Venu Menon
Wellington, June 18,2024
The coalition Government’s move to exempt the forestry sector from paying annual service charges under the Emissions Trading Scheme (ETS) is aimed at easing “excessive costs” to forest owners, Forestry Minister Todd McClay says.
The annual service charge of $30.25 per hectare introduced last year by the Labour government now stands cancelled.
“To give participants certainty, we will remove the annual charge for 2023/24. Participants will continue paying for specific services, but they won’t be charged the $30.25/hectare,” the minister has confirmed in his statement released on June 14
The government also plans to introduce a package of initiatives in Parliament to boost growth in forestry.
The decision follows the independent review announced by the government earlier this year, which will go into forestry’s role in the Emissions Trading Scheme.
The New Zealand Forest Owners Association (NZFOA) has hailed the announcement of the review of the government’s emissions trading policy. Its chief executive Elizabeth Heeg says the ETS fees imposed last year “saw foresters collectively landed with more than $30 million in overheads.”
“That equates to a 1600% increase on the previous ETS charges,” she notes.
Heeg claims some companies now face “a yearly charge of over $1 million just to continue in business.” This has resulted in many businesses “being forced to exit the [emissions trading] scheme.”
But it is not clear if the independent review report, expected in April and which drives the current policy change, is officially out yet.
Forestry Minister McClay says “there are more than 590,000 hectares of post-1989 forest land in the ETS and around 4,200 forestry participants. We are working with the sector to ensure they have confidence in the function, operability, and cost recovery of the Forestry ETS.”
The Emissions Trading Scheme (ETS) offers incentives to businesses to reduce greenhouse gas emissions in New Zealand, and meet international obligations under climate change treaties such as the Paris Agreement and the Kyoto Protocol.
Forestry is one of the sectors covered by the ETS, which encourages new forests to be planted when older forests are razed. The ETS works by businesses and owners of forest land earning or paying New Zealand Units (NZUs), also known as carbon credits, carbon units, or emission units. One unit represents 1 tonne of carbon dioxide (or equivalent greenhouse gases). Units can be bought or sold.
Greenhouse gas emitters in certain sectors must pay units, according to the greenhouse gases they release. The ETS provides an incentive for businesses to reduce their net emissions and receive units from the government for reducing or removing greenhouse gases from the atmosphere.
Forests absorb carbon dioxide from the air, which means owners of forest land who have registered under the ETS will earn units over time as the forest grows.
But when a forest is razed, carbon is released. So deforesting land leads to owners having to pay out units under the ETS.
Only post-1989 forest land is eligible for registration under the ETS, as the scheme came into effect after 31 December 1989. Post-1989 forest land must meet eligibility criteria such as tree-size, height and crown cover, among other conditions.
Owners cannot earn units from pre-1990 forest land. However, they still have to pay or surrender units for deforesting the land.
On the other hand, owners of forest land registered under the ETS are able to earn units as the forest grows. But once the land is harvested, the owner may have to pay units.
Forest land owners registered under ETS are responsible for reporting the amount of carbon held in their forest, harvests undertaken, or if the land is sold. Owners are liable to be penalised for failure to meet their legal responsibilities.
Criminal violations can lead to fines or imprisonment.
But the present three-party coalition Government looks set to review these rules for owners of forest land in New Zealand.
Venu Menon is an Indian Newslink reporter based in Wellington
