Hon Jim Anderton
Minister of Forestry
Hon David Parker
Minister Responsible for Climate Change Issues
31 August 2006
Backgrounder
The Permanent Forest Sink Initiative:
An initiative to support reforestation carbon sinks
Questions and Answers
The principles behind the permanent forest sink initiative ..................................... 2
What land qualifies?.............................................................................................. 2
What forests qualify? ............................................................................................ 2
What activities qualify? ......................................................................................... 2
What would forest owners actually receive? ......................................................... 3
Can trees be harvested? ....................................................................................... 3
What is continuous canopy management when harvesting? ................................ 3
Why are clear-fell plantation forests not included in the permanent
forest sink initiative? .............................................................................................. 3
What are the benefits of the permanent forest sink initiative? ............................... 3
What are the costs, risks and liabilities? ............................................................... 3
What is meant by ‘replacing’ units......................................................................... 4
How will landowners’ rights and obligations be specified? .................................... 4
Is land locked into the permanent forest sink initiative forever? ............................ 4
What if the forest burns down or blows over? ....................................................... 4
Is insurance required? .......................................................................................... 4
What if the harvesting limitations are breached? .................................................. 4
What if the land is sold? ........................................................................................ 5
When can landowners get started?....................................................................... 5
Are other consents needed? ................................................................................. 5
How will carbon storage be measured? ................................................................ 5
What happens after 2012 (the end of the first commitment period)? .................... 5
Are exotic and indigenous species allowed? ........................................................ 5
Who will run the permanent forest sink initiative? ................................................. 5
What other activities can take place in the forest? ................................................ 5
Do these forests get rates relief? .......................................................................... 5
Can emission units be forward sold? .................................................................... 6
Who might purchase emission units? ................................................................... 6
What are emission units worth? ............................................................................ 6
Are any mechanisms like this already in operation? ............................................. 6
Where can potential investors go for more information? ....................................... 6
The principles behind the permanent forest sink initiative
Forests contain more carbon for a given area than bare land. This extra carbon comes
from removing CO2 from the atmosphere, which in turn reduces human-induced climate
change. The Kyoto Protocol recognises this and allows emission units (sometimes
referred to as ‘sink credits’) to be generated when new (post-1990) forests are
established. The emission units generated are equal to the increase in CO2 stored in a
given area of forest between 2008 and 2012. This period is referred to as the first
commitment period.
By ratifying the Kyoto Protocol an opportunity has opened up for landowners, particularly
of largely marginal land, to establish permanent forests and gain Kyoto emission units.
In return, landowners will have to meet all costs associated with generating emission
units and agree to ‘replace’ any units should there be a decrease in the carbon stored in
the forest.
These rights and obligations will be formalised in a contract between landowners and the
Crown. These contracts will be registered against land titles and will bind all future
landowners.
What land qualifies?
To enter the permanent forest sink initiative, the land must be eligible to earn emission
units under [Article 3.3] of the Kyoto Protocol. Essentially, this means the land must not
have been covered in forest as at 31 December 1989. “Forest” is defined under the
Protocol. However, in areas of mixed scrub and pasture the boundaries may not be clear
and eligibility will have to be determined on a case by case basis.
What forests qualify?
Kyoto-compliant exotic forests established after 17 October 2002 (the date the policy was first
announced) and Kyoto-compliant indigenous forests established from 31December 1989
would be eligible to enter the permanent forest sink initiative.
Mature indigenous forest is not covered by the permanent forest sink initiative.
What activities qualify?
To qualify for emission units the new forest must be “direct human induced … through
planting, seeding and/or the human-induced promotion of natural seed sources.” This
means some form of active management will be required in establishing the forest.
However, this does not mean landowners would necessarily have to plant or even fence
the new forest area.
Landowners will need to consider what actions they plan to take to establish the forest
and agree this with the administrators of the permanent forest sink initiative. These
actions will be set out in a simple management plan, which will help assure the
international community that the forests are indeed “direct human induced”.
