UPDATE: Govt hints at higher carbon price cap

UPDATE: Govt hints at higher carbon price cap as forestry funding soars; targets natives

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By Pattrick Smellie

Aug. 13 (BusinessDesk) - The government is hinting it will lift the $25 a tonne upper limit on the price of a New Zealand Unit of carbon dioxide in the Emissions Trading Scheme, in an announcement following hard on a doubling of funding for government tree-planting.

Climate Change Minister James Shaw and Economic Development and Forestry Minister Shane Jones jointly announced a six week consultation on "improvements to the ETS", in which "the government is interested in hearing stakeholders’ opinions about exploring the possibility of a change to the $25 fixed price option".

The previous government imposed the $25 upper limit for NZUs to assist transition towards a fully fledged scheme in which the price of carbon would rise to reflect international carbon prices and assist New Zealand firms and people to take action to meet the country's commitment to carbon emissions by 30 percent from 2005 levels by 2030 and reach net zero emissions by 2050.

“A net zero emissions target by 2050 is currently being considered in the Zero Carbon Bill process but, in the meantime, we need to make sure the ETS is improved so that it is a credible and well-functioning scheme to help us meet our emissions targets,” the ministers said, noting the forestry industry's desire for certainty before committing to large-scale commercial planting after sharp swings in ETS policy over the last 10 years knocked confidence in the economics of so-called 'carbon farming'.

The ETS announcement coincided with a doubling to nearly $500 million the funding for forestry planting from its Provincial Growth Fund, with as many as two-thirds of those trees being native species.

The funding decision means one-sixth of the $3 billion, three-year PGF will be spent on planting trees.

Jones announced the boost after the weekly Cabinet meeting, including a target that two-thirds of the forestry planted with government backing should be native forests, despite native seedlings costing 10 times a pine seedling and the fact that native forests' slow growth rates reduce their short-term contribution to meeting New Zealand's carbon emission reduction goals.

Forestry planting has emerged as a key element of the government's efforts to tilt the New Zealand economy towards action on climate change, land erosion, water quality and regional unemployment, with the government committing to help fund around half of its 'One Billion Trees' initiative on land unattractive to commercial foresters.

The $240 million commitment to plant some 60 million trees will be funded through the PGF with about $118 million set aside for grants and a further $120 million for partnership projects over three years and will come on top of the $245 million already committed to the so-called 'One Billion Trees' project to kick-start the programme, which includes funding for joint ventures and the expansion of the Hill Country Erosion programme.

The funding would "support tree planting in areas where wider social, environmental, and regional development goals can be achieved" rather than clear commercial returns.

“We’re strengthening our support for planting over the next three to four years in areas where there are currently limited commercial drivers for investment, and where wider social, environmental or regional development benefits can be achieved," said Jones in a statement.

“The new grants scheme will provide simple and accessible direct funding to landowners for the cost of planting and establishing trees and regenerating indigenous forest. Private landowners, government agencies, NGOs and iwi will all be able to apply."

At a press conference to announce the initiative, Jones also made clear the government wants to avoid bringing in foreign labour to do the tree-planting, saying a key part of the plan was to get "my so-called nephs (nephews) off the couch" and into work. Some 1,000 jobs, mostly low-skilled planting, were likely to be created by the PGF funding, although Jones acknowledged that unemployed youth in South Auckland might have to move to the regions to take the work.

The government last week launched a 'Mana-through-Mahi' pilot scheme, which will subsidise employers to take on unemployed people between the ages of 18 and 24 who are on the dole, although at this stage forestry is not amongst the pilot industries.

Jones said that by 2020 close to 100 million of the targeted billion trees to be planted within a decade should be in the ground. Funding at this stage was also required to allow nurseries to gear up seedling production and for the forestry industry to start training a larger workforce.

(BusinessDesk)

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