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Scoping Report for an Environmental Assessment of the New Zealand Emissions Trading Scheme and Closely Related Measures

Executive Summary

1 Introduction

2 Methodology and Policy Scenarios

3 Changes and Environmental Effects by Sector

4 Effects by Environmental Resource

5 Possible Response Mechanisms

6 Further Investigation of Environmental Effects

7 Summary of Proposed Response Measures

8 References

Appendix 1: Excerpt from Project Brief: Scoping Report for an Environmental Assessment of the NZ ETS

Appendix 2: Policy Scenarios

Appendix 3: Acknowledgements

Appendix 4: Significance of Environmental Effects by Environmental Resource

3 Changes and Environmental Effects by Sector

This chapter consists of sector by sector assessments of the possible environmental effects of the ETS and closely related measures. For each sector, the discussion is organised based on the questions considered at the workshop, which are the focus of this scoping report. The summaries also distinguish which of the measures in the policy scenario are the main drivers of behavioural change for a given sector, which in some cases is important for consideration of policy response measures.

3.1 Stationary energy supply – electricity and direct sources of heat

3.1.1 Behavioural changes

Overview

Fossil fuels used for electricity generation, manufacturing and commercial and residential use (excluding transport) account for around 45%⁹ of New Zealand’s GHG emissions from energy¹⁰ in 2006. Energy accounts for over 42% of total GHGs in the 2004 National Inventory. Carbon dioxide emissions from thermal electricity generations have increased by 138% between 1990 and 2006 and, with transport emissions, account for the bulk of the increase in GHG emissions from the energy sector since 1990.¹¹

The short-term effects of the ETS-plus on electricity and gas demand are hard to predict but the longer-term effects are reasonably clear. The ETS-plus is expected to result in an increase in the proportion of electricity supplied from renewable energy sources over the longer term. Use of coal within New Zealand, and coal production for domestic use, is expected to decrease and gas use is also likely to decline relative to the base case in the longer term.¹²

These changes are largely the result of the cost of emissions being incorporated into investment decisions through the ETS. The impact of the preference for renewable energy (the so-called “thermal moratorium” or “thermal restriction”) is less clear.

Renewable electricity

Generation and transmission investment

The ETS-plus is expected to lead to increased development of renewable sources of energy¹³ relative to the base case, and this effect is expected to increase as the cost of carbon rises (MED, 2007d, p.12). Over the period of this study, new baseload electricity generation plant is expected to be geothermal, and new peaking capacity is likely be either hydro, combined or open cycle gas or distillate,¹⁴ with wind expected to provide a significant but variable proportion of mid-range capacity.¹⁵ Around 90% of electricity is likely to be generated from renewable sources by 2025 (ibid). This notably contrasts with the base case scenario where coal features as a generation option in the longer term.

The precise locations, scale and timing of new renewable generation between now and 2020 are somewhat unclear. These are commercial decisions that depend on the scale and sequence of investment in both generation and transmission, and the spatial pattern of electricity demand, as well as its overall level. Options for larger scale wind, geothermal and hydro development are limited by the location of the energy source (and transmission infrastructure), and this has been reasonably well documented.¹⁶ Industry sources also suggest new hydro schemes are unlikely to have significant storage and will be more “run of river” schemes. This is understood to reflect both relative construction costs and planning issues.

Increased use of renewables has implications for the overall level of generation. Greater emphasis on renewables requires a higher-level of installed capacity to deliver security of supply in a dry year (EHMS, 2005; EC, 2007c; EC, 2007d; EC, 2007e).¹⁷ MED figures indicate both costs and excess capacity could be expected to rise markedly as the share of renewables exceeds 90% (MED, 2007d, pp.13–14), but that the extra requirements are expected to be moderate below this level. The extent of the extra capacity required also depends upon the extent to which demand-side management and distributed generation and/or distributed storage¹⁸ options are in place.

A further issue in relation to hydroelectric generation specifically is that water availability for hydroelectricity is likely to be influenced by climate change over the lifetime of any new facilities. The extent and direction of this influence is unclear.¹⁹

The short-term variability of wind generation has led some stakeholders to question the extent to which increased wind investment will require new investment in other forms of electricity generation in order to provide security of supply. On the basis of studies to date (Energy Link-MWH NZ, 2005; Strbac et al, 2006),²⁰ stakeholders expect:

1. the variability effect to be limited²¹
2. there to be capacity within the existing system to incorporate considerably more wind capacity than presently exists
3. that existing hydro can provide the short-run reserve power for the bulk of the 2008 to 2020 period covered by this study.

