Carbon credit glut irks forestry body

Forestry experts have labelled the ban of two carbon credits from the Emissions Trading Scheme laudable but little more than window dressing.

The ban, announced by Climate Change Issues Minister Tim Groser earlier in the week, prevents the sale of credits generated from industrial gas destruction and certain large-scale hydropower projects whose environmental credentials are suspect.

Groser hailed the move as a step to boosting the credibility of the New Zealand's ETS, and one that would start to impact on carbon prices in about two years once certain exceptions had worked through the system.

But PF Olsen chief executive Peter Clarke, who sits on the executive council of the Forest Owners Association, doubted the move would see the prices budge from record lows with "millions" of international credits keeping pressure on prices.

New Zealand carbon units recently traded at about $2.50 per tonne, down from $25 per tonne when the ETS was launched in 2007, and about $22 a tonne about a year ago.

That's largely due to the inclusion of international credits into the New Zealand carbon market, many from Eastern Europe which are banned by many developed economies.

"We have far more credits than we will ever need right now," Clarke said.

Foresters and conservation groups have long bemoaned their inclusion, saying the depressive effect stripped foresters of any incentive to invest in plantings, an asset that takes 20 to 30 years to mature.

Figures from the Ministry for Primary Industries show new forest plantings have tailed off from around 90,000 hectares in the mid- 1990s to close to zero in 2008, with deforestation starting to occur from 2005 onwards.

Questions put to the minister and his office about the changes and pricing impacts were not answered as the article went to press.

Sally Sisson, forestry management officer at plantation owner Roger Dickie, said the low prices were effectively encouraging pre-1990 foresters to convert their land to higher-yielding practices such as dairy.

A farmer would have to buy $21,500 worth of carbon credits at $25 per tonne to convert a hectare of mature forest to pasture based on an estimated carbon capture of 850 tonnes. At today's price of $2.50 it would cost just $2125.

"This crazy emissions scheme has the perverse incentive to deforest," Sisson said.

Commentators within the industry say the Government needs to emulate countries like Japan, Korea and the European Union, where international carbon credits entry is limited to 50 per cent of the total scheme - a move the Government would push hard to avoid under the recent ETS amendments.