New Zealand forest. A fern sits in the center of frame. Photo: RNZ / Cole Eastham-Farrelly
The government has "no plans" to shake up the Emissions Trading Scheme (ETS) to stop polluters from relying on forest planting to mop up emissions, Climate Change Minister says.
Parliament's environment watchdog called for a seismic shake-up, removing the ability of carbon emitters to rely on planting trees to meet their climate obligations - instead of cutting emissions.
Parliamentary Commissioner for the Environment Simon Upton said what New Zealand currently had was mostly a "tree planting scheme" that did little to cut planet-heating gases and pine forests were not as permanent as the scheme gave them credit for.
"The world actually needs real reductions in gross emissions, not an accounting triumph," he said.
Parliamentary Commissioner for the Environment Simon Upton. Photo: VNP/Louis Collins
Forest owners hit back, and said the proposal to phase forestry out of the ETS would have widespread implications not just for forest owners, but New Zealand's climate goals.
New Zealand Forest Owners Association chief executive Elizabeth Heeg said it would be counter-productive to progressing climate action.
"Climate action is urgently needed and as it stands, there is a question mark over New Zealand meeting its 2050 emissions targets... it makes no sense to limit the tools we do have available."
She said the recommendations around the ETS "appear to be driven by a misconception that forests are consuming valuable land at an exponential rate".
"Production forests currently occupy six percent of New Zealand's total land area. Sheep and beef farming occupies five times that."
The Parliamentary commissioner said without big changes the scheme would stop functioning in the 2030s because it would drive planting of so many carbon forests that the carbon price would plunge.
A low price means there would be little incentive for companies to cut their emissions - and also little incentive to plant new forests. He warned climate progress could grind to a halt.
"In the mid-2030s there will be a glut of forestry units in the ETS which will cause the price to fall," Upton said.
"This will leave us with an ETS that can deliver neither tree planting nor emissions reductions, threatening the country's ability to meet its climate targets."
But Climate Change Minister Simon Watts, said the government's approach to forestry had already been set in its Emissions Reduction Plan and it did not plan any other changes.
Climate Change Minister Simon Watts. Photo: RNZ / Nick Monro
The government had already announced plans to restrict whole farm conversions to forestry on certain classes of productive land.
"The forestry sector will play a key role in driving economic growth by creating more jobs in our regions and boosting the value of exports. It also provides a nature-based solution to climate change, which is a key pillar of the government's climate strategy," said Watts.
According to the report Upton tabled in Parliament, allowing unlimited forestry in the ETS risks permanently locking up hundreds of thousands of hectares of land in carbon forests, hurting rural communities and limiting future generations' ability to decide how to use land.
Upton said the government may end up having to pay to maintain huge areas of permanent pine forests in order to meet climate targets, if companies doing the planting today collapsed after pocketing the income, or the ETS itself was wound up because it was no longer working.
Currently - with the scheme operating - companies have to repay their carbon income if a forest was felled or destroyed.
The report said fire, disease and the practice of harvesting or thinning pine trees (for example, to allow a transition to permanent native forests) would likely mean only a fraction of the carbon stored by pine forests in the next few decades was truly "safe".
However, the ETS treated trees as if they locked up carbon dioxide forever - using them to offset carbon dioxide that will be in the atmosphere for thousands of years.
NZ Initiative economist Eric Crampton said the ETS should aim for the lowest-cost option for cutting emissions, and concerns about land use, biodiversity and other topics should be dealt with outside the scheme, for example by local councils making decision on land use.
He said the ETS should only be concerned about emissions.
When the previous Labour government tried to tinker with forestry's role in the ETS, participants in the scheme revolted and the carbon price crashed.
National immediately reversed course after the 2023 election, scrapping plans to even consult on changes to forestry's role.
Upton acknowledged last week that changing the scheme would be difficult.
"Changing anything you've put in place which creates all of these expectations is always going to be difficult," he said.
"Equally we can't ignore the overwhelming evidence seems to be be that in the mid 2030s the sheer volume of forest units will overwhelm the market," he said.
Forestry and climate scientists who had read the report largely supported Upton's recommendations.
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