On this basis increased wind capacity is more likely to affect the timing and location of transmission investment rather than the level of reserve generation capacity. Increased use of geothermal energy for electricity generation also has implications for transmission investment (EC, 2007e). The scale of new transmission investment expected is unclear (Strbac et al, 2006; EC, 2007d). Transmission capacity investment in turn will affect the viability of different sites and types of renewable electricity generation.

Compared with combined-cycle gas plants, geothermal and wind investments are likely to have notably longer lead times and hydro investment lead times can be expected to be even longer. Similar lead-times could be expected for non-traditional renewables such as marine energy. Stakeholders suggest this difference reflects investigation and design needs as much as planning issues. How this factor will influence decisions is unclear – it may lead to more distributed generation and a heavier emphasis on demand management, or it may lead to more large projects being proposed, on the basis that only some will proceed.

Pricing and distributed generation

Wholesale electricity prices in New Zealand vary regionally and by time of day. These create incentives for avoiding peak usage (ie, high price) times, typically for large or wholesale consumers who are exposed to such prices. This could occur, for example, through scheduling production activities to avoid these times or through on-site generation or storage.

Stakeholders have indicated that there is uncertainty regarding the extent to which regional wholesale electricity prices will actually reflect the cost of emissions at times when, for example, coal is at the margin for generation. To the extent that this cost is reflected in wholesale prices, the ETS can be expected to affect the daily pattern of demand.

Some stakeholders also suggest that larger users are already investigating ways to avoid peak electricity charges. This includes active investigation of on-site generation and distributed storage. If the ETS accelerates this change, this can be expected to have implications for the overall pattern of demand and affect the viability of various proposals (eg, rapid adoption of electric cars) that rely upon a pool of lower cost off-peak electricity.

According to some industry sources, demand is increasing for distributed generation solutions at a small enterprise and farm level. The economics of distributed generation from a household to major industry scale is likely to be influenced by both the price of delivered electricity and the nature of connection agreements and pricing.²² A further influence on distributed generation will be the form of the replacement for the existing supply obligation on lines businesses, which is due to expire in 2013.²³ Moreover the extent to which local and central government facilitate distributed generation will also influence the pattern of development.

The preference for renewable energy

The preference for renewable energy forms part of the ETS-plus package. MED has advised²⁴ that its purpose is to preclude new baseload electricity generation from fossil fuels, while allowing for peaking and mid-range plants. The supply curve for new generation in the New Zealand Energy Strategy (NZES, 2007, p.38) suggests that renewables – largely wind and geothermal – and combined cycle gas are the next most economically viable increments of supply. Some industry sources believe the economics of new gas plants to be marginal, even without the renewable preference. This stems from the expected prices of both emissions and gas, the latter a function of the limited availability of domestic gas for new generation after 2016.

One clear impact of the renewable preference is to eliminate the possibility of rapid development of new thermal plant in the event of a major gas find in New Zealand.²⁵ It is also expected to discourage the development of an LNG import facility. The sunk cost of such a facility would make future gas generation relatively more economic, so the renewable preference could exert a significant influence on longer-term trends in this scenario. The possibility of a new coal-fired baseload power station is also eliminated by the renewable preference, even if it were viable in the presence of the significant emissions cost of burning coal.

Some stakeholders have expressed a concern that the renewable preference could encourage development of hydroelectric capacity earlier than would otherwise be the case (ie, with the ETS alone). In the view of some stakeholders, the use of combined cycle gas, for example, may provide a better transition path to non-traditional renewables such as marine energy. As noted above regarding the likely electricity supply curve, it is not clear the extent to which the renewable preference alone will actually influence investment decisions towards hydro rather than gas.

A more technical version of the stakeholder argument above is that the renewable preference will mean more hydro needs to be built to provide reserve capacity for new wind. In the absence of the renewable preference, some stakeholders have argued, this reserve capacity would be more likely to be provided by peaking thermal plants (although this is counter to the view that gas plants are marginal economically even without the renewable preference). However, the renewable preference in its present form would not exclude peaking gas (or indeed diesel or coal) plants as a source of reserve energy to complement wind power; it only creates a need to apply for an exemption. Until it is clear how this exemption will be administered, it is difficult to draw definite conclusions about the additional effects, if any, of the renewable preference in relation to reserve capacity.

