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Clarky's Comment - February 2011, Afforestation Scheme Review

Afforestation Scheme Review

MAF is currently conducting a review of the various forestry encouragement schemes. The review terms and discussion document can be accessed on:

http://www.maf.govt.nz/news-resources/consultations/forestry-schemes-review.aspx

The PF Olsen submission can be accessed here.

In summary PF Olsen Ltd submits that:

  1. One feature of the Permanent Forest Sink Initiative (PFSI) over the ETS is the issuance of AAUs, rather than NZUs. We submit that consideration be given to issuing AAUs under the ETS should they remain as a currency of carbon credit trade post-2012.

  2. The Afforestation Grant Scheme (AGS) appears to have been effective at encouraging planting, is valuable in providing cash to fund planting for those that have land, and appears to be close to costless to the taxpayer considering the first 10 years of NZUs accrue to the Crown. We support its continuation with improvements suggested around funds allocation between the high and low sequestration categories, and between the MAF administered and Regional Council administered pools.

  3. The East Coast Forestry Project (ECFP) effectively subsidises planting on remote highly erodible land that is otherwise unattractive for forestry investment on the East Coast. The funds available were not being fully picked up by landowners until the ETS came along. Now they are.

    PF Olsen supports its continuation with clarification around the grey area of claw back of ECFP funding on entry to the ETS, such that the idea of any claw back is dropped. PF Olsen has also recommended a less prescriptive establishment and tending regime that will improve the attractiveness of the ECFP to landowners by saving around $20 million in costs over the remaining 45,000 ha targeted for the scheme, with little, if any, loss of erosion control benefit.

  4. PF Olsen Ltd has little to say about the Sustainable Land Management Hill Country Programme as we have limited experience or knowledge of its practical application.

General comments are made that to the extent possible any subsidy for forestry planting should be designed so as to minimise the opportunity for the subsidy to commute directly into land value, as that defeats the purpose. Land cost is the single biggest impediment to forestry investors seeking to enter the sector. Any meaningful progress towards a 20,000 ha/annum new planting target is likely to need capital from new investors that do not presently own land.

In addition the pastoral farming and forestry sectors need to be on a level playing field in respect of regulations and costs associated with environmental impacts if we are to get the best land use mix for New Zealand over time, considering both economic and environmental values.