Submission on the proposed redesign of the Emissions Trading Scheme, 2023

Submitter: Professor Euan G. Mason

Profile: Dr Euan Mason is a Professor at the New Zealand School of Forestry, University of Canterbury, where he teaches silviculture, statistics, modelling, and research methodology.  His research interests include forest growth and yield modelling, tree physiology, and silviculture.  He has published numerous peer-reviewed articles and a chapter in a textbook relating to climate change and forestry, and has been employed by government ministries and political parties to advise them on climate change issues from time to time.  He is a New Zealand citizen, born in Invercargill.  He was educated at universities in New Zealand and the United States of America.

Synopsis of submission

I provide a summary of our current state and the role of forestry in helping New Zealand respond appropriately to climate change.

Many proposed changes to the emissions trading scheme (ETS), particularly the idea of splitting credits into sequestered carbon versus avoided emissions with only the latter of any market value, are irrational, will create confusion, will lower confidence in carbon forestry, and will cause us to fail to meet our targets. This will cost the nation potentially billions of dollars in purchases foreign carbon credits of dubious quality, and in lost markets as other countries begin to sanction our lack of action.

Continued expansion of forests, particularly exotic ones, is vital for us to reach our national targets.

Unharvested exotic carbon forests could be assured of ultimate conversion to native by:

a.       Carefully selecting sites on which these forests are established,

b.       Requiring owners of such forests to place a portion of their carbon credit revenues in an escrow account to pay for any management required for their conversion.

More accurate assessments of sequestration on small woodlots would encourage farmers to establish carbon forests on small portions of their farms and reduce the likelihood of whole-farm conversions to forest that are currently causing such anguish in the agricultural sector.

Our emissions trading scheme ignores those responsible for more than half of our gross GHG emissions.

The “emissions leakage” argument used to exempt most greenhouse gas (GHG) emitters from the ETS does not work, because it requires us to assume that:

a.       We are the most greenhouse gas (GHG)-efficient producers of primary products

b.       Other countries will not seek lower their GHG emissions;

c.       People will continue to purchase goods with a high greenhouse gas footprint as the climate crisis worsens.

Moreover, actual studies of emissions leakage show that it is a negligible problem. Therefore the NZ agricultural sector and other trade-exposed industries, responsible for 57.5% of our gross GHG emissions, should not use the “leakage argument” as a justification for their exemption from purchasing NZUs.

The discussion document suggesting changes to the ETS fails to make the case that forest-based carbon credits threaten reductions in gross GHG emissions by overwhelming the carbon market with cheap credits. This case relies on the assumption that the supply of credits will increase while the demand for credits will remain small. However, making trade-exposed industries and agriculture responsible for their emissions would greatly increase the demand for credits, invalidating the argument that forest-based credits necessarily threaten reductions in gross emissions.

The pathway to lowering gross emissions is to:

a.       Require everyone, including farmers and trade-exposed industries to submit credits for the full amount of their greenhouse gas emissions;

b.       Allow the price of carbon credits to rise to the point where it is more cost-effective to lower emissions that to purchase offsets;

c.       Stop auctioning carbon credits;

d.       Stop giving away credits.

The threat of carbon forestry to our high country farming culture can be mitigated by making carbon lookup tables accurate and/or allowing owners of carbon forests < 100 ha in extent to measure actual carbon sequestration in their woodlots. This would encourage farmers to establish their own small woodlots, reducing the incentive to convert whole farms to forest and greatly increasing the profitability of hill country farms.

Background

Aotearoa has so far failed to make substantial progress in its response to climate change, and proposed changes to rules for permanent forest carbon sinks will further undermine progress in meeting our net GHG emission commitments for 2030 and 2050. That our nation is one of the worst greenhouse gas polluters is beyond doubt. Climate Action Tracker provides an assessment of our performance and rates it as highly insufficient (Figure 1).

