Friday, March 29, 2024

Changes simplify carbon scheme

Neal Wallace
Changes to the Emissions Trading Scheme simplify how applicable forests earn and repay carbon credits. Known as an averaging approach, the changes eliminate the need for owners to repay New Zealand Units, equivalent to one tonne of stored carbon, when the trees are harvested provided the land is replanted in trees.
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It also simplifies by averaging the calculation of how much carbon is stored in a forest.

The changes also abolish the obligation to repay NZ Units (NZU) for carbon stock reduced by storm or fire and allow landowners to sell their NZU as they earn them.

The ETS entitles owners of forests planted since December 31 1989 to receive one NZU for each tonne of carbon dioxide stored in their forests, known as carbon farming.

Rabobank’s sustainability analyst Blake Holgate says those units can be accumulated or sold on the NZ carbon market.

A Rabobank analysis says weak price signals and changes to climate change policy have made owners hesitant to register applicable forests or plant new forests.

But some of that uncertainty has been removed with the likely passing in to law of the Government’s Zero Carbon Bill setting binding carbon reduction targets, with the ETS the main tool to reduce emissions.

The changes also remove the requirement for landowners to surrender NZUs equal to the amount of carbon dioxide released when forestry is harvested, provided it is replanted.

Previously, those selling their NZUs before harvesting created a financial liability that couldn’t be valued until harvest time, at which stage they had to go onto the open market to buy NZUs to repay the harvested woodlot.

“This has proven a strong disincentive against carbon farming for many landowners,” Holgate says.

The changes cap the number of NZU an area of forest can earn to its peak storage capacity.

Holgate says a pine forest harvested after 28 years will reach its peak carbon stage at between years 18 and 20, after which it will no longer earn NZU.

By that stage it will have earned 473 NZU’s a hectare, which, at $25/NZU, equates to $11,825 a hectare.

Once that peak average carbon storage level is met ETS participants will no longer receive any more NZU for either the remainder of the growing cycle or subsequent growing cycles.

But the land will have to remain in trees indefinitely or the NZU repaid if the land is deforested.

A new round of NZU can be earned if the forest is replanted in an alternative species that increase the overall average carbon stock.

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