We share the concern others have expressed over the EPA's recent suboptimal performance in the shape of multiple market information glitches (Carbon News 1/9/23).

That concern has hardened into outrage after last week's announcement that ETS forestry participants are being required to pay an annual charge of $30.25 (plus GST) per hectare of registered post-1989 forest.

The annual charge has been imposed to enable the recovery of certain defined categories of EPA costs. It is claimed that these costs are currently $29.8 million per year.

NZ Forest Service say that forestry participants continue to receive significant benefits from the ETS and point to the value of NZUs issued this year for the 2018 - 2022 MER period being $1.2 Billion. This of course is specious because an equivalent number of NZUs must be surrendered on harvest. The reality is that forestry participants get very little ongoing benefit from the ETS beyond that derived by anyone else in the country.

We think the first thing forestry participants will be demanding of the new Government is a review of the cost structure and performance of the EPA.

Also, there is doubt that the new regulation imposing the annual charge will withstand judicial review. There are multiple grounds here.

As just one example, section 167 of the Climate Change Response Act 2002 authorises regulations that prescribe an annual charge payable by participants or classes of participants.

Arguably, this means that the same annual charge needs to be imposed on all participants or, if separate classes are created, on all participants within those separate classes.

But the new regulation doesn't do this because it imposes a differential annual charge on all participants (depending on forest area) and doesn't attempt to create separate classes.

Moreover, there is no direct causal link between these differential annual charges and the categories of EPA costs able to be recovered under section 167. More hectares don’t necessarily mean more EPA costs. That may make imposition of the annual charge arbitrary or capricious from a legal perspective.

This annual charge is not what section 167 appears to authorise. Therefore, absent some other authorisation from Parliament, the new regulation is likely to be ultra vires and in breach of the "levying money" provision in the Bill of Rights 1688.

There is a lot of money involved here so no doubt the new regulation will end up being thoroughly scrutinised by some of the country's best legal minds.

Halt NZU Grab

halt.nzu.grab@gmail.com

www.haltnzugrab.org.nz

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