Forestry and the Emissions Trading Scheme

Draft report of the Climate Change Commission

As has been publicised widely in NZ media over the last couple of days, the Climate Change Commission released their draft report to the government on Sunday 31 January.

Of particular interest to our industry is a proposed heavier focus on indigenous afforestation in the longer term. The Commission proposes that up to 25,000ha per year of native forest be planted to achieve a total of 300,000ha by 2035. Exotic afforestation is proposed to be maintained at 25,000 per year until 2030, before reducing considerably as the focus switches more in favour of permanent natives.

The Commission also recommends focus on investment in bioenergy projects that utilise wood-waste.

The full report can be found here. Consultation is now open so have your say here.

Changes to the Emissions Trading Scheme

The roll out of ETS changes continued with the latest batch coming into effect on 1 January 2021. These changes include:

  • Change to transfer rules so that ETS participation does not automatically transfer when a forestry right or registered lease is created.
  • A new penalty regime, with tougher penalties for failing to submit an emissions return by due date, submitting an incorrect emissions return, or failing to surrender or repay units.
  • Minor changes to the definition of deforestation and when deforestation is deemed to have occurred;

More information can be found here.

ETS registrations (reminder)

Interest to register eligible post-1989 forest land in the ETS is starting pick up substantially. Forest owners want to ensure they are registered prior to the end of 2022 so as not to miss out on any units. PF Olsen want to plan this workload out to ensure we have adequate resources to hand. We will be contacting clients over the next few weeks to discuss, but feel free to contact Mike Duckett if you want to lock this work in now.

Early AGS grantees are starting to come off contract now. Under new averaging rules there could still be significant benefit in registering this land in the ETS. Note that eligibility will need to be assessed again. Get in touch with your PF Olsen manager if you want to look into this further.

Price update

NZU spot pricing crept upwards through December and January, as we progressed closer to the commencement of auctioning in March. The market spiked to new highs early this week following the release of the Climate Change Commissions draft report, which suggested that price control mechanisms need to be set higher than $20 floor / $50 CCR trigger price currently being used.

The market seems to be well supported at this level with a noticeable uptick in interest on both sides. Current spot pricing (as at 4 Feb) is around $39.50/NZU.