Cheats Never Prosper

Geoff SimmonsEnvironment

In a speech to the Environmental Defence Society Climate Change and Business Conference, the Climate Change Minister Paula Bennett said the Government is looking at measures to encourage more forests to be planted. This is tantamount to an admission of the failure of the short-term thinking that led to our Emissions Trading Scheme being flooded by fraudulent foreign credits, which caused new forest plantings to completely crash.

Getting more trees in the ground and (even better) reducing our emissions are certainly cheaper in the long run than continuing to buy credits from overseas. The Government’s about-face on forestry has two problems; we would have been better off if we’d planted these forests years ago, and the forestry industry has rightly been burnt by their past experience. They are wary of making investments when the Government so easily ran roughshod over those investments in the past. That rough-as-guts intervention has raised the cost of New Zealand meeting our climate change mitigation responsibilities significantly.

Wakey Wakey

The new Climate Minister Bennett seems to have woken up to the mess left by her predecessor Tim Groser. New Zealand’s emissions continue to grow; net emissions were at a record high in 2015. Yet we have made promises to reduce our emissions back to 1990 levels by 2012, 5% below 1990 levels by 2020, and 11% below by 2030. In light of that performance, any reasonable person has to ask whether such pledges are at all credible.

We achieved the 2012 and 2020 target thanks to the pine forests fortunately planted in the 1990s (well before we were talking about reducing emissions) and by purchasing cheap foreign credits, the majority of which turned out to be fraudulent. Those fraudulent credits crashed the carbon price, wiping out the investments of many foresters that had planted on the assumption of a steady price. This rightly leaves those foresters wary of making investments in the future.

Now that the Government has woken up to the results of their short-term thinking, they acknowledge the need for the forestry industry to participate if we are to meet our 2030 (and future) targets in the most cost effective way possible. But damage has been done to the confidence of the forestry industry, which implies serious commitments will be required from Government to rebuild that confidence. Whoops.

Too little, too late

The Government has spent the last five years destroying the industry that they now want help from. Foresters are rightly once bitten twice shy about investing in new planting, when the Government showed it was able on a political whim to crash the price of carbon, decimate the return on new forest investments and spark a rash of deforestation. Who in their right mind would invest in that kind of environment?

Because of the government’s deliberate destruction of the market for forestry credits it is already too late to get the full benefits of forestry planting by 2030. The fact is that forests take a while to grow, and during the first few years they sequester very little carbon. The old adage applies here – the best time to plant trees to help our 2030 target was actually a few years ago.

The only trouble is that a few years ago our Emissions Trading Scheme was flooded with cheap fraudulent foreign credits, and land-owners were falling over themselves to cut down forests and convert to dairy. It has turned out to be a bit of a climate change own goal.

The Minister’s conversion to now become a fan of forestry is welcome, but the scale of her ambition doesn’t seem large. The example she used in her speech was planting 10,000 hectares in 2018 in order to sequester 3 million tonnes of CO2 by 2030. That is a little over 1% of the total emissions reductions the Minister says we need to make by 2030.

To make a decent dent in the 2030 target we need ten times that effort; up towards 100,000 hectares per year over several years. That level of planting is doable – we have achieved it briefly in the mid-1990s – and we have over a million hectares of low-value, erosion-prone land in the country. That sort of effort could potentially contribute up to a third of the current shortfall in our 2030 target, so the timidity of the Minister needs to be reviewed. However, to scale up planting from pretty much zero to 100 in a hurry is a challenge – especially given the foresters’ understandable lack of trust in the Emissions Trading Scheme. This kind of scale will only be achieved with very ambitious and concerted government policy.

Of course forests planted in later years will contribute less by 2030, and less again if they are native plantings, which grow slower. A typical pine forest will sequester 1,000 tonnes of CO2 per hectare over 30 years of growth. Planting a tree in 2018 means that only one third of the total possible carbon will be sequestered by 2030 (although it would continue to contribute to future targets). Again, it would have been cheaper for our country if the Government had realised the importance of forestry some years ago.

What will it take to get forestry on side?

Government has some serious making up to do if they want foresters to trust them again. That will take more than hiking up the price of carbon, they will need some commitments to show they are serious about keeping the price of carbon high. There are a number of ways to do this: they could expand the Afforestation Grant Scheme, or guarantee a minimum price for carbon sequestered (which the Minister hinted at yesterday), or pay for advisers to help hill country farmers assess the value of planting erosion prone land.

The fact remains that none of these bribes would have been needed if the Government hadn’t screwed over the forestry industry in the first place. So in the long run this Government has actually increased the cost of meeting our emissions targets by its dealing in fraudulent foreign credits. The public needs to hold it accountable for this impost, otherwise we have a high risk of Minister Bennett’s recent epiphany being buried down the track by a government interested only in short term political gains as this government was.

Cheats Never Prosper was last modified: October 12th, 2016 by Geoff Simmons
About the Author

Geoff Simmons

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Geoff Simmons is an economist working for the Morgan Foundation. Geoff has an Honours degree from Auckland University and over ten years experience working for NZ Treasury and as a manager in the UK civil service. Geoff has co-authored three books alongside Gareth.