More native forest can help firms manage emissions

More native forest can help firms manage emissions obligations

Companies with high greenhouse gas emissions face the risk of high costs in a carbon market where prices could soar as high as US$190 per unit. Researchers at Motu Economic and Public Policy Research have today released a report showing an environmentally and economically attractive way to decrease the risk for those high emitting companies by establishing more native forest.

The report, commissioned by Air New Zealand, explores some of the barriers and potential to get more native forestry offsets created in New Zealand.

“Eight percent of the forest land registered in the ETS is native,” said Dr Suzi Kerr, Senior Fellow at Motu and co-author of the report. “Since 2008, however, only 500 Ha of new native forest has been established and registered. If we established another 10,000 Ha of land in native forest, this would sequester 65,000 tonnes of greenhouse gases annually, which would be eligible to earn 65,000 NZUs per year under the ETS.”

Firms with obligations in the Emissions Trading Scheme (ETS), or with high emissions that they cannot rapidly reduce, all need to plan ahead in case the unit price goes substantially higher than its current $17 per NZU.

“Recently the International Energy Agency[1] predicted that the international carbon unit price could go as high as US$190. If that happens, the more native forest we have established, the more we will celebrate” said Dr Kerr.

“We don’t want all of NZ back in native forest but on large areas of marginal pasture land there really is no way New Zealand can lose,” said Dr Kerr.

“As well as the benefits for NZ firms who need to meet their future ETS commitments, there is strong interest among a variety of stakeholders, including community groups and iwi, to plant more native trees for biodiversity, plantation forestry diversity, cultural and aesthetic reasons, and for erosion control.”

Dr Kerr also mentions increased certainty around New Zealand’s global commitments with the Paris Agreement as impetus for using native forest to offset carbon emissions, and the fact that there are other payments for planting native forestry available.

“The thing I really like about this opportunity is that it all comes together in a moral and economically justifiable package, which is the whole reason I got into environmental economics in the first place,” said Dr Kerr.

The researchers also looked into other options for offsets, including soil carbon, marine carbon and carbon capture and storage.

“We found that these more alternative options are not yet strongly enough supported by scientific evidence to include in regulation. They may offer possibilities in the future.” said Dr Kerr.

A recent academic paper by Dr Kerr and Tom Carver outlines this issue in more depth: “Facilitating Carbon Offsets from Native Forests” is now available on the Motu website. A note about the alternative options for offsetting emissions written by Veronika Meduna is also available. Both of these publications were commissioned and funded by Air New Zealand with the help of the Aotearoa Foundation and the Tindall Foundation.

Native_Forest_Offset_Options_Exec_Summary.pdf

[1] P.7, Executive Summary of Perspectives for the energy transition – investment needs for a low-carbon energy system ©IRENA 2017.

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About Motu

Motu Economic and Public Policy Research is an independent economic research institute which never advocates an expressed ideology or political position. A charitable trust, Motu is founded on the belief that sound public policy depends on sound research accompanied by well-informed and reasoned debate.

Motu is the top-ranked economics organisation in New Zealand. It is in the top ten global economic think tanks, according to the Research Papers in Economics (RePEc) website, which ranks all economists and economic research organisations in the world based on the quantity and quality of their research publications.

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