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5 Projected removal units from forest sinks

Removals of carbon dioxide via forest sinks is a key component in how Parties can meet their commitments under the Kyoto Protocol. New Zealand is in a relatively unique situation having planted a substantial area of forest since 1990. It is estimated that between 1990 and 2005 675,000 hectares of new plantation forest have been established as a result of afforestation and reforestation activities.

Projected removals from the land use, land-use change and forestry sector are based on data and assumptions from the Ministry of Agriculture and Forestry and the Ministry for the Environment. The forest 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, come from work carried out by Ensis and Landcare Research.

Forecasting is a challenging task. Forecasts are greatly influenced by prevailing conditions and those that have existed over the last one to two years. As described below the economic and policy environment in which New Zealand forest owners have been operating has been changeable. This makes forecasting the future less certain than when a stable operating environment prevails.

These forest sink projections cover the likely range of the major contributing factors to land use, land-use change and forestry sector removals and emissions (forest sinks) based on the current economic environment, policy settings and the state of scientific knowledge.

5.1 Forest sector operating environment

The New Zealand forest growing sector has seen difficult trading conditions over the last three to four years. 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. In addition there has been the largest number of forest sales since state forest privatisation in the late 1980s. There is now a greater separation between forest ownership and land ownership than has been the case historically. Land owners are looking to maximise value from the land by realising some of the increased land value through forest land sales. Livestock farmers are currently prepared to pay higher land prices than commercial forest owners. The net result of these changes and a somewhat uncertain future has led to:

  • A significant decline in the rate of afforestation. Afforestation has fallen from a 30-year annual average (1974 to 2004) of 43,000 hectares to just 6,000 hectares in the year to December 2005.
  • The new phenomenon of deforestation where plantation forest land is converted to alternative land uses, particularly pastoral grazing. In the year ended March 2005, an estimated 7,000 hectares of deforestation occurred. Historically there has been little plantation deforestation.

A climate change policy review was undertaken by the Government in the second half of 2005. While policy changes have been signalled, at this point climate change policy development is still underway. These projections do not account for future changes to climate change policy settings and are based largely on prevailing policy.

5.2 Forest model description

Projected forest sink removals were calculated using a simulation model of the Kyoto forest estate. The model was based on a carbon yield table which describes the per-hectare carbon stock at each age for 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.

5.3 Scenarios and results

Most likely, upper and lower scenarios have been used to quantify the likely range of carbon dioxide removals by forests and carbon dioxide emissions from deforestation during the first commitment period.

Table 7 represents current efforts to quantify the likely range of the major contributing factors to estimating LULUCF sector removals and emissions. The scenarios attempt to anticipate the results from when the New Zealand Carbon Accounting System (NZCAS) is in operation. The progressive implementation of the NZCAS will replace and likely revise all values reported in Table 7.

Table 7: Calculation of projected removal units during the first commitment period

Projected removal units

Mt CO2-e

Upper

Base

Lower

Total removals from simulations combined in model

60.4

78.2

114.5

Projected deforestation emissions

38.5

21.0

6.3

Net removals (RMUs)

21.9

57.2

108.2

Effects of different input assumptions

 

Total sequestration under different planting rates (0, 5k, 20k ha/yr)

95.4

96.6

98.0

Factor adjustments to total sequestration (see assumptions below for details)

     

Kyoto forest growth rates

-9.7

0.0

29.5

Soil carbon change with afforestation

-9.5

-3.0

0.0

Planted forest not meeting the Kyoto Forest definition (Ineligible Kyoto Protocol planting)

-20.3

-15.5

-7.7

Note: Factor adjustments to total sequestration do not add to total removals because assumptions have been combined in the model to account for the interrelationships between the assumptions. For further details see Appendix B.

A large source of uncertainty for carbon removals by forest sinks is due to uncertainty around the value to apply for growth rates (of Kyoto Forests). The uncertainty range suggests some scope for higher carbon sequestration due to higher forest growth rates than currently assumed in the most likely scenario. The current most likely scenario uses data on growth rates from older (non-Kyoto) forests. Post-1990 forests may be more productive than older (non-Kyoto) forest due to improved knowledge of forest management, more fertile soils and improved genetic stock. The true growth rate for post-1990 forest will be better known once the New Zealand Carbon Accounting System is fully operational, and permanent plots have been installed and measured in the Kyoto forests.

