Carbon price cap dubbed perverse

A forestry lobby group is warning there will be no private investment in new forest planting if the Government caps the price of carbon under an emissions trading scheme.

A Radio New Zealand report suggested a cap on the price of carbon could bring New Zealand into line with Australia which plans a limit of A$10 (NZ$12.26) a tonne of carbon dioxide, in the first year, rising to A$40 a tonne in the second year. There may also be a ban on international trade in carbon credits for New Zealand.

The Government is still awaiting a report from a committee reviewing the emissions trading scheme, although in May it said New Zealand's scheme would align with Australia's. Climate Change Minister Nick Smith would not comment yesterday on a possible price cap.

The Kyoto Forestry Association, representing about 30,000 Kiwi investors in about 250,000 hectares of forests, said yesterday the potential price cap on carbon would make a mockery of National's policy to have up to 800,000 hectares of eroding land planted in trees.

"There will be no private investment in new forest planting under this anti-free enterprise policy," association spokesman Roger Dickie said. A carbon price cap was "perverse" after the Government said its emission reduction target of 10 per cent to 20 per cent depended on significant new forests being planted.

New Zealand needed one million hectares of forest to get close to the emissions reduction target and records suggested private investment could easily achieve that target, he said. But a decade of delays, U-turns and uncertainty meant there had been a collapse in investor confidence.

Last year, National said it would get "New Zealand planting again" in part to reduce net greenhouse gas emissions.

In May, Prime Minister John Key signalled that it remained the Government's priority to align New Zealand's climate change response with Australia's. In May, Australia announced a one-year delay until July 2011 and more generous compensation for the biggest polluters. Mr Smith said then that there could not be a carbon price cap on one side of the Tasman but not the other.

So-called "Kyoto forests" are those planted after 1990 on land that was previously pasture. Under present rules, owners of forests planted before 1990 are penalised if they harvest trees without replanting on the same land.

Kyoto forest investors would not want to plant for carbon credits in the face of a price cap, but then face uncapped liabilities when they harvested the trees, Mr Dickie said. A ban on international trading contradicted New Zealand's Ambassador for Climate Change Adrian Macey who said last week that the target of 10 per cent in emission reductions would be aimed at if there was a comprehensive global agreement.

Mr Dickie said new planting this year and next would be the lowest on record.

- © Fairfax NZ News