Emissions Trading Scheme should encourage the planting of native forests

Environment Canterbury is formally supporting the government’s proposal to exclude exotic forests from the Emissions Trading Scheme (ETS).

From 2023, a new permanent forest category would allow both exotic and indigenous forests to be registered in the ETS and earn New Zealand Units.

The government is now looking at excluding exotic species, such as radiata pine, from that category.

When announcing the proposal, Forestry Minister Stuart Nash pointed out the need to encourage the “right tree, in the right place, for the right reason”.

Our council agrees that permanent exotic forests carry potential environment and ecological risks, and could impact the reduction of gross emissions in the long term.

A case study 

We have made a submission favouring the move – stemming from a ‘real life’ example from a Little River farmer.

Ben Manson, who’s also a Banks Peninsula Water Zone committee member, had considered retiring 24 ha of sheep and beef land to restore and protect 48.9 ha of native forest on his property.

He, alongside (then) land management advisor Harry Miller, analysed the financial impact of doing so – comparing carbon earnings under the ETS (from land use change to permanent forestry), to income losses from animal production.

They presented their finding to the zone committee in April 2021, and then to us in September.

Crunching the numbers 

The pair’s key conclusion was that, due to the way the New Zealand ETS is set up, Ben’s plan would be uneconomic.

They looked at the upfront cost (around $600,000) of establishing the native forest, along with income lost from the retired land – and compared those losses to the financial returns from carbon sequestration. They then extrapolated the figures out to ten, 20 and 30 years - and found a pattern of diminishing returns.

Ben’s estimated financial loss over 30 years (including carbon returns) was $803,340. Excluding carbon returns, the estimated loss was $891,074.

An unviable option 

Financially, it was not viable for Mr Manson to convert land from pastoral production into fenced and planted native forest for carbon income.

“I thought the returns would be close, but I was surprised by how far off it was,” he said.

The scheme instead incentivises pine tree plantations, which have faster growth rates – meaning more CO2 is sequestered per year. However, this did not appeal to Mr Manson for many reasons, including concerns around biodiversity losses, and the vulnerability of Banks Peninsula’s steep hill slopes and fragile soils to erosion.

“When storm events occur during and soon after harvesting of plantation forests, major erosion and sediment discharges are common, despite rules meant to protect waterways,” he said.

Our submission

Council’s submission proposes that the New Zealand ETS should recognise, alongside tree-planting, other biodiverse landforms such as natural wetlands, which can offer significant carbon sequestration benefits. This would incentivise farmers to view this type of marginal land as a financial asset.

Our submission’s key points:

  • It is acknowledged that well-managed indigenous forests can have better environmental and biodiversity outcomes over time than comparable exotic forests.
  • Despite indigenous forests growing more slowly than exotic forests, they permanently lock away carbon in the soils as well as in the trees. This currently is not accounted for under the NZ ETS.
  • Permanent exotic afforestation can mean forgoing opportunities for natural regeneration of native ecosystems including native vegetation communities, wetlands, and tussock grasslands which have multiple benefits – including carbon sequestration (usually slower but longer term than sequestration from exotics).
  • We note that exceptions could be warranted. The impacts of exotics need to be balanced against the role they can play in flood protection, soil stabilisation and reducing sediment and debris flow into waterways.

 Download our submission to the Ministry for Primary Industries on the Managing exotic afforestation incentives: Proposals to change forestry settings in the NZ Emissions Trading Scheme discussion document April 2022 (PDF File, 260.6KB)