Retrospective changes harm forestry owners

Ian Jackson.
Ian Jackson.
Forest owners are angry and frustrated a change to legislation affecting how they can pay for their emissions obligations has been fast-tracked through Parliament.

The amendment to the Climate Change Response Act 2002 was pushed through with post-Budget legislation and came as a surprise to forest owners.

It means only New Zealand Units (NZUs) - not lower value international units - can be used to pay for obligations when post-1989 forest land is deregistered from the Emissions Trading Scheme (ETS).

Climate Change Minister Tim Groser said the amendment would remove an unintended consequence of the operation of the scheme which allowed forest owners to ''arbitrage'' NZUs.

Arbitraging is a form of trading which means participants in the ETS can profit by selling high value NZ units while meeting their obligations using cheaper international units.

If left unchecked the situation could create ''reputational and integrity risks'' to the ETS and fiscal costs to the Crown, Mr Groser said.

New Zealand Farm Forestry Association president Ian Jackson told Courier Country the move was a ''big negative'' for forest owners and was yet another example of the Government giving them ''more of the same'' treatment.

''The ETS is just a bloody mess.

''The Government hasn't got the will to enact it.

''It wants it to go away but it's not politically astute to do so.''

This legislation was put in place to appease other emitters but it effectively penalised forest growers because they were locked into the scheme, he said.

''It blurs the whole investment market in forestry.''

The scheme was supposed to be simple but the various amendments had changed that.

As a result, the numbers of new forest plantings was down despite returns lifting of late, Mr Jackson said.

Forest Owners Association (FOA) president Paul Nicholls said forest owners who had planned to pay their emissions obligations with international units were no longer able to do so under the amended Act.

Yet, these units, which typically sell for about a tenth of the price of NZUs would still be legal tender for power companies and other emitters.

''Forest owners who have bought international units to meet their obligations during the next 12 months will be forced to sell them at a likely loss.''

Mr Nicholls said the number of forest owners directly affected was not known but all forest growers would be concerned by the inequity of this.

''For the second time in the tawdry history of the ETS, forest owners are being hit by retrospective legislation.''

While the Bill was designed to stop arbitraging by forest owners, it also caught out everyday forest owners who entered the ETS in good faith and who wanted to exit because ''it isn't worth the candle''.

''Small forest owners and iwi will be disproportionately affected.

''Meanwhile, power companies and other emitters will be allowed to arbitrage for another year.''

FOA chief executive David Rhodes said arbitraging did not benefit New Zealand or the climate in any way but was an inevitable result of allowing unrestricted volumes of cheap international units into the country.

FOA, Maori interests, the Parliamentary Commissioner for the Environment and environmental groups had repeatedly told the Government these units undermined New Zealand's ability to address climate change.

''Finally they've decided to act. But why now? Why with such urgency? Why retrospectively? And why only forestry?

''Mr Groser announced, in December, non-New Zealand units would not be able to be used in the ETS from mid-2015, which would have given people time to adjust, Mr Rhodes said.

Primary Industries Associate Minister Jo Goodhew said post-1989 foresters could still use Kyoto units for liabilities incurred through deforestation or harvesting, and sell Kyoto units on either domestic or international markets.