Forestry and the Emissions Trading Scheme

The latest New Zealand Greenhouse Gas Inventory for 1990-2016 released in April shows an increase in gross emissions of 20 percent since 1990. The agriculture and energy sector contributed the largest increase in emissions, agriculture at 12 percent and energy at 32 percent. The increase in agriculture emissions arose primarily due to the number of dairy cows nearly doubling since 1990 but also due to an increase of 600 percent in the application of nitrogen fertilisers in the same period. A decrease in sheep and non-dairy cattle has partially offset these increases. The increase in emissions from the energy sector is mostly attributed to road transport. Based on the new inventory New Zealand is ranked 21st globally for emissions but ranked 6th on an emissions per capita basis. 

Also released in April was the NZ Productivity Commission draft report on how to transition to a low-emissions economy. The commission states that the three key drivers required to set New Zealand on a path to achieving its mitigation goals are:

  • Replacing combustion of fossil fuels with electricity where feasible.

  • Reductions in the emissions intensity in agriculture.

  • Changes in land use to favour afforestation. 

Forestry will play a vital part in New Zealand’s ability to achieve large net emissions reductions to 2050, but it can only buy time for other, more permanent, mitigation technologies to emerge. 

Stable and credible climate policy needs to:

  • Get emissions pricing right to send the right signals for investment. Modelling suggests that New Zealand’s emissions price will need to rise to at least $75 a tonne of carbon dioxide equivalent, and possibly over $200 a tonne, over the next three decades.

  • Harness the full potential of innovation and support investment in low-emissions activities and technologies.

  • Create laws and institutions that endure over time and act as a commitment device for future governments. 

In a media statement the Minister for Climate Change, Hon. James Shaw says the draft report supports work that the Government is already putting in place , namely the Zero Carbon Act, establishment of a Climate Change Commission, review of the Emissions Trading Scheme and consideration of inclusion of Agriculture into the ETS. 

The Productivity Commission draft report is open for feedback. 

Price Update 

NZU prices have remained firm through the end of April and into May, with trading in a reasonably tight range. Current pricing (as at 8/5/18) is around $21.45.

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