By Jo Blundell, CEO CarbonCrop
It’s unsurprising that native forest owners in New Zealand’s large and growing carbon farming community are feeling a collective case of whiplash.
On March 22, in the space of two hours flat, the sector was slapped with push-me, pull-you announcements from two government departments casting the future of the Emissions Trading Scheme (ETS) in entirely different lights.
It turns out the government has been quietly working on a major review of the ETS. This was tabled in a cabinet meeting by Minister for Climate Change James Shaw in late September last year, with a 27-page tome that foreshadows a comprehensive review of the ETS. This follows advice from the Climate Change Commission on the need to strengthen ETS incentives for actual overall emissions reductions.
The review of the ETS is important, and big news to those who work in, grow or buy carbon credits. It seems to recognise the need to adjust the carrot and the stick so we actually decarbonise as an economy rather than try to plant our way out of trouble, with pines. It could be an opportunity to rebalance the incentives to reforest with natives, and remove GHG emissions through native forests rather than pine plantations.
So far, so good, for natives.
The wording of the review has been warmly welcomed in the industry for “evening the carbon playing field” for native forests. But any euphoria or hand rubbing over the review was disabused the same day by the Ministry for Primary Industries (MPI) proposing to hit the brakes on its no-fees policy for the Permanent forest category of the ETS. In essence, this amounts to plonking steep fees back on the category where native forests are usually registered.
It comes only 90 days after the MPI removed these fees in the first place. In our view it directly undermines the government’s commitment to incentivising new native forest planting through the ETS by introducing further obstacles to restoring native forests.
As a country, are we for native forests, or against?
Native forests are usually in smaller parcels than their plantation cousins and do not earn as many carbon credits. The restoration of these fees means the cost to register a native forest in the ETS is superficially the same as it is for pine trees. But in reality, this can make it cost-prohibitive to register natives. Under the proposed new fees, a 10ha block of natives will cost $1815 + GST to register. These fees mean that almost 100% of the revenue from the first four years of carbon yield for natives will go to covering fees, versus less than 15% for pines in most locations around New Zealand, which is anything but equitable.
Native forests are crucial to NZ’s ecosystem and biodiversity. They play a significant role in mitigating climate change by sequestering carbon from the atmosphere. As recent extreme weather events have shown, they can also help mitigate other aspects of climate change.
After announcing free registration and processing fees for permanent forests at the end of last year, it sends a pretty negative message to change this now. These new fees will make it more challenging for landowners to register native forests. It could lead to even faster expansion of exotic forests, which the ETS review has identified as a risk.
The MPI is also proposing a new admin fee to cover internal ETS platform costs. We’d like to see this covered within the MPI’s budget for native forests. These costs could be minimised by adopting broader automation, like we’ve done with our technology. Removing the administrative costs to participate is table stakes if the government does indeed want to rebalance native forest recognition in the scheme.
Native forests won’t be “getting a free ride” in the scheme. Quite the opposite is true. Native forests on farms do more than just remove carbon and they receive no additional recognition for the biodiversity, water quality, and climate resilience benefits they deliver beyond farm boundaries to New Zealand at large. Until this is properly recognised and incentivised, the least that could be done is to support them through removing fees. I’m sure others will be taking a similar view back to the MPI.
But the conclusion we’re taking from this regulatory “push me, pull you” is that anyone with a forest should register it in the ETS as a matter of urgency – whether it is native or exotic. The current conditions for the ETS participation are more attractive now than they will likely be later.
For many, delaying the decision to register last year meant they missed the deadline to claim five years of carbon credits. Registrations are now taking around eight months, so it could be better to submit before further changes are announced and new fees take effect.
If uncertainty is the enemy of business, native forest owners in New Zealand’s carbon farming community can be excused for a very sore collective neck as two different arms of the government pull in different directions, causing a bad case of regulatory whiplash.