Proposed Cost Recovery Changes in the ETS
On 22 March, Te Uru Rākau - New Zealand Forest Service (TUR) released a discussion document proposing a roughly tenfold increase in cost recovery for ETS-related government services and overhead costs. If implemented, the proposal would see the taxpayer contribution to operating these services drop from 94% to 37%. Overhead costs for the average forestry-sector ETS participant, on the other hand, would likely more than double. The proposed changes are in addition to a first tranche of already significant fee hikes, which were implemented in January.
The current proposal sets out fees for 22 services that were previously provided free of charge and a new, area-based annual charge to cover TUR’s overhead costs. The service fees range from $165 to $7,425 and the annual charge is $30.25 per CAA hectare.
TUR’s rationale for the proposed changes is that taxpayers shouldn’t have to majority fund a system that benefits private entities.
We agree that a degree of cost recovery is appropriate. However, the proposed changes are so extreme that they threaten to dampen forestry sector participation in the Emissions Trading Scheme, and thereby CO2 removals – and this at a time when New Zealand is already anticipating having to spend billions of dollars on buying in overseas carbon credits.
We further contend that CO2 removals are a valuable public service and that the proceeds from NZU sales are not “free money” but come at the expense of asset values, long-term commitments and costs, and considerable exposure to natural and regulatory risk.
PF Olsen strongly opposes the proposed changes and will be expressing its concerns to Te Uru Rākau in a formal submission. We encourage anyone with ETS forestry interests to do the same before the consultation closes on 19 April.