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Projected Balance of Emissions Units During the First Commitment Period of the Kyoto Protocol

1 Executive Summary

2 Introduction

3 Net Position Compliance Equation

4 Projected Emissions over the First Commitment Period of the Kyoto Protocol

5 Sectoral Emissions

6 References

Annex A: Agriculture Emissions Projections provided by Ministry of Agriculture and Forestry

Annex B: Energy and Industrial Processes Emissions Projections provided by Ministry of Economic Development

Annex C: Land Use, Land-use Change and Forestry Sector provided by the Ministry of Agriculture and Forestry

Annex D: Waste Emissions Projections provided by Ministry for the Environment

Annex C: Land Use, Land-use Change and Forestry Sector provided by the Ministry of Agriculture and Forestry²³

Disclaimer: This report contains forecast projections of carbon dioxide removals and emissions by the land use change and forestry sector. These projections need to be used with an understanding of the uncertainties that exist. This uncertainty is due to the complexity of forecasting biological systems which are inherently variable and are affected by climate and changing economic conditions. The projections are based on the best information currently available and the current state of scientific knowledge. While every effort has been made to provide the best projections as at March 2007, future changes in projections are inevitable with changes in economic conditions, improved information and new scientific knowledge.

Summary

This report provides forecast projections of carbon dioxide (CO₂) removals and emissions from New Zealand’s land use, land-use change and forestry (LULUCF) sector, limited to post-1990 afforestation, reforestation and deforestation activities accounted for under the Kyoto Protocol.

The projections cover the First Commitment Period (2008–2012) of the Kyoto protocol. The key use of the LULUCF projections is as an input to the “2007 Projected Balance of Emissions Units” report produced by the Ministry for the Environment. The Ministry for the Environment’s report is known as the “net position” report and brings together the projected quantity of greenhouse gas (GHG) emissions and removals from all sectors of the economy. The net position report is a core component of the New Zealand Government’s projected financial position over the First Commitment Period of the Kyoto Protocol.

These projections are forecasts of future CO₂ removals and emissions by the LULUCF sector. Forecasts are greatly influenced by prevailing conditions. These forecast projections need to be used with an understanding of the uncertainties they contain. These uncertainties are due to the complexity of forecasting biological systems which are inherently variable and affected by climate and changing economic conditions. These projections are based on currently available information and the current state of scientific knowledge. Every effort has been made to provide the best projections as at March 2007, however future changes in projections are inevitable to allow for future changes in economic conditions, improved information and new scientific knowledge.

Net removals by the LULUCF sector (that is, removals by post-1990 forests minus deforestation emissions) for the period 2008 to 2012 are projected to be in the range of 16.0 Mt CO₂ to 98.3 Mt CO₂. The base scenario is projected to be 58.0 Mt CO₂ which is very similar to the 2006 base scenario projection of 57.2 Mt CO₂.

Table C1: LULUCF projected CO₂ removals and emissions (Mt) in CP1 (2008–2012)

1 The combined model results account for interrelationships between adjustment factors (forest area, growth rates, soil carbon changes, ineligible afforestation, and scrub clearance during site preparation). The removals attributed to each factor are not additive, because some factors are correlated.

2 Current government policy as at March 2007 is to cap its liability for deforestation of pre-1990 forests at 21.0 Mt CO₂.

3 41.0 Mt CO₂ is based on 50,000ha deforestation which is the base scenario from a deforestation intentions survey carried out in late 2006. For a description of the deforestation intentions survey results refer to Manley, 2006. Details on the calculation of deforestation emissions are available later in this report and in Wakelin et al, 2007.

Estimates of net removals for the pessimistic and optimistic scenarios in 2007 have changed since 2006 due to an allowance being made for the uncertainty of New Zealand’s Kyoto forest area. Net removals in the optimistic scenario have dropped because expected deforestation emissions have increased. In 2006, 6.3 Mt CO₂ was used for the optimistic deforestation scenario. In the 2007 projections, the deforestation cap of 21 Mt CO₂, set by government in 2002, has been used for both the base and optimistic scenarios.

If policy measures are not implemented to manage the government’s deforestation liability within the deforestation cap of 21 Mt CO₂ during CP1, the government’s deforestation liability is likely to increase by a further 20 Mt CO₂ to reach 41 Mt CO₂. This pessimistic deforestation scenario assumes 50,000 hectares will be deforested during CP1 based upon forest owners’ actual intentions as reported in a survey completed for the Ministry of Agriculture and Forestry (Manley, December 2006). Furthermore, if the government does not implement policies to manage deforestation in CP1 but signals that it may do after CP1, it is likely that forest owners would bring additional deforestation plans forward into CP1. Clearly any additional deforestation brought forward into CP1 would further increase deforestation emissions beyond the pessimistic deforestation scenario.

The LULUCF projections are very uncertain with a range of 16.0 Mt CO₂ to 98.3 Mt CO₂. This uncertainty is caused by measurement uncertainty and information gaps, scientific uncertainty and to account for possible future changes in government policy. Uncertainty has been incorporated into the LULUCF projections through the use of scenarios. These scenarios are described in detail later in this report. Overall the LULUCF sector projections are the least certain of all the sectors in the net position report. Measurement and some scientific uncertainty will be reduced when the Ministry for the Environment’s Land Use and Carbon Analysis System (LUCAS) is operational from about 2010.

With respect to future policy development it is important to note that:

1. afforestation will have little effect on increasing CO₂ removals in CP1 because newly established forests will remove little CO₂ from the atmosphere in their early growth years
2. deforestation rates will have a substantial effect on New Zealand’s net position in CP1. The base scenario in these projections uses the deforestation cap of 21 Mt CO₂. If there are no policy measures put in place to manage the government’s liability within the cap then the level of deforestation emissions is likely to be significantly higher than 21 Mt CO₂.

