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4 Effects by Environmental Resource

4.1 Introduction

Chapter 3 examined the changes in behaviour that could arise from ETS-plus across sectors of the economy and identified the environmental effects that could result. This chapter summarises these environmental effects by environmental resource and comments on their significance. (Please note: references provided in Chapter 3 for statements about behavioural change and environmental effects are not repeated in this chapter.)

The terms of reference for this study call for an assessment of the domestic environmental effects of the ETS and closely-related measures, ie, the ETS-plus policy package. The domestic environmental effects, and assessment thereof, fall into two distinct categories.

As discussed in Section 2.1.2, the domestic environmental effects of the ETS-plus, and our assessment of those effects, fall into two distinct categories:

  1. effects on GHGs, both relative to the base case and in absolute terms
  2. effects on New Zealand’s environment as a result of behavioural change of households, businesses, government and non-government organisations.

The tables in Appendix 4 provide a comprehensive compilation of all identified environmental effects of the ETS-Plus scenario by environmental resource. The tables indicate whether the potential environmental effects are positive or negative, when they are expected to commence, the expected extent and duration of change, and the overall significance, including where this is uncertain.

This chapter summarises and discusses the most significant effects identified in Chapter 3 and Appendix 4, and those where the significance is uncertain. Many of these effects can be adequately addressed by existing measures in place under the Resource Management Act and other legislation, whereas some might require new or additional policy responses. Chapter 5 will consider the adequacy of existing measures and propose possible response measures where these are considered appropriate.

4.2 Greenhouse gases

The ETS aims to reduce net emissions below business-as-usual. The net approach with the ETS encompasses reducing gross emissions of GHGs, avoiding deforestation and increasing removals of atmospheric CO2.

4.2.1 Avoided deforestation

The anticipated introduction of the proposed ETS, which would place obligations on the forestry sector as of 1 January 2008, has resulted in two significant effects. Actual deforestation was higher in 2007 than forecast in 2006 (19,000 ha cf 13,000 ha, Manley, 2008) and the 2007 deforestation survey indicates that deforestation will be lower over the study period than forecast in 2006.

In the short term, this delivers an absolute increase in emissions, due to recently cleared land being added to pastoral production. However, further additions to New Zealand’s emissions will then decline rapidly through both avoided deforestation and avoided methane and nitrous oxide emissions from intensification of pastoral farming conversions. This is expected to be the largest effect of the proposed ETS-plus on net emissions, at least in the short to medium term.

4.2.2 Afforestation

Afforestation is also encouraged by the ETS-plus. New forest establishment is expected to be significantly ahead of the base case over the study period, resulting in increased carbon sequestration, especially in new exotic forests.

4.2.3 Gross emissions (outside the forestry sector)

CO2

Over the study period, a reduction in domestic gross emissions of CO2 compared with the base case is expected. Gross domestic emissions are likely to continue to rise in absolute terms, largely due to growth in transport emissions.

The direct price effect of the ETS-plus will reduce energy demand and alter the way energy (especially electricity and industrial, commercial and domestic heat) is supplied. The initial effect of ETS-related price changes is expected to be small in the transport sector, and other components of ETS-plus are expected to achieve greater reductions in transport emissions in the early part of the study period.

Methane and nitrous oxide

Methane emissions are likely to rise in absolute terms, though they are expected to be lower than in the base case. Any reduction in methane is expected to be initially associated with reduction in stock numbers or improvements in animal efficiency and relatively small, while larger reductions are likely to only occur once mitigation technologies are available and used widely by farmers. This is expected to be beyond the study period.

Nitrous oxide emissions are also likely to be reduced compared with the base case by the end of the study period, although the speed and extent of this is expected to depend heavily on the use of nitrification inhibitors being taken up at the farm.

4.2.4 Overall effects on GHGs

Overall, net emissions are expected to be below base case levels over the study period. The extent of this reduction will depend on the global price of carbon, which will affect both domestic gross emissions and domestic removals.

Domestic gross GHG emissions are expected to increase above present levels over the study period despite the presence of the ETS and closely-related measures.93 This is largely as a result of emissions from the energy sector (in particular from the use of liquid fuels in transport), along with growth in intensive pastoral agriculture, in particular dairying.

