ETS changes kill appetite for forestry ‘carbon farming’
"Could there be a bigger insult to an 'actual' farmer than the concept of 'carbon farming'?"
Featured commentBUSINESSDESK: Changes to the emissions trading scheme will stop investment in one of New Zealand's most important sources of future carbon emissions reduction – forestry "carbon farming", Carbon Farm chief executive Murray McClintock says.
As a provider of forest management services to the fledgling industry, he says "the net result of these changes will be there is very little incentive to supply New Zealand Units into the New Zealand carbon market".
"We are trapped now in a price-taking situation where the future pricing will be set by the price in Europe," he said.
European carbon prices have already collapsed and appear likely to stay low for at least the next four years while the 27 European Union member states agree on measures to undo a glut of carbon credits.
That fall had already undermined the economics of carbon farming, Mr McClintock said, and the government could have created a buffer to that by requiring a certain proportion of credits to be sourced as domestic NZUs.
Europe and Australia, the only other parts of the world with ETS policies, both have such caps in place.
Business and farm lobbyists argued against such a move, saying a cap on the use of internationally sourced emissions credits would impose new costs on local businesses and households, while interventions to counter temporarily low global carbon prices would violate market principles.
In the end, the government rejected proposals for NZU proportions of between 10% and 50% of annual carbon credit requirements to force purchase of NZUs.
This week's decisions have created pressure on large emitters to dump NZUs, which they had been stockpiling at current low prices, in anticipation of increased carbon offset obligations.
However, Climate Change Minister Tim Groser put those proposed increases on hold this week.
The decisions announced on Monday leave the ETS in a semi-permanent state of transition, with no changes to existing obligations on large emitter industries and no target date for including the agriculture sector in the scheme.
"The government has had a number of options in respect of the changes they could have made," Mr McClintock told BusinessDesk. "In each case where they had a choice, they've favoured emitters."
The latest announcements would discourage further planting, yet the government expected carbon farming to become a substantial source of offsets for future carbon liabilities.
"We could have made some modest changes that gave some encouragement to the supply side," he said.
While the conditions for a carbon market were likely to improve at some future time in New Zealand, the experience among early investors of gearing up for a market that has been postponed would slow its development in the future.
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Comments and questions23
McClintock should talk to Key.Key said it was all a hoax.
Scrap it. Problem solved. Hoax over.
In an economy that prides itself on being so open, its hard to be sympathetic to anyone who lobbied the Crown to establish a legislated market, a privileged market, to whet their appetite. Its a faux attempt at a market, destined always to fail. Let it go.
Oh dear, how sad. Mr McClintock will just have to find something else to peddle. I've heard there is a shortage of tulip bulbs after the market glut and dip about 300 years ago.
Maybe the Govt. took some notice of ( or I hope they did) this letter from Barry Brill
http://www.nzcpr.com/guest284.htm
Sounds all good to me. Mr McClintock should be investing in forestry for the timber. He should not be in it for Gov. subsidies. Especially when those subsidies are screwed out of Fellow NZ investors who are producing products that real consumers have an effective need for.
Carbon Farm chief executive Murray McClintock = vested interest
Murray should pack his bags and head off to Oz. He'll be happy now that carbon tax is a reality there.
Could there be a bigger insult to an 'actual' farmer than the concept of 'carbon farming'? So we want to be as dopey as the Europeans, destroying our economy like they have their's? Carbon farming is the ultimate tag that indicates the sinking of reality under the hubris of politicians. Homepaddock explains well on this link that farmers are getting no free ride, already, above this nonsense, and I explain on this link how the fastest way to convert the South Island into a dairy farm, and score an own goal, will be to put livestock into an ETS, also, how this whole notion of farmers as polluters is more likely to be city folk putting city values onto the country. What would be more pleasant: driving through our pristine countryside on Sunday morning, or down Queen Street after Saturday night?
A functioning ETS was bringing significant co-benefits in terms of water quality, biodiversity, soil improvement and protection over and above green house gas emission mitigation.
I spend most of my time working in the countryside the length and breadth of the land. I am staggered at the scale of the damage that dairy farming is inflicting on our soils, streams, rivers and biodiversity.
but, of course you are happy to eat meat and drink milk eh. i.e. taxing people with a scam draws no links to pollution resolution whatsover. The money train with the ETS never winds up in beneficial hands does it. Or, are you fooling yourself. And, such scam tax has no effect over the emissions. They occurr anyway whilst the tax is collected. This is because people no longer believe in the scam where most sensible people, in control of their senses, tend to look at the big yellow thing in the sky to tell if it's warm or not.
Oh for Heaven's sake. You say 'a functioning ETS was bringing significant co-benefits ...'
Prove that? What functioning ETS? If you're talking forestry ETS, it's barely been in yet, compared to the life of a tree, so how could there have been provable benefits yet? Especially given the advertising of the forestry ETS was so miniscule I'm willing to bet most farmers with woodlots big enough to be affected don't even realise they're in the scheme (pre-1990) and so are doing nothing different to what they ever were. So any benefits you were seeing must have been farmers going about their business of farming in the normal way, and ensuring their environment, which they live in, it kept as good as they can manage it, with the improving practices they are employing, voluntarily, as they are learning all the time through the R&D they fund.
I spend a lot of time in the countryside also, and I don't see all this rural destruction, not at all.
Anon #8. You are a man of the lands you say. You of all people should understand the ETS will do sweet-fanny-adams for our rivers, diversity etc.
