Government Divided Over Forestry Policy

Government Divided Over Forestry Policy

KYOTO FORESTRY ASSOCIATION
MEDIA STATEMENT

Sunday 25 February 2007
For Immediate Release

Government Divided Over Forestry Policy As Carbon Credit Fight Reaches Industry Heartland Of Rotorua

The Prime Minister and her Forestry Minister are now at odds over basic industry facts as deforestation accelerates and the carbon credit fight moves to the industry heartland of Rotorua, the Kyoto Forestry Association (KFA) said today.

KFA spokesman Roger Dickie urged everyone with an interest in Rotorua's forestry industry to attend MAF's land use consultation meeting at Rotorua's Kingsgate Hotel at 9.45 am, Monday 26 February.

"The Government cannot ignore a strong message on forestry from Rotorua," Mr Dickie said. "The Rotorua forestry industry employs more than 2,500 locals and earns $250 million a year for the region. It is important everyone with an interest in the future of our industry turns up to the Kingsgate Hotel tomorrow to say no to the Government's plans to confiscate the carbon credits earned by forest owners since 1990."

Mr Dickie said the Government was now at "sixes and sevens" over basic forestry industry facts and a strong message from Rotorua would encourage it to return to the policy drawing board.

"The Prime Minister is reported in today's Sunday-Star Times as saying there was never any promise to the forestry industry in the 1990s that carbon credits would be owned by forestry investors, but her own Forestry Minister's office has confirmed to the Gisborne Herald that former Environment Minister Simon Upton made exactly that commitment. Mr Anderton's office says forestry investors were 'bloody fools' for relying on statements from Mr Upton and other government officials through the 1990s, but their comments disprove what the Prime Minister is saying now."

Mr Dickie said the only way the Government could stop deforestation was by abandoning its confiscation plans and committing to implementing the six-point plan to get planting underway again agreed last year by the New Zealand Forest Owners Association (NZFOA), the New Zealand Farm Forestry Association (NZFFA), the Federation of Maori Authorities (FOMA) and KFA, after work with Government officials.

"The issue is one of industry confidence," he said. "Jim Anderton keeps saying that the only reason new plantings have collapsed to below replacement levels is because of low prices for commodity logs, but our industry operates with 25-year investment timeframes. Low spot prices in a particular year do not drive investment decisions.

"The important issue for a long-term industry such as forestry is stability in Government policy and confidence that property rights will be respected over a quarter century or more. Deforestation is occurring because those things have been undermined by the Government. That's what Mr Anderton seems not to understand - but that is what he has to address if he does not want history to record his time as Forestry Minister as a total failure."

Mr Dickie said Mr Anderton's confidence in subsidy schemes for new planting - such as the $20 million a year the Government is considering - was just as naïve and would not address the environmental and economic tragedy of deforestation.

"Twenty million dollars a year is a trivial amount compared with the $400 million per year that private individuals invested in forestry in the 1990s," he said. "He cannot seriously believe it will do anything to address deforestation."

More importantly, Mr Dickie said, the $20 million a year for five years was trivial compared with the billions of dollars the Government was confiscating from forest owners in the form of carbon credits.

"Even if Rotorua had as little as 1,500 hectares of post-1990, Kyoto-qualifying forestry, the Government's confiscation would rip at least $20 million out of the region. In fact, we think there is probably more like 40,000 hectares of post-1990 Kyoto-qualifying forestry around the wider region which would mean the Government's confiscation plans could be costing the Rotorua forestry industry at least $520 million and up to $800 million," he said.

"What's $20 million a year in subsidies spread thinly across the whole country compared with the hundreds of millions of dollars of carbon credits the Government is confiscating?" he asked.

Mr Dickie said that whatever subsidies were put on offer, there would continue to be very little investment in new forestry while the Government persisted with its confiscation of carbon credits and continued with talk of new taxes on the industry of up to $13,000 per hectare.

END

Attached: Background Information
Introduction to Carbon Credits
NZ Forestry Industry's Six-Point Plan to Get Planting Underway Again
NZ Forest Plantings 1990-2005

BACKGROUND INFORMATION

Introduction to Carbon Credits

Kyoto carbon credits, which the Government plans to confiscate, are earned by those individuals and businesses that sequestered carbon by planting new forestry since 1990, and by those industries which have cut their carbon emissions since then.

Through the 1990s, Government officials made clear that forestry investors would gain financially from the credits, which are a clear property right, as confirmed by the Treasury.

This fuelled a planting boom through the 1990s with 30,000 ordinary New Zealanders and forestry companies putting up as much as $400 million per annum of their own risk capital to invest in more than 600,000 hectares of new forest - both because of the benefits predicted to arise both from the sale of wood products and from carbon credits earned from carbon sequestration.

Since the Government first indicated that it intended to confiscate the credits, tree planting in New Zealand has plunged and New Zealand is now experiencing net deforestation for the first time in living memory.

The Government has previously indicated it would limit its confiscation of the credits to those associated with the First Commitment Period of the Kyoto Protocol, costing forest owners nationwide as much as $2.5 billion. Now, however, Government officials are indicating it may extend the confiscation to the Second Commitment Period, putting eventual losses nationwide up to at least $8 billion and potentially many billions more.

The New Zealand Forestry Industry's Six-Point Plan

1. Remove the inequitable, retrospective 'deforestation cap'.

2. Allow land owners with Kyoto-qualifying forests (forests planted from 1990) - as well as those replanting non-Kyoto forests after harvest - to financially benefit from the value of the carbon their forests remove from the atmosphere.

3. Introduce broad-based carbon charges, ensuring that all emitters of greenhouse gases face the same opportunity costs.

4. Ensure that New Zealand's Kyoto policies have the best long-term outcomes for New Zealand, even if they don't exactly mirror current Kyoto rules.

5. Develop a regime which puts a value on the environmental attributes of forestry, thereby encouraging investment in the sector.

6. Act immediately.

New Zealand Forest Plantings 1990-2005

Year Hectares
1990 16,000
1991 15,000
1992 50,000
1993 62,000
1994 98,000
1995 74,000
1996 84,000
1997 64,000
1998 51,000
1999 40,000
2000 34,000
2001 30,000
2002 22,000
2003 20,000
2004 11,000
2005 6,000

Source: http://www.climatechange.govt.nz/resources/reports/projected-balance-emissions-jun06/html/fig-1.html

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