The Forest Owners Association says the government’s reset of the Emissions Trading Scheme (ETS) auction settings will stabilise the carbon market and set New Zealand on a positive trajectory to achieve its net-zero target by 2050. Source: Timberbiz
The carbon market tanked after the government tightened ETS settings in December 2022. Carbon unit prices plummeted from a healthy NZ$88 per unit to just NZ$33. The reset announcement should see auction floor price settings increase from NZ$33.06 to NZ$60, effective December 2023.
FOA president, Grant Dodson, says the government’s adoption of the Climate Change Commission’s advice will incentivise forestry and wood processing investors and ensure the carbon market is operating as intended.
“Plantation forests absorb more than half the nation’s carbon dioxide emissions from the atmosphere each year and continue to be New Zealand’s only cost-effective solution for reducing our net emissions,” he said.
“The latest announcement goes some way in ameliorating the effects recent ETS decisions have had on the carbon market, and show the government is taking its greenhouse gas emission obligations, and forestry’s role within that, seriously.
“Re-stabilisation of the carbon market will help restore foresters’ confidence in the ETS and ensure that meaningful investments in the fight against climate change continue.”
Mr Dodson said that while the latest decision is a conducive one, New Zealand could still be at risk of failing to achieve its net zero emissions target if the latest suite of options in the ETS reform are approved.
“Trees are New Zealand’s solution to mitigating and overcoming climate change.
“Options three and four in the reform could see forestry generated NZUs given a differential or lower value to an emissions reduction NZU, which would achieve little more than complication.
“Some foresters with investments in the ETS have plantings that are reliant on receiving forestry NZUs for 25 years of more. It’s unlikely anyone will purchase NZUs in future if those NZUs already invested in forest plantings are soon to be deemed worthless by the government.
“Not only will these options disincentivise tree plantings, there will be flow on effects to the community, for whom, forestry plantings and operations generate jobs, support regional economies and contribute $6.6 billion in export earnings each year.
“The aftermath of such a reform could be a loss in the figure of billions.
“The forestry industry has the capacity to be an instrument and core facilitator in achieving our nation’s net emissions reduction target – but we need the government to enable our sector to do that,” Mr Dodson said.
