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Forestry and the Emissions Trading Scheme - April 2013

NZUs lifted from the low of $1.50 in February and traded in the $1.90 to $2.10 range in March. Currently the price is around $2.10. The lift in prices has been brought about by tight supply and emitters on the hunt for volume while NZUs are cheap. ERUs traded in the $0.15 to $0.18 range during March, currently at $0.15.

At $0.15, ERUs are not only the carbon credit of choice for industrial emitters, but also for pre-1990 forest deforestation liabilities, harvesting liabilities for post-1989 forest and post-1989 forest owners exiting the ETS and having to surrender claimed credits. If you have to transact any credits for compliance purposes in 2013 and 2014, you should be using the cheapest available credit, which is currently ERUs. If you need any advice or assistance on this, feel free to contact Colin Hercus at colin.hercus@pfolsen.com.

Can you convert pre-1990 into post-1989 forest land?

In previous editions of Wood Matters we have raised the issue of forest owners thinking they can deforest pre-1990 forest land by simply paying the liability after harvest and then registering the replanted land as post-1989 forest land. The following appeared in the March edition of MPIs Sustainable Forestry Bulletin.

We [MPI] have received queries on the deforestation of pre-1990 forest, followed by replanting and entering the land as post-1989 forest in the Emissions Trading Scheme (ETS).

It is important to realise that deforestation is not simply the removal of trees. Under the ETS, deforestation is where land remains unstocked for a period of at least four years, or when the land use is changed from forestry to another land use.

When a land-use change has occurred, the land management practices must be consistent with standard practice for that new land use i.e. fencing, de-stumping, contouring, etc. If land owners then replant and attempt to enter the land as post-1989 forest, MPI will assess the land eligibility on a case-by-case basis.

Are you deforesting pre-1990 forest land?

We have received a number of enquires from pre-1990 forest land owners who have or are looking to deforest and want to understand the notification process. A question that often comes up is "if I don't tell MPI that I have deforested, how will they find out?" With the use of satellite imagery, land use databases and aerial surveys, deforestation is easy to detect given the contrasting vegetation change. We know of examples of MPI picking up on relatively small areas of deforestation. So if you have deforested you need to notify MPI. It is a statutory requirement to do so within 20 working days of commencing deforestation. This means that if you intend to deforest when you start harvesting, you need to notify MPI within 20 working days of commencing the harvest.