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The Maniototo Community Board could face a $373,160 emissions trading scheme (ETS) liability unless it replants its cleared Naseby forestry blocks before the end of next year.
The board's forestry investment and the implications of the ETS on the future management of its portfolio are on the agenda for the board's meeting on Thursday.
The scheme covers significant greenhouse gases covered by the Kyoto Protocol. Central Otago District Council property officer Brian Taylor said the ETS legislation was quite complex and he had sought the advice of forestry consultant David Janett, of Forest Management Ltd.
"The driving principle behind the ETS as it affects forestry is to encourage retention of trees as a 'carbon sink'. In essence, there is no penalty for forest owners who harvest the crop then replant. However, owners who harvest and don't replant must either surrender units or pay the Crown the equivalent value in cash, " Mr Taylor said in a report to the board.
The board's two Naseby blocks, a total of 40ha, had both been deforested - one was felled and the other was flattened by gale-force winds in 2006.
" ... the board will note the potential liability of $373,160 for the purchase of credits for surrender to the Crown, through the land having been deforested, " he said.
Under the scheme, the primary unit of trade is the New Zealand Unit (NZU). One NZU represents one tonne of carbon dioxide either released or removed from the atmosphere. Under the ETS, owners of pre-1990 forest land have to surrender NZUs if they deforest.
Mr Taylor said forest owners had a period of grace to replant before incurring any penalty under the ETS, but the board would have to take action by November 2012.
He recommended the blocks be replanted in Corsican pine in 2011-12.