The Ministry of Economic Development is currently modelling the combined effects of the ETS and the thermal renewable preference and expects the results to be available in the near future.

Sources of process and space heat

The ETS is expected to increase demand for renewable sources of process and space heat, as well as electricity, over time. This is largely the result of fuel switching away from fossil fuels as heat sources, although gas may substitute for coal to some extent.

Woody biomass

In the short to medium term, the use of woody biomass as a fuel is likely to increase as a result of the ETS.

Recent estimates suggest that there is a significant amount of wood available for use as feedstock for process and space heating (EHM, 2005). Other stakeholders suggest that these estimates are low, possibly significantly so. Demand for woody biomass as a fuel source is expected to rise under the ETS-plus compared with the base case. Stakeholders and studies (EHM, 2005, pp.36-40) suggest that a substantial part of this demand could come from the forestry processing sector itself (EHM-Scion, 2007).

The extent to which wood will be available for other uses (institutional heating, electricity generation or cogeneration, domestic heat) if large industrial consumers in the forestry industry were also to increase demand for woody biomass as a solid fuel, is unclear. The ETS is expected to increase afforestation. However, varying views have been expressed by stakeholders as to whether expansion of plantation forest as a result of the ETS-plus is likely to increase the supply of wood as a solid fuel.

The availability of wood over time is also dependent on harvesting and planting cycles, both of which are expected to be affected by the ETS (refer to the Forestry section of this chapter).²⁶ In addition, the economics of using wood as fuel at a site distant from where wood is grown depends on both transport and drying costs as well as production costs.

The potential for wood farming close to urban areas has also been identified by some stakeholders; ie, combining wind on ridges with fuel forestry on slopes. The economics and public acceptability of this approach are also unclear.

Direct use of geothermal heat

Geothermal energy is a major source of direct heat as well as a feedstock for renewable electricity generation. It is possible that energy-intensive industry will relocate or establish close to geothermal energy sources. There is also potential for co-location between geothermal electricity generation and activities requiring lower grade process or space heat, possibly including drying of woody biomass.

Non-traditional renewables

Marine energy

Investigation of marine energy sources for electricity generation is likely to be accelerated compared with the base case, although the speed of this, and the form it takes will depend somewhat on research and development work in the next few years.²⁷ At present, officials advise that the cost of marine energy prohibits its commercial deployment

On the basis of comments from stakeholders:

1. it is likely that pilot projects will be established over the next decade
2. it is unlikely that marine energy sources will meet a significant proportion of energy demand before 2020
3. there is an awareness of possible future resource use conflicts arising from development of marine energy.

Solar energy

There is little information on the role of solar energy outside households and institutions, and few stakeholder comments were received. The ETS-plus can be expected to increase incentives for the use of solar energy (provided higher energy costs do not also increase the capital cost of solar technologies significantly). On the basis of information produced by MED²⁸ the main use of solar energy is likely to be passive design changes in buildings, together with direct water heating in households and small institutions over the study period. Increased use of solar energy for commercial water heating is also possible.

The uptake of photovoltaics is likely to increase, albeit from a low base. It is possible this could be accelerated if use of heat pumps creates a daytime peak in household electricity demand, when photovoltaics are most cost-effective.

Significant changes in solar technology and cost are possible, especially in regard to photovoltaics, as this area is under active investigation internationally.

3.1.2 Potential environmental effects arising from behavioural changes

Greenhouse gas emissions

In the medium term, the ETS is expected to reduce greenhouse gas emissions from electricity supply and industrial process heat relative to the base case. This effect is expected to increase over time. In the short-term, emissions from direct coal use are expected to fall and emissions from gas use and electricity generation are likely to increase.

Biodiversity, freshwater quality and quantity, landscape and natural character

Increased renewable electricity generation is expected to increase pressures in a range of areas. The scale and significance of adverse effects depends on the size and nature of the projects, and their location.

Wind generation is likely to affect landscape values, amenity and natural character, and possibly affect biodiversity. The extent of these effects is very site specific. For some people and some sites, amenity effects can be positive.