Introduction

Under the terms of the Kyoto Protocol of the United Nations Framework Convention on Climate Change (UNFCCC), New Zealand has agreed to take responsibility for its greenhouse gas emissions in the first commitment period (2008–2012) (CP1).

As forests grow they remove carbon dioxide (CO₂) from the atmosphere through photosynthetic activity. The Kyoto Protocol provides mechanisms for Parties to account for CO₂ removals by forests established on non-forested land since 1990. These removal units can be used to offset greenhouse gas emissions from other sectors.

This report provides forecast projections of CO₂ removals and emissions from New Zealand’s land use, land-use change and forestry (LULUCF) sector, limited to post-1990 afforestation, reforestation and deforestation activities accounted for under the Kyoto Protocol. These projections form a core component of the New Zealand Government’s projected quantity of units over the first commitment period (2008–2012) of the Kyoto protocol. The LULUCF projections from this report feed into the Ministry for the Environment’s “2007 net position” report.

The key assumptions used in these projections are:

• future rates of deforestation

• forest growth rates

• the proportion of afforestation since 1990 which may be ineligible “Kyoto” forests because some may have been over-planted onto land which was already defined as forest

• the loss of soil carbon following afforestation of grassland

• future afforestation rates.

The projections also include error bounds around the existing area of “Kyoto” afforestation.

Forestry trends and drivers

Forecasting is a challenging task. Forecasts are greatly influenced by prevailing conditions and those that have recently existed. This section describes the economic and policy environment in which New Zealand forest owners have been operating over the last four to five years. During this period the operating environment has changed substantially. This makes forecasting more uncertain.

The last four to five years have been difficult for the New Zealand forestry sector. A high exchange rate, increasing costs, particularly shipping costs, along with competitive and changing international markets have adversely affected forest growing profitability in New Zealand. Recently international log prices have increased. The outlook for international log prices is good with the Russian Government’s decision to increase export duties from the current level of 6.5 per cent to 20 per cent in July, with further increases over the next two years to 80 per cent. Trading conditions and profitability for many domestic wood processors have deteriorated with a high exchange rate and increased log prices.

There has been the largest volume of forest sales since state forest privatisation in the late 1980s. New Zealand’s two largest corporate forestry companies (Fletcher Challenge and Carter Holt Harvey) have both been sold to private investors. The pattern of forest ownership has changed rapidly. Before being purchased by the Rank Group, Carter Holt Harvey sold around 100,000 hectares of forest to Matariki Forests (a consortium of Rayonier, AMP and Deutsche Bank Infrastructure managed funds). In late 2006, the Rank Group sold almost all of the remaining Carter Holt Harvey forest estate to Hancock Natural Resource Group. Superannuation funds and timber investment management organisations (TIMOs) have purchased large areas of plantation forests in New Zealand. TIMOs now own more than a third of the total planted forest area in New Zealand.

There is now greater separation between forest ownership and land ownership than has been the case historically. Land owners are looking to realise some of the increased land value through forest land sales. In some locations, pastoral farmers are willing to pay higher prices for land than commercial forest owners resulting in a change in land use from forestry to agriculture.

The net result of these changes and perceptions of forestry future profitability has led to:

• a major decline in the rate of afforestation; afforestation has fallen from a 30-year annual average (1976 to 2005) of 42,000 ha to just 5,000 ha in the year to December 2006

• the new phenomenon of deforestation where plantation forest land is converted to alternative land uses, particularly pastoral grazing. In the year ended March 2006, an estimated 12,900 hectares of deforestation occurred. This was predominantly in the Central North Island and Canterbury regions. Prior to 2004 little plantation deforestation occurred.

A number of climate change policy discussion documents were released for public consultation in late 2006 including Sustainable Land Management and Climate Change – Options for a Plan of Action. Submissions on this discussion document closed on 30 March 2007.

These forecasts do not account for any future climate change and forest policies. The projections are based on the prevailing policy settings as at March 2007.

Modelling methodology

This report provides scenario-based forecasts (projections) of removals and emissions for the LULUCF sector for the period 2008 to 2012. The projections are based on the best available information as at March 2007.

Projected removals from the LULUCF sector are based on data and assumptions from the Ministry of Agriculture and Forestry (MAF) and the Ministry for the Environment (MfE). The carbon modelling was undertaken by Ensis (formerly Forest Research). The underpinning science incorporated in the forest carbon models used in these projections, along with scientific assumptions, comes from work carried out by New Zealand’s crown research institutes, predominantly Ensis and Landcare Research.

In order to incorporate scientific uncertainty, knowledge gaps and the range of possible future outcomes (particularly for afforestation and deforestation), a scenario-based approach has been used. The scenarios presented are labelled pessimistic, base and optimistic. These scenarios are today’s best attempt to cover the likely range of major contributing factors to estimating LULUCF sector removals and emissions based on the current economic environment, policy settings, knowledge of land-use patterns, and the state of scientific knowledge.

The projected forest sink removals were calculated using a spreadsheet simulation model of the Kyoto Forest estate. The model is based on a carbon yield table which describes the per-hectare carbon stock at each age during the growth of a typical Kyoto forest stand. To calculate the carbon stock in a given year, values in the yield table are multiplied by the net stocked forest area at the corresponding age, and then summed. The distribution of areas by age class is defined by the new planting rate – the simulation advances these areas through annual time periods (1990 to 2012). Net carbon uptake is calculated as the stock change in the first commitment period (2008–2012). A more detailed model description is available in Annex 1.

