The forestry industry has come up with its own "green" alternative, writes BRIAN FALLOW.
The forestry industry has proposed a "green package" to the Government to mitigate the damage it expects to suffer if New Zealand ratifies the Kyoto Protocol on climate change.
This month, the Government will release its preferred policy plan for a further round of consultation before a Cabinet decision on ratification in August.
The business and farming opponents of ratification hope that their concerns about the potential impacts on international competitiveness have by now got the attention of senior ministers.
In particular, they hope the fact that Prime Minister Helen Clark is now taking a keener interest in the question will mean that the short-term risks to business confidence get more weight than the long-term risks to the climate from global warming.
The Government's rhetoric has become more soothing.
Releasing a summary of the first round of submissions on climate change policy last week, it said that policies would result in permanent and sustainable reductions in greenhouse-gas emissions. But they would also be "incremental and adaptable", "acknowledge that competitiveness, now and in the future, is important for all industries", and "recognise uncertainty about future changes, such as those in our emissions profile, technology and the international environment".
The Forest Industries Council believes the smart approach would be to wait until New Zealand's major developed-country trading partners (Australia, the United States, Japan and Europe) have ratified the protocol and its main developed-country trading partners and competitors have signed on for its second five-year commitment period, which starts in 2013.
But because of the risk that business opposition will not succeed in torpedoing the Government's plan to ratify Kyoto this year, the council has contributed the green plan to the policy design process.
Council chief executive James Griffiths would not provide details of the plan, but says the aims are to:
* Minimise a contingent liability that Kyoto would impose on the owners of pre-1990 plantation forests, namely the risk of a hefty impost if they switch land from forestry to some other use.
* Avoid "carbon leakage" - driving emission-intensive industries overseas to non-Kyoto countries.
* Use the forest carbon sink credits, assets created by Kyoto, to encourage new investment in processing.
* Recognise the value of wood waste as a renewable energy resource.
The contingent liability arises from the fact that 1990 is the Kyoto Protocol's year zero. Under the protocol, New Zealand would undertake that its average net emissions of greenhouse gases between 2008 and 2012 would be cut to 1990 levels.
The protocol recognises that a switch in land use from, say, pasture to plantation forestry increases the amount of carbon per hectare that is taken out of the atmosphere and "sequestered" or temporarily locked up in the growing trees.
In the strange new world of Kyoto accounting, the credits New Zealand would earn from the carbon sinks in its post-1990 forests would more than cover the debits from likely increases in greenhouse emissions from the rest of the country over and above the 1990 baseline.
For that reason, the treatment of those sinks is central to the policy design problem.
The Forest Owners Association says the distinction between pre and post-1990 forests is artificial. It ignores the fact that many pre-1990 forests were established on bare land or farm land and that many of them will still be sequestering carbon during the first commitment period, 2008 to 2012.
It is iniquitous, they say, to retrospectively place a potential liability on the owners of the pre-1990 forests. The liability would arise if they switched to another, possibly more productive, use of the land after harvesting the trees.
The Farm Forestry Association says much of the pre-1990 forest land would no doubt remain under forest but significant areas, perhaps including parts of the Kaingaroa Forest if it becomes part of a treaty settlement, would be more profitable under dairy farming.
The Forest Industries Council warns that the owners of pre-1990 forests, which make up two-thirds of the current plantation forest estate, may bring forward harvesting ahead of 2008 to avoid that liability, which could depress log prices.
Most of the post-1990 forests belong to small forest owners.
The Farm Forestry Association notes that ownership of the rights to the carbon sinks has yet to be resolved.
"Forest owners are suspicious of the costs of the inventory and auditing systems necessary for a credible carbon trading system and who will pay," it says.
"It could turn out to be just another feeding trough for lawyers and consultants."
It suggests a "no gain, no pain" policy. Carbon trading should be voluntary for any forest owner. A grower who forgoes the sale of carbon rights should be relieved of any obligation for carbon emissions at harvest.
"This would mean the Government could use our Kyoto forests in its accounting while forest owners are left to manage their forests as they see fit."
Most farm foresters are also livestock farmers, potentially exposed to any measures adopted to address the largest source of emissions of greenhouse gases in New Zealand, the methane that sheep and cattle belch.
The association calculates that a typical hill-country farm would need 10 per cent of its land in plantations to balance the methane.
The need to avoid carbon leakage - driving emissions-intensive industry from Kyoto to non-Kyoto countries, to no environmental purpose - is one the Government acknowledges.
In practice, addressing it probably means some form of grandfathering arrangement.
The Government's preferred policy instrument for major industrial emitters is likely to be customised agreements intended to ensure the companies do as much as is technically and commercially possible to reduce emissions without imposing obligations that would put them out of business.
But there is also a problem of opportunity cost - deterring potential investment in the forest-processing sector because of Kyoto-related costs.
The wood-processing strategy being developed by the industry and the Government aims to attract $3 billion of new investment by 2010.
Griffiths says the industry's green package includes proposals on how to use carbon-sink credits to attract that investment.
Policy should also recognise the importance, current and potential, of waste wood, and forest biomass more generally, as a renewable energy resource.