Thursday, March 28, 2024

Exotics forestation surges on ETS carbon values

Avatar photo
Plantings predicted to hit twice the rate envisaged by CCC.
The structure of the ETS is such that it causes a ‘rush to plant’, the CCC’s Stephen Walter says – followed by a fall in the price of units, weakening the signal to reduce emissions.
Reading Time: 2 minutes

The Climate Change Commission is estimating exotic forestation has surged to a rate well beyond the annual levels it says is required for New Zealand to achieve 380,000ha of exotic plantings by 2035.

The commission’s general manager for emissions budgets, Stephen Walter, told delegates at this year’s Carbon Forestry conference that the latest data indicates 60,000ha of exotic forest will be planted this year. That is more than twice the rate the commission envisaged.

This is also reflected in the Ministry for Primary Industries’ workload for accepting forests into the Emissions Trading Scheme. MPI’s ETS forestry manager, Simon Petrie, said there is an application queue of 130,000ha of forest awaiting scheme approval as of June.

The recent move by the commission to recommend the government limit carbon units is partly due to concern that current ETS emissions prices will drive large-scale afforestation for sequestering carbon, rather than behaviour change to reduce emissions.

“We are recommending 10 million less units being available over the next four years, and are aware of the ‘surplus’ of about 49 million units in the market that are currently not being allocated to carbon reduction,” Walter said.

He acknowledged the estimate of 49 million units is “highly uncertain”.

“But the proposed reduction in auctioned units will encourage participants to use up these units,” he said.

The commission hopes a change in behaviour will also be prompted by the ensuing increase in unit prices.

“We want to see a much broader band of price movement. The scheme is oversupplied with units and is agnostic between gross reductions and new forests,” he said.

The structure of the ETS is such it causes  a rush to plant, the price of units fall in the future, which is a lesser not greater signal to reduce emissions, he said.

The commission’s concerns that price signals in the ETS are not enough to invoke technology and behaviour change to reduce emissions were echoed by Professor Keith Woodford.

Foresters today are telling me they want to access easier country where harvesting is easier, there are less health and safety risks,” he said.

Short-term rotations and the current price of carbon are providing the incentive for them to do so.

“The carbon price is not sufficient to change behaviour in urban areas but is just enough to incentivise planting pines. This could and should have been identified back in 2008 when the ETS was legislated.”

But some forest investors at the conference questioned the commission’s estimates that 60,000ha of new forest are due to be planted this year. 

This figure equates to about 60 million seedlings, an amount that would seriously challenge the ability of the nursery industry to provide in a single year.

“With that sort of area, it could be that they are planting it out over two, maybe three years. I don’t know how we would have the capacity to do that much in one,” an investor told Farmers Weekly.

Total
0
Shares
People are also reading