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South Island Set To Lose $2.7 Billion

Monday 5 March 2007

South Island Set To Lose $2.7 Billion From Govt Carbon Credit Grab

The South Island could lose at least $2.7 billion and potentially up to $4.2 billion from the Government's decision to nationalise Kyoto carbon credits legitimately owned by forest owners and forestry investors, the Kyoto Forestry Association (KFA) said today.

The association released the calculation on the eve of the Government's consultation meeting at Christchurch's Russley Hotel at 9:45 am tomorrow, Tuesday 6 March.

It is based on an estimate of the area of post-1990 Kyoto-qualifying forestry in the South Island, derived from official MAF forest area data by age class and territorial authority, and an estimate that carbon credit values will reach between $13,000 and $20,000 per hectare during the life of a forest.

Canterbury's loss will fall at between $575 million and $885 million, according to the analysis.

KFA spokesman Roger Dickie said more than 1,400 forest owners had attended MAF consultation meetings in the North Island and Nelson, and had delivered an overwhelming message rejecting the Government's confiscation of carbon credits and its plans for massive new taxes on the forestry industry.

"Canterbury forest owners need to unite with the rest of the industry and make the message unanimous throughout the country," Mr Dickie said. "We need to leave the Government in no doubt that we will never accept our carbon credits, or any other property, being confiscated by the Government without compensation."

Kyoto carbon credits, which the Government plans to confiscate, are earned by those individuals and businesses that sequestered carbon by planting new forestry since 1990, and by those industries which have cut their carbon emissions since then.

Through the 1990s and the early part of this decade, officials under both National and Labour Governments made clear that forestry investors would gain financially from the credits, which are a clear property right, as confirmed by the Treasury.

This fuelled a planting boom with 30,000 ordinary New Zealanders and forestry companies putting up as much as $400 million per annum of their own risk capital to invest in more than 600,000 hectares of new forest - both because of the benefits predicted to arise both from the sale of wood products and from carbon credits earned from carbon sequestration. In Canterbury, KFA estimates that approximately 44,000 hectares of Kyoto-qualifying forestry was planted.

Since the Government first indicated that it intended to confiscate the credits, tree planting in New Zealand has plunged and New Zealand is now experiencing deforestation for the first time in living memory.

Mr Dickie said the Government had previously indicated it would limit its confiscation of the credits to those associated with the First Commitment Period of the Kyoto Protocol, costing forest owners nationwide as much as $2.5 billion. Now, however, Government officials are indicating it may extend the confiscation to the Second Commitment Period, putting eventual losses nationwide up to at least $8 billion and potentially many billions more.

"The chainsaw massacre we are seeing across the country, and particularly in Canterbury, is caused by a collapse in confidence in the industry," Mr Dickie said.

"Forestry operates over a 30-year investment horizon. Forestry investors need stability in Government policy and certainty that property rights will be respected over the long-term.

"The Government has neither provided policy stability nor respected property rights, so new forest planting has plunged and the chainsaws have been revved up.

"The Government needs to understand that if it wants tree planting to start up again, it needs to restore confidence amongst forestry investors.

"Confidence cannot be restored by cheap subsidy schemes. Confidence can only be restored by returning our post-1990 carbon credits to us."

Mr Dickie said the time was fast approaching when all political parties would be expected by the industry to firm up their policy commitments to it.

"Forest owners are the environmental and economic good guys," he said. "We employ around 25,000 New Zealanders, we are the fourth largest export earner in the country, our trees protect the quality of our land and we are crucial to the fight against climate change that both the Prime Minister and the Leader of the Opposition have been talking so much about.

"We know our industry, and what makes it tick. We expect the Government and the Opposition to endorse the six-point plan to get forest planting underway again, which was agreed last year by all key players in the industry, including the New Zealand Forest Owners Association (NZFOA), the New Zealand Farm Forestry Association (NZFFA), the Federation of Maori Authorities (FOMA) and KFA."

END

Attached: Background Information NZ Forestry Industry's Six-Point Plan to Get Planting Underway Again NZ Forest Plantings 1990-2005

Inquiries: Roger Dickie Kyoto Forestry Association Ph: 027 4428687

BACKGROUND INFORMATION

The New Zealand Forestry Industry's Six-Point Plan

1. Remove the inequitable, retrospective 'deforestation cap'.

2. Allow land owners with Kyoto-qualifying forests (forests planted from 1990) - as well as those replanting non-Kyoto forests after harvest - to financially benefit from the value of the carbon their forests remove from the atmosphere.

3. Introduce broad-based carbon charges, ensuring that all emitters of greenhouse gases face the same opportunity costs.

4. Ensure that New Zealand's Kyoto policies have the best long-term outcomes for New Zealand, even if they don't exactly mirror current Kyoto rules.

5. Develop a regime which puts a value on the environmental attributes of forestry, thereby encouraging investment in the sector.

6. Act immediately.


New Zealand Forest Plantings 1990-2005

Year Hectares 1990 16,000 1991 15,000 1992 50,000 1993 62,000 1994 98,000 1995 74,000 1996 84,000 1997 64,000 1998 51,000 1999 40,000 2000 34,000 2001 30,000 2002 22,000 2003 20,000 2004 11,000 2005 6,000

ENDS

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