Another key source of uncertainty is the value used for soil carbon losses from afforestation. Current research is showing that when a new forest is planted there is a loss of soil carbon. The lower case is there is no loss of soil carbon, however there is downside potential for soil carbon losses due to afforestation that has to be accounted for in the treatment of uncertainty. The range around soil carbon losses from afforestation represents a source of uncertainty in these projected carbon removals.

Any new forest planted from 2005 onwards will only have a small impact on total carbon removals during the period 2008 to 2012 because newly planted forest will not absorb as much carbon as forests that are a few more years into their life cycle. Hence the results are not particularly sensitive to varying the planting rate assumptions for new forests.

5.4 Forestry assumptions

Further details on these assumptions are contained in Appendix B of this report.

Kyoto forest growth rates

The most likely 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 percent 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 lower 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 high yield table has:

  • higher volume at maturity
  • lower carbon for a given volume (trees on fertile ex-pasture sites have lower wood density and therefore carbon content)
  • higher rate of growth in the second half of the rotation.

The upper scenario yield table was set at 10 percent 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
  • same pattern of growth as assumed by the NEFD derived yield table.

The growth rate scenarios are broadly indicative only. Accurate modelling of forest carbon removals requires representative sampling of the post-1990 forests. This will not be available until a representative plot network has been established and measured in New Zealand's Kyoto Forests.

Planting rate

The most likely estimate in the May 2005 projection report was based on a planting rate of 10,000 hectares per year. It is provisionally estimated that 6,000 hectares were planted in 2005. The assumptions for planting rates used in this projection are shown in Table 8. The average planting rate over the last thirty years has been 43,000 hectares per year. A future afforestation rate of 5,000 hectares per year is low in the historical context.

Table 8: Afforestation rate assumptions (hectares)

Calendar year Upper Base Lower
2005(p) 6,000 6,000 6,000
2006 0 5,000 5,000
2007 0 5,000 10,000
2008 0 5,000 15,000
2009 0 5,000 20,000
2010 0 5,000 25,000
2011 0 5,000 30,000
2012 0 5,000 35,000
Average 0 5,000 20,000

P Provisional estimate for 2005

Soil carbon

A loss of 3.0 Mt CO2 (range 0 to -9.5 Mt CO2) is included for a loss of soil carbon through the afforestation of "grassland". This is based on research by Landcare Research. Landcare Research was commissioned to review the loss of soil carbon and this value has been revised from last year's most likely estimate of -2.2 Mt CO2. The most likely scenario assumes a loss of soil carbon following afforestation of 4.7 tonnes carbon per hectare over a 20-year period.

Ineligible Kyoto Protocol planting

A loss of 15.5 Mt CO2-e is included for plantation forests planted into existing forest. Field studies and a national analysis in a geographic information system have suggested that a proportion of existing planted forests, estimated at up to 16 percent nationally, were planted in scrub that could meet the definition of forest in the Kyoto Protocol, ie, the planting was not onto "grassland". There is anecdotal evidence that the ineligible Kyoto Protocol planting estimates may be too high; however, in the absence of better quantitative evidence the more conservative estimate has been retained. Better estimates will not be known until the NZCAS is in operation. The upper and lower estimates use estimates of 21 percent and 8 percent of forests being planted in existing forest as well as new forest planted from 2006 onwards.

Deforestation

At the time of these projections, the deforestation cap is Government policy. Based on this the cap of 21.0 Mt CO2 has been used for the base scenario. The upper scenario assumes an emission liability of 38.5 Mt CO2. This is based on a deforestation intentions survey completed in December 2005. The results from this survey indicated that under current conditions, forest owners intended to deforest about 47,000 hectares during the first commitment period (2008-12). This scenario allows for the removal of the deforestation cap and for current market conditions to prevail. The calculation of 38.5 Mt CO2 is based on all deforestation being mature forest and all emissions being instantly emitted.

