancy Compass Climate said it would not be overly complicated to set up.

“We need to be thinking about emission reductions and support for forestry as two independent issues, and trying to solve both of those rather than continuing to trade them off against one another.”

The increase in pine planting has prompted an outcry in the rural sector over fears productive land will be swallowed up and communities hollowed out.

Beef + Lamb chief executive Sam McIvor said his organisation had been pointing out major flaws in the ETS for years.

“The government’s acknowledgement today that [the scheme] isn’t working and requires change is encouraging,” he said.

“There is a lot of detail to work through, but on the face of it there looks like there are some practical options here that will make a difference.”

After public consultation, the final advice will go to whoever wins October’s general election.


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