It's a tax to be fiddled. It's pedalled by the greatest snake-oil salesman of a generation. It's about politics and has zilch interest in the environment.
That's how it facilitated our paying $300-mil to the Harvard Pension Fund, without an conditions on how that money is spent. Carpark for Boston campus staff/ a mausoleum honouring Castro, whatever?
And since we are paying them this money, we are acknowledging that they, a US owned institution, own "our" carbon pit or whatever you types think THEIR trees are. We aren't entitled to that carbon credit...again, I don't know what that is either.
What I do know is this is Goron nonsense like a Nigerian scam.
Enough
The ETS is not a tax it is a market. The ETS creates property rights with regards to emissions and sequestration. It is no different to the property rights of owning land, fishing quota, access to the electromagnetic spectrum or intellectual thoughts etc on which the wealth of the nation is based.
The whole point of the ETS is to constrain net emissions in the most cost-benefit efficient way so as to avoid cooking the planet.
The ETS is a tax. Like all unearned increment on goods and services, it is a tax on nature. Don't believe me, then please tell me just one cost/tax that does not end up extracted from/paid by nature.
In response to Mark Hubbard. I understand around 40 farms were purchased for forestry purposes on the East coast of the North Island (Wairapa to Gisborne) in the last year or two. This market has now collapsed.
Many of these farms were owned by hill country farmers who have been on the bones of their bums for ever. There still heaps of these types hoping that sale to forestry interests will save them from eternal penal servitude.
Interesting. Okay, here's the counter point, as I see it. Counter to the comment from another anonymous above - wish you guys would at least use monikers - a carbon credit does not create a property right: it is nothing like IP. I create IP so can have property in it, a carbon credit is a completely artificial market created by politicians with no regard to unintended consequences, that is, real markets. That is why the carbon market has collapsed (utterly) in Europe, with people losing their shirts, and has collapsed in the US, and will collapse here.
So, long term, these 40 farms going into forestry for a carbon market that will collapse just creates another, bigger, problem. The only reason to take those farms out of sheep and beef is because forestry might provide a better return in a real market for its products. Courting artificial markets is courting disaster, quite apart from the philosophical issues involved, being a carbon market grows the size of the state, yet again, and that is the true, and very real, threat. Again, look at a disintegrating Europe.
We've done the big state crony capitalist thing over and over: one day there will be a wise generation that realises it always ends in some Gulag or other, and economic misery.
The govt should embark on a crusade to encourage us to become vegans and to drink only soy milk. That would bring an end to all this grief.
Fantastic Mark and John. We should also ask 'anonymous' to explain why those 40 farms were either failing as sheep and beef farms or were not fit to be purchased in an open market for forestry. Planting a tree was never an onerous proposition until the self serving ETS was enacted. As a forester and a farmer who had just started farming when the wind back of state privilege in mid 1980's occurred its staggerring to witness the rebirth of such privilege by those who find real world employment to hard and cold.
Yes, note above how the dislikes on my posts outweigh the likes, yet, per the link to my blog post in my first post above, even if I play the devil's advocate and say, despite the growing science to the contrary, that there is a man-made climate change issue, prove to me that a carbon trading scheme will change such an issue for the better - no one can, because even if we say there is a problem, carbon trading won't fix it. How can it?
Yet these same people are willing to sacrifice the standard of living of struggling families in NZ, by increasing their energy and their protein costs, to chase an empty symbolism. And the Greens will put livestock into an ETS, despite they must know it will be an own goal and see much more marginal land, that should be farmed for sheep and beef, go into the dairy estate, simply by the demands of the artificial costs created.
The Left: you wouldn't want them running a country.
There really is only one reason for ETS, and that is "consumer perception" and "market access".
If that means our Gov. must be seen to be doing something, then so be it. Let our Gov. talk and have meetings, (it is what they do very well) BUT they should not do any more than that.
Unless USA and China etc ( the worlds biggest poluters) get fully involved in ETS, the efforts of NZ are nothing more than a tax on our economic activity which will hamstring our economy ( as if we needed another hamstring in additon to our very generouse Social welfare system) - ETS is a complete waste of time and money. Trendy left wing NZ politicians, keen to secure positions in the U.N etc, have been keen to sell the average N.Zer a fiction. The benefit of which will go off shore. The intention and focus should be to continually improve the quality of our " NZ" enviroment, if so , than why do we need to be caught up in an international ETS?. As for putting a carbon value on animal farts - its nothing more than green madness. We should look locally to do our bit to fix the planet, forget about how we can fix the world , just fix NZ, we are so small what influence do we really have internationaly by joining ETS, why chain our efforts to a flawed system that the major polluters will never adopt. ETS will only leave NZ with less money to deal with our own enviromental issues. Lets walk away from the Kyoto ETS and focus on what we can have some influence over - our own enviroment.
Nah John M. That was the lie sold to the country by people who have nothing to sell. Gee they still peddle that clean, green line. Ask anyone who trades our food. They talk safety and trustworthiness. A slogan that started out clean, green and nuclear free was then shortened but not for any benefit food product traders. 100% PURENZ Adventure was shortened to PURENZ. Who for? The people who promote unattainable expectation as a right to discredit hard working producers. I call them economic treasonists!
In commerce, CONSUMER perception is reality.
FACTS do not come into it.
It is the CONSUMER that employs you and everybody else.
Agree that the consumer is the ultimate employer. But lying to any consumer can only last so long...until reality wins over perception!