What is climate change?
Climate change is a phrase we use to describe changing climate patterns that:
- can be attributed to human activity that alters the earth’s atmosphere;
- are beyond natural climate variations observed over comparable time periods.
The effects of global warming and climate change are already measurable. New Zealand’s climate is changing, largely because of the build-up in the earth’s atmosphere of greenhouse gases particularly carbon dioxide, methane and nitrous oxide.
The effects of climate change are seen in global warming, rise in sea levels and the increase in extreme weather events worldwide.
What is the ETS and how does it work?
The ETS is a carbon market that affects all New Zealanders. It is based on the fact that trees absorb carbon dioxide as they grow, so the more trees we plant, the more carbon dioxide will be taken out of the atmosphere. The ETS places a value on the amount of carbon dioxide that is taken out of the atmosphere (the term that is used for this process is “sequestration”).
What is a carbon credit and who uses them?
A carbon credit is the value attributed to taking one tonne of carbon dioxide out of the atmosphere. Companies buy carbon credits to trade off against the tonnes of carbon they produce (emissions) in their businesses whether it is using carbon fuels (e.g. airlines), selling carbon fuels (petrol companies) or manufacturing processes which create emissions
The ETS provides a market for people who want to buy or sell carbon credits.
Who buys and who sells carbon credits?
All major sectors of the economy have obligations under the New Zealand emissions trading scheme. This includes the following sectors: forestry, stationary energy (power generation), industrial processes, transport (liquid fossil fuels used on land, sea and in the air), synthetic gases, with waste and agriculture being adopted into the ETS soon. Under the scheme, sector participants are required to surrender one emissions unit for each tonne of greenhouse gas emissions they are responsible for producing. Some sectors receive an allocation of emission units.
Households and small businesses are not required to participate in the emissions trading scheme but may experience indirect price increases in the cost of electricity and fuel when the stationery energy and transport sectors enter the scheme.
Who does the Emissions Trading Scheme apply to?
Every sector and every greenhouse gas in New Zealand. Everyone in New Zealand who uses electricity or fuel for a car will notice increased costs.
Who needs carbon credits?
The right to pollute the atmosphere is becoming increasingly regulated internationally hence the carbon market has been developed to provide an equitable way for industry to offset their greenhouse emissions. Basically emission units (carbon credits) are traded for the right to emit CO2 into the atmosphere.
How are credits delivered?
Carbon credits are claimed annually by filing an application with the New Zealand Government.
What is carbon storage?
Carbon storage is simply the storage of organic matter in soil and trees that reduces the amount of carbon dioxide in the atmosphere.
How can planting trees assist in reducing emissions?
Carbon dioxide is believed to be the primary greenhouse gas that is contributing to climate change. Photosynthesis is the natural process that trees and plants use to grow. This process uses carbon dioxide from the atmosphere together with sunlight in a chemical reaction to produce oxygen and glucose. It is because of photosynthesis that growing trees can help reduce the emission of greenhouse gases to the atmosphere. Carbon Sequestration is the term used to describe this process of absorbing and storing carbon.
How is Carbon Sequestration measured?
It is not feasible to directly measure the amount of carbon that a forest is storing over time, so the preferred approach is to use tree-growth modelling to estimate the amount of carbon stored. This modelling is then adjusted on a regular basis to reflect the occurrence of events that affect the rate of carbon sequestration, such as rainfall or bushfire. Many different models for carbon sequestration are available.
So what does one tonne of carbon dioxide look like?
If you take a typical pine tree trunk, half of it is carbon (cellulose, lignin etc). Let’s assume that the tree trunk is 2 cubic metres, therefore 1 cubic meter is carbon. It took 3.67 tonnes of carbon dioxide to make that one tonne of carbon.
What is meant mean by “marginal land”?
This means land that is currently not producing much return for the landowner. Perhaps it is being farmed but is not generating much income or perhaps it is difficult to access such as steep, earthquake prone or erosion prone land. These types of land lend themselves particularly well to carbon farming.
What is a permanent forest?
This is a forest that is not intended to ever be cut down. Instead, it will be managed in a way that, over time, will revert to native forest.
Why are there rules around the land having to have been clear of trees as at 1990?
There are strict rules under the Emissions Trading Scheme as to what land is “eligible” to receive carbon credits. These rules are set out in international and national law. Only land that was not planted in trees as at 1990 is eligible for carbon farming. Part of the role of MCF is to help you to identify how much of your land is eligible for carbon farming.
What is a carbon right?
A carbon right allows another person to access your land, plant and maintain a forest for its carbon yield. This right is registered on your land title. It will take the form of a‘forestry right’ which is a legal document created under NZ law and the accepted way of participating in the Emissions Trading Scheme.
Why is the carbon right 30 years?
This is a long-term project and trees take a long time to grow. Because of this, it takes time to start to generate carbon credits for landowners. A timeframe of 30 years gives the project time to produce a viable investment return after the upfront costs have been repaid.
What happens after 30 years?
The carbon right ends and the landowner owns the trees. From that point on, the landowner will own all of the carbon credits produced by the forest. The forest will remain in the Emissions Trading Scheme.
Can the forest be accessed for other activities such as planting for manuka honey production?
Yes, as long as nothing is done to harm the trees, the landowner will have full access to their forest during the period of the carbon right.
As a landowner could I lose ownership of my land due to this activity?
