Ollie Belton talks to the Press about the recently announced rebooted AGS, with the Government pool of $22.5M or $1300/ha for new plantings on marginal erodible land. In return the government gets the first 10 years of carbon. A good scheme for landowners wanting a timber forest, or permanent carbon forest. But some possible pitfalls for landowners wanting timber and carbon income.

Read the full article here.

While the first 4 months of 2014 had New Zealand Units (NZUs) languishing in the low $3 dollar range, the last 4 months has seen a couple of rallies.

The first major rally was in mid May where NZUs briefly touched $5/unit before falling back. The reason for the upsurge in prices was in direct response to the unexpected law change blocking Post-1989 forest owners from using Kyoto units when leaving the ETS. This law change had a sudden twofold impact. It stopped the supply of NZUs to market from forest owners selling up and exiting the ETS, and it created panic buying from foresters yet to exit who needed to re-purchase NZUs they had already sold.

The latest rally is most likely a result of the upcoming elections. Mid-August with the revelations around the Dirty Politics scandal, there was a sentiment that Nationals election prospects were weakening. The carbon price has increased over that period from $3.80 to around $4.30.

It is well known that Labour supports a strengthened ETS and higher carbon price, and while the Greens prefer a carbon tax there have been indications lately that would support a much bolder ETS if they had to. The question is what will the carbon price do under a National led government? Some expect prices to increase given that overseas units will be banned completely from New Zealand from May 2015, and that holders of NZUs are unlikely to sell off in large volumes at prices less than $10. However, on the flipside, emitters do not have to surrender their first NZU for another 12 months after that in May 2016, and Government now has given itself the power to print and auction NZUs into the market.

In the latest issue of New Zealand Tree Grower we explore the implications of storm damage to both Pre-1990 and Post-1989 forests in relation to landowner and forest owner responsibilities under the New Zealand Emissions Trading Scheme.

Owners of forests have can have obligation to report to Government forests damaged by storm events and in some instances may have a liability to repay emission units.

You can read the article here. 

Earlier this month the Government released their latest reports on the Emissions Trading Scheme.

It highlighted what most of us in the industry already knew. That the NZ Emissions Trading Scheme should be re-named the Eastern European Emissions Trading Scheme.

99.5% of units surrendered to the Government were from overseas and primarily originated from eastern countries such as the Ukraine and Russia in the form of Emissions Reduction Units (ERUs).

Only 227,000 of the 45.5 million units surrendered were NZUs, and only 140,000 of these were from NZ forests.
                                                                                              Source: ETS 2013- Facts and Figures (Environmental Protection Agency)

The reports also confirm that owners of Post-1989 forests have left the scheme in droves with 700 owners exiting the scheme between 01 July 2013 to 30 June 2014.

The area of registered Post-1989 forest has reduced to 261,148 hectares; less than half of the total Post-1989 forest estate of 550,000 hectares.

Net deforestation is again on the rise for the first time since the ETS was implemented. New plantings have fallen to pre-2009 levels, and patterns of harvesting without replanting are back to 2010 levels.

Source: ETS 2013- Facts and Figures (Environmental Protection Agency)                        You can read the full reports here. 

Ollie Belton gave a presentation at a NZ Institute of Forestry meeting in July 2014, alongside Prof Euan Mason of Canterbury University, and Anders Crofoot, Vice President of Federated Farmers. Read the Presentation here.

Ollie Belton explores the potential issues faced by forest owners who have exited the the NZ ETS in relation to MPI re-classifying land from post-1989 to pre-1990 land in the May 2014 edition of New Zealand Tree Grower Magazine.

Read the full article here.

Note that on 16 May 2014 the Government prohibited post-1989 forest owners from using Kyoto units (such as ERUs) to meet surrender obligations arising from the removal of forest from the ETS. Kyoto units can still be used in some circumstances such as repaying units to account for over issuance.

Ollie Belton talks to the NZ Farmers Weekly about the implications on post-1989 forest owners of the recent ban of Kyoto Units within the NZ Emissions Trading Scheme.

Read the full article here.

3 News TV item on NZ ETS Loophole closing but only for forestry, and not emitters. Ollie Belton for Carbon Forest Services interviewed and points out the hypocrisy. You can see the news item here.

More than 12 months after the Government was first alerted to post-1989 forest arbitrage, the loop hole has finally been closed. However many forest owners have already exploited the loop hole and much damage has already been done, both to the integrity of the NZ ETS and also to the market fundamentals.

One has to ask why has it taken so long for the Government to act? Ministry of Primary Industries officials were first alerted in early 2013 to the arbitrage, and the huge reputational and fiscal risk it presented. Yet it took Government a year to stamp it out. In the interim period nearly 25% of post-1989 ETS Participants de-registered in 2013, and at least another 5% have de-registered in 2014. As a result millions of forestry NZUs have become unencumbered meaning they are not linked to harvest liabilities so are more likely to be sold into a low priced carbon market for profit taking. The number of these unencumbered NZUs could number as many as 15 million units and add to a struggling domestic carbon market estimated as already oversupplied to the tune of 110 million NZUs.

"Why does the National Party hate the forestry sector" That was the question posed in Parliament on Friday by Labour's Moana Mackay, Spokesperson for Climate Change Issues. She was speaking during the first reading of the Budget Measures (Miscellaneous Fiscal Matters) Bill which sneaks in an amendment which prohibits forest owners from using Kyoto Units when they remove forest registered under the NZ Emissions Trading Scheme (NZ ETS) and prevents 'reregistration arbitrage'.