KEY POINTS:
In his thoughtful column Can't see wood for trees, Brian Fallow correctly identifies the challenge in front of the Government in allocating carbon units to the owners of forests planted before 1990.
Unfortunately Fallow's analysis misses the mark on several points.
The Government's climate change policies are not designed simply to reduce the Crown's fiscal risk. If they were, we wouldn't be offering hundreds of millions of dollars of free allocation to industries in transition.
The Government's primary objective is to reduce emissions, and soon-to-be-released figures will show that our policies are proving effective in reducing deforestation.
Fallow argues that controls on deforestation risk discouraging land owners from going into forestry. He seems to have missed the fact that those who decide to plant new forests are not required to enter the Emissions Trading Scheme at all, so can be exempt from any future liability.
Even if they do choose to enter the scheme, the credits they earn will generally be in excess of any liabilities they might incur if they decide to convert back to forestry at a later date. So, at worst, they won't be out of pocket.
Timber millers are arguing that emissions trading will push up the price of logs and increase the profitability of forestry, and that foresters recently purchased every last douglas fir seedling in the South Island to benefit from carbon credits. So I think the facts will, in time, show that the business case for forestry is stronger as a result of Government policy, not weaker.
I simply do not accept Fallow's contention that deforestation liabilities are a retrospective tax. Deforestation liabilities do not penalise people for planting forests years earlier, but rather on new activities in the present.
No liability arises from someone who replants their forest after harvest - liability falls only on those who decide to change land use.
Legislative and regulatory controls of all types affect us in ways we may have been able to avoid with foresight but if governments could never take measures that affected people who had made past decisions, then governing would soon become impossible. Does Fallow believe drivers should be exempt from increases in petrol tax simply because they bought a gas guzzler before the policy was announced?
Should coal-fired power stations be exempt from emission charges because they were built years earlier?
Fallow correctly identifies that there are more than a million hectares of highly erodible hill country in desperate need of afforestation.
While much of this land is marginal for grazing, it has never been planted because farmers have had little incentive to change land use.
Carbon credits are already changing this. If Fallow is arguing that the taxpayer should pay credits to those planting trees but not serve a liability on those who cut trees down, then his solution will cost the country billions, and all the good of planting new forests will be undone by those who are clearing their land. This is surely a lose-lose for New Zealand.
Fallow argues that the disincentive on land conversion created by the Emissions Trading Scheme may reduce economic output. But this is only true if the taxpayer doesn't face the environmental costs of emissions.
Furthermore the case for conversion only looks attractive while dairy is so profitable compared with forestry. Only a few years ago the opposite was true and no one can be sure of market trends.
There is every reason to believe that in the carbon constrained future, sustainable and renewable forestry will become more profitable.
I agree with Fallow that flexibility of land use is an important element in New Zealand's ability to meet changing commodity market conditions. This is why the Government chose an emissions trading regime over direct regulatory controls on land use.
However, what we all have to accept is that land use cannot change at any cost to the environment. The Emissions Trading Scheme has been designed to maximise flexibility while ensuring the costs to the environment are taken into account.
* Jim Anderton is the Minister of Forestry.