From a global environmental perspective, the best evidence to date suggests that very large cuts in global emissions will be necessary to stabilise the climate. Prudent environmental management suggests that complementary measures should be strengthened in order to achieve a more significant reduction in gross domestic emissions over the study period and beyond.

4.3 Land and soil

The ETS-plus policy package is expected to have a range of environmental effects, positive and negative, on land and soil health including changes in erosion and sedimentation, soil structure and soil carbon content.

The environmental effects of dairying are expected to be reduced relative to the base case as a result of the ETS-plus. Soil compaction and associated changes in structure and soil carbon will have increased up to 2013 before agriculture comes into the ETS. At this stage it is uncertain whether these effects will be reversible through a reduction in stock numbers or the use of on-farm management practices such as concrete pads for winter feeding. Research is underway to establish the sustainable limits94 of intensive farming on soils in New Zealand, the results of which are needed with some urgency.

In terms of the biofuels obligation and the possible increase in short rotation biofuels crops, the effects on the land and soil are likely to be negative but of low policy significance. The effect on soil from the cultivation of crops for biofuels or for stock feed for dairy growth95 will depend on the extent to which crop management practices reduce soil disturbance. The signs to date are that such practices are increasingly driven by the price of energy inputs. The ETS effect on energy prices will be evident in 2009 and 2010 and is expected to help counteract any extension of the land area in crops that involves a higher degree of soil disturbance.

Landscape effects of increased afforestation and any associated wilding tree problems are expected to be an issue in those areas of New Zealand where forestry is not currently a prominent land use and in some areas where exotic forestry is in proximity to indigenous vegetation of high landscape value (particularly in the South Island high country). These effects are expected to start emerging as soon as the ETS-plus is in operation and to continue for the life of the forest, although public perceptions of landscapes could change over time.

The increased forest area as a result of the ETS-plus is likely to increase the pressure at time of harvest on land and soil with periodic and temporary increases in sediment yield in some localities, although this could be moderated to some extent by increased rotation times.

The overall net effect of the ETS-plus on land and soil could be positive or negative depending on the scheme design and the extent to which the environmental effects are considered in its implementation. A reduction in erosion and sediment yield is likely as a result of the ETS-plus, especially the AGS. Once agriculture enters the ETS in 2013, reductions in soil compaction are also likely, although whether this will result in improved soil health is still uncertain. Uncertainty about the effects of the ETS-plus on biodiversity is discussed in section 4.5 Biodiversity.

4.4 Freshwater

The ETS-plus policy package is expected to have a range of environmental effects, both positive and negative, on freshwater flows and levels and on freshwater quality and ecosystem health. The full list of potential effects is provided in Appendix 4.

In terms of freshwater flows and levels, the environmental effects of the ETS-plus are expected to be mixed. The increased demand for renewable energy driven by the ETS-plus is expected to put significant additional pressure on freshwater systems as energy companies look for new sources of renewable energy to meet New Zealand’s anticipated demand growth. Increased afforestation is likely to reduce water yields, but this is likely to be significant only at a local scale. On the positive side, the ETS price signal is also expected to cause a reduction, compared to the base case, in the demand for irrigation, due to an increased price of electricity for pumping and to the cost of emissions from livestock production.

The negative effects of additional hydro-electric power generation are likely to be concentrated on particular river systems, whereas the positive effects of less irrigation pressure are likely to be more widely dispersed across regions where irrigated dairy farming is prevalent and where water is in short supply during the summer months. Both the positive and negative effects are likely to continue until at least 2020, and could increase over time especially if the price of emissions increases.

In terms of freshwater quality and ecosystem health, the ETS-plus is likely to have mostly positive environmental effects. These stem from the behavioural change in the forestry sector, including avoided deforestation as well as new forest establishment, and in intensive farming, which is likely to ease back on inputs, and therefore non-point source discharges to water, at least somewhat relative to the base case. The extent to which this occurs will depend on a complex mix of factors discussed in the land use section of Chapter 3 – if sheep and beef farming exits in some regions in favour of dairying, there could be an adverse effect on water quality.

