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11th Hour Disclosure Of NZ ETS Review Modelling

Giving less than 48 hours’ notice, Government officials yesterday hosted a webinar on the modelling which underlies the NZ ETS Review. They also released the associated data sets in the form of pages of excel spread sheets.

Why the Government left the release of this modelling so late, with just 2 weeks left in the consultation period, boggles the mind. Officials said the modelling hadn’t been released earlier because it “wasn’t crucial to the Review” and was only being released now because “someone asked for it.”

Attendees were told that the modelling doesn’t analyse the 4 options put forward in the Review document. This was because “the options had not been specified in enough detail to permit modelling”.

In just 20 minutes the 3 presenters took us through a series of charts leading to (their) conclusions that:

  1. Modelling ETS supply and demand is uncertain because of uncertainties over price response and complicated because of the size and possible behaviour of the stockpile.
  2. However, the analysis suggests prices that would... incentivise a significant afforestation response that would “over-supply” the market (and) there is a significant risk that, under current settings, prices will be too low (or even falling) such that there will be little gross emission reduction.

Offered in support of these conclusions was an MPI technical paper titled NZ ETS Forestry Allocation and Surrender Forecasts (the Elvidge paper). This paper reveals that the modelling is heavily dependent on a 2021 survey by the University of Canterbury School of Forestry (UCSF) which asked forest owners about their afforestation intentions.

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One of the attendees, who described himself as the owner of a small forestry management company, queried how scientifically robust the survey was. He explained that he had participated in the survey and had simply been asked over the phone what his forestry plans were for the next couple of years. He said he didn’t have confidence in the survey numbers. The officials quickly moved onto the next question.

When one of the presenters was asked about future afforestation assumptions, with it now looking like there would be a downturn in planting over at least the next 2 years, he answered that the modelling was “not responding to what was happening on the ground”. In other words, what is happening in the real world. Another official insisted that, rather than a forestry planting downturn this year (as many forestry leaders claim), there was evidence that 88,000 hectares of exotics would be planted this year. He didn’t care to elaborate.

Understandably, there were a lot of Q&As. We asked the following questions but were told the Ministry would respond by email.

1. The 2021 UCFS survey is obviously a key document in the forecasts. As the Elvidge paper concedes at para 6.1, the uncertainty analysis in that survey excludes changes to the ETS settings over 2023 - 2027 recommended by the Climate Change Commission (and now accepted by the Government). Also excluded is the scrapping of most new forest plantings in 2023 and perhaps longer. At what point does all this uncertainty mean that the forecasts risk becoming meaningless?

2. The forecasts presumably underlie figures 3, 4 and 5 in the NZ ETS review consultation. Fig. 3 in that document shows NZUs held by existing forestry participants to meet future harvest obligations, and notes that it is generally not expected these NZUs would be supplied to the market. Where in the forecasts does it explain why these NZUs have been included in the expected future forestry supply (of NZUs) shown in figures 4 and 5?

3.At para 5.3 of the Elvidge paper it says that a significant proportion (around 80%) of the post 1989 forest estate is projected to be harvested over the next decade (to 2033). Why then does figure 5 in the Elvidge paper show the rate of future NZU allocations from existing stock change forests continuing to grow from 2033 to 2050?

Frankly, we learned little more than we had already surmised, namely that the modelling which underlies the Review document is based on questionable assumptions and that the objective of the Review is to create an incentive scheme for forestry outside of the NZ ETS. We remain concerned that the Government is determined to amend the Climate Change Response Act 2002 to (1) force existing forests out of the NZ ETS and into that new scheme, where they will in future be allocated inferior “removals units” instead of NZUs, and (2) reclassify more than 96 million forestry NZUs currently held in private ownership, as removal units. As we have previously noted, a legislative change of this kind is a classic illustration of expropriation involving the taking or impairment of private property rights.

If you are someone who could be adversely affected if the ETS changes contemplated by the Review end up becoming law, then we encourage you to make a submission before 11 August 2023. A quick submission can be made at:

Halt NZU Grab

Campaign Co-convenors: H. Bradbury and S.Thomson


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