NZ$7b windfall from new forestry rules expected

Friday 20 Sep 2019

The move to new forestry carbon accounting rules will earn the NZ Government NZ$7 billion over the next 30 years. Off that, however, will come NZ$1.35 billion in revenue that would have been generated under the old rules and NZ$52 million in extra administration costs, leaving the Crown NZ$5.6 billion better off by the middle of the century.

The figures are contained in a regulatory impact assessment (RIA) released by the Ministry of Primary Industries. In March, the Government confirmed that it would shift to a system of averaging, meaning that instead of forest owners earning credits each year and facing a carbon liability at harvest time, the value of carbon credits would be averaged over the lifetime of the trees.

The increased revenue will come from increased carbon sequestration from extra forests expected to be planted as a result of the new rules. The RIA says the change is expected to lead to the sequestering of an extra 15.5 million tonnes of carbon dioxide, worth NZ$844 million, between 2021 and 2030; 41.8 million tonnes (NZ$2.35 billion) between 2031 and 2040, and 68.6 million tonnes (NZ$3.86 billion) between 2041 and 2040.

The value is based on the avoided cost of the country having to buy NZUs at $37.50, plus a multiplier of 1.5 for the cost of capital. The forecast could be affected, however, by “any inclusion of agriculture in greenhouse gas emissions reduction efforts”, which would increase incentives to convert farmland to forestry, the RIA says.

Source: Carbon News 2019

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