More Information Wanted on Proposed Carbon Market

MEDIA STATEMENT

Wednesday 2 May 2007

For Immediate Release

Forest Owners Want More Information on Proposed Carbon Market

The Kyoto Forestry Association (KFA) is seeking more information on the proposed TZ1 carbon market announced yesterday by big business and immediately endorsed by the Government.

KFA spokesman Roger Dickie said owners of post-1990 forests, who earn carbon credits, would be interested in any proposed market through which they could trade those credits, but he said important questions remain unanswered about TZ1.

“There is no indication of what the rules of the market will be, who will be eligible to participate and how the value of the credits they will trade can be guaranteed against arbitrary Government decisions in the future,” Mr Dickie said.

“For yesterday’s announcement to have any meaning, we need to know who is going to have a legal obligation to buy carbon credits and who has any to sell. It is interesting that, of those promoting the market, most appear to be likely buyers, with no likely sellers, such as forestry companies, represented.

“Potential market participants will also need to know what rules will be put in place to guarantee the ownership and value of carbon credits. The Government’s arbitrary decision in 2002 to confiscate carbon credits earned by forest owners – despite commitments through the 1990s, including to foreign governments, that we would own the credits we earned since 1990 – is a poor foundation on which to build confidence in the proposed market. Until that and associated issues are settled, any prudent investor would be right to be wary of the proposed market.”

Mr Dickie said forest owners were also surprised that Climate Change Minister David Parker had so quickly endorsed the proposed market on behalf of the Government, given that officials and ministers were meant to be considering recent submissions on climate change policy with an open mind.

“Mum-and-Dad forestry investors who have earned carbon credits since 1990 participated in the recent consultation process on the understanding that our submissions would be considered in good faith and with an open mind, and will be a little surprised to learn that the Government has all along been working in secret with big business on the proposed market,” he said. “It raises the question of whether that consultation process was genuine.”

However, Mr Dickie said that, on the plus side, forest owners would be pleased the Government were seriously considering market-based climate change policies.

“A move in this direction advances the argument that the Government should reverse its 2002 decision to confiscate our carbon credits, in order to provide liquidity to the proposed market.”

ENDS

Attached: Background Information: Introduction to Carbon Credits

BACKGROUND INFORMATION

Introduction to Carbon Credits

Kyoto carbon credits are earned by those individuals and businesses that sequestered carbon by planting new forestry since the Kyoto Protocol’s baseline of 1 January 1990, and by those industries which have cut their carbon emissions since then.

Through the 1990s and early part of this decade, 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 in 2002, 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 Government is also proposing a retrospective tax of up to $13,000 per hectare on the owners of forests planted before 1 January 1990, if those forest owners decide to convert their land to another land use.

MAF is carrying out a consultation process on these and other ideas to address climate change. The deadline for submissions is 30 March. Forest owners have asked for an extension to this deadline but Forestry Minister Jim Anderton has refused.

The confiscation of the credits, the proposed retrospective tax and Mr Anderton’s handling of the forestry portfolio have received near-unanimous condemnation at the MAF consultation meetings, with forest owners even in his home town of Christchurch calling on him to resign.

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