According to our Ministry for the Environment, Aotearoa emits about 78 million tonnes of CO₂-e annually . These are known as “gross emissions”. In 2018 we emitted 16.9 tonnes of CO₂-e per capita. This level of emissions placed us 16^th worst among all countries[1], and is far above both the Organisation for Economic Cooperation and Development average of 10.83 and the global average of 6.45 tonnes of CO₂-e per capita[2].

Aotearoa has agreed to two international commitments. Firstly, we have agreed to a “Nationally Determined Contribution (NDC) to keep our net GHG emissions at 50% of gross 2005 emission levels between 2021 and 2030. Secondly, and more importantly, we have pledged to get our net emissions down to zero by 2050, with perhaps some exceptions for methane emissions from agriculture.

Recent progress has been made by setting up a Climate Change Commission, providing incentives to purchase electric vehicles, and attempting to negotiate with farming lobbyists. In addition an emissions trading scheme has been set up so that for a bit less than half the country’s emitters there is a price on greenhouse gas emissions. The price recently rose to as high as $85/tonne of CO₂, leading to some investment in carbon (C) forestry, among other things, and some concern from hill country farmers about whole-farm conversions to C forestry.  Conversion of whole, mostly hill country farms, has become a political issue, prompting some lobby groups to push for legal constraints on conversions. Typically these concerns are about impacts of whole-farm C forests on hill country farming as a way of life. The farming lobby has been joined by an anti-exotic species lobby that questions what might happen to exotic C forests that remain unharvested and would much prefer to see indigenous species in C forests.

Figure 1 – An assessment of our national performance at climate change mitigation, available on-line at https://climateactiontracker.org/countries/new-zealand/ (Accessed on 14/4/22)

The role of forestry

Creating new forests is the most efficient way we currently know of to extract CO₂ from the atmosphere. Trees absorb solar energy and create sugar from CO₂ and water. Some of the created sugar is used to provide energy for living functions, and some is stored for longer periods in biomass. Typically half the dry-weight biomass in wood is elemental C, and amounts of CO₂ extracted from the atmosphere (“sequestered”) by trees can be calculated by multiplying the mass of stored elemental C by 44/12.

New forests are called “sinks” for CO₂ because they extract far more CO₂ from the atmosphere than they emit through respiration, but forests do not remain sinks forever. The name “permanent forest sink” can therefore be misleading for those who are unfamiliar with forestry. Eventually forest sinks become simple carbon reservoirs. Those that are repeatedly harvested and re-established typically retain about 60-70% of their maximum C content at harvest in long-term average storage, while unharvested forests eventually reach the point where they are emitting as much CO₂ through respiration and decay of dead biomass as they absorb. Their long-term storage may be punctuated by small- and large-scale disturbances such as wildfires or windthrow that reduce their average long-term storage just as periodic harvesting can reduce average long-term storage.

Establishing new forest sinks to absorb GHGs we emit can only, therefore, be a temporary solution, with additional new forest sinks providing a cheap way to extract our GHG emissions from the atmosphere, achieving net GHG neutrality while we develop ways to reduce our gross GHG emissions to zero. If we wished to rely on forest sinks to achieve GHG neutrality on a permanent basis then we would need an unlimited supply of unforested land on which to establish new forests each year. This fact was clearly recognised by authors of the “Globe” study, a multi-partisan, parliamentary-initiated study designed to explore how Aotearoa could reach GHG net neutrality by 2050 (Vivid_Economics, 2017).

After extensively studying Aotearoa’s GHG-emitting and forestry sectors, the authors of the Globe study stated that in their opinion we could not reach net GHG neutrality by 2050 simply by reducing gross GHG emissions to zero because new technologies had to be developed, and resistance to rapid change would be strong. They recommended that new forest sinks be used to fill the gap between what we wished to achieve by 2050 and what could realistically be achieved by gross GHG emission reductions. This situation is clearly shown in a graph that quantifies the gap in our accounts that we need to fill with sequestration of CO₂ by forest sinks while we reduce our gross emissions to zero (Evison & Mason, Forthcoming) (Figure 2).

