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Emissions Trading Legislation and its Impact

The Impact on the Small Forest or Woodlot Owner

Background

The N.Z. Government has enacted 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 centre 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. The NZETS is a mechanism to encourage emitters to change their behaviour by finding better or different technologies.

Measurement

Under the new legislation you (if planted post 31 Dec 1989) 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 government has set a capped price of $25 per tonne

(1 tonne = 1NZU (New Zealand Unit) = 1 carbon credit – $25 cap)

The approximate carbon absorption per annum per hectare in your forest could be worth around $500 – $1000 per annum per hectare depending on age and price of N.Z.U

 

What are the Options?

  1. 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.
  2. 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 (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 will receive annual N.Z units. The tree owner would also be liable for emissions at harvest. Continuing planting of your forests will see continuing units paid to the owner. However if you harvest the trees you will 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 energy companies) will need to purchase. Co-operative pools will also give a degree of risk mitigation to the forest owner

There is a compliance period of two years (ending 31 Dec 2012) for you to opt in to the first emissions return period 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 you may wish to look at www.goodground.com and click on Forests

Martin Albrecht