Projection results

Table C2 below provides a breakdown of the major contributing factors on which the removal and emission forecasts are based.

Table C2: LULUCF projected CO₂ removals and emissions (Mt) in CP1 (2008–2012)

1. The combined model results account for interrelationships between adjustment factors (forest area, growth rates, soil carbon changes, ineligible afforestation, and scrub clearance during site preparation). The removals attributed to each factor are not additive, because some factors are correlated. For example, the impact of soil carbon decline due to afforestation is –3.0 Mt CO₂ under the base new planting assumption, but falls to –2.5 Mt CO₂ under the base ineligible afforestation scenario, because the area planted is reduced. Three separate simulations were run using all of the pessimistic, base and optimistic assumptions respectively to produce the combined model results.
2. Current government policy as at March 2007 is to cap its liability for deforestation of pre-1990 forests at 21.0 Mt CO₂-e.
3. 41.0 Mt CO₂-e represents 50,000 ha which is the base scenario from a deforestation intentions survey carried out in late 2006. An “accelerated deforestation and more” scenario presented in the deforestation report was 65,000 ha or 53.3 Mt CO₂-e.

Removals from the LULUCF sector for the period 2008 to 2012 are projected to be in the range of 16.0 Mt CO₂-e to 98.3 Mt CO₂-e. The base scenario is projected to be 58.0 Mt CO₂-e.

Model assumptions

Future afforestation (plantations)

The average new planting rate over the last 30 years has been 42,000 hectares per year. In the period 1992 to 1998 new planting rates were high; during this period new planting averaged 69,000 hectares per year. Since 1998 new planting has declined. Afforestation in 2006 was 5,000 ha.

Table C3 below shows the afforestation rates used in the 2006 projections.

Table C3: Future plantation afforestation (hectares)

The base scenario assumes annual afforestation of 5,000 hectares. The optimistic scenario assumes average afforestation of 20,000 hectares per year between 2008 and 2012. The pessimistic scenario assumes no further afforestation occurs after 2006. These afforestation rate assumptions are the same as last year.

Kyoto forest area

Kyoto forest areas have been estimated from the National Exotic Forest Description (NEFD) database. This combines data from a survey of major forest growers undertaken by the Ministry of Agriculture and Forestry, the Small Forest Growers survey completed by AgriQuality in 2004, and estimates of new planting based on data obtained from nursery surveys (Eyre, 1995). The total area of planted forests in the NEFD database is estimated to be accurate to ±5 per cent.

Growth rates (plantations)

The base scenario uses a national carbon yield table developed from the National Exotic Forest Description (NEFD) yield table database.

The NEFD yield tables better represent the growth of forests on traditional forestry sites. The generally held view is that post-1990 plantation stands have higher growth rates than earlier plantings.

Analysis of forest growth data suggests that fully stocked stands planted after 1990 show a 15–35 per cent improvement in productivity over stands currently being harvested, as a result of genetic improvement, better site quality and improved forest management. The upper end of this range was used to develop the optimistic scenario, which is based on a growth model projection for pruned radiata pine growing on an ex-pasture site. Compared with the NEFD-based yield table, the optimistic yield table has:

• higher volume at maturity

• lower carbon for a given stem volume (trees on fertile ex-pasture sites have lower wood density and therefore lower carbon content per unit of volume)

• a higher rate of growth in the second half of the rotation.

The pessimistic scenario yield table was set at 10 per cent lower than the NEFD yield table. This assumed:

• no increase in volume productivity over stands currently harvested

• no reduction in wood density (and therefore carbon) due to ex-pasture sites

• the same pattern of growth as assumed by the NEFD-derived yield table.

These assumptions have not changed from those used for the 2006 projections. The growth rate scenarios are broadly indicative only. Accurate estimation of forest CO₂ removals requires representative sampling of “Kyoto” forests. A statistical representative sample plot network is to be established across New Zealand’s “Kyoto” forests as part of the Ministry for the Environment’s Land Use and Carbon Analysis System (LUCAS) project. Estimates of LULUCF CO₂ removals from the LUCAS are expected to be available from 2010.

Changes in soil carbon

Soil carbon levels are a function of climate, land use and soil type. Most pasture to radiata pine afforestation occurs on erosion-prone hill country where soil properties are inherently variable, including that of soil carbon. Work is currently underway to improve New Zealand’s approach to determining change in soil carbon with afforestation.

At present New Zealand uses two methods to estimate the change in soil carbon with afforestation:

1. The soil paired plot database; and
2. The New Zealand Soil Carbon Monitoring System (SCMS).

The first method for estimating soil carbon change with afforestation is the analysis of the soil-paired plot database – a cache of purpose-collected data intended to be used as validation of the SCMS estimates. Analysing data from the soil-paired plot database in those localities where afforestation has taken place provides an estimate of soil carbon loss of 4.7 ± 2.6 tC/ha. This is used for the base scenario. This dataset contains several outliers, all of which indicate substantial carbon losses. If these outliers are excluded from the calculation of soil carbon change with afforestation, the estimate becomes a gain of 0.2 ± 2.5 tC/ha (95 per cent confidence level). While excluding these outliers is consistent with the approach of excluding sites where erosion affected the forest site more than the pasture site, exclusion of these plots needs more analysis. For this reason the optimistic scenario assumes no soil carbon change.