The projections include a lower scenario of 6.3 Mt CO2 to show the effect of changes in either forest policy or improved forest growing profitability. In absence of any better figure the lower scenario is based on 1,500 hectares of deforestation each year, slightly higher than the historical deforestation rate.

No allowance has been made for deforestation of indigenous forest or shrub land that meets New Zealand's adopted Kyoto forest definition. Under current legislation (eg, Resource Management Act 1990, Forests Act 1949 amended 1993) and/or codes of practice (eg, The New Zealand Forest Accord), any significant deforestation of indigenous forest is, in practice, difficult to do.

Other assumptions

These projections assume an average harvest age of 28 years. Harvesting forest stands younger than 22 years old prior to 2012 would result in harvesting emissions during the first commitment period. These have not been accounted for in these projections.

5.5 Impact of 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.

At the time of writing this report the Climate Change Response Amendment Bill had passed its first reading in Parliament and had been reported back from Select Committee. If the Bill proceeds through its final Parliamentary stages, regulations will need to be developed for the PFSI to become operational.

There is potential for some of the existing Kyoto-compliant forests to enter the Permanent Forest Sink Initiative. Any switching of these forests to the Permanent Forest Sink Initiative will result in the devolution of those credits and their removal from the Crown's balance of units. However, given the various risks and uncertainties associated with the initiative that existing forest owners will need to consider, it is not possible to provide an estimate of the area of existing forest that might switch to the Permanent Forest Sink Initiative at this stage.

5.6 Current data limitations

There are acknowledged weaknesses in some of the data used in these LULUCF sector projections due to information gaps and scientific uncertainty.

The National Exotic Forest Description database and Land Cover Database continue to be used for projecting forest sink carbon dioxide removals until the NZCAS becomes operational. The NEFD database was designed to forecast future wood supply, not for forest carbon accounting purposes. Much of the information required for carbon accounting purposes is currently unavailable. The NEFD describes the pre-1990 forests, where the ownership is dominated by larger forest growers' forests well. NEFD information on the plantation forests established since 1992 by a large number of smaller-scale forest owners is of poorer quality.

With funding confirmed for the further development of the NZCAS in August 2005, the Ministry of the Environment commenced implementing the NZCAS during the 2005/06 year. The NZCAS is being designed to provide robust land use, land-use change and forestry sector inventory data specifically for Kyoto carbon accounting purposes. This is a long-term, large-scale project that will take some years before being fully operational. In protest over Government's climate change policies, forest owners currently have a ban on the installation of forest carbon inventory plots in their forests. This has delayed the implementation of some NZCAS work streams. Delays in implementing the NZCAS will mean that it will take longer to reduce the uncertainty of some elements of estimating and projecting land use, land-use change and forestry carbon dioxide removals and emissions.

There is still scant information on forest carbon stocks and fluxes in New Zealand's 6.5 million hectares of indigenous forest and 2.6 million hectares of shrubland.

5.7 Accounting for Article 3.4 forest management

Under Article 3.4 of the Kyoto Protocol, New Zealand has until 2007 to elect which additional Article 3.4 land use, land-use change and forestry activities, if any, it wishes to account for in the first commitment period. The election of these activities is voluntary for Annex I parties. Forest management is one such activity and would include accounting for emissions and removals from forests not eligible under Article 3.3 over the first commitment period. The Government has agreed in principle not to account for these activities in the first commitment period. However, a final decision will not be made until closer to 2007, when further information is available.

At present, there is considerable uncertainty in the data on carbon stocks and carbon stock changes for forest land. The available data suggest that carbon stocks are likely to be in a steady state or a slight decline. An assessment of the significance to New Zealand of Article 3.4 forest management activities concluded that the balance lay somewhere between -92 Mt CO2-e to 11 Mt CO2-e over the first commitment period. New Zealand is also subject to a cap of 1.0 million tonnes carbon (equivalent to 3.67 million tonnes carbon dioxide equivalent) for Article 3.4 forest management activities during the first commitment period.

Whether New Zealand will be obliged to account for such activities in subsequent commitment periods is a matter for future international negotiations. If New Zealand is obliged to account for pre-1990 forests and these forests are in fact losing carbon, then this would add to New Zealand's emissions liabilities.