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Carbon Critical feedback on NZ's Emissions Reduction Plan

Updated: Apr 21, 2023

The Ministry for the Environment recently called for feedback on NZ's first Emissions Reduction Plan.

This plan will set the direction for climate action for the next 15 years. It will also set us on a pathway to meeting our 2050 net-zero greenhouse gas emissions and biogenic methane targets by implementing policies and strategies for specific sectors. The first emissions reduction plan is due to be delivered by the end of May 2022.

Forestry is one of the major sectors covered by this plan. And this area is of particular interest to us here at Carbon Critical as we are looking to launch initiatives in this space in the months and years ahead.

We see trees as a critical part of our race to reach net-zero emissions (and to keep drawing down carbon beyond that point). Click here to listen to our team discussion on forestry and the climate crisis.

The Climate Change Commission (He Pou a Rangi) has put forward a number of proposals around forestry which could fundamentally change the way this sector works in the decades to come.

They are concerned that current policy is providing too much incentive for planting exotic species (like pine trees) and not enough incentive to plant native trees. Furthermore, they are concerned that current policy and resulting rise in carbon pricing is making forestry more and more financially attractive, while not yet being high enough to incentivise gross emission reductions by the companies that generate emissions in the first place.

The Climate Change Commission also see a need to reduce NZ's reliance on exotic forests and encourage more native tree planting,

The Commission has presented several options for how to amend the NZ ETS to manage incentives for afforestation (creating new forests), including:

  • reducing demand by limiting how many forestry units non-forestry participants can surrender

  • requiring them to pay an additional fee when surrendering forestry units

  • reducing the rate at which units can be earned by exotic forest

  • limiting the overall area of forest that can be registered in the NZ ETS each year, or otherwise amending the eligibility criteria

You can read the full emissions reduction plan discussion doc here (see the emissions pricing section on page 36).

Carbon Critical feedback

Here are a few extracts from our submission...

The government needs to get a move on with taking real action on the climate crisis. Far too much time has been spent on commissions, mulling over reports, consulting on what the next steps should be... Time that we do not have. The government has declared an emergency but is not acting like the building is on fire.

We need to make an absolute commitment to climate in line with international targets, e.g. a genuine 50% reduction in emissions by 2030 (measured in net-net or gross-gross terms, not the gross-net methodology of the current NDC). And then do whatever is required to hit that target. This is different from the current policy of talking about future reductions while trying not to upset anyone.

On the options presented above to constrain forestry inside the ETS...

In a world threatened with climate disaster, it is madness to try to suppress effective carbon removal solutions. Especially nature-based solutions that are proven, scalable, low-cost, low-risk and bring multiple other benefits, including erosion control and water filtering.

We should not be penalizing the purchase of forestry credits when the only alternative is 'free credits' that do not correspond to any actual reduction in atmospheric CO2.

If it is really deemed necessary to limit forestry, then the constraints should not apply to well-managed permanent forests - especially permanent exotic forests - which hold far more carbon per hectare, and have lower establishment and maintenance costs, than indigenous forests.

What does the Government need to consider when assessing options?

Trees are Aotearoa's superpower for tackling climate change. And there is no need to constrain forestry. This is an exaggerated example to show why:

Suppose we were (somehow) capable of planting pine trees at the maximum rate NZ has ever managed (100,000 hectares per year), starting now, and sustaining that level of planting for the next 28 years straight. By 2050 an extra 10% of NZ would be covered in forestry.

All this new forestry would fit into less than one-third of the land area currently allocated to beef and sheep farming. The reduction in farm productivity would be much less than one-third though, because the tree planting would happen on the most marginal land. By the year 2050, these 'new' forests would have a mix of ages between 1 and 28 years, and would sequester a total of 80 million tonnes of CO2 each year. This would be more than enough to cover our gross emissions at that time, to easily hit our net zero goal.

If we are effective at making gross emissions reductions between now and then (via effective government policies and regulations, which are the only way that deep cuts are going to happen) then we will have a surplus of carbon credits. This gives us options.

We could harvest a large portion of the forests for logs and timber, which are likely to have a very high price at that point in time, as wood is a sustainable resource with a multitude of uses, including replacing carbon-heavy materials like steel and concrete.

Or we could sell high-quality carbon credits to the world. At the Commission projection of $250 per NZU by 2050, the carbon sequestered by the 'new' forests would be worth $20 billion per year in export revenue. This is more than double the current revenue of our beef and sheep sector ($8.6b / year). If the trees were left standing, to become sustainably managed permanent forests, then they would continue to generate up to $20 billion / year in revenue for at least the next 100 years.