The second estimation method is the New Zealand Soil Carbon Monitoring System (SCMS) – a model that uses historical soil data from the National Soils Database (NSD). These data are coupled with the key factors that influence soil carbon. The SCMS generates estimates of soil carbon change associated with afforestation as well as for a range of other land-use changes and the system has been described in peer-reviewed, international journals. Recent scrutiny of the model predictions for localities where most of the pasture to radiata pine land-use change occurs, has led the developers and officials to suspect that the predicted soil carbon reduction associated with afforestation is overstated. The limited number of historic soil data in such localities (erosion-prone hill-country) is the prime reason for these views. It is because of this issue that the estimate produced by the SCMS (a loss of 18 ± 11 tC/ha) is considered to be the most pessimistic estimate of likely soil carbon change with afforestation. The difference between the estimate provided by the soil-paired plot database and that derived from the SCMS provides a strong case for accepting the SCMS value as the most pessimistic estimate.

The pessimistic estimate has changed from that used for the 2006 projections as additional plots from a Marlborough study have been added to the dataset and plots also included in the paired sites database have been excluded from this calculation.

Ineligible planting

Initial investigation has indicated that some plantation afforestation since 1990 may have occurred on land that, from a definitional perspective, already met the New Zealand Kyoto adopted forest definition. Under carbon accounting rules, any land planted after 1990 where the land was already ‘forest land’ under the Kyoto forest definition, does not qualify as “Kyoto” forest.

The estimates of the proportion on “ineligible” exotic forests used in the 2006 LULUCF projections were 16 per cent (base), 8 per cent (optimistic) and 21 per cent (pessimistic). These have been used again in the 2007 projections.

The base and pessimistic figures were based on the use of two national classifications to test the representativeness of a pilot mapping project in Nelson-Marlborough, in terms of post-exotic forest planted into possible forest land. The two sources of data were the 1987 Vegetation Cover Map and the 2001/02 Land Cover Database. Spatial intersection of these indicated the likely area of post-1990 forest planted into possible forest land being: nationally 16 per cent; Marlborough region 21 per cent; and the Gisborne region 15 per cent. Some anecdotal information at the time suggested that the levels could be as low as 8–10 per cent, and this was used for the optimistic figure. These estimates were made at a time when it had not been decided how New Zealand was going to interpret, and map, the Kyoto forest classes as defined in the Marrakech Accords (which defines the Kyoto forest definition).

Table C4: Percentage of existing forest (shrubland) ineligible under the Kyoto Protocol

Forest industry commentators have expressed the view that the proportion of “ineligible” Kyoto forests is too high. However, to date no further quantitative information has become available to provide improved estimates of the area of forest over-planting. In light of this, these projections use the 2006 scenarios again in 2007. Indications from further preliminary analysis suggest that the proportion of ineligible forests may be reduced once further land-use mapping for the LUCAS has been completed.

A closely related issue is the requirement under the Kyoto Protocol to account for emissions from burning and decay of scrub biomass that is cleared for afforestation. That is, if the previous land use does not meet the definition of forest but still contains significant carbon stocks, the carbon stock change due to afforestation must be accounted for. An allowance has been made for this in the combined model results.

Future deforestation (plantations)

Emissions from forecast deforestation for the period 2008 to 2012 are currently projected to be in the range of 21.0 Mt CO₂-e to 41.0 Mt CO₂-e. The government is currently consulting on policy options to manage deforestation. In the absence of any new deforestation policy decisions as at March 2007, the 2002 government-stated policy²³ of capping the Crown’s liability for deforestation of pre-1990 forests at 21.0 Mt CO₂-e has been used for the base and optimistic scenarios in these projections.

The relatively new trend of not replanting forest after harvesting, and in some cases converting immature forest to pasture, started on a larger scale in 2004. New Zealand has always had relatively dynamic land-use change patterns so changes in land use are not unusual. However, the scale of conversion of planted production forest land has been greater than anticipated. The 2006 NEFD survey estimated that 12,900 hectares of forest clear-felled in the year ended March 2006 will not be replanted. This area represents 33 per cent of the area harvested, and compares with historical information indicating that only about 2 to 5 per cent of the area harvested had not been replanted prior to 2004.

The government is currently reviewing submissions received as part of its consultation process associated with the Sustainable Land Management and Climate Change consultation document. It is anticipated that decisions on deforestation policy options will be made by the government later this year. The broad deforestation policy options proposed in the ‘Plan of Action’ consultation document were:

• a flat charge on land use change from forestry

• a tradeable permit regime

• passing legislation to prevent deforestation of land unless government approval has been granted

• RMA controls on deforestation.

The government’s previously stated decision to cap its deforestation liabilities at 21 Mt CO₂ has been used for the base and optimistic scenario. This is a change from the 2006 report when –6.3 Mt CO₂ was used for the optimistic scenario, representing a reversion to historic deforestation rates.

The pessimistic scenario assumes an emission liability of 41.0 Mt CO₂. This scenario is based on a deforestation intentions survey completed for the Ministry of Agriculture and Forestry in December 2006. The results from this survey indicated that under current conditions forest owners intended to deforest about 50,000 hectares during the first commitment period (2008–12). The calculation of 41.0 Mt CO₂ is based on all deforestation being mature forest and all emissions being instantly emitted. This is up slightly on the value of 38.5 Mt CO₂ used in the 2006 projections.

Deforestation of 50,000 hectares during CP1 was the base scenario presented in the 2006 deforestation intentions survey. An “accelerated and more” scenario of 65,000 hectares deforestation in CP1 was also presented in this report. This assumed that the rate of deforestation for two large conversion projects was increased, as was the level of deforestation by small forest growers. If the “accelerated and more” scenario was used as the pessimistic scenario in this report it would increase deforestation emissions from 41.0 Mt CO₂ to 53.3 Mt CO₂.