No, that can never happen unless the landowner chooses to sell the land but the carbon right will remain for 30 years from planting and the trees can never be cut down or the carbon credits received under the ETS will have to be paid back.
How do landowners know their land is always protected?
There will be no mortgage over the land at any time. However, a 30-year carbon right will be registered over the land to make it possible to receive carbon credits from the Government. At the end of the carbon right,this right will be removed and the landowner will own the trees as well as the land.
What is the difference between a forestry right and a carbon right?
A forestry right grants ownership of the trees, but not the land. A carbon right means those trees are included in the ETS and can never be cut down.
What if something goes wrong with the project?
The landowner continues to own the land and after any costs are taken care of, the right to 50% of the value of the carbon credits produced by the forest.
Will there be a mortgage over the carbon right?
Under no circumstances will there be a mortgage over the land. The security for the finance will be limited to a mortgage over the forestry right. That is, the landowner will never carry an obligation to meet any finance repayment cost from either planting or ongoing operations.
How much money do I get?
How much depends mainly on 2 things:
- How many carbon credits the forest produces. This depends on what is planted and how well it grows on the land; and
- The carbon credit price over time.
We will develop a tailored plan for every forest. As an example, the owner of an average forest could expect to receive about 400 carbon credits per hectare over 30 years (after all costs) – although this depends on the species of trees planted. Based on today’s carbon credit prices, which are around $22, this represents $8,800 per hectare.
What are the costs that will be deducted from my share?
- Looking after the trees;
- Getting the carbon credits confirmed by the Government;
- Legal and accounting compliance; and
- The cost of financing the above costs.
When does the landowner start getting carbon credits?
Carbon credits are distributed after the planting and operational costs have been met. This also depends on how many carbon credits the forest produces and the carbon credit price over time. Based on today’s carbon credit price, landowners could expect to start getting their share of the carbon credits about 7 years after planting. However, if the carbon credit price increases the return will come sooner.
How do landowners know these returns are real?
The carbon right MCF signs with the landowner will protect the landowners rights to their share of the carbon credits generated on the land. Half of the carbon credits generated on the land (after costs) belong to the landowner.
How does the landowner sell their carbon credits?
This can be done by the landowner him or herself or MCF will offer this service for a small commission.
How does the landowner know what the carbon credit price will be? And, what if the carbon credit price falls?
There can be no certainty regarding the carbon credit price. However, there is currently cross-party support for the ETS which reduces the risks involved. The Government has recently signalled its desire to lift the that the carbon credit price ceiling, which is in line with the Productivity Commission Report.
Furthermore, MCF will continue to work with Government over the next 30 years to champion the best settings for landowners.
What if something goes wrong with the Emissions Trading Scheme and landowners can’t get carbon credits anymore?
In that case, landowners will be given an option to pay to keep the trees. If they elect not to do so and there is a mortgage over the forestry right, then the bank may decide to sell the forestry right and use the money to repay the balance of the planting and other costs, with any residual being equally shared with the landowner. If there is no finance owing, then the carbon right may be sold and the landowner will receive half of the money from that sale
Who gets the rest of the carbon credits from the forest?
Planting the trees, paying the project costs and maximising the number of carbon credits produced by a forest requires significant finance and specialist carbon credit expertise. The balance of the carbon credits from the forest pay for these activities.
Can the landowner choose what gets planted?
What gets planted depends on several things, including what vegetation is on the land already and what are the landowners priorities for the project. MCF will work with the landowner to come up with the optimum mix of planting species for the land, noting that exotic species such as pine and Douglas Fir grow much quicker than indigenous species and therefore produce carbon credits much faster.
Can the landowner provide people to be used for the planting?
This depends on their experience and skill levels. MCF has a primary objective to utilise local people if they have the required skills and experience to plant high quality forests. Also, MCF intends to use this initiative to create jobs and increase planting capability in the regions to the level required to plant high quality forests.
Are there any restrictions on what the landowner can do on their land after planting?
Apart from looking after the trees , there are no restrictions. MCF’s carbon specialists will need access from time to time to check the trees and measure their growth (carbon absorption).
What kinds of things will landowners need to do to look after their forest?
Landowners will be expected to undertake routine stewardship tasks such as controlling access, preventing fires, pest control, keeping tracks clear and fixing fences and these out of pocket expenses will be provided. MCF will take care of everything else that needs to be done.
If the landowner has an agreement for another use, such as beehives, can the land still be used?
Land can be used for other purposes, including honey, as long as the trees are not disturbed. In fact, Manuka hives thrive under MCF planting.
How does this tree planting protect our waterways?
MCF forests are permanent, that is they are never cut down. Because of this, there is no slurry or waste generated from the forest to move down into the waterways. As well as avoiding waste from cutting operations and not requiring infrastructure for extraction of logs, permanent forests also assist in the reduction of erosion, due to the tree roots stabilising the soil.
How does this planting revert to native forest?
There is a strong body of scientific evidence that supports this planting approach and the final outcome it delivers. To achieve this reversion, proven scientists and top advisors in the field of regeneration are used to optimise the planting mix for the land. From this, the land is managed to optimise both carbon credit production and reversion to the native state. This includes ensuring seed sources are present and there are sufficient light wells so that native species can thrive under the canopy species that protects their establishment.
Is there any upfront cost to the landowner?
None at all. The project costs are all covered within the profit share model.