Submission on NZ's proposed ETS redesign

Friday 1 Sep 2023

Professor Euan G. Mason, Professor at the New Zealand School of Forestry, University of Canterbury has provided a well-reasoned and researched submission to the NZ Governments proposed redesign of the ETS. It summarises the current state and the role of forestry in helping New Zealand respond appropriately to climate change.

The full submission can be accessed on the link supplied below.

Synopsis of submission

Many proposed changes to the emissions trading scheme (ETS), particularly the idea of splitting credits into sequestered carbon versus avoided emissions with only the latter of any market value, are irrational, will create confusion, will lower confidence in carbon forestry, and will cause us to fail to meet our targets. This will cost the nation potentially billions of dollars in purchases foreign carbon credits of dubious quality, and in lost markets as other countries begin to sanction our lack of action.

Continued expansion of forests, particularly exotic ones, is vital for us to reach our national targets. Unharvested exotic carbon forests could be assured of ultimate conversion to native by:

a. Carefully selecting sites on which these forests are established,
b. Requiring owners of such forests to place a portion of their carbon credit revenues in an escrow account to pay for any management required for their conversion.
More accurate assessments of sequestration on small woodlots would encourage farmers to establish carbon forests on small portions of their farms and reduce the likelihood of whole-farm conversions to forest that are currently causing such anguish in the agricultural sector.

Our emissions trading scheme ignores those responsible for more than half of our gross GHG emissions. The “emissions leakage” argument used to exempt most greenhouse gas (GHG) emitters from the ETS does not work, because it requires us to assume that:

a. We are the most greenhouse gas (GHG)-efficient producers of primary products
b. Other countries will not seek lower their GHG emissions;
c. People will continue to purchase goods with a high greenhouse gas footprint as the climate crisis worsens.

Moreover, actual studies of emissions leakage show that it is a negligible problem. Therefore, the NZ agricultural sector and other trade-exposed industries, responsible for 57.5% of our gross GHG emissions, should not use the “leakage argument” as a justification for their exemption from purchasing NZUs.

The discussion document suggesting changes to the ETS fails to make the case that forest-based carbon credits threaten reductions in gross GHG emissions by overwhelming the carbon market with cheap credits. This case relies on the assumption that the supply of credits will increase while the demand for credits will remain small. However, making trade-exposed industries and agriculture responsible for their emissions would greatly increase the demand for credits, invalidating the argument that forest-based credits necessarily threaten reductions in gross emissions.

The pathway to lowering gross emissions is to:

a. Require everyone, including farmers and trade-exposed industries to submit credits for the full amount of their greenhouse gas emissions;
b. Allow the price of carbon credits to rise to the point where it is more cost-effective to lower emissions that to purchase offsets;
c. Stop auctioning carbon credits;
d. Stop giving away credits.

The threat of carbon forestry to our high country farming culture can be mitigated by making carbon lookup tables accurate and/or allowing owners of carbon forests < 100 ha in extent to measure actual carbon sequestration in their woodlots. This would encourage farmers to establish their own small woodlots, reducing the incentive to convert whole farms to forest and greatly increasing the profitability of hill country farms.

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Source: Euan G. Mason

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