Furthermore, if the government does not implement policies to manage deforestation in the first commitment period it is likely that some forest owners would bring future (post-2012) deforestation forward into the first commitment period if they believed that post-2012 policy measures to control deforestation were likely to be introduced. The 2006 deforestation intentions survey indicated that between 17,000 and 37,000 hectares of plantation forest were intended to be deforested over the period 2013–2017. Clearly, any deforestation brought forward into CP1 would further increase deforestation emissions beyond the pessimistic scenario presented in this report.

No allowance has been made for deforestation of indigenous forest or shrubland that meets New Zealand’s adopted Kyoto forest definition. There are currently no national statistics available on the clearance of either indigenous forest or shrubland (that meets the forest definition). A Landcare Research report (2001) provided estimates for the area of clearance of indigenous forest and scrub between 1989/90 and 1996/97. To estimate clearance between the two periods, visual interpretation of ground cover was completed for satellite images taken at the two time periods. Complete coverage for New Zealand was not achieved as there were insufficient cloud-free images for much of Northland, southeast Wairarapa, the northwest and southwest of the South Island. For the areas that could be mapped the area of indigenous forest cleared was 1,809 hectares or 0.03 per cent of the total area of indigenous forest as at 1996. The area of scrub removed was 1,409 ha or 0.05 per cent of the total area of scrub as at 1996.

It is thought that under current legislation (eg, Resource Management Act 1990, Forests Act 1949 amended 1993) and/or codes of practice (eg, The NZ Forest Accord 1991) any significant deforestation of indigenous forest is, in practice, difficult to do. Although until improved national mapping of forest area change is available the actual level of indigenous forest and shrub land clearance is currently uncertain and will not be known until the LUCAS is operational from 2010.

Data limitations

There are acknowledged weaknesses in some of the data used in the LULUCF sector projections due to a lack of current knowledge and scientific uncertainty. With funding confirmed for the further development of the Land Use and Carbon Analysis System (LUCAS) in August 2005, the Ministry for the Environment commenced implementing the LUCAS during the 2005/06 year. The LUCAS is being designed to provide more robust LULUCF sector inventory data specifically for Kyoto carbon accounting purposes. This is a long-term and large-scale project that will not be fully operational until 2010. A lack of support from forest owners has delayed the installation of forest carbon inventory plots in their forests. This has delayed the implementation of some LUCAS work streams, in particular the establishment and measurement of sample plots across planted “Kyoto” forests. Delays in implementing the LUCAS will mean it may take longer to reduce the uncertainty for estimating and projecting LULUCF CO₂ removals and emissions.

Because the LUCAS is not yet generating data, existing forest resource information such as the NEFD database and Land Cover Database (LCDB) continue to be used for projecting LULUCF carbon dioxide removals. It is important to note that the NEFD database was designed to forecast future wood supply and is not designed for forest carbon accounting purposes. This means that some of the information required for carbon accounting purposes is not currently available. The NEFD describes the pre-1990 forests, where the ownership is dominated by larger forest growers’ forests, reasonably well. NEFD information on the plantation forests established since 1992 by a large number of smaller-scale forest owners is of poorer quality. In addition there is relatively scant information on New Zealand’s 6.5 million hectares of indigenous forest and 2.6 million hectares of shrubland.

Review of past projections

The 2005 greenhouse gas projections were subject to a number of reviews. The most comprehensive review was undertaken by AEA Technology from the United Kingdom. While the AEA Technology review identified a number of improvements which could be made in producing future projections, most of which have been incorporated in producing this year’s projections, the overall finding of the review was that “the methodologies employed to project emissions and sinks across the different sectors [are] generally sound and reasonable in their approach”. The review noted the uncertainties inherent in all countries’ approaches to projecting future greenhouse gas emissions, and that it is “not uncommon” for projections to change on re‑analysis. The reviewers provided a number of useful suggestions for improving the accuracy and robustness of future forecasts. They recognised that many of their recommendations built upon improvements already in train. The key conclusions for the AEA Technology LULUCF review were:

• “methodologies and input assumptions are reasonable and the resulting removal and emission projections are of a good standard

• a single document should be produced for any future projection estimates that provides a detailed basis and sources for all calculations

• four key issues will require further consideration to minimise uncertainty in future projections:
  1. reasons and drivers for the downward trend in new forest planting
  2. the areas of post-1990 forest planting at a national scale into existing shrublands that meets the Kyoto Protocol definition of forest
  3. estimation of areas deforested and drivers for this process
  4. time patterns of loss of carbon soil after afforestation

• the New Zealand Carbon Accounting System (now called Land Use and Carbon Analysis System) will provide valuable data in assessing removals and emissions for land use land-use change and forestry.”

Work has been completed to address two of the key issues identified above. A report has been produced looking into the financial returns from forestry and its relationship to forestry planting rates. This report is available on the Ministry of Agriculture and Forestry’s website. In 2005 and 2006, deforestation surveys were also completed looking at where deforestation is taking place and why. The results of these surveys have been incorporated in these projections. A summary of the 2006 deforestation report is also available on the Ministry’s website.

Current policies

The Permanent Forest Sinks Initiative

The Permanent Forest Sink Initiative (PFSI) provides an opportunity for landowners to establish permanent forest sinks and obtain tradable Kyoto Protocol compliant emission units in proportion to the carbon sequestered in their forests. New forests established under the PFSI will still be young even at the end of CP1 (2012) so will only be removing a small amount of CO₂. As credits for PFSI forests will be devolved to forest owners, new PFSI forests will not affect the Crown’s balance of units.

