Biofuel levy the “last straw” for forest owners

11 Nov 2009

A government decision to make big companies pay for some of their greenhouse gas emissions when using wood pellets and other biofuels is seen as the last straw by many in the forest industry.

"The rest of the developed world is desperately trying to reduce its use of fossil fuels like coal and oil. Sustainable biofuels like wood pellets are being strongly encouraged," says Forest Owners Association chief executive David Rhodes.

"In New Zealand, our government is going to make some users of sustainable biofuels measure and pay for the tiny traces of methane and nitrous oxide they emit from their boilers. Yet these make up only 0.3% of the country’s energy emissions and 0.13% of its total emissions."

Mr Rhodes acknowledges that the proposed 5000 tonne threshold means only a handful of very large emitters – such as the big pulp and paper mills – will have to buy carbon credits to cover these emissions, but he says the message sent by the policy comes across loud and clear.

"Forest owners see the government on behalf of taxpayers picking up the tab for the 1.2 million tonnes of methane generated by livestock each year. Then they hear the same government demanding payment from users of biofuels for generating relatively trivial amounts of the gas.

"The message that comes across to forest owners is that the government cannot be relied upon to develop an emissions trading scheme that is fair and rational; one that rewards good behaviour and ensures that polluters pay.

"Forestry is clearly one of the good guys of climate change. But it is little wonder that many in the sector have lost confidence in the ETS."

He says the decision to set an emission charge for biofuels follows hard on the heels of a signal from government that NZ carbon credits may not be tradable outside Australasia if the government aligns its emission trading scheme with Australia’s.

"If forest owners are limited to selling their credits on the Australasian market the emitting industries in Australia and New Zealand will be the only buyers. Given that our major emitters are being featherbedded for the foreseeable future, there will be little demand for the credits and their value will be well below the world carbon price.

"Since forest owners at harvest will have to repay at the full world price for the credits they earned while their trees were growing, why would they accept anything less than the full market price if they sell? Unless this changes, new forests won’t get planted and forest credits won’t be offered for sale."

Mr Rhodes also points to unjust liabilities imposed on those who own forests planted before 1990 and notes the particular concerns of Maori forest owners. No pre-1990 forest owners can convert their land to another use without incurring huge deforestation emission penalties. Nor can they earn credits for the carbon their forests have stored since 1990.

"The government has been planning to pay forest owners token compensation for this, in two instalments – with the majority being paid after 31 December 2012. But it has now signalled that it might not pay this second instalment if the international agreement that replaces Kyoto allows for harvested pre-Kyoto forests to be ‘offset’ – replanted on a new site."

He says this compounds the injustice, as even with off-setting, the forest owner would still have to finance the re-establishment of forest infrastructure on a new site, and that site would still have a permanent deforestation liability attached to it.

"Clearly a property that has such a liability will have a lower market value, regardless of whether forestry is the highest and best use for it today."

Given policies such as this, Mr Rhodes says is not surprising that the decision to levy large users of biofuels for the traces of nitrous oxide and methane in their emissions is seen as the final straw for the credibility of the ETS in the minds of many in the industry.

"Only with fair, economically rational, treatment of all industries – emitters and sequesters – will the government get the forests it so badly needs to meet its Kyoto obligations and for New Zealand to become a low carbon economy."