Forestry and the Emissions Trading Scheme

Domestic News

No need for delay in forest planting

A recent press release from the New Zealand Forest Owners Association (NZFOA) called for the government to signal to industry some key planks of the on-going ETS review, so that investment decisions on both planting trees and emissions reductions can be made in advance of any final report and amendment to legislation.

Early action is important as the timeline for trees to have a material effect is 5-8 years on from any clarity on policies. This is due to both the time required to gear up for tree planting, and the 5 – 6 years before trees start accumulating material amounts of atmospheric CO2.

In essence the NZFOA says that any delay in announcing these key planks is unnecessary, as they are so obvious that they must underpin New Zealand’s pathway to meeting its Paris Accord commitments.

The key policy planks NZFOA is calling for comprise:

  1. The decoupling of domestic and international units for emitters. This is necessary to give foresters the confidence that the future value of NZUs will not be undermined by making cheap (albeit environmentally sound) imported units available to emitters, while not restricting the NZ Government from importing them.
  2. Stating clearly that anyone that plants trees now will not be treated any differently from a person that waits for the ETS revisions to be finalised and announced.
  3. The government to show leadership by planting trees on some of its own land that is suitable.

The full press release can be viewed here: No Need to Delay Planting

Price Update

NZU prices have dropped steadily through the second half of April and into May, with current bid pricing of under $17.00 for spot sales as at the 15th May.

It is not unexpected for the carbon market to be slow at this time. Emitters submitted their returns in March, and are due to complete surrender by the end of May, so should have their immediate NZU requirements mostly sorted.

On the other hand, forest owners have been more focussed on summer / autumn harvesting activity (while log prices are healthy), and in certain regions, surveying the damage from recent storm events. In general, there has been little interest to sell at recent prices.

The figure below shows the recent carbon credit prices for EUAs and NZUs. Note that from 1st June 2015 only NZUs or New Zealand AAUs are valid units in the NZ ETS. EUAs are valid units for trading within the European Union.

Figure 1: Recent Carbon Prices - NZ$/t CO2e – Real (CPI adjusted)