There is the potential for existing Kyoto-compliant forests to move into the PFSI allowing the forest owner to receive Kyoto Protocol compliant emission units. Any existing Kyoto-compliant forests that are moved to the PFSI will result in the devolution of emission units and the removal from the Crown’s balance of units. There is currently insufficient data to identify the area of existing Kyoto forest that may move into the PFSI, however only exotic forest planted since 17 October 2002 will be eligible.

Accounting for Article 3.4 forest management

New Zealand has made the decision not to account under Article 3.4 of the Kyoto Protocol. New Zealand had the option of electing which additional Article 3.4 land use, land-use change and forestry activities, if any, it wished to account for in the first commitment period. Forest management is one such activity that could have been included under Article 3.4.

Under Article 3.4, New Zealand would have to account for carbon stock and carbon stock changes in New Zealand’s indigenous forests as well as its pre-1990 planted forests. At present, there is uncertainty in the data on carbon stock changes in New Zealand’s indigenous forests. Available data suggest that the carbon stocks are likely to be in a steady state or possibly in slight decline. An assessment in 2006 of the significance to New Zealand of Article 3.4 forest management activities concluded that the balance lay somewhere between –92 to 11 Mt CO₂-e over the first commitment period. If New Zealand decided to account for forest management under Article 3.4, it would also be subject to a cap restricting the maximum amount of carbon dioxide removals it can claim in the first commitment period to 3.7 Mt CO₂. Under Article 3.4 potential emissions and the related liabilities would remain uncapped. There would also be substantial costs incurred in measuring New Zealand’s entire forest estate to secure a maximum of 3.7 Mt CO₂ over the first commitment period.

New policy proposals

Sustainable land management and climate change consultation

At the time of producing these projections the government had just completed a public consultation round on its proposed options for a plan of action on climate change in the land management sectors. This plan of action covers how the agriculture and forestry sectors could work with the government to adapt to climate change; capitalise on business opportunities arising from climate change; reduce greenhouse gas emissions from land-based activities; and create carbon sinks. The broad options in the plan of action for forestry are outlined below.

To encourage afforestation:

• an afforestation grant scheme where growers who establish new post-2007 forests could tender to receive an afforestation grant. Grants would be awarded based on highest expected carbon storage for the lowest tender grant rate. Sites with more co-benefits such as erosion control, watershed management and mitigation of nitrate leaching could be given higher priority in the allocation of grants

• giving growers a choice between being part of the afforestation grant scheme or devolution of the relevant sink credits and their associated liabilities for new post-2007 forests. Devolution of credits and liabilities would operate in a similar manner to the Permanent Forest Sink Initiative.

Both of these would work alongside the current Permanent Forest Sink Initiative.

For discouraging deforestation of non-Kyoto forests:

• flat charge on land-use change from forestry to another use for the loss of stored carbon

• a tradeable permit regime where the government allocates tradeable deforestation permits to forest land owners; those who deforest are liable for emissions above the level of permits they hold

• centrally determined deforestation levels where the government passes legislation to prevent deforestation of land unless government approval has been granted (to ensure total deforestation remains within a government-established target)

• RMA controls on deforestation: a national environmental standard would require local authorities to prescribe limits for greenhouse gas emissions for the explicit purpose of controlling deforestation.

Under these options, the government could carry a portion of the deforestation costs incurred under the Kyoto Protocol by setting a threshold below which the policy would not apply. Under the flat charge option, the government could carry a portion of the cost through setting the expected international price of carbon.

The above are a range of potential climate change policy options for the land-use sectors. The government is currently analysing submissions following the consultation round on these options and is continuing to consider the policy options. Until specific policy measures are agreed and implemented it is not possible to include them in the LULUCF projections.

The choice and effectiveness of deforestation policy will have a material effect on New Zealand’s net position in CP1 (and beyond) while any new afforestation policies will have negligible impact in the short term but will increase CO₂ removals over a longer period of time.

Reconciliation with 2006 projections

Table C5: LULUCF projected CO₂ removals and emissions (Mt) in CP1 (2008–2012)

1. The combined model results account for interrelationships between adjustment factors (forest area, growth rates, soil carbon changes, ineligible afforestation, and scrub clearance during site preparation). The removals attributed to each factor are not additive, because some factors are correlated. For example, the impact of soil carbon decline due to afforestation is –3.0 Mt CO₂ under the base new planting assumption, but falls to –2.5 Mt CO₂ under the base ineligible afforestation scenario, because the area planted is reduced. Three separate simulations were run using all of the pessimistic, base and optimistic assumptions respectively to produce the combined model results.
2. Current government policy as at March 2007 is to cap its liability for deforestation of pre-1990 forests at 21.0 Mt CO₂-e.
3. 1.0 Mt CO₂-e represents 50,000 ha which is the base scenario from a deforestation intentions survey carried out in late 2006. An “accelerated deforestation and more” scenario presented in the deforestation report was 65,000 ha or 53.3 Mt CO₂-e.
4. Uncertainty in the area of Kyoto forest planted was not included in the 2006 report.

The base scenario is very similar to that presented in 2006. While uncertainty in the area of Kyoto forest planted between 1990 and 2006 has been introduced under the base scenario, the adjustment in the area of Kyoto forest is 0. Introducing this uncertainty has widened the gap in total removals between the optimistic and pessimistic scenarios.

Removals less deforestation emissions have decreased for both pessimistic and optimistic scenarios from 2006 with the cap of 21 Mt CO₂-e now being used for deforestation emissions under the optimistic and base scenarios, and 41 Mt CO₂-e being used for the pessimistic scenario. This follows work in 2006 looking at deforestation intentions of forest owners.

