Carbon Tax Means Reduced Wood Export Value

4 May 2005

Carbon Tax Means Reduced Wood Export Value

More logs on wharves and less high value export production will be the inevitable consequence of the Government's carbon tax, says NZ Forest Industries Council Chief Executive Stephen Jacobi.

"Quite simply the tax will penalise investment in wood processing by increasing the cost of energy when the outlook for energy supply is already very difficult. This means New Zealand will lose the economic benefit of value added manufacturing and we will see continuing growth in lower value log exports."

Mr Jacobi said there would be some relief for energy intensive industries such as the pulp and paper sector through Negotiated Greenhouse Agreements (NGAs).

"But the Government is guaranteeing this relief only until 2012 - the economic life of most investments in our sector extend well beyond that."

Mr Jacobi said the Government's climate change policy also prevented forest owners from deriving value from forest carbon sinks.

"One of the really big challenges for businesses operating in the forestry sector is the broader uncertainty around carbon policy including in relation to potential liabilities for deforestation for forests planted before 1990. The Government has failed so far to enter into meaningful dialogue with the industry. Quite simply our members can't plan investment with any confidence until this is sorted."

Mr Jacobi said there was a risk the carbon tax would also offset some of the potential benefits of the recently announced Forest Industry Development Agenda (FIDA) developed by Government and the industry.

"On the one hand we have agreed on a number of very good initiatives to support industry growth. On the other hand we will have a tax in place that will add to the costs of doing business in New Zealand and that has been put out there when wider carbon policy is still formative.

"What's more, this tax won't change people's behaviour, it won't lead to decreased emissions for the simple reason there are no simple energy alternatives and it cannot hope to have any effect whatsoever on the world's total emissions profile. It's an empty gesture with no meaningful outcome."

Mr Jacobi encouraged the Government to focus its attention on working with industry to develop energy efficient solutions, such as through the bio-energy programme under FIDA, and to do more to encourage the plantation of forests to soak up carbon emissions.

About Forestry

NZFIC represents and promotes the interests of all sectors involved in the New Zealand forest and wood processing industry. Membership comprises forestry companies and industry associations who collectively own, manage and process wood and paper products from a sustainable, planted production forest resource of 1.8 million hectares.

New Zealand forestry directly employs 26,000 people, accounts for just under 4 percent of GDP, has annual sales of more than $5 billion and is the country's third largest export earner at $3.5 billion annually. Through its Vision 2025, the industry aims to become New Zealand's largest export sector, directly employ 60,000 people, contribute 14 percent of GDP and record an annual turnover of $20 billion.

ENDS

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