Emissions Trading Legislation and its Impact on the Small Forest or Woodlot Owner
Background
The N.Z. Government is enacting legislation to create an Emissions Trading Scheme (E.T.S.). This is set against a background of climate change and the world’s efforts to reduce the amount of carbon being emitted into the atmosphere. The United Nations is at the center of co-ordinating this initiative. Forestry is a key sector from a climate change perspective. As trees grow they absorb carbon dioxide from the atmosphere and convert and lock it up as wood.
Measurement
Under the new legislation you (if planted post 1990) forest will “officially” start absorbing carbon the 1st January 2008. This carbon is able to be measured. As a rough guide one hectare of pinus radiata will absorb about 33 tonnes of carbon dioxide per annum.
What’s it Worth?
The treasury has set a price of $15 per ton
(1 ton = 1NZU (New Zealand Unit) = 1 carbon credit - $15)
The approximate carbon absorption per annum per hectare in your forest will be worth around $500 per annum per hectare. The international (European) market is currently paying around $1400 per annum per hectare.
What are the Options?
- You may decide to do nothing and not register entry into the N.Z.E.T.S. If this option is taken the credits will default to the Government.
- You may decide to apply to enter the E.T.S. Joining the scheme will mean a cost to measure the carbon in the forest and an administration cost to register with the administration agency (probably a department set up under M.A.F knows as the New Zealand Emissions Unit Registry).
What are the Obligations?
Once in the scheme you would receive annual carbon credits. The tree owner would also be liable for emissions at harvest. Continuing planting of your forests will see continuing credits paid to the owner. However if you harvest the trees and do not replant you would be responsible for any harvest emissions liabilities.
The legislation states that you will never have to surrender more NZU than you have gained.
Other Options
The credits can be “saved” and not used or they can be sold and traded. It is almost certain that co-operative pools will be created to facilitate trading because of the large amounts of credits that buyers (such as oil companies) will need to purchase.
There is a compliance period of two years (ending 31 Dec 2009) for you to opt in or out of the E.T.S.
Various commentators have suggested that there is an advantage by opting in early and joining a co-operative pool and thereby having the opportunity to take advantage of the higher international carbon price.
For more information and some F.A.Q’s you may wish to look at www.goodground.com and click on Carbon$.
Martin Albrecht
01.02.08