Most likely, we would want to do all three things: offset our domestic emissions, harvest for logs and timber, and export carbon credits from permanent forestry. Careful planning would be required to ensure we end up with a good mix of production and permanent forests.

In reality, we are not going to be able to plant 100,000 hectares of forestry a year for the next 28 years. But it would be a good goal to strive for, and a solid low-risk plan for NZ. We could be the first country in the world to reach, and maintain, net-zero emissions. The more we can reduce gross emissions by 2050, the more export revenue we can earn from logs + timber + carbon. We should be trying to make this happen - not working on ways to suppress it.

What unintended consequences do we need to consider to ensure we do not unnecessarily restrict forest planting?

Relying too much on native planting for carbon sequestration. Whatever amount of funding is available to support forestry in NZ, it will not go very far if we use a significant portion of that budget to fund the planting of native trees and shrubs. Any restriction on exotic forestry significantly increases our chances of missing our net-zero target, and reduces our opportunity to earn massive export revenue in the future from selling carbon, logs, timber and harvested wood products.

Very little progress has been made so far in decarbonizing any area of our economy. And so far the government has only set weak reduction targets that are not comparable with international efforts, or what the UN IPCC tells us is necessary. It is very naïve to assume that we are not going to need to utilize every advantage we have to reach net-zero as a country. Exotic trees are our biggest asset in fighting climate change.

How can the emissions reduction plan promote nature-based solutions that are good for both climate and biodiversity?

Separate out the two issues (climate and biodiversity) and then address each with the solutions that have the most potential:

For climate - Encourage planting of exotic forests, as many as possible, to drawdown carbon and provide renewable resources.

For biodiversity - Encourage landscape scale natural regeneration and preservation of existing indigenous forests (especially pest eradication).

Stop trying to use the climate crisis / ETS to subsidize planting of natives. Instead, create a biodiversity credit scheme that can sit aside the ETS, and allow projects to access both schemes simultaneously, to whatever extent they can.

Do you agree the treatment of Forestry in the NZ ETS should not result in a delay, or reduction of effort, in reducing greenhouse gas emissions in other sectors of the economy?

Yes. We need to urgently reduce gross emissions, and our forest industry should not be used as an excuse to avoid decarbonization. BUT if the government is serious about reducing gross emissions then it should make binding commitments to do exactly that - independently of forestry. People do not buy petrol guzzling new SUVs because they assume that someone will plant pine trees in response - they buy them because there is no economic reason not to. A high tax on petrol, or a ban on imported petrol/diesel cars, would go a long way toward solving that.

The only 'license to pollute' in the ETS comes from the abundance of 'free credits' the government issues under cap-and-trade. The most direct way to address gross emissions would be to remove the free credit supply and rely only on 'genuine' credits (coming from forestry). The resulting supply shortage would push up the NZU price in auctions and incentivize deep emissions reductions. This supply shortage will become more profound as more industries and businesses are brought into the ETS.

The government is correct to worry that this could put kiwi businesses at risk and result in 'emissions leakage' to overseas companies. However, this risk could be avoided by allowing emitters to purchase NZUs now that will be fulfilled in a genuine way (most likely via forestry) as soon as possible in the future (perhaps with an interest term applied to allow for the climate impact of delayed offsetting). This could be used as an alternative to NZ purchasing overseas credits. It would also provide more certainty for both emitters and suppliers, especially if future NZU pricing was locked in at the start.

So to summarize: instead of inhibiting the unique and powerful carbon sequestration advantage that NZ has, we should be trying to enable and maximize it, via a clearly communicated and committing plan and supporting regulation.

Do you have any examples of your organisation demonstrating leadership and taking action to reduce GHG emissions?

Carbon Critical was established in April 2020 with the sole mission of creating new initiatives that lead to large-scale GHG emission reductions.

Our first initiative was to launch the Net-Zero Fund. This is a charitable fund that provides a convenient way for kiwis to make tax-deductible donations to the global organisations making the biggest impact on averting emissions (e.g. by protecting rainforests, influencing government policy, or campaigning at a grassroot level)

We are about to launch a new initiative to incentivize the planting of long-lived carbon-sucking trees (primarily redwoods) in ways and places where it might not otherwise happen. We are aiming to encourage individual participation and share the economic, social and environmental benefits of permanent forestry with as many people as possible (not just farmers / landowners).

We would be very happy to engage with local and central government on ways to support sustainable permanent forestry in NZ, with a view to maximizing carbon drawdown on every hectare.


You can read our full submission here:

Carbon Critical response to Emissions Reduction Plan - large text
Download PDF • 408KB

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