Government thinks its climate policy is planting too many trees
The Government isnt happy that its key climate policy is planting oodles of carbon-absorbing trees instead of driving clean energy. It has publicly presented ideas and an opportunity to sew elements together to get its Emissions Trading Scheme (or ETS) to more effectively reduce pollution. A revamp is likely to make fossil fuels such as petrol, diesel, natural gas, coal and fossil-fuelled electricity slightly more expensive. Currently, a large emitter can buy carbon units from forests to cover its entire greenhouse footprint, which effectively offsets the pollution rather than affecting how much is produced in the first place. This relatively inexpensive option could come to an end, after the official review. The Government hasnt backed any of the four options. The consequences for pollution and energy bills are unique to each idea. Each option would increase the penalty that polluters pay for every tonne of emissions they release to the atmosphere since that is the way the ETS incentivises them and their customers to ditch fossil fuels in favour of clean energy. Currently, the ETS penalty adds roughly 13 cents to the cost of a litre of petrol down from 20 cents in late 2022. Each idea could affect this share to a different degree. The consultation document says two options are likely to boost the amount of money the Government would generate to help struggling businesses and families adapt to the higher costs. The other two could reduce this pool of cash. A Frankenstein-like proposal sewing elements from different options into a new whole is also on the table. When it was first designed in the late 2000s, the ETS aimed to drive down net emissions which counts the release of greenhouse gas from coal, oil and gas plus any removals from carbon-sequestering forests. If it was cheaper for companies to fund tree-planting than to ditch fossil fuels, the ETS would incentivise lots of new forests. Thats currently whats happening, according to the Governments adviser the Climate Change Commission. It estimated more than 60,000 hectares of exotic forest were planted last year. The commission has repeatedly recommended the Government address this issue. If left as is, commission chair Rod Carr said, it will ultimately put our economy at a competitive disadvantage relative to a decarbonised global economy and shift cost burdens onto future generations. Climate Change Minister James Shaw and Forestry Minister Peeni Henare presented four ideas and launched a public consultation on Monday morning. Under one proposal, large emitters would only be allowed to use a limited number of forestry credits to cover their pollution. This echoes the Californian Emissions Trading Scheme. While the Californian system allows between 4 and 6% of a companies footprint to come from approved offsets, Kiwi officials have not suggested a percentage. Other limits including an idea that companies would need to buy two forestry credits for every tonne of pollution are also outlined in the consultation. Another proposition could mean polluters are no longer able to use any forestry units at all similar to the British and European Emissions Trading Schemes. There would still be other avenues for businesses to buy and trade carbon units, for example the four pollution auctions held each year. Since the Government has control over the number of units for sale at auction, it could exercise more control to reduce gross emissions. Forestry would be incentivised separately. The Government could become the sole purchaser of carbon units from trees, potentially buy[ing] removals from indigenous forests at a premium price, boosting biodiversity. Two of the four proposals came from the public. Neither limit forestry. The Government and offshore organisations could purchase some forestry units to increase demand, which could in theory reduce gross emissions. Alternatively, the Government could reduce the number of units for sale in the pollution auctions. However, officials provided scepticism including issues raised by the Climate Change Commission about these two options within the consultation document. Speaking during a press conference, Minister Shaw said that all options have consequences, and these issues have been flagged. We are maintaining an open mind on where this lands. Since the options arent mutually exclusive, the final package of reforms could include parts from multiple options, he added. We need the ETS to incentivise both emissions reductions and carbon removals from forestry. Although carbon-absorbing forests were critically important, the design of the ETS has dulled the incentive for widespread transformation, Shaw said. [It] should not be a static institution. University of Otago climate and energy expert Sebastian Gehricke thought ETS reforms were needed. There are simpler ways to do some of this, he said. If cheap credits from exotic forestry is causing a problem, the Government could stop issuing carbon units for these trees, Gehricke said. That would mean only forests with native species, or those that have transitioned into natives, would be eligible for carbon units. On concerns the reforms would increase fossil energy bills, Gehricke said that was the whole point. You cant have your cake and eat it too. But the Government could take that money and return it to all families, or the most vulnerable, he added. How we manage the pain is important, but we cant avoid the pain by creating more complexities. At the press conference, Minister Henare said the reforms were in the forest industrys best interests. An oversupply of forestry units projected to occur in the 2030s would reduce demand and the profits of forest owners. What were doing is looking for a stable and effective ETS. A related consultation was also launched, on how permanent forests would be regulated. Henare said forests offered many benefits, beyond absorbing greenhouse gas. The industry provides jobs and export revenue. Forests can help stabilise erosion-prone land and this is especially important as severe weather events become more common. The sector is particularly important to tangata whenua, Henare said. Some Maori landowners want the scheme to support exotic tree planting, he added. Maori need options for their land. The public can provide feedback on the ideas from Monday until Friday August 11. Our weekly email newsletter, by the Forever Project's Olivia Wannan, rounds up the latest climate events. Sign up here .