Clarky's Comment - February 2009, Important Deadline on Claiming Compensation NZUs looming

The deadline for claims for compensation NZUs for pre-1990 forest landowners is 31st July 2009. For many forest owners this will not be a straightforward exercise as the area claimed must be consistent with (or at least no more than) area determination rules set out in the MAF. Simply using recorded Net Stocked Area may either overstate the claim (and risk delays and additional costs) or more likely will understate the area. At say $20/NZU and up to 60 NZUs/ha, any understatement is simply foregoing significant value for no good reason. PF Olsen management clients can expect individually addressed correspondence outlining our recommended course of action to maximise your claim within the rules Forestry in the Emissions Trading Scheme.

NZFOA Submission to Select Committee

NZFOA has prepared a submission to the Select Committee considering amendments to the Emissions Trading Scheme that PF Olsen fully supports. In summary this submission:

  • Calls for maintenance of the existing level of compensation for loss of land value for pre-1990 forest landowners, but introduction of the rights to avoid deforestation liabilities by replanting an area different from the area harvested (offsetting). That would lower the cost imposition and constraints to land use change that is not addressed by the compensation units alone.
  • Suggests timing of entry for liquid fuels, industrial processes, stationary energy and agriculture and wastes need to be maintained. Going soft on emitters risks removing the incentive to grow forests to sequester carbon - both demand and supply side need to be real for an ETS to function as the least cost solution for NZ Inc.
  • Warns that further sheltering of the agriculture sector by taxpayers has consequences for land value and availability that will be negative for tree planting.
  • Points out that the costs of deforestation to the nation could be significantly reduced if the domestic rules allowed replanting then removal of that young planted crop soon after planting. While this is bizarre behaviour that makes no sense from an environmental perspective, it is not excluded under the Kyoto rules and is only forced upon NZ by a bizarre Kyoto rule that does not permit relocation and land use change for planted forests. This could be combined with offsetting to ensure the atmosphere was no worse off, and fixed as part of the post-2012 negotiations.
  • Supports an averaging option that would reward foresters with 50% of the maximum carbon sequestered in their forest; such units to be earned as the carbon is sequestered up to that level, with no harvest liabilities provided the forest is replanted. This option would enable farmers or other existing landowners to benefit from planting single age-class forests without concerning themselves with managing carbon liabilities associated with harvesting. Such an option must be additional to rather than replace the existing ETS post-1989 regime.
  • Recommends that the government cover carbon loss liabilities arising from catastrophic losses that are both uninsurable and outside the reasonable control of the forest owner. This is primarily to cover large scale wind or disease loss. It could logically be covered by the government retaining a small portion of the allocated NZUs until such time as a sufficient pool of NZUs was accumulated.
  • Calls for recognition in form of free allocations to industry for emissions reductions made by the wood processing sector since 1990.
  • Calls for inclusion in the post-2012 negotiations recognition of that portion of forest carbon that becomes locked up for long periods of time in construction and wooden furniture etc. This would reduce or at least defer liability for up to 20% of the harvest emissions in some forests. This is already on the agenda of NZ and Australian officials involved in negotiating the rules post-2012.

Korea Free Trade Agreement

For many years now Korea has been by far the largest destination for our export logs (around 50% of the total export volume in 2008). One of the constraints to direct investment in sawmilling and ply manufacture by Korean firms in New Zealand has been escalating import tariffs applied to processed wood products. Following a joint study the NZ and Korean governments are now calling for public submissions a Free Trade Agreement with Korea. PF Olsen is preparing a submission strongly in support of such agreement, and is actively involved in attracting Korean investment in wood processing to New Zealand. This work slots neatly into the roles I play on the Korea New Zealand Business Council and the International Business Council.