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What would forest owners actually receive?
Owners who meet the requirements will receive tradable, Kyoto Protocol compliant
emission units, which they will be free to sell to whomever they wish. The amount of units
received will be equal to the increased CO2 stored in the forest for the period between
2008 and 2012 (the first commitment period of the Kyoto Protocol). Units would not be
transferred to landowners until verification of the amount of increased CO2 stored in the
forest has occurred.
The rules of the Protocol have only been negotiated internationally for the first
commitment period. However, landowners will have rights to emission units beyond 2012
also, provided the future Protocol rules allow for this.
Can trees be harvested?
Yes, timber will be able to be removed on a continuous canopy basis. Clearfelling of the
forest will not be permitted and will incur penalty payments. However, these harvesting
restrictions will be removed after 99 years.
The previous 35-year non-harvest restriction has been removed.
What is continuous canopy management when harvesting?
Continuous canopy management is an approach that aims to ensure the ground is
always covered by a canopy of tree species, even after some harvesting has occurred.
For the purposes of the permanent forest sink initiative, continuous cover forestry will
basically allow the harvesting of 20 percent of the trees (as measured by basal area per
hectare) and the forest must be allowed to recover before this amount of trees can be
removed again.
Why are clear-fell plantation forests not included in the permanent forest
sink initiative?
This permanent forest sink initiative is clearly distinguished from plantations by allowing
only limited timber harvest. Limiting timber harvest also limits the carbon liabilities arising
to landowners (and the Crown) when trees are harvested. This helps protect the interest
of both parties to the contract.
What are the benefits of the permanent forest sink initiative?
The permanent forest sink initiative is principally designed to allow greater economic
benefit to be derived from land, especially marginal land. However, it will deliver many
other benefits, including improved biodiversity; soil, water and flood protection; better
protection of existing natural forest remnants; diversification of forest timber species;
development of a sustainable special purpose timber supply; and funds for natural forest
restoration.
What are the costs, risks and liabilities?
Landowners will be required to meet all the costs of entering and administering the
permanent forest sink initiative. This will include the costs of ongoing forest monitoring
and verification (probably once every five years) as well as ‘replacing’ units from any
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carbon that is lost from the forest where this results in emission liabilities for New
Zealand under the Kyoto Protocol.
What is meant by ‘replacing’ units
Every emission unit generated creates an equal contingent liability which would
crystallise if and when the carbon stored in the forest decreases. If this occurs, any such
liabilities will have to be covered by the landowner through ‘replacing’ units equal to the
carbon stock change. Obligations for ‘replacing’ units will be part of the permanent forest
sink initiative contract.
How will landowners’ rights and obligations be specified?
Landowners’ rights and obligations will be specified under contract and registered
against land titles.
Is land locked into the permanent forest sink initiative forever?
The contracts will be in perpetuity. However, they will be able to be changed with the
mutual consent of the Parties.
If the Kyoto Protocol no longer allows emission units to be generated from the forest,
then all harvesting restrictions will be removed – though, to the extent that CO2 emission
liabilities remain in respect of units already claimed; these liabilities will need to be met
by landowners if the CO2 is released into the atmosphere.
Finally, landowners will be allowed to convert the forest into some other land use at any
time. The only restrictions on this will be that trees cut down will not be able to be
removed (except those removed in accordance with allowable harvest provisions) and
landowners must ‘replace’ emission units for if carbon is lost from the forest.
What if the forest burns down or blows over?
Landowners will be required to ‘replace’ emission units for any CO2 released back into
the atmosphere for whatever reason.
Is insurance required?
The contracts will need to contain a way of assuring that landowners’ obligations (in
particular, the obligation to ‘replace’ units if carbon is lost from the forest) will be met in
the event of default of payment.
What if the harvesting limitations are breached?