There is likely to be an increase in periodic effects on water quality and ecosystem health due to increased forest harvesting activities as forests incentivised by ETS-plus mature, although that is likely to be 25–30 years in the future. Where post-1990 regenerating scrub or indigenous bush is cleared to establish pine trees, this is likely to have an adverse effect on local freshwater quality at forest establishment.

Overall, the effect of the ETS-plus on freshwater quality is likely to be positive, but this is subject to uncertainty due to the difficulty of predicting land use change.

4.5 Biodiversity

The ETS-plus package is likely to have potentially significant effects on biodiversity, which could be both positive and negative.

In general, policies that result in an increase in forest area are positive for indigenous biodiversity values. This statement would apply to regeneration and indigenous afforestation under most circumstances.96 In the case of exotic plantation forests, there are some important caveats to this statement. Afforestation on marginal hill country has positive effects for biodiversity (especially freshwater biodiversity) because it reduces erosion and sedimentation, adds additional habitat for some indigenous species, can increase buffering of existing remnants of indigenous forest, and in the longer term increases indigenous riparian and under-storey vegetation.

However, exotic afforestation replacing regenerating indigenous scrub, or in indigenous non-forest habitats such as tussock grasslands and sand dunes etc, are expected to have negative biodiversity impacts on such habitats, some of which are recognised as threatened or priority vegetation. To the extent that ETS-plus measures allow or encourage afforestation of such habitats, this is likely to have negative impacts on biodiversity values where these habitats are not adequately protected through local or regional RMA measures policies.

Based on the experience of past forest establishment, there will be an increased wilding tree problem in some parts of the country as a result of increased exotic afforestation to meet the sequestration objectives of the ETS-plus. Wilding trees have become significant weeds affecting biodiversity values in a number of New Zealand regions (DoC, 2001). The longer control is deferred, the greater are the impacts and costs of control.

Increased electricity generation from renewable sources, particularly expanded hydro generation, is another potentially significant effect on biodiversity. Hydroelectric generation can have significant adverse effects on freshwater and riparian biodiversity, unless sufficient environmental flows remain in exploited waterways. These effects are ongoing and essentially non-reversible. Biodiversity effects of other renewable energy, such as geothermal or wind power, have been noted but are generally minor and localised, as long as construction effects are minimised by good management through the RMA. It should be noted that wind power can co-exist with other land uses that have positive biodiversity effects, such as regenerating indigenous bush in hill country, with wind turbines and access roads confined to ridge systems.

Potential ETS-plus effects on biodiversity via changes in the agricultural sector are much more difficult to predict. The biofuels obligation could have the same adverse impact on threatened habitats as described for forestry, but this would be entirely dependent on which biofuel species is planted in which habitats. Dairy conversions could also have the same effects if they occur on the same land. By decreasing the incentive for dairy conversions, especially as 2013 approaches, the ETS-plus is likely to have a positive effect on biodiversity.

4.6 Landscape and natural character

In general, potentially significant landscape and natural character effects of the ETS are similar to those summarised above for biodiversity, with the most significant relating to exotic afforestation and renewable energy sources. To the extent that the ETS-plus package increases either, it is expected to have adverse effects on landscape and natural character in some areas where these land uses have not existed before and where landscape and natural character values are deemed to be high.

Exotic afforestation reduces natural character, and is perceived by many to have negative effects on landscape values compared to the landscapes which it replaces (Fairweather et al, 2003). Perceived adverse landscape effects generally decrease over the rotation time of the exotic crop, and increase sharply at the time of harvesting and replanting when bare land surfaces are visible. Wilding conifers in regenerating indigenous scrub and tussock grassland habitats are often perceived to have an adverse impact on natural landscapes, as well as on indigenous biodiversity.

Energy generation generally reduces natural character and can have adverse effects on the landscape. Adverse effects related to energy generation and transmission are generally permanent except for the rare cases when infrastructure is dismantled. The effects of wind generation and transmission lines on landscape values have been a particularly controversial management issue under the RMA in recent years in some locations. Some proposed wind projects have had their generation capacity reduced on appeal. On the other hand, a number of other wind projects have been supported by communities and erected within months.