References

Baisden WT, Beets PN, Davis M, Wilde H, 2006. Changes in New Zealand’s Soil Carbon Stocks Following Afforestation of Pastures. Landcare Research Contract Report: KC0506/105 prepared for Ministry for the Environment.

Eyre J, 1995. Predicting and Measuring New Planting from Nursery Surveys. New Zealand Journal of Forestry, August 1995, pp 45–46.

Horgan G, 2007. Financial Returns and Forestry Planting Rates. Ministry of Agriculture and Forestry report.

Manley B, 2006. 2006 Deforestation Survey. Canterprise contract report prepared for the Ministry of Agriculture and Forestry.

Ministry of Agriculture and Forestry, 2006. A National Exotic Forest Description as at 1 April 2005.

Ministry of Agriculture and Forestry, 2006. Sustainable Land Management and Climate Change – Options for a plan of action.

Ministry for the Environment, 2006. Projected Balance of Units During the First Commitment Period of the Kyoto Protocol. Ministry of the Environment.

Smith B, Horgan G, 2006. Area of Forest “At Risk” from Deforestation. Ministry of Agriculture and Forestry report.

Stephens P, Heke H, Sutherland A, Shepherd S, Pinkney T, 2001. Estimating Clearance of Indigenous Forest and Scrubland between 1989/90 and 1996/97. Landcare Research, unpublished contract report prepared for the Ministry of Agriculture and Forestry.

Wakelin SJ, Paul T, Beets PN, Kimberley M, 2007. 2007 Net Carbon Uptake Projections (2008–12) – Land Use, Land-Use Change and Forestry. Ensis. Unpublished contract report prepared for the Ministry of Agriculture and Forestry and the Ministry for the Environment.

Annex 1: Description of the LULUCF net position models

1 Model for projecting net removals

Background

Article 3.3 of the Kyoto Protocol allows the net changes in greenhouse gas emissions by sources and removals by sinks resulting from afforestation, reforestation and deforestation since 1990 to be used to meet the commitments of Annex B parties. Sources and removals are to be measured as verifiable changes in carbon stocks in each commitment period. The carbon stocks to be accounted for are above-ground biomass, below-ground biomass, dead wood, litter and soil organic carbon.

The Land Use and Carbon Analysis System (LUCAS) is being developed and implemented so that New Zealand can meet its international obligations for reporting under the Kyoto Protocol. The LUCAS project will report emissions and removals of greenhouse gases across the carbon pools for forests planted since 1990 and any land deforested over the first commitment period of the Kyoto Protocol (CP1). The basis for estimating stock changes in the biomass and dead organic matter pools will be a representative sample of the Kyoto Forest estate taken at or near 1 January 2008 and repeated at 31 December 2012.²⁵

Because the LUCAS carbon monitoring plots have yet to be established, an alternative approach is currently used to project CP1 net CO₂ uptake. This is hampered by the absence of a spatial database of post-1990 planted forest areas. The approach used for this report is based on the methodology that has been used to estimate carbon stocks in planted forests for UNFCCC reporting since the early 1990s.

Methodology used in this report

Projected removal units from afforestation and reforestation since 1990 are calculated as the difference between modelled carbon stocks on 1 January 2008 and 31 December 2012. The base data for calculating carbon stocks are the Ministry of Agriculture and Forestry’s estimates of annual afforestation area since 1990, and a national carbon yield table, derived from the NEFD regional yield tables. The national carbon yield table provides carbon stock estimates by age on a per hectare basis for all non-soil carbon pools. All forest areas planted in the same year are pooled and modelled as a single forest area for that planting year. The model keeps track of these planted areas as they mature, and generates annual estimates of carbon stock by multiplying planted area by the carbon yields per hectare at the appropriate age. This approach is the same as that employed by routinely-used forest estate planning simulators, such as IFS (Interactive Forest Simulator, Garcia 1979).

The calculation of annual carbon stocks from the national carbon yield table and annual afforestation areas is illustrated in Figure C2, for the period 1990–1992. It is assumed that the carbon stock in the year of planting is zero. Annual stocks are calculated for each age class and summed over all age classes to give the total annual stock. Net removals are calculated as the annual change in stocks.

Soil organic carbon stocks are estimated in the same way, except that a separate national soil carbon yield table is prepared which reflects changes in soil organic carbon resulting from afforestation of pasture. These changes are modelled as occurring gradually, rather than instantly at the time of afforestation. Values in the yield table start from a high point representing steady-state soil organic carbon under pasture, then decline before stabilising at a steady-state planted forest level.

Projected emissions from deforestation are determined by estimating the difference between pre- and post-deforestation carbon stocks on land deforested since 1990. Pre-deforestation stocks are calculated by multiplying the area assumed to be deforested by the per hectare carbon stock value in the national carbon yield table at the nominal deforestation age of 28. The IPCC methodology allows for an instantaneous loss of carbon at the time of harvest, or a gradual change over time (eg, through decay of residues). The model allows either option to be applied.

The model

Three Microsoft Excel spreadsheets are used to calculate carbon removal and emission units.

Afforestation calculations

This spreadsheet model multiplies the area of forest planted each year post-1990 by the appropriate value in the carbon yield table. This is done for each year in the simulation (1990 to 2012).

The spreadsheet allows combinations of post-1990 afforestation rate with alternative carbon yield tables. Afforestation rates are varied to allow for different scenarios. These include the modelling of future afforestation rates, and the adjustment of forest areas to deduct ineligible forest areas planted onto existing forest land (ie, shrubland that met New Zealand’s forest definition). In the latter case, the over-planted proportion is removed from the calculations. The carbon stock for each planting year cohort is calculated annually from the time of planting to 2012, by multiplying the area by the yield table values at the appropriate age. Each year, carbon stocks are summed across planting cohorts to give the total annual carbon stock. Projected removal units are calculated as the stock change during the commitment period, defined as the stock as at 31 December 2012 minus the stock as at 31 December 2007. Carbon stocks include all living biomass, dead wood and litter, but exclude soil organic carbon.

