Overview of trade-offs of options for Māori landowners and forest managers

Summary of feedback

We had strong feedback from owners of Māori land during the last consultation on averaging accounting. This fact sheet summarises that feedback and highlights key decisions and options in this consultation that will have implications for Māori considering registering new forests in the New Zealand Emissions Trading Scheme (ETS).

During the last consultation there were 3 key themes to the feedback we received from Māori landowners and forest managers:

• Land use flexibility should be preserved.
• The ETS should be made simpler, easier to understand, and easier to access.

Penalties for permanent forests in the ETS should not be excessive as this could discourage people from planting and registering permanent forests – the final penalties for permanent forests are being worked through based on this feedback.

The options for averaging accounting have important trade-offs

We have revisited the initial proposals for averaging accounting in light of feedback from last time and would like to test some new, simpler options for how averaging accounting could work.

The options for averaging accounting being consulted on now present important trade-offs that will impact how forests will earn carbon credits in the future, and how complex the ETS will be to be a part of. These trade-offs include:

• flexibility of land use and forest management versus more precise earning of carbon credits
• simplicity of participation versus detailed tracking of carbon stock.

These trade-offs will be particularly felt by Māori landowners and forest managers of post-1989 forests because the decisions made in the first rotation of a forest could have long-lasting implications on the land-use and forest management options of later rotations.

We would like your feedback on what is most important to you and your hapū/iwi or organisation, and your preferred set of options so we can ensure the design of averaging accounting works both now and in the future.

Overview of the 2 decisions we need to make

In order to make averaging accounting work we need to decide 2 things:

• How flexible it will be to changes in harvest age that impact the average amount of carbon in the forest – this is the kaupapa on “age bands” in the discussion document/te pepa matapaki (page 11)
• Whether to require detailed carbon accounting on second and later rotations – this is the kaupapa on second rotation accounting in the discussion document/te pepa matapaki (page 24)

There are 3 options for age bands and 2 options for second rotation accounting – the combination of these options ranges from very simple to more complex.

How flexible it will be to changes in harvest age

Simple options for age bands

The simplest option for age bands is to just have 1 band (page 12 in the discussion document/te pepa matapaki). This would enable you to earn carbon credits up to the average carbon stock of the forest, assuming it’s harvested at a typical age. For example, we assume a pine forest is harvested at 28 years, and you would earn credits to the average age of that forest (around 16 years).

The number of credits the forest earns wouldn’t change if the forest is harvested earlier or later than this age, so long as it is replanted in the same type of forest.

Benefits

• Simple to manage participation.
• Flexible land use and forest management over the long term – the ETS wouldn’t restrict different harvest times.

Drawbacks

• Removes the opportunity to earn more carbon credits by delaying harvest.

What might happen with high carbon prices

If carbon price increases, this could mean:

• the planting of new forests, particularly exotic rotational forests, to maximise the returns from carbon in the first rotation
• the time of harvesting would be determined by market factors such as timber prices, rather than the carbon price.

We could also use a hybrid approach that lets participants earn carbon credits for a large extension to the harvest age without making the system too complicated. More details can be found on page 15 in the discussion document.

Complex options for age bands

The more age bands we introduce, the more complex participation becomes and the greater the opportunity to earn more carbon credits by changing forest management.The more complex options would allow participants to earn more carbon credits if they:

• delay harvest
• replant a forest in a species which typically stores more carbon.

On the other hand, the more complex options make participation more difficult to manage and could restrict land use options in the future. For example, if forest owners want to keep the extra units earned by delaying harvest, that new harvest age would be locked in – they would need to use the same harvest age each time the forest is replanted in the future.

Managing a large forest estate in this way would be complicated if forest owners have to maintain many different harvest ages. Careful planning will be required to earn carbon on one rotation and avoid surrenders on another. A lot of information will need to be kept to ensure future decision makers know what liabilities are attached to the land.

If carbon prices increase, the complex options could encourage:

• the planting of new forests, particularly exotic rotational forests
• delayed harvesting of these forests, which would mean our forests store more carbon but could affect domestic timber processing and income from timber.

Whether to account for changes in carbon in later rotations

If we account for changes in carbon outside of the normal harvest age on the first rotation, and also account for changes in carbon in later rotations (the most complex combination of options), decisions made on the first rotation will have a large impact on the management of later rotations.

For example, if decision makers decided to extend the harvest age of the first rotation to earn more carbon credits, the next rotation would also need to be harvested at that later age to keep those additional credits. This impacts the ability for decision makers on the second rotation to harvest at a normal age as they would need to surrender carbon credits.

Even the simplest approach for age bands (a single band) could lock in the type of your forest. For example, if decision makers registered a first rotation pine forest in the ETS, the second rotation decision makers would have to surrender units if they wanted to change it to another kind of forest after harvest.

Option to not account for changes in carbon in later rotations

We are consulting on an option which would stop detailed accounting after the first rotation. This would mean that subsequent rotations could have a different forest type or harvest age without any carbon credits being earned or surrendered.

Benefits

This could let forest owners manage their forests how they see fit in line with changing environmental, regulatory, and economic priorities. All participants would have to show is that their land remains in forest. This means that a forest would need to be replanted within 4 years of being harvested.

Drawbacks

Owners of second rotation forests would not be able to earn carbon credits, and this approach would only work with simple averaging accounting options.
This option is discussed in more detail on page 25 of the discussion document/te pepa matapaki. We would like to hear how not accounting in detail for later rotations would affect you and your hapū/iwi or organistation, and if you support it.

Where to find more information

The Ministry for Primary Industries website has information on all of the policy changes being made to the forestry parts of the ETS.

ETS improvements for forestry

You can also get in touch with us at:

• etsforestrychanges@mpi.govt.nz
• or 0800 CLIMATE (0800 254 6283).