Emissions Trading Scheme (ETS) Review Panel Submission

Unsurprisingly business lobby groups, including agriculture, are calling for a continuation of the soft approach to emitter accounting for greenhouse gas emissions, with the general taxpayer picking up the shortfall. The forest owner submission, summarised below, contests that such approach will not reduce our national dependence on fossil fuel, will not encourage farmer uptake of the technologies already available to reduce NO2 emissions and is out of step with efforts being made by many other countries. The submission also suggests some modifications to the forestry provisions of the ETS that would be costless to the taxpayer and would encourage new planting to take place.

Key Points of NZ Forest Owners' Association Submission

  • The ETS is New Zealand's primary effort in meeting its international obligations and therefore our commitment to it will determine our credibility. Equally redefining "all sectors all gases" to allow permanent omissions of either is not credible.
  • In making international comparisons and determining fair share it must be noted that renewable energy targets exist in most other countries and the NZ ETS is not a cap and trade system (like the European Union ETS). The NZ ETS is intensity based.
  • LULUCF (relating specifically to forestry) negotiations are making good progress, but whatever the outcome of the Kyoto negotiations, international commitment will remain and efforts will intensify.
  • The forest sector has an important role to play and new forest planting is needed to smooth out emission cycles. And more than any other sector, forestry needs policy stability for investment because of the length of the investment commitment.
  • The risks to biodiversity from ETS-driven forestry are small and overall the biodiversity impact will be positive.
  • There are significant supply-side risks for the ETS from certain "hot air" and industrial gas units. Controls must be introduced to restrict their entry into the NZ ETS if it is to remain functional.
  • There is insufficient evidence at this stage to warrant amending any of the timetables for entry or phase-out in the ETS particularly given the time that still remains before they take effect.
  • It is considered that the free allocation based on intensity, and the two-for-one subsidy on only those units above the free allocation, are providing the same type of relief. It would be more transparent and administratively efficient to have just the one measure of free allocation.
  • The price cap should not become a permanent fixture because it is distortionary and creates undesirable "gambling" on the future differential between it and the real world price. If continued, the same level of price cover should be provided to foresters at harvest. In the meantime the price cap should not be able to be exercised while NZUs are available at a lower price.
  • It is important domestically and internationally that agriculture faces a price signal from the NZ ETS. The signal is more important than the magnitude and the timetable of 2015 means there is no need to amend the entry date at this time. Monitoring and reporting should commence as scheduled next year.
  • There are some deforestation liability risks that can, and should, be addressed through additional policy to deal with force majeure events, offsetting and enforced deforestation.
  • If New Zealand fails to achieve modifications to the international rules to allow offsetting then the ETS should allow offsetting domestically anyway, or the government should remove the nine year rule regarding deforestation penalties - a rule that is not required by Kyoto.
  • The option of choosing to receive credits equal to the long-term average level in a forest should be provided in the regulations to stimulate lower-risk new planting.
  • Field monitoring of forest carbon should be an option made available for owners of forests less than 100 hectares in size.