8 December 2013

The government has clarified what units will be permitted in the Emissions Trading Scheme (ETS) from 2015, but this does nothing to stimulate action to reduce the nation's net greenhouse gas emissions, says the Forest Owners Association.

"In making the announcement on Friday, acting climate change minister Simon Bridges said he wanted to bring certainty to participants in the ETS. But overhanging the market is the ability of the government to auction NZUs to stimulate supply," says association vice-president Peter Clark.

"Since the government has given no indication of the NZU price at which auctioning would be used, both emitters and foresters have been left uncertain and unwilling to take action. This is deeply concerning for anyone who understands the economic and environmental potential of forestry. Without a meaningful carbon price, new planting will remain at extremely low levels and deforestation on land with dairying potential will continue apace."

Mr Clark says participants will be able to continue to use dodgy cheap international credits to meet their emissions obligations until June 2015 when NZ units will be the only ones permitted, with supply controlled by auctioning.

"Ever since this government took office forest owners have been asking for a government commitment to a carbon floor price to match the current ceiling price and for the removal of the one-for-two taxpayer subsidy for emitters. We and other participants need to know that the government is committed to carbon prices being in a band that provides us with an incentive to invest in carbon reduction."

Less than a month ago iwi leaders met with the prime minister to ask for the ETS to be strengthened. They asked for a carbon price mechanism that better balances the interests of emitters with those who have the ability to invest in measures to reduce emissions. The Forest Owners Association wrote to the prime minister in support of the iwi submissions.

"We said a higher carbon price will lead to increased forest planting. This would give greater security of supply to domestic processors, increase primary sector diversification and resilience to adverse economic and environment events," says Mr Clark.

"Given that the maximum price has already been passed on to consumers by power companies and fuel suppliers, a meaningful floor price is unlikely to have a significant impact on costs to household consumers."

He says a higher carbon price is not a subsidy for forest owners, because any credits they earn are met with an equal liability at harvest. Also, income from carbon would help offset the risks which deter farmers and others from investing in forestry.

"Forestry is a more profitable land use and contributes more to the economy than hill country sheep and cattle farming, but in the current economic and regulatory climate no-one is willing to commit to an investment where you have to wait 30 or more years before you get a return. A clear indication of the band in which the government would permit NZUs to trade in via auction would provide the certainty that all participants need to base investment decisions on."

For more information, please ring FOA vice-president Peter Clark, Tel 021 726 197 or FOA environmental committee chair Peter Weir Tel 027 454 7873