Ebex21 News

EBEX21® Newsletter Issue 13, May 2008

Kanuka scrubPolicy Update

Welcome to the first commitment period (CP1) of the Kyoto Protocol that commenced on 1 January 2008. The government policies and operational detail to provide a regulatory framework for creation of Kyoto carbon credits from natural forest regeneration continue to develop. Whilst the PFSI scheme is operational, in theory, there are a number of details and risk impacts that are still in development resulting in no commercial transactions occurring from forest credits to date, including natural regeneration.

MAF has recently released the Emission Trading Scheme (ETS) draft regulations for forestry that are proposed for implementation later this year. The draft regulations have a number of major negative implications for owners of regenerating indigenous forests that can be addressed. We therefore encourage you to take note of our feedback and join us with submissions before the 30th of May 2008 to address these major implications. Landcare Research is developing a submission and we will send you a further document in May that will enable you to simply make a submission.

EBEX21 Update

EBEX21 has been working with MAF to determine the difference between the PFSI and ETS schemes for landowners wanting to create carbon credits from natural forest regeneration. At the same time we are actively working with MAF to ensure that the schemes are credible and create the greatest possible value for landowners.

Since both schemes still have operational details in development this remains a very detailed and on-going process. At present, landowners are only able to sign up to the PFSI scheme but will have the option to migrate to the ETS scheme in time.

We have also been working closely with MAF to take a pilot sample of existing landowners through the PFSI programme to road-test and lead the development of outstanding operational details and risks. As the operational details have developed, these increasingly mirror the proven processes and systems of the EBEX21 programme.

In the meantime, the EBEX21 programme has continued to work with landowners, certifying and brokering the sale of units for carbon sequestered prior to 2008.

Draft ETS regulations released

On May 6 the draft regulations for forestry in the Emissions Trading Scheme were released. These can be viewed at: www.maf.govt.nz/climatechange/legislation. For more information on making a submission visit: www.maf.govt.nz/climatechange/legislation/regulations/page10.htm

MAF has indicated that fees and levies and measurement methodologies will in turn be passed in to the PFSI to ensure comparability across the mechanisms. To this end there are some significant issues for owners of indigenous forests, whether planted or regenerating. Issues fall into three major areas:

  1. Proposed Cost Structure
    Registration for the PFSI currently incurs a modest fixed fee which we believe is workable and reasonable. It is our experience that the actual costs of registering land, determining eligibility and measuring carbon are similar regardless of size of land holding. The draft ETS regulations, however, propose a per hectare fee, albeit on a sliding scale, both for registration and then for “filing” emissions returns. This means that owners of indigenous forests will pay higher fees for a given amount of sequestration than their exotic counterparts. The ideal fee structure is one that levies costs on the size of the value created, i.e., per tonne of CO2 sequestered. This brings the structure into line with other MAF levies which are charged on the amount of product generated and not the size of boat/packing shed/farm used to produce the goods.

  2. Size of costs
    Most EBEX landowners possess holdings of 100‑2,000 hectares. Registration costs for this amount of land will be either $2411 or $6412 (areas over 500 ha), an increase of 400% or 1200% on the current PFSI costs of $500. They will then be subjected to on-going administration costs ($1358 or $5824 for areas over 500 ha). Most of our landowners will want to claim credits (i.e., get paid) every year! Just what is the owner of an indigenous forest going to get for a "filing fee"? Filing fees are purported to cover "emission return audits". If owners of indigenous forests have no option but to accept a default value why should they then be subjected to an emission return audit?

  3. Default value for indigenous forest sequestration with no option to measure the actual rate. While owners of exotic forests will be able to choose whether they accept actual modelled values for carbon sequestration of their stand from region-specific look-up tables or have independently verified assessments, owners of indigenous forests will need to accept a low conservative value without an option to measure the actual sequestration rate. Accepting a default value is expected to be a good option for landowners with less than 100 ha of regenerating forest, or those in sites of low fertility and rainfall. In most other instances, the costs of measurement will be more than offset by the increased revenue resulting from proof that the land is sequestering carbon at a higher rate. Landowners need to lobby the Government to allow indigenous forests the same option of having land assessed rather than accepting what will be a conservative modelled number.

Key differences between ETS and PFSI as at May 8, 2008

The following table has been produced by the EBEX team with a summary view of the implications for landowners with regenerating indigenous forests.

Factor

PFSI

ETS

Covenant

PFSI Covenant required; can opt out after 50 years if pay all claimed credits back. PFSI Covenants are carbon-specific. Owners can get out of covenant if transfer to ETS within 18 months of ETS legislation being passed.

Land use can be changed if pay all credits back. However, EBEX would require a QEII or Conservation Covenant in addition to ETS registration plus additional contracts with EBEX to cover carbon issues.

Costs

Cheaper for 2008
(c. $500)

Unknown but eventually the same as PFSI, and indicated much higher than present.

Timing

Available now

Not before 2009

Payments available

As soon as PFSI Covenant is in place EBEX could consider promissory sales under contract.

Not before 2009, and more likely to be at least a year for legislation to be passed and regulations to be completed.

AAUs

Guaranteed, available 2009.

Likely, available 2009 in the form of NZUs that can be converted. Would only not be available if there was huge forestry sign-up to ETS.

Audit requirements

Some audit likely – costs still unknown.

Some audit likely – indicated costs are high.

Reporting

Annual or once a commitment period– landowner to choose. Fees likely the same as ETS.

Annual or once per commitment period – landowner to choose but fees charged each time.

Infringement penalties

Pay back credits at a high compounding rate.

Pay back credits plus criminal liabilities.

Measurement

Only a default value available at this stage. EBEX and landowners need to lobby for optional measurement, especially in cases where growth likely to exceed default.

Only a default value available at this stage. EBEX and landowners need to lobby for optional measurement, especially in cases where growth likely to exceed default.

 

Newsletter content copyright © Landcare Research 2018
ISSN 1178-9190

Enquiries:
Please contact May Chang, 03 321 9831, or email ebex21@landcareresearch.co.nz
www.ebex21.co.nz

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