Greater development of geothermal energy is also likely to have localised effects on biodiversity and landscape values, and may possibly affect water quality and quantity if fluids are not reinjected. These effects are potentially more significant than with comparable fossil fuel plants due to the reduced flexibility in the location of a geothermal power plant. These effects could also be more significant if industry relocated towards geothermal energy sources.

The expected increase in hydroelectric generation compared with the base case means an expected increase in the pressure, especially over the medium to longer-term. Aspects of the environment likely to be affected include:

• the quantity of fresh water available, as power generation is a competing use for water

• instream values and ecosystems, landscape and natural character, and freshwater quality.

Hydroelectric development creates largely irreversible local environmental changes, and in the view of some stakeholders these are substantial in comparison with the increment in electricity generation. While these effects are local, the values affected, such as biodiversity, may also be national or even international values. Furthermore, climate benefits only arise where a renewable project is displacing thermal generation, rather than alternative renewable sources or demand-side activity.

Land with conservation values (both publicly and privately owned) is likely to come under pressure for both hydro development and wind development, as stakeholders indicate that a proportion of sites identified as suitable for wind and hydro are located on such land.

Effects arise not just from the location of renewable projects but also from construction activities associated with their development. The location of these effects is driven by the location of the wind and water resources and by proximity to transmission facilities (and reserve energy to some extent).

The location, nature and need for future upgrades of the electricity distribution system to deal with higher levels of renewables are also likely to result in increased pressure on landscapes and natural character from transmission investment, compared with a base case where thermal generation may be located closer to sources of demand. To the extent that distributed generation increases, this may counter some of the need for augmentation of the transmission system. Some additional investment in transmission is expected in any event; the ETS-plus is expected to change the pattern of that investment and may result in additional investment being needed.

Overall, pressures from renewable development can be expected to be significant between now and 2020. Where the sector ends up is also likely to depend on the sequencing of decisions. For example, larger scale renewable generation accompanied by transmission investment could possibly to crowd out smaller scale distributed solutions, and energy efficiency, and lead to further larger scale projects. Large scale renewables tend to result in concentrated local impacts and increased pressure on hydro resources, but fewer dispersed effects overall. Smaller scale distributed solutions could mean relatively more local issues of amenity and visual impacts, and possibly increased transmission investment, but less pressure on rivers.

The extent and pattern of demand growth, as well as the direct influence of the carbon price, and investment decisions will shape the extent and location of pressures.

Other effects

Local air quality

Changes in local air quality as a result of changes in stationary energy supply arising from the ETS are likely to be small but positive. These will arise from reduced emissions from fossil fuel combustion for stationary energy and process or space heat. There is also a possibility of localised adverse effects in the short-term due to discharges from thermal electricity generation.

Land and soil

To the extent that coal mining is reduced by the ETS, environmental pressure on land from mining will also reduce. The likely extent of any change is unclear as a significant proportion of domestic coal production is exported.

Increased pressure due to increased afforestation for woody biomass is possible, although the short-medium term additional effect of this is likely to be small compared with other drivers of afforestation.

Turning to renewable energy generation, geothermal energy development is likely to have localised effects on land and soil, and public concerns remain about the potential for subsidence of land when underground geothermal fluids are extracted.²⁹ These effects are likely to be minor but could be more significant if industry relocated towards geothermal energy sources.

For hydroelectric development, effects are possible due to the inundation of land, and alterations in sediment balances, although the extent of these is very site specific.³⁰

Coast and marine

Coastal areas are significant sites for wind generation and it is likely expected that there will be further pressure on coastal landscapes from wind generation projects, and possibly from associated transmission projects.

In the longer term, the possibility of marine generation adds a potentially competing use to inshore waters. The impacts of this form of electricity generation are unknown, as are potential conflicts with uses such as aquaculture, fishing, recreation and navigation.

3.2 Energy demand

3.2.1 Behavioural changes

This section focuses on the effects of the ETS-plus on energy demand from households, small to medium size enterprises and public institutions. The effects of the ETS-plus on energy demand from industrial sectors are addressed in the discussion of those sectors. This section focuses on the effects of the ETS-plus on energy demand from households, small to medium size enterprises and public institutions.

The influence of price changes in the short to medium term

The Regulatory Impact Statement contained in the ETS legislation suggests retail price rises of 5–10% for electricity and 2–4% for retail gas,³¹ compared with a 40–67% increase in the wholesale price of coal (assuming emission prices of $15 and $25 per tonne of CO₂-e, respectively).