Figure 2 – The Globe study’s “Innovative” scenario of gross GHG emission reductions (red), the path Aotearoa has committed itself to for net GHG emissions (green), and the gap in our national C accounts that needs to be filled by forestry (blue dashed line) (Evison & Mason, Forthcoming). The graph and an accompanied analysis of our options will soon be submitted to a peer-reviewed scientific journal.

Reality is a bit more complicated than the situation represented by Figure 2 because we have not consistently planted the same area of new forests in Aotearoa each year. The last large-scale afforestation programme occurred during the 1990s, and many of those forests will be harvested in the 2020s, effectively reducing our carbon storage in forests, and this needs to be taken into account if we wish to genuinely reach net GHG neutrality by 2050. I’ll show that later, but for now let’s consider what factors influence the rate of CO₂ sequestration/hectare and the maximum amounts of CO₂-e storage in new forest sinks.

C sequestration by forests

Three factors overwhelmingly influence both rates on forest sink sequestration and maximum storage in forest reservoirs. These three factors are:

1.       The fertility, soils and climate on sites where the forests are established;

2.       The species established on those sites; and

3.       The ways that forests are managed. We call this management “silviculture”.

Impacts of site are easily illustrated, but are complicated by the fact that, by definition, no forests are currently growing on candidate sites for new sinks. We need to estimate potential productivity by examining the impacts of soils and climate on tree physiology (Figure 3).

Such a map would be subtly different for each tree species, because species differ in their responses to site conditions and pests.

If we ask which sites currently have no forest, and are not prime farmland, i.e.: land use classes 5 and 6, we get a map like that shown in Figure 4.

Rules for the national emissions trading scheme (ETS) specify that forests planted on land that was unforested in 1990 can earn carbon credits called New Zealand Units (NZU). One NZU is meant to represent 1 tonne of CO₂ removed from the atmosphere as trees grow. Land areas larger than 100 ha can be measured at various times and the tonnes of C stored can be estimated. However, if a forest owner’s land area is less than 100 ha then they are required to use default “lookup” table for sequestration. For some species, such as radiata pine, the tables vary with region, but for others there is simply one table. Tables tend to be conservative.

There is one lookup table for all native forests, which is a simple Gompertz yield equation based on data from 52 sites that rises to an asymptote of 445 t CO₂-e/ha assuming no water deficit (Payton et al., 2010). Clearly this table has too low an asymptote for many of the indigenous forests quoted in Table 1, and it was intended to be used for young forests established after 1990. Almost all the 52 sites measured contained manuka, kanuka and/or gorse with a few emergent native hardwoods.

 

Figure 3 – Megajoules/m² of solar radiation (of which ~50% is photosynthetically active) potentially useable by a species like radiata pine over the 10 years between June 2008 and June 2018 across Aotearoa. This geographical information system layer has approximately 3 million pixels, each representing 9 ha. Green = more productive, and white = unsuitable. Scales are NZTM eastings and northings.

Figure 4 – Areas in land use classes 5 and 6 that are currently unforested, coloured by likely productivity as shown in Figure 3.

Estimates of forest CO₂ sequestration rates and storage per hectare vary widely (Table 1).

Table 1 – Example carbon dioxide sequestration rates and storage by forests in Aotearoa. The first 10 entries were in natural stands, while the other examples were in plantations. In some cases below-ground C was considered while in others it was not.

