Grey areas in efforts to cut carbon levels

By BRIAN FALLOW

The forestry industry is warning that its growth and even survival could be at risk from measures to mitigate global warming.

Over the next two weeks, officials and ministers from around 160 countries meeting in the Hague will try to put enough flesh on the bare bones of the Kyoto Protocol on climate change to enable countries to ratify it.

New Zealand, with the European Union's members and a small number of other countries, has indicated a desire to ratify by the middle of 2002.

That would mean New Zealand's reducing its net emissions of greenhouse gases back to 1990 levels over the next 10 years.

The NZ Forest Industries Council contends that New Zealand, which is responsible for less than half a per cent of the world's emissions, would be foolish to undermine its export competitiveness by getting ahead of the pack in ratifying.

Australia and the United States, which respectively buy 30 per cent and 11 per cent of NZ's forestry exports, show no sign of being quick to adopt the Kyoto Protocol.

The forestry industry also points out that the 1997 protocol imposes no obligations on key export competitors such as Chile and Brazil.

And it warns that the further investment needed to process New Zealand's burgeoning timber harvest would be more likely to occur in industrialising countries with no Kyoto obligations, such as China, India and Indonesia. That would confine New Zealand to the role of log exporter.

Another area of concern is that the Kyoto Protocol envisages mechanisms whereby a country could discharge some of its obligations, not by reducing domestic emissions, but by acquiring credits for newly established forests planted as "carbon sinks" elsewhere.

This, the forest council argues, could fundamentally change the international economics of forestry.

While New Zealand has an estimated 3 million hectares of marginal farmland suitable for afforestation, forest scientist Piers Maclaren says that worldwide the figure could be as much as 500 million hectares.

Pete Hodgson, the minister who will represent New Zealand at the Hague, says the Government is "mindful" of the forestry industry's concerns about trees being planted for carbon sequestration rather than commercial purposes.

There are large areas of uncertainty about such emissions-trading.

At the domestic level, the mechanism would see a government initially allocate emission permits, on as-yet-unknown criteria, to companies or sectors. They would then have the right to emit their allotment of greenhouse gases or trade their rights.

If they were going to exceed their allotment they would need to buy credits from someone with a surplus or invest in carbon sinks, to obtain credits to offset against emissions.



Under the Kyoto Protocol, only forests established since 1990 will qualify for carbon credits, and then only if that represents a change in land use. About 500,000ha of New Zealand's 1.7 million-hectare plantation forest estate has been established since 1990, mainly as farm forestry blocks.

But does harvesting a stand of trees count as an emission, which would need to be covered by a carbon credit?

The Kyoto Protocol talks of "deforestation" but that needs to be distinguished, Mr Maclaren says, from harvesting and replanting plantation forests. The environmental gain is from switching from a low-carbon-density land use, such as pastoral farming, to a high-carbon-density use such as forestry. Keeping detailed track of fluctuations around that higher baseline over the life of a forest would involve big compliance costs to little effect. It will act as a carbon sink for as long as that land is forested.

Mr Maclaren worries, however, that handing out tradeable carbon credits when a new forest is established would push up the value of marginal farm land - a windfall to current owners - with a flow-on effect on the price of other land.

Karen Price, an environmental lawyer with Rudd, Watts and Stone, says that at this stage we just do not know whether harvesting forests will count as an emission or whether replanting will create a credit. "The Forest Owners Association has been telling people you won't get a credit, but they have an interest in ensuring there is no liability when pre-1990 forest is harvested," she says.

"I think there should be a carbon credit for replanting. If there isn't, freshly harvested land might be left and new land planted to gain the credit."

Ultimately, the value of these potential new property rights, and the cost of the obligations, depends on whether the Kyoto Protocol comes into force, which can happen only if countries responsible for at least 55 per cent of 1990 developed-country emissions ratify it.

In practice, that will require the US Congress to see its way past a wide array of lobby groups mustering the same sorts of arguments the New Zealand forest industry advances here.

Mr Hodgson says it is possible, but not particularly likely, that the Kyoto process will fall over.

"But if it does, climate change itself will not go away."