Landowners who deliberately breach the harvesting restrictions (that is harvesting
outside of the allowable limits) will be required to ‘replace’ emission units for the CO2
released, plus make a penalty payment. The penalty payments will be additional units
calculated on the basis of an annual compounding rate of 10 percent applied to each
year’s units received, commencing from the earliest year in which the units were
generated.
Penalties are only payable for breaches of the restrictions on harvesting and NOT for
CO2 emitted for other reasons such as fire, disease or windthrow.
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What if the land is sold?
The rights and obligations run with the land and will bind future owners.
When can landowners get started?
The legal framework to register contracts against land titles needs to be provided for in
legislation and regulations. The necessary legislative backing is included in the Climate
Change Response Amendment Bill, which is currently before the House. No contracts
can be signed or registered before this legal framework is established.
Are other consents needed?
This will depend on the requirements specified by local District and Regional Councils.
How will carbon storage be measured?
The development of a series of forest growth and carbon accumulation models that will
be applicable to many forest types is planned. It is intended that these models are the
basis on which carbon storage is measured.
What happens after 2012 (the end of the first commitment period)?
Should the Kyoto Protocol no longer allow emission units to be generated from these
forests, then the harvesting restrictions will automatically be removed. However, to the
extent that CO2 emission liabilities remain in respect of units already claimed; these
liabilities will need to be met by landowners if the CO2 is released into the atmosphere at
some future point.
Are exotic and indigenous species allowed?
Yes, there are no restrictions on eligible species. In some areas local authorities may
impose their own restrictions or controls on the establishment of certain species. Exotic
forest and indigenous forests, however, have different eligibility dates.
Who will run the permanent forest sink initiative?
The permanent forest sink initiative will be administered by the Ministry of Agriculture and
Forestry’s Indigenous Forestry Unit, which has offices in Christchurch and Rotorua.
What other activities can take place in the forest?
Apart from limiting the harvesting of timber, no other restrictions will apply to the use of
the forest.
Do these forests get rates relief?
Rates relief is usually provided only where land has no commercial value. The
permanent forest sink initiative will allow ongoing income to be generated from the land.
Should landowners wish to retire land completely they should discuss their options with
their local authorities.
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Can emission units be forward sold?
This would be a private matter between the landowner and a third party purchaser of the
units. Nothing in the registered contract will legally prevent landowners from forward
selling units at any time.
Who might purchase emission units?
A number of markets are developing for the trading of emission units. It is anticipated that
companies or countries with obligations under the Kyoto Protocol may be interested in
purchasing emissions units. Third party traders and speculators may also wish to
purchase the units.
What are emission units worth?
At this stage it is difficult to say what units are worth. Landowners should seek their own
advice on this issue.
Are any mechanisms like this already in operation?
Yes. Landcare Research, as part of its EBEX21 Programme, operates a mechanism
where landowners can reserve land in return for ‘certified carbon credits’, though at this
stage these credits can not be used by countries to meet their obligations under the
Kyoto Protocol.
Where can potential investors go for more information?
In the first instance potential investors may wish to contact:
Indigenous Forestry Unit
Ministry of Agriculture and Forestry
Postal: PO Box 25022, Christchurch, Address: 138 Victoria Street,
Christchurch
Tel: 03 379 1941,
Fax: 03 379 1942,
Email: ifu@maf.govt.nz
The information contained in this publication is general initial information only. The detail of this initiative is subject to further
policy development and to consideration by Parliament. This publication is not produced for the purpose of giving professional
advice of any nature. Whilst every effort has been made to ensure the information in this document is accurate the Crown, its
employees and consultants do not accept any responsibility or liability whatsoever for any error of fact, omission or opinion
which may be present, however it may have occurred, nor for the consequences of any decision based on the information in this
publication. Without in any way limiting the above statement, the Crown, its employees and consultants expressly disclaim all
and any liability to any person in respect of anything, and the consequences of anything done or omitted to be done in reliance,
whether wholly or partly, upon the whole or any part of the contents of this publication.
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