Section 2: Inclusion of Indigenous Pre-1990 Forest in the Emissions Trading Scheme
This section discusses whether deforestation of pre-1990 indigenous forest should be included in the New Zealand Emissions Trading Scheme (NZ ETS) and, if so, on what basis. The government is yet to finalise a preferred position on these matters and has sought feedback from stakeholders.
New Zealand has large areas of pre-1990 indigenous forest – over 7.5 million hectares – of which officials estimate 2.4 million hectares is in private ownership. Deforestation of the private indigenous estate is estimated to be 1,100 hectares, or 0.04 per cent of the total area, each year.
These relatively low levels of deforestation are expected to continue in the near term, mostly in the regenerating scrub classes of indigenous forest (for example, manuka-kanuka scrub) as part of a normal hill-country pastoral farming cycle. There is also some conversion of taller indigenous forest on the west coast of the South Island for dairying.
Over the longer term, higher deforestation rates are possible if the economic drivers for clearance of indigenous forest change.
There does not appear to be any practical and defensible way of delineating pre-1990 regenerating scrub from post-1989 regenerating forest. This – combined with the relatively low levels of carbon per hectare; the strong economic disincentives to deforest; and the likely level of resistance of landowners to the inclusion of scrubland – means that we do not intend to include deforestation of regenerating scrubland forest in the ETS.
Arguments in favour of including tall indigenous forest (excluding regenerating scrubland) in the ETS are as follows:
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some deforestation of tall forest is occurring and the forest has high carbon densities
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while regulatory controls exist in some district plans, effective controls are not complete at a national level
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subject to final confirmation, it appears practical to delineate these taller indigenous forests from regenerating scrublands by applying previous land-use maps
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it would provide a once-and-for-all solution to the ongoing risks of deforestation of these forests
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many landowners would welcome this move, since any units allocated to them would almost certainly be a windfall gain.
The alternative view is that there is little to be gained from bringing deforestation of the remaining indigenous forests into the ETS since:
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there are regulatory controls already, which while incomplete, appear broadly effective
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there is some risk of Treaty claim
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the cost of bring these forests into the ETS is roughly equal to the benefit – since the government will allocate New Zealand Units equal to the expected level of emissions that would occur if deforestation had not come under the regime.
The government is currently of the view that the inclusion of deforestation of taller indigenous forest (that is, not regenerating scrub) in the NZ ETS is desirable assuming that there is a final confirmation that it is practicable, and that the cost in terms of levels of free allocation is not overwhelming. This is primarily a risk mitigation strategy. Further investigation is needed into the issues implicit before a firm decision on this matter is made. This work is under way.
The possible inclusion of indigenous forest in the ETS has been flagged by government since 2002 but has not received great attention in some quarters until recently. Emerging (anecdotal) evidence suggests that there is a likelihood of relatively significant levels of deforestation of taller indigenous forest, particularly on the west coast, if this forest is not included in the ETS. As such, it would be preferable to include this forest in the ETS as soon as possible, assuming final confirmation of the practicalities of such an approach.
In terms of levels of free allocation, the engagement material suggested that an appropriate level of free allocation would be 8.1 million units in total (and 3.1 million units in the first Kyoto commitment period); this was based on historic rates of deforestation. The climate change Maori Reference Group and the Maori Leadership Group suggested a higher level of compensation (21 million units in the first Kyoto commitment period) would be more appropriate.
Officials remain of the view that the appropriate methodology for assessing levels of compensation is through an estimation of historic rates of deforestation. Given this, and given the proposed exclusion of regenerating scrubland from the ETS, if indigenous forest is to be included in the ETS then (theory would suggest that) an allocation of less than 8.1 million units would be appropriate to maintain equity with landowners of pre-1990 exotic forests.
