Tuesday, March 5, 2024

Getting hard to see the good for the trees

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Voluntary sequestration schemes create opportunities but also confusion – in an already confusing regulatory landscape.
Proposals for Significant Natural Areas could end up ‘preventing farmers from doing anything with huge swathes of their own farmland’.
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In a recent article, I wrote that carbon credits are not created equal. This inequality is now leading to game-playing and confusion across society. Terms like “greenwash” as the carbon equivalent of a whitewash  are increasingly heard and there is increasing talk of “hot air” carbon claims. 

Since writing that article, I have been wrestling with the challenge of further deepening my own understanding of how the carbon game is being played. It is a game where different players are playing by different sets of rules, as are the certifying referees.  Many of the certifying rules are far from transparent. 

Here in this article my focus is specifically on the rules surrounding sequestration that removes carbon from the atmosphere. That leaves other aspects of the carbon rules for another time. 

In New Zealand, the dominant sequestration rules to date have been those of the Emission Trading Scheme (ETS). However, that could now be changing with the emergence of voluntary certification schemes with potential for local and international certification outside of any official system.

To understand the basic differences between alternative sequestration systems, it is necessary to understand “additionality” versus “business as usual” in relation to “baselines”.  Those three terms are where most of the complexity and potential confusion lie. 

Within the NZ ETS, the key baseline is December 31 1989.  If either a native (indigenous) or exotic (introduced-species) forest was in existence before that date, even if at only an early stage of regeneration, it is not eligible to earn official NZUs within the ETS. The supposed logic of this is that the ongoing growth in these forests is “business as usual” consequent to decisions that were made pre-1990, when no one was thinking about carbon credits.  

Nearly all of the ETS-registered forests are introduced species, which reflects a simple reality that establishment of native forests is a long and expensive process. 

When I hear people saying that these new forests should comprise native species, my response is to suggest they come up with the money if that is what they wish to happen. There is a need to recognise that planting natives is not a paying proposition and that is why it is unlikely to happen on any scale unless publicly funded. Incidentally, according to the Ministry for Primary Industries website, we already have 10.1 million hectares of forest in NZ of which 8 million hectares are native forests. That means that 30% of NZ’s total land area of 26.8 million hectares is already in native forests.

The exception in relation to native forest establishment costs is where regeneration is feasible based on existing seed stocks in the soil. 

In recent weeks I have become aware of an example where a farmer has been able to register a regenerating native forest into the ETS in a situation where some elements of the regeneration commenced prior to 1990.  At that time there were remnant groves of native trees in the gullies. However, the farmer and his consultant have been able to demonstrate that this area has increased considerably since 1989, and that there is a contiguous area of new forest approaching 100ha, defined by squiggly lines that exclude the pre-1990 regeneration. There are also other properties where this is occurring and there may well be many other farms where this is a possibility. 

However, there are also many landholders, and sheep farmers in particular, who have regenerating native forests that are failing to meet the ETS criteria. Some big questions need to be asked as to whether the pre-1990 baseline is being applied in a way that is unduly tough for long-life regenerating forests.

In relation to the pre-1990 baseline issue and its fairness, there is an important distinction to be made between exotic and indigenous forests. For example, NZ has approximately 1.4 million hectares of exotic pre-1990 forests that are into their second, third and even fourth rotations. Logic suggests that unless there are changes to rotation length, then there is no net sequestration occurring in relation to the overall amount of carbon within these forests.

In contrast, almost all regenerating indigenous forests are still relatively early in the regeneration cycle and will be sequestering carbon for some hundreds of years, even if that commenced pre-1990. Just because that regeneration started before 1990, is that a valid reason to exclude acknowledgment of the sequestration that is occurring?

It is with some surprise that I have learnt in recent months that although landholders cannot claim credits for these pre-1990 regenerating forests, the government does include the assessed net growth in these forests within its nationally determined contribution (NDC) and this is reported to the United Nations Framework Convention on Climate Change. The argument is that because all of these forests are managed – in the main by the Department of Conservation – net sequestration is a valid contribution to the NDC. 

Interesting questions then arise as to whether private landholders should be able to claim credits within the ETS for the indigenous forests that they too are managing. Also, if credits were available, this would give a clear incentive to undertake more management by fencing and other methods of predator control, leading to additional sequestration. 

It is the absence of credits within the ETS for genuine sequestration in pre-1990 indigenous forests that is creating space for voluntary sequestration schemes to develop. The CarbonCrop example that I referred to in my last article illustrates this point. In the case of CarbonCrop, the rules of the game as set out within their website do seem explicit.

I am advised that the early sales of CarbonCrop units for native forests have been at $50 per tonne of sequestered carbon.  This is still early days and the price could go in either direction. CarbonCrop currently requires a landholder to register a minimum area of 20ha of native forest, with this no doubt reflecting that small areas become too expensive to justify the measurement, registration and administration costs.

One thing that has changed markedly in the past few years is the ability to measure growth in established forests using a combination of GPS and artificial intelligence systems including inbuilt learning capacity. Precise measurement of growth in pre-1990 forests is now feasible from “eyes in the sky” in a way that was totally infeasible when the ETS was established.

My big concern is the need for standardisation both of the overarching methodologies (rules of the game) and the accuracy of measurement with different measuring techniques. Linked to this, it is important that carbon claims are demonstratively not greenwash. I note that there is an international non-governmental body called Integrity Council for Voluntary Carbon Markets (ICVCM) working towards this.  The rules of the game for carbon markets extend well beyond sequestration, but sequestration is an important component.

As for non-indigenous trees, I see the possibility of a voluntary scheme also emerging for post-1989 exotic forests. This could be in response to government restrictions on access to sequestration within the ETS as advocated both by Climate Change Minister James Shaw and Climate Change Commission chair Dr Rod Carr.  

In regard to the ETS, the government can do whatever it likes. However, if landowners are restricted from registering their exotic forests in the ETS, then the alternative of a voluntary scheme may well have appeal. The question then becomes whether overseas buyers would see merit in purchasing such units, with the units then credited to the buyer rather than NZ’s NDC.   We do indeed live in interesting times.

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