Clarky's Comment - August 2010

Last week I presented at the 6th Australia – New Zealand Climate Change and Business Conference in Sydney. The take home message was despite residual opposition from the farming sector, we are fortunate in New Zealand to have a pragmatic ETS in place. Most Australian businesses understand very well that the science around human induced global warming is robust and that ultimately Australia will be called to account to play its part in a global response. But the lack of a price on carbon and no political or public consensus on what must be done is making it impossible to support business investments into projects that will reduce emissions.

In New Zealand we have an ETS that is well-designed, not debilitating on business or consumers and flexible enough to encompass all sectors and all gases at a rate aligned to what our main international trading partners do. Our Australian cousins expressed envy at where we have got to compared to them.

But the NZ ETS is up for review in 2011. My presentation focussed on the enhancements we propose to promote to make our scheme more forestry-friendly. Key enhancements are:

  1. Bi-partisan support to give the ETS durability across multiple election cycles.
  2. An unequivocal statement that other emitters will be included (or continue to be included) in the NZ ETS, with only the timing and level of taxpayer funded protection being up for negotiation. Such a statement is important to encourage investors and farmers to plant trees.
  3. An averaging option is adopted, as set out in the Australian Carbon Pollution Reduction Scheme (CPRS) white paper. Under this option credits are issued as carbon is sequestered in plantation tree crops up to 50% of the full rotation carbon, but there are no harvest liabilities to manage. See the chart below. The yellow bars are the carbon credits issued.
  4. A government run catastrophic loss insurance scheme is put in place. Under this scheme some small portion of all credits registered in the ETS would be held back to cover losses from fire, wind or disease. Such a scheme was built into the Australian CPRS as represented by the blue line in the chart above. The blue line is the limit of credits issued after deduction of the "loss of carbon insurance" credits.
  5. Allow offsetting, meaning pre-1990 forests may be cleared and land use changed without penalty, provided an area of forest capable of sequestering equivalent CO2 is planted elsewhere.
  6. Recognise the long-lived nature of carbon captured in some wood products made from harvested trees.

Enhancements 1 to 4 above could be implemented at no cost to the NZ taxpayer. Items 5 and 6 are being promoted by NZ officials involved in international post-2012 climate change negotiations.

One complementary measure would be a requirement that all government funded buildings have a wood design option put forward and costed. This idea was promoted by the former Minister of Forestry, Hon. Jim Anderton, but was subsequently dropped, presumably under lobby pressure from the steel and concrete sectors. There are several advantages of such a regulation:

  1. Increased wood use in commercial buildings would reduce the national energy demand and greenhouse gas emissions.
  2. Increased wood use in commercial buildings would improve domestic markets for structural timber, creating additional employment from wood processing and reducing unprocessed log exports.
  3. Without such regulation there is no reason for architects or engineers to learn about or even consider wood as an alternative to concrete slab or steel construction that is the norm.

Such a policy would be entirely consistent with a statement made in a recent FAO report see article below: "Stable demand for forest products is one of the most important factors in avoiding forest land use change and maintaining stable forest cover to withstand global warming".