Government foreshadows new ETS sequestration categories but then creates yet another communication muddle
The Government’s on-farm sequestration policy appeared to have taken a big step forward with a media release from the Government on 30 November, apparently timed to coincide with the National Field Days at Mystery Creek. However, precisely where the step has landed is not clear.
The media statement released by the Prime Minister’s Office included statements from Prime Minster Jacinda Ardern, Climate Change Minister James Shaw and Agriculture Minister Damien O’Connor.
A key reason why things are less than clear is that once again the Government’s communications messed up in a big way. Remarkably, there were two different versions of the media release. One of these was released to media by Andrew Campbell in his role as Chief Press Secretary in the Office of the Prime Minister. This was the version I was working with when I first drafted this article. The other version is what can currently be found here at the Government’s official Beehive website (beehive.govt.nz)
At the top of both versions of the media release are three dot points, which supposedly encapsulate the key points, and which inevitably provide the criteria that outcomes will be judged against. The problem is that two of the dot points differ significantly between the different versions.
It is as if the Government has tried to spin the new policy in two different directions. Or is this just the spin-doctor officials in the Government’s communication system that have stuffed up in a big way? Oh, how I wish for a Government-communication system that could stick to concise presentation of facts and policy, and stop trying to impose spin!
What a shambles!
The first dot point, with this being common to both versions, says “Government to work with primary sector on developing a sequestration strategy”. Further down, the Prime Minister said: “We want a plan for reducing agricultural emissions we can all agree on. We’ve heard sequestration is a top priority for farmers and critical to making He Waka Eke Noa work.”
Where ‘working with primary sector’ finally lands among diverse rural groups only time will tell, but it is certainly an explicit statement. However, Government started saying that more than three years ago. Since then, the notion has become more than a little frayed.
The second dot point in the version from the Office of the Prime Minister said that “Government confirms today it will bring all scientifically robust forms of sequestration into the Emissions Trading Scheme, starting from 2025.”
In contrast, the Beehive version simply says that “Government is committed to sequestration being recognised from 2025”. Well, that Beehive version is a meaningless statement given that sequestration is already included within the ETS, albeit with provisos.
A key missing phrase from the Beehive version is “all scientifically robust forms of sequestration”. Those words are of fundamental importance.
Another key phrase in the version from the Office of the Prime Minister is that this additional sequestration will be embedded within the Emission Trading Scheme (ETS). This contrasts with industry’s He Waka Eke Noa (HWEN) proposals that it be funded within HWEN as an offset for methane emissions.
If sequestration is in the ETS, then funding comes from emitters elsewhere in the economy. If funding comes from HWEN offsets, then it is Peter Farmer paying Paul Farmer by a higher methane levy.
So, getting all sequestration within the ETS would be an outstanding outcome, totally logical, and would remove a fundamental problem within industry’s own HWEN proposals. I have argued consistently for that. Is this what the Government is now promising?
The third dot point in the version from the Office of the Prime Minister was that “This will be done at full value, rather than at a discount, so farmers can realise the true potential of the vegetation on their farms”.
This too is an outstanding outcome, much better than HWEN’s pragmatic proposals that pre-2008 native plantings should be at a discount.
However, the third dot point in the Beehive version takes a different tack, saying absolutely nothing either in the dot points or further down about discounts, but instead that there will be “Transitional arrangements in place from 2025 with entry into the ETS to follow later”
So just what will those transitional arrangements be? And when is later? And if the additional sequestration is to initially be outside the ETS then who is going to pay for these credits?
For the Beehive version, it seems there could be a long transition with Peter Farmer paying for Paul Farmer, and with a consequent need for a higher levy on methane well beyond what is needed for the funding of RDE&E (research, development, extension and education).
The other key outcome, not explicit in either version, but surely now very much on the table, is that the pre-1990 barrier for sequestration from native forests will disappear. This should apply in all situations where native forest owners can show that they are appropriately managing these native forests with fencing and pest control, thereby meeting additionality criteria for the sequestration.
If this dropping of the 1990 barrier is not the intention of Government, then Minister Shaw’s statement within both versions of the media release that the proposals are a ‘significant shift’ relating to the ETS would not be defensible.