Over the next few years, increased electricity demand at peak times is likely to be met by increased use of thermal electricity generation.³² During periods of peak demand, all renewable energy is likely to be online and thermal plants are needed to meet the extra demand. This is likely to affect electricity prices as the emissions price is incorporated into electricity prices in the short to medium term. This influence may possibly become less marked towards the end of the study period as the relative share of renewable electricity increases.³³

The impact of these price changes alone on overall energy demand is likely to be limited in the period immediately following the entry of stationary energy to the ETS. The exception is coal use, which is expected to fall. Electricity and gas prices have risen significantly in recent years³⁴ and the demand response has overall been modest. Nonetheless, significant changes in energy demand from households, small businesses and public institutions are expected as a result of increased fuel prices for electricity, coal and gas resulting from the ETS over the period to 2020.

In general these price changes can be expected to encourage:

• a switch to less carbon intensive fuels (eg, electricity and/or wood or gas for coal). and/or

• increased direct use of solar energy, especially for water heating, and/or

• increased attention to efficient use of energy, and/or

• reduced use of energy.

The exact combination of those effects will vary between individual households and businesses. There is good international and New Zealand evidence that energy use varies widely between households.³⁵ There is also evidence that some New Zealand households are already restricting home heating for price reasons.³⁶

Understanding of direct fuel use by households has been greatly improved by the Household Energy End-use Project (HEEP)³⁷. Direct use of coal by households is expected to fall as a result of the ETS and electricity, gas and/or wood use may rise, depending on the relative impact of the ETS on electricity and gas prices. Changes in electricity and gas prices as a result of the ETS are forecast to be similar at lower emissions costs so demand for both fuels may increase, at least until emissions costs become more significant.

The availability of wood for household use following the entry of forestry into the ETS is uncertain, however depending on availability and relative price, there is the possibility of increased direct use of wood for home heating. Studies by the ARC indicate that wood scavenging is a significant source of fuel for a significant number of households³⁸ and this activity could be expected to increase.

Similarly, the extent and rate at which hospitals and schools convert boilers from coal to wood or shift to heat-pumps or solar water heating will depend very much on the information, programmes and incentives (including the relative costs of fuel) these institutions encounter. There has been little feedback from stakeholders on the likely response of small enterprises and public sector institutions generally. Some NZEECS programmes, such as the pilot programme to convert school boilers to wood pellet burners, do target these groups specifically.

The influence of the NZEECS in the short to medium term

The size and exact nature of the demand responses over the short to medium term is expected to depend in part on the impact of programmes within the NZEECS, which have the potential to increase responsiveness to price changes. It is also expected to depend on:

• the ease of access to high quality information about options to improve energy efficiency

• the cost of new technologies

• the nature of government adjustment assistance to households

• the level of public acceptability and understanding of the ETS and its effects (including attitudes to price rises).

The nature of the demand response over time is also expected to depend on the size of energy cost in relation to total budgets and the availability of affordable capital to undertake changes. In the absence of direct financial assistance, lower income households are more likely to reduce consumption (most likely directly and, in some cases, through low cost energy efficiency measures) and budget-constrained public institutions (eg, hospitals) may experience increased financial pressure if they wish to maintain energy services. Other users are more likely to consider alternative technologies such as solar heating, and substantial energy efficiency improvements. A number of NZEECS programmes seek to address these differences.

The measures contained in the NZEECS are expected to significantly improve comfort levels for some households and reduce demand somewhat (Isaacs et al, 2006).³⁹ The NZEECS as a whole contains a broad range of actions to promote energy efficiency in all households, ranging from direct financial assistance to awareness raising campaigns to promote the benefits of investment in energy efficiency measures. However, at their present scale, the specific NZEECS programmes considered as part of ETS-plus will directly affect a much smaller group than the price effects of the ETS, which is expected to affect electricity prices more quickly than energy efficiency measures can be ramped up. This raises questions about the public response and the nature and timing of any adjustment assistance for households.

Longer-term issues

Second-round effects of changes in patterns of energy demand (eg, fuel switching) are complex. For example a rise in the demand for electricity due to a switch from direct heat to electrical heat-pumps may raise the overall level of electricity demand and change patterns of demand if heat pumps are also used for summer air conditioning. Informal advice from some industry sources is that the system is not capacity constrained in December–January and an increase in demand could be met from existing capacity (although the extent of this may depend on location and timing of extra demand). A sustained increase in demand over three to four months⁴⁰ would however raise capacity issues.