4.7 Coastal and marine

The effects of the ETS-plus on coastal and marine environments are of three main types: effects on coastal ecology due to changes in sedimentation from land use, effects on marine ecology due to changes in fishing, and effects on natural character and amenity values due to the possibility of energy developments.

Afforestation due to the ETS-plus is expected to reduce sedimentation of coastal environments, but not until newly established forests achieve canopy closure (about eight years after planting) and the existing bedload of sediment is flushed out of river systems.

Changes in environmental effects due to fishing are likely to be relatively minor and mixed, as the main behavioural response is expected to be a redistribution of fishing pressure to reduce fuel costs. To the extent that energy-intensive trawling is reduced in favour of other methods, the ETS-plus is expected to have a positive effect on benthic environments.

The possibility of new methods of electricity generation from the marine environment could result in as-yet unknown environmental pressures in the marine environment. Investigation of potential marine generation technologies is at a very early stage, so it is not within the scope of this report to speculate on possible environmental effects, but these could be a matter for future investigation.

4.8 Air quality

Overall, the ETS is likely to result in fewer discharges of pollutants to air from the use of fossil fuels for stationary energy, space heating and transport. The medium to long-term effects of the ETS on air quality are therefore expected to be positive. However, there are also likely to be localised increases in discharges, especially in the short-term, primarily from changes in fuel for household heating. As the effect of discharges on air quality depends very much on the location of the discharges, the effects of the ETS on air quality in the short-term are ambiguous.

Moves away from coal use and unflued gas heaters are expected to reduce pressure on interior and ambient air quality. Increased pressures are expected in some areas due to the increased use of wood in older solid fuel heaters and fireplaces in place of electricity. It is possible that increased direct use of scavenged wood has already been a part of household responses to increased electricity prices. Open fireplaces and older woodburners are a significant cause of local air quality problems and so any increased pressure in this area is potentially of concern.

The impact of biofuels on air quality is complex and requires further investigation. Use of liquid biofuels, especially biodiesel, generally results in fewer emissions than fossil diesel and petrol. There are, however, potentially significant exceptions to this conclusion. In particular, there is some evidence that petrol/bioethanol blends may lead to higher emissions of some pollutants than mineral petrol alone.97

Over the longer term, ETS-plus is likely to reduce the level of transport emissions and change their spatial distribution. A reduction in emissions is unambiguously positive for air quality, while changed distribution implies a mix of localised increases and decreases in pressure on ambient air quality.

4.9 Human health

Human health effects flow from changes in air quality and also from the direct effect of increases in fuel prices, in particular due to reductions in ambient heat in dwellings.

4.9.1 Air quality related health effects

The effects of poor air quality on health are now well understood and national air quality data has improved. In the short-term the ETS-plus is not expected to be the major driver of air quality effects on human health. It is possible ETS-plus will have significant local health impacts (due to increased use of firewood in older space heaters and open fires in the short term, and changes in transport patterns in the medium term). The overall effects of ETS-plus will become more important in the longer-term. These longer-term effects on air quality are generally expected to be positive.

4.9.2 Direct effects of increased fuel prices

To the extent that increases in liquid fuel prices due to ETS-plus encourage increased walking and cycling, this is expected to provide benefits to human health.

Another direct effect of the ETS on human health will be through its impact on ‘fuel poverty’ and associated health problems. There is good evidence that health problems associated with cold, damp houses are significant in New Zealand, and ETS-plus is expected to add to pressure in this area.

93 Although the impact on domestic emissions is expected to be limited during the first commitment period (2008–2012), the ETS will contribute to Kyoto compliance through the purchase of international emission units that would otherwise be used for emissions in other countries.

94 The Sustainable Land Use Research Initiative a FRST funded programme.

95 A move to stock crop feed regimes on dairy farms has increased with dairy expansion and intensification and likely to continue while world dairy prices are high. The ETS-plus is not likely to influence this greatly unless the price of carbon is high (personal communication, Nick Pyke, FAR).

96 An exception would be attempts to establish a type of indigenous forest cover where it is not the original natural vegetation cover, eg, a kauri plantation replacing ‘natural’ indigenous scrub in areas south of kauri’s natural distribution. Currently, this is a hypothetical situation but may not necessarily remain so in the future.

97 References can be found in section 3.1.1.

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