Potential for Otago Southland forestry

Media release from the Southern Wood Council

September 4, 2009

Potential for Otago Southland forestry resource in Emissions Trading Scheme review

It’s pleasing to see the importance of new forest plantations recognised by the review of the Emissions Trading Scheme.

The Emissions Trading Scheme select committee set up by the Government to review the current Emissions Trading Scheme reported its findings earlier in the week, recommending that New Zealand has an emissions trading scheme, rather than a carbon tax, as the primary economic mechanism to manage climate change.

Peter Weir, Environment Manager for Tapanui-based Ernslaw One and Chair of the NZ Forest Owners Association Environment Committee, says policy and political uncertainty has actively discouraged new forest plantings over recent years.  “The Government needs multiple party support to confirm legislation that provides for stable long term policy to incentivise new planting.”

One of the recommendations was that certainty for the forestry industry be legislated for as soon as possible to ensure that further planting is not inhibited.  Given New Zealand’s recently announced 2020 emissions reduction target, positive signals are urgently needed to incentivise land owners to undertake new tree planting programmes.

“Importantly, the Select Committee acknowledges that forestry has a key role in off-setting New Zealand’s carbon footprint, and meeting its Kyoto emission targets,” Mr Weir said.

The review considers imposing a price cap on emission units in the New Zealand ETS, but does note that this would disable price linking to the international carbon market, and could further undermine the confidence of new forest investors. The review shows that the National Party currently has very little, if any, political support for price capping.

Grant Dodson, Chairman of the Southern Wood Council said any modifications by this Government to the current Emissions Trading Scheme legislation that result from  this review must take the needs of New Zealand forestry into account.  “Land owners can then maximise the opportunities that now exist for international carbon trading.”

But while the review is being discussed, international trading of carbon units by New Zealand organisations registered in the current Emissions Trading Scheme continues as usual.

South Island forest owner first to enter the international carbon market

Last month’s first-ever sale of carbon credits from New Zealand to a European buyer was managed by Ernslaw One Ltd, one of the largest owners of private Kyoto-compliant forests in New Zealand and a major forest owner in the lower South Island.

The 520,000 tonnes of Assigned Amount Units (AAU’s), awarded under New Zealand’s current Emissions Trading Scheme, were sold to Norway.  The AAU’s were from NZU carbon units that came from forests owned by Ernslaw One Limited.

Ernslaw One has almost 28 thousand stocked hectares of forest, 11,000 hectares of which are planted in longer-rotation Douglas fir in Otago and Southland, with the balance in radiata pine in the North Island.

The multi-million dollar sale is understood to be the world‘s largest forest sink sale to date, and has been regarded as an industry breakthrough, which will open the door for other New Zealand forest owners to sell their carbon sequestration potential.

Otago and Southland’s post-1989 forest resource has major export potential for a totally new revenue stream – that of carbon trading.

Grant Dodson believes Otago and Southland are particularly well positioned because it has ideal growing conditions for Douglas Fir, a longer-rotation tree species that can produce up to twice the standing volume of timber when compared to Radiata pine, and therefore has the potential to absorb twice the amount of carbon.

“There is enormous potential for the region, which is already known for its Douglas fir plantations, to be the driver of species diversification change in New Zealand.”

The Southern Wood Council, which represents most of the forest growers and wood processors in the region, welcomes measures that encourage the sustainable economic development of the forest products industry in Otago and Southland.

It believes the recent carbon unit sale demonstrates there is significant interest internationally in New Zealand’s forestry carbon units, and highlights the potential value of our plantation forests for carbon sequestration.

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