Ironically, the Government already claims sequestration for pre-1990 forests in its national Inventory determinations that are reported to the UNFCCC, but very few industry people have been aware of this.
There has been a widespread belief both in industry and in the broader community that pre-1990 forests were somehow prevented by Kyoto and subsequent agreements. But that is not the case. Rather, the key requirement for international acceptance is that explicit verifiable management decisions are creating additional sequestration beyond what would otherwise occur.
Within New Zealand, it is very clear that fencing and pest management, particularly for deer and possums, are essential for forest health. Without these programmes, native forests go backwards.
One of the key frustrations until now for farmers with native plantings has been the challenge of demonstrating that their native forests satisfied the post-1989 criterion. Everything gets much simpler once that barrier is broken down and farmers can focus on demonstrating that the forests are managed.
The ability to measure this sequestration in native forests is also proceeding in leaps and bounds, with various ‘eye in the sky’ and precise GPS systems. This makes measurement feasible in situations that were previously impractical.
The Government emphasises that a lot of work is now needed to get all the necessary systems in place to make all of this happen. But two years through to 2025 is still a long time if people put their minds to it. The rules themselves are not complex. The challenge is to ensure that claimed outcomes are verifiable.
I expect that there will be still be robust discussions regarding the practicality of small holdings of less than a hectare, be those pre-1990 or post-1989. Also, many of the riparian plantings are essentially of non-woody species and some farmers may be disappointed at how little sequestration is occurring. However, the ecosystem benefits of these plantings go well beyond the sequestration benefits. Let’s see where that ends up.
The priority for Government right now is to clarify exactly what they do mean. Why are there two different versions of the media release? Is one version an earlier draft? And if so which one? Someone needs to admit to stuffing-up in a big way.
One of the challenges for industry when they next sit around the table with the relevant ministers and their officials will be to make sure that their own knowledge of the science and practicalities is strong. They owe that to their members.
Despite the shambolic way this has been managed and communicated, the good news is that prospects of an agreed path forward in relation to on-farm sequestration credits for native forests, including those where the regeneration commenced pre-1990, now look more feasible than they did just a few weeks ago.
Of course, this is just one aspect of the greenhouse gas issues that New Zealand has to work on. It still leaves big issues relating to productive farmlands threatened by corporate forestry. And it still leaves methane and nitrous oxide policies in disarray. But hopefully it is a step forward.
Hi Keith, great but depressing article!
While not trying to create a conspiricy theory as it might well be just a mistake, could it be that the government is trying to create so much confusion about their approach that they can then just go ahead and do what they want. All the while they will be saying something like “we have tried to work with the industry but they just can’t seem to agree so have to do the right thing and put it all into the ETS”.
The government does this by using these techniques:
1. Release multiple related but slightly different proposals on a regular basis. The industry bodies and commentators then lose focus on the real issues and go off in different directions.
2. Put up a whole lot of red herrings (e.g. not allowing certain logical sequestration options). This means that the industry has something relatively minor (sequestration by hedges) to really focus on, get angry about and agree on a position. Then the government says “we have listened to the industry and will allow this” and get the rest of the policy in without a word of dissent and look like the reasonable ones while agriculture are just whingers.
3. Creating then shooting down straw men. When it is rightly claimed that methane doesn’t belong in the ETS, their main focus is on you being a climate change denier.
At the end of the day, it’s just politics to them and they can’t see past the next election!
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It sounds like it is heading towards a very expensive system to administer. Measuring the C sequestered in small pockets of vegetation is one thing. But then presumably it will need to be audited.
Yes, This is why I (and also the Climate Change Commission) thought that the HWEN focus on areas <1 ha was heading down a dangerous path. There are more important things for HWEN to focus on
Hi Rob. I agree that anything like this is going to be difficult to administer but AI is proving quite useful in this type of work. I live in Ireland where maps have to be produced annually for the purpose of calculating the eligible area for EU subsidy payments. High definition satellite maps are produced annually and a computer runs its eye over the area to do many things but two are of most importance:
1. look for “ineligible areas”, for example areas of gorse and rushes which are not eligible for area payments and
2. land use changes (e.g. a new farm track) which are deducted from the eligible area.