Land cover	Sequestration t CO2/ha/year	Storage t CO2/ha	Below ground?	Reference
Native forest average (from national vegetation survey)		525	No	(Hall, 2001)
Native woody scrub		128	No	(Tate et al., 1997)
Manuka/kanuka shrub, ~25 years	10	238	No	(Scott et al., 2000)
Manuka/kanuka shrub, ~35-55 years		554	No	(Scott et al., 2000)
Manuka/kanuka shrub, 40 year span	7-9		Yes	(Trotter et al., 2005)
Lowland native podocarp-broadleaf forest		1238	No	(Tate et al., 1997)
Mature beech-podocarp forest		1287	No	(Beets, 1980)
Mature beech-podocarp forest		1290	No	(Tate et al., 1997)
Hard beech forest		1172	No	(Tate et al., 1997)
Mountain beech forest		938	No	(Tate et al., 1997)
Kauri, Northland, aged 67, 492 stems/ha	13.8	926		(Kimberley et al., 2014)
Kauri, Fred Cowling Reserve, aged 38, 1402 stems/ha	10.9	413		(Kimberley et al., 2014)
Kauri, Fred Cowling Reserve, aged 51, 11256 stems/ha	12	614		(Kimberley et al., 2014)
Kauri, Fred Cowling Reserve, aged 69, 1325 stems/ha	18.9	1306		(Kimberley et al., 2014)
Kauri, Taranaki, Brooklands Park, aged 50, 630 stems/ha	13.3	663		(Kimberley et al., 2014)
Kauri, Taranaki, Brooklands Park, aged 71, 630 stems/ha	14.5	1027		(Kimberley et al., 2014)
Kauri, Taranaki, Brooklands Park, aged 83, 630 stems/ha	13.4	1116		(Kimberley et al., 2014)
Kauri, Hawkes Bay, aged 48, 1700 stems/ha	20.1	966		(Kimberley et al., 2014)
Kauri, Northland, aged 36, 650 stems/ha	10.9	393		(Kimberley et al., 2014)
Totara, Northland, aged 102, 1225 stems/ha	17.4	1770		(Kimberley et al., 2014)
Totara, Northland, aged 102, 1825 stems/ha	13.3	1357		(Kimberley et al., 2014)
Totara, Northland, aged 58, 816 stems/ha	6.5	376		(Kimberley et al., 2014)
Totara, Hawkes Bay, aged 48, 1975 stems/ha	8	382		(Kimberley et al., 2014)
Totara, Waikato, aged 30, 2831 stems/ha	6.1	182		(Kimberley et al., 2014)
Kahikatea, Waikato, aged 30, 2831 stems/ha	9.6	289		(Kimberley et al., 2014)
Puriri, Bay of Plenty, aged 69, 588 stems/ha	15.2	1046		(Kimberley et al., 2014)
Red Beech, Waikato, aged 16, 738 stems/ha	9.2	147		(Kimberley et al., 2014)
Red Beech, Southland, aged 14, 1579 stems/ha	6.2	87		(Kimberley et al., 2014)
Black beech, Southland, aged 14, 1508 stems/ha	7	98		(Kimberley et al., 2014)
Pasture without grazing		11	Yes	(Ford-Robertson et al., 1999)
Pruned radiata pine on a good site, 400 stems/ha (modelled), average over three 28 year rotations		814	Yes	(Ford-Robertson et al., 1999)
Pruned radiata pine on a poor site, 250 stems/ha (modelled), average over three 28 year rotations		550	Yes	(Ford-Robertson et al., 1999)
Pruned radiata pine, 250 stems/ha to age 28 Central North Island (modelled)	33	918	Yes	(Robertson et al., 2004)
Untended radiata pine, aged 15, 2500 stems/ha, site index=23	38	571	Yes	(Yallop, 2021)
Untended radiata pine, aged 15, 1250 stems/ha, site index=23	34	514	Yes	(Yallop, 2021)
Untended radiata pine, aged 15, 625 stems/ha, site index=23	27	401	Yes	(Yallop, 2021)

 

Paula Yarur Thys (2021) measured C storage in planted native forest stands on Banks Peninsula, Canterbury up to 59 years after planting, and compared their C storage to those estimated by the lookup table assuming a water deficit (Figure 5). She found that data were highly variable, that they more or less agreed with the lookup table for young stands, but older stands had C storage exceeding that shown in the table. Moreover, a nationwide survey by Beets et al. (2009) demonstrated that many natural stands exceeded the asymptote in the lookup table (Figure 6).

Figure 5 – Measured CO2-e storage (blue triangles) versus age, and the Ministry for Primary Industry’s carbon sequestration lookup table for native forests on dry sites in Canterbury (red line).