In addition, the Household Energy End-Use Project reveals that the level of household warmth depends in part on fuel type; houses with solid fuel heaters tend to be warmer than those with electric or gas heating (Isaacs et al, 2006). The reasons for this observed pattern are unclear; possibly it reflects the lower overall cost of wood once scavenging is taken into account. If some of these households with a higher ambient temperature switch to electricity, a significant increase in demand is possible.

Over the longer term it is likely that, in the face of rising prices, many households become relatively more energy efficient and in doing so reduce overall energy use as well as increasing comfort and service levels.⁴¹ Officials advise they are already seeing increased investment in energy efficiency in response to energy price increases and greater awareness of the wider impact of energy use decisions.

The speed and scale of response by smaller users is expected be heavily influenced by the nature of the existing and new building stock, both residential and commercial, and the extent to which it is constructed or modified to reduce energy demand. The nature of the building stock will in turn depend on both the expectations of users and developers and the extent to which Government programmes (including regulation) lead to more energy efficient buildings.

Non-price measures are expected to be an important influence on the scale and speed at which households become more energy efficient. In addition, low to modest income households can be expected to lag behind in their investment in energy efficient building retrofits, and other energy efficiency measures/behaviours, unless specifically assisted and encouraged to undertake them.

3.2.2 Environmental effects

This section discusses how the behavioural changes above are likely to influence environmental effects from the consumption of stationary energy services. Direct effects of changes in the way electricity is generated are considered in the previous section on energy supply.

Greenhouse gas emissions

Gross emissions of CO₂ are expected fall somewhat compared to the base case as a result of changes in energy demand from the household, SME and institutional sector. This is expected to be initially due to fuel switching away from coal, with lower growth in energy demand over the period of the study. Increased demand for electricity (and possibly gas) may mean CO₂ emissions from electricity (and possibly gas) rise initially, even though some households reduce overall energy use. Over the longer term an increase in the proportion of electricity from renewable sources, increased direct use of solar energy and ongoing improvements in energy efficiency, will offset this effect.

Local air quality

Reductions in coal use are expected to improve local air quality. Increased direct use of wood as a substitute for electricity, especially in open fires or older wood burners could possibly increase pressure on air quality in some areas.⁴² Stakeholders, including officials, advise that technologies are available to eliminate air quality issues associated with domestic wood burning. Actual air quality impacts are highly localised and require specific assessment.

The Environment New Zealand 2007 report identifies airsheds where air quality is already poor. In a few cases (eg, Christchurch) local authorities have information that could enable them to assess the relative air quality effects of these two forms of fuel-switching. Any shift from gas to electricity would be likely to generally improve indoor air quality, especially if older gas stoves and flueless heaters are scrapped or relegated to reserve capacity only.⁴³

Human health

Increases in fuel prices make it more likely that those on low incomes will spend less on heating. Some may resort to open fires from scavenged firewood where this is practical. The ETS is expected to create further pressure in this area from additional fuel price increases.

There is good evidence that there are significant health issues associated with the poor thermal performance of the New Zealand housing stock.⁴⁴ Both the direct effect of colder, damper houses as a result of reduced heating and, to a lesser extent, the possible risks to indoor air quality from open fires are expected to increase pressures on human health.

The measures in the NZEECS that address these effects will deliver important positive benefits in relation to human health, however at their present scale they are expected to reach a relatively small proportion of households compared with the price effects. In the base case, the Clean Heat programmes, eg, in Christchurch and Nelson, target the low-income households that are most likely to be at risk of inadequately heated houses. These will help to reduce the final impact on households in these areas.

Biodiversity, landscape and natural character

There is a possible risk of firewood scavenging and poaching encroaching on a range of indigenous woody ecosystems. The extent of this is difficult to estimate but could be locally significant, given the evidence that scavenging is already a significant source of wood fuel in Auckland.

Some stakeholders have suggested that clearance of marginal land for firewood may be encouraged. To the extent this occurs, it is likely to be highly sensitive to the extent such land is captured by the ETS provisions relating to deforestation.

Scavenging and firewood harvesting are general effects of increased energy prices; it is possible the ETS will add to pressure in this area, especially if pre-1990 indigenous forests are excluded from liability under the ETS.

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