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Emissions Trading Scheme and Forestry - April 2012

Carbon Price

NZU prices were relatively stable in March trading in the $7 to $8 range. We are experiencing very little activity with most holders of NZUs not prepared to sell. We are still seeing some post-1989 forest owners taking advantage of these low prices by repurchasing some or all of what they sold last year.

Post-1989 ETS Registration Deadline

The 31 March deadline for submitting voluntary emissions returns has passed for those forest owners already registered into the ETS. The next emissions return deadline is the 31 March 2013, this being mandatory for forest owners registered into the ETS.

Why register my forest into the ETS?

This was a question put to me recently by a farmer with 25 hectares of radiata pine planted in 1995.

This is a fair question as post-1989 forest land planted in the 1990's allows you to earn NZUs but you have to relinquish all these NZUs at harvest – there is no, what is commonly referred to as, 'safe carbon'. Wisely, they didn't want to put their harvest revenue at risk if NZU price was to significantly increase above the price at which they were sold. So it appeared there was no reason to register.

But then I asked if they were interested in planting additional area in forest. The answer was yes.This changes the situation considerably. They could register their existing post-1989 forest into the ETS and sell only the portion of NZUs estimated to be the 'safe carbon' in the new plantings (provided they replant after harvesting the new forest). Even at $8 per NZU, these credits will more or less pay for the establishment of another 25 hectares. Then when they harvest the 1995 forest, the new forest will have accumulated sufficient NZUs to offset the remaining NZU liability associated with harvesting. Provided they insure for the loss of carbon, this option is a risk-free approach to gaining benefit from the ETS.

If you have similar queries regarding the ETS, email colin.hercus@pfolsen.com.