28 Apr 2010
For more than two years forest owners have been bound by the emission trading scheme. Although this has caused difficulties for many of them, they say unwinding the scheme now would be hugely complex and costly. It would also undoubtedly reduce interest in new forest planting.
“Unwinding the ETS now would send powerful messages to affluent overseas consumers and potential tourists about New Zealand’s real commitment to its 100% Pure brand. Trade protectionist lobbies would not hesitate to use it to undermine our access to their markets.”
He says it now appears that the majority of Kyoto forest owners are registering their forests with MAF so they can be part of the ETS.
“MAF estimates that more than $1 billion worth of credits will be paid out to them in the next 12 months – much of which will be used to fund the planting of new Kyoto forests. It also places an obligation on forest owners to replant following harvest.”
The ETS is intended to encourage consumers and businesses to reduce their carbon emissions and become more energy-efficient. Emitters can also offset their emissions by buying carbon credits from owners of Kyoto forests and, because it is an intensity-based scheme, reduce their exposure by becoming more energy efficient.
“Quite apart from the need for New Zealand to reduce carbon emissions and meet its Kyoto obligations, these behaviour changes are strategically important for New Zealand,” Mr Berg says. “We need to reduce our dependence on imported oil and we need to encourage the planting of forests on erosion-prone farmland which is often uneconomic for production forestry.”
He says the quite small ETS charges that will apply to fuel and energy add up to significant sums when calculated across the whole economy. But they need to be seen in the context of recent market price movements.
“For the next two years – and the government is not looking much further ahead than that – the ETS will cost the average dairy farmer 1.8 c/kg of milk solids, a figure that can be compared with yesterday’s 40 c/kg increase in prices announced by Fonterra. The average electricity price increase of 5 per cent is dwarfed by the 72 per cent increase in prices from 2000-2008.
“While no-one wants to pay more for anything, the ETS charges are modest and will doubtless encourage changes for the better. Further charges are scheduled for 2013 and 2015, but the government says their implementation will depend on what other countries are doing – which seems eminently sensible.”
He says much is being made of the need to align the NZ ETS with whatever Australia is doing.
“We need to understand the huge differences between the economies and emission profiles of the two countries. Australia is largely a fossil-fuel powered mineral exporter. New Zealand is a food and fibre exporter with large renewable energy resources,” Mr Berg says.
“One of the real gains that comes from the ETS lies in establishing the clean green credentials of our food and fibre exporters. This is hugely important when servicing high value world markets, in Western Europe and North America and increasingly, Asia.”
For more information, please contact Peter Berg, tel 021 421 291