This used to be done by a team of people staring at computer screens all day but now computer AI flags up even the smallest of changes which are then checked by the team. It is not a stretch of the imagination that the same technology could be employed to check even for single trees as it able to do with quite good precision and is getting better all the time.
I’m not saying that this would be a welcome development but it is possible!
Keith, my view is different. Current increases in planting and the stockpile of NZUs and the continuation of auction volumes will likely drive price down. this is the reason why they have made a Uturn on sequestration and kept it out of HWEN. There wont be enough demand from emitters to pay a reasonable price so the voluntary market will be an option but that will be set on the compliance market prices.
The other factor re pre 90 forest is there is no liability for harvest as long as you replant and also a free deforestation provision if you have less than 50ha. If there became an additionality credit then there would be a potential liability being created as well, which wouldn’t be a problem if the value of NZU’s was minimal but will create a potential liability on someones balance sheet.
Ecosystem services are very hard to value and very hard to prove that there is an economic benefit. My experience, which is small, is that these are easier to value as cost replacement, ie fencing, planting opportunity cost of the land versus habitat, freshwater quality and infrastructure protection through flood mitigation.
HWEN is still a tax with minimal mitigation available that is scalable and cost effective.
I agree with the person above the differnt versions just mean they can keep things murky until a final decision is made
The current decline in the price of NZUs is a direct consequence of the Govt decision in the week just before Xmas to not accept the CCC advice re maximum and minimum carbon prices and the use of buffer funds. The timing was exquisite as it slipped right under the radar of the media, who in any case would largely not have understood the implications. Let there be no doubt, the ETS system is now in disarray. The political implications are huge.
Yes and and no. Your right about govt advice not accepting the CCC CCR price points which will basically increase supply, adding current non ETS forest carbon volumes to this will just make it worse. As well there is the “free allocation” to trade exposed industries.
My main comment was that the Govt HWEN announcement will just increase supply while not really allowing farmers to offset.
Id be interested in what you mean about the political implications.
I see it as driving the price down to allow a cheaper Paris buy out.
The political implications include that the decision by Labour to not accept the CCC recommendation drives a huge gap between the Greens and Labour. I think this will shift a significant number of voters across to the Greens once the schism is understood. There may also be some Blue- Greens who drift across. The Green party itself will have to decide whether they are a Green party independent of left/right consideration) or a Socialist-Left party. Overall I see a much more fractured political scene.
It is important to recognise that most forestry is and will be in HWEN (or whatever emerges out of HWEN). A lot of the current sequestration arguments are about rats and mice issues. This is disappointing given how important issues are thereby getting insufficient attention.
I don’t think it’s in total disarray they have just slowed the price trajectory and kicked the can down the road for a few years. The CCC commission must be wondering what they are doing!!!
How the small areas will be measured and sit inside the ETS, accepted overseas etc is a mystery to me and I know the officials who are bewildered as well.
The Crown has now set the price trajectory with the trigger price and the CCR will be taken each year, also forcing the Crown to spend 100s of millions buying units offshore, and a slow price grind up from here based upon the price points. Internationally you can’t go backwards and Australia’s new price caps line up with our price triggers.
It’s also locked the ETS in now as farmers will be beneficiaries of cash from it and rely on it, many already do now. Remove the ETS and many will struggle – over 3,000 participants now with over 2,000 plus farmers there and growing by the day. They and the other farmers getting in in will not welcome restrictions.
At some stage they will need to limit forests – who do you limit? Farmers, NZ investors, NZ foresters, Iwi ?
Keith, are you and your family OK?
No articles from you for a while.
Have been relying on you to explain the implications of unfolding events
Thank you and all the best
Alas, I have pancreatic cancer and hence the lack of recent writing.
I’m so sad to hear that is the reason that you are not writing.
You make a massive contribution to our primary industries.
Thoughts with you and your family during this time.
I hope every day is better.
Alas, I am distracted by a battle with pancreatic cancer.