Soil carbon calculations

This spreadsheet models the impact of afforestation on the soil organic carbon pool, including both the magnitude of the change in carbon per hectare and the rate of soil carbon change over time. Projected removal units are calculated as the soil carbon stock change during the commitment period (for converted pasture and planted forest combined) and confirmed by the sum of emissions over the same period.

Deforestation calculations

This spreadsheet models variations in deforestation rate and alternative treatments of post-deforestation residues. It is assumed that deforestation occurs in pre-1990 planted forests following a normal harvest at age 28. The merchantable stem component is modelled as an instantaneous emission of carbon, but tracked separately from harvest residues. The latter may be emitted instantly, or allowed to decay under alternative decay rates. In addition, the proportion of instantly emitted versus decaying residues can be adjusted.

Projected removal units are calculated as the sum of annual emissions over the commitment period. Emissions and removals associated with post-deforestation land uses (ie, agriculture and lifestyle blocks/settlements) are not modelled, including changes to the soil organic carbon pool on this land.

Both removals and emissions are calculated in the three spreadsheet models described above based on stock differences, where the stock is the product of areas multiplied by yield table values. The estimates of afforested and deforested areas are key variables, as are the values in the carbon yield table, which is described in the next section.

2 National average carbon yield table

Projected removal units are calculated using a national area-weighted average carbon yield table for New Zealand’s planted forests. This yield table formed the basis for the 2005 UNFCCC planted forest carbon inventory (Wakelin and Paul 2007). The process used to construct the yield tables is outlined in Figure C3.

NEFD volume yield tables

NEFD yield tables are prepared periodically to support wood supply modelling carried out by the Ministry of Agriculture and Forestry (MAF). The latest set of yield tables (MAF 1996b, replacing the MAF 1992 set) was used for both the 1996 and 2000 Wood Supply Forecasts. The yield tables have been reviewed (eg, Jaakko Poyry Consulting 2003, Manley 2004) and a new set is in preparation.

Regional carbon yield tables

The process used to derive a carbon yield table for each NEFD yield table is described in more detail in Wakelin et al (2005). The two main steps are:

1) Convert NEFD yields net of mortality to gross yields.²⁶

2) Use C_change to firstly convert stem volumes to stem biomass, and then to convert stem biomass to stand biomass.

The first step is required because C_change requires both gross and net increments as inputs. Gross volume increment is used to calculate total dry matter production; the difference between gross and net volume is used to derive carbon in annual tree mortality, and the resulting dead carbon is added to the dead component carbon stock. An analysis of Permanent Sample Plot data held by Ensis was made to determine the relationship between net and gross volume for each broad NEFD regime. The PSP data was also used to determine pruning and thinning schedules for each regime.

Inputs to C_change include the NEFD stem volume yield tables, wood density classes for regions and species, and silvicultural regime details. C_change is used to:

• derive stem wood biomass increment from volume increment and density

• apply an increment expansion factor to convert this to total carbon fixed

• partition the total carbon to live biomass pools

• calculate transfers from live to dead pools from mortality functions and regime details (ie, pruning/thinning)

• apply decay functions to estimate carbon loss from dead pools.

The output from C_change is a carbon yield table corresponding to each of the 89 NEFD crop types, with estimates of carbon per hectare by age class for each pool.

Note that these carbon yield tables assume:

• volume growth that is species specific, based on the species and species groups used in the NEFD yield tables

• broad wood density classes differentiated by species (and by region for radiata pine)

• regime assumptions (particularly initial and final stocking) that are based on radiata pine PSP data

• carbon partitioning based on radiata pine relationships, as data for other species is limited

Area-weighted national average yield table

A national aggregate age class distribution was produced by using the IFS/FOLPI utility “AVGYLD” (FRI 1995) to calculate an area-weighted national crop type yield table and associated age class distribution from the individual NEFD crop types as at 1 April 2005.

Issues

The assumption made is that the national average carbon yield table will be representative of stands planted since 1990. Obviously the growth of individual stands will vary. The applicability of the national average yield table is discussed further in the growth rate section earlier in this report.

The main problem with using the NEFD yield table as the basis for carbon yield tables arises out of the relatively narrow focus of the NEFD Steering Committee:

• yield tables are prepared as a basis for wood availability studies, so the focus is on yields at the range of rotation ages modelled (20–40 but more typically 26–30)

• the main focus of the company yield tables that are used to compile the NEFD yield tables is around areas that will be harvested in the short- to medium-term from the large forest owners’ resource.

This means that:

• yields and increments may not be accurate at other ages – for instance, NEFD yield tables may over-predict yield (and therefore carbon) at young ages

• yield tables do not necessarily reflect future growth rates

• yields may not be applicable to the small growers’ estate

• the yield tables were prepared in 1995 for the NEFD crop types that existed at that time. Suitable yield tables do not exist for some of the crop types found today – eg, production-thinned Douglas fir in East Cape and southern North Island have been assigned the Douglas fir waste-thinned yield table from their respective regions

• regime differences may not be explicitly captured in the yield tables at the time of silviculture, unlike yield tables produced using a stand growth simulation model.

Until LUCAS is fully implemented, the NEFD yield tables are likely to remain the best published source of growth data suitable for national carbon modelling purposes.

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