Proposed ETS changes miss opportunity to restore our native ecosystems

The Emissions Trading Scheme (ETS) needs to financially incentivise restoring native ecosystems to simultaneously sequester carbon, provide habitats for our endangered species and improve resilience to climate change. The currently proposed changes are narrowly restricted to removing exotic forest plantations.  This is a significant missed opportunity.

Current proposal

The Ministry for Primary Industry (MPI) and Ministry for the Environment (MfE) are proposing to restrict exotic forests being registered in the ETS new Permanent Forest Category, which is scheduled to become available on January 1st 2023.  The submission period for the proposal opened on March 14th and closes on April 22nd 2022.

The proposed amendments are intended to resolve the current social and environmental problems being created by widespread planting of financially-lucrative exotic (primarily Pinus Radiata pine)  plantations that sequester carbon rapidly but also:

• Generate no indirect investment and no jobs for rural communities many of which are already struggling with depopulation, closing community amenities, businesses and schools.
• Accelerate the loss of native terrestrial ecosystems and host large numbers of invasive pests, both of which are devastating to our unique endangered indigenous animal and plant species.
• Acidify underlying soils.
• Exacerbate soil erosion on steep sloping sites which feeds sediment-laden runoff to nearby surface waters.
• Pose fire risks that will increase as the New Zealand climate changes.

At the current carbon price ($80/tonne), returns to landowners for these pine plantations are around $30,000 per hectare versus around $4,500 per hectare for sheep and beef farming. This income differential between “carbon farming” and other landuse options will grow as the price of carbon increases. 

Fundamental changes so that ETS incentivises nature-based solutions to climate change

New Zealand’s ETS needs updating urgently to financially incentivise restoring our native ecosystems in ways that sequester carbon, provide high-quality habitats for our native species and improve our resilience to climate change impacts.

Under the existing setup, native forests are eligible for carbon credits but financial returns do not stack up well in comparison with exotic plantations.   The Tanes Trees Trust (TTT) has estimated that a hectare of native forest will absorb around 6 tonnes carbon/annum for the first twenty years.   In comparison pine plantations sequester approximately 25 tonnes carbon/annum over the same time period.  As a result, the current ETS setup generates an initially larger financial return for planting permanent pine rather than native tree forests.   Planting pine as a nursery crop for natives that will grow and flourish over time is often used to rationalise this short-term action.  But depending on which scientist you speak to, this scenario may, or may not, be realistic.  

Climate change and ecological degradation are long-term intergenerational problems.  We should be thinking about changes to the ETS that factor in long-term carbon sequestration in a way that incentivises native forest planting now.   

Overseas  researchers estimate that wetlands  sequester approximately 10 times more carbon than forests.  In New Zealand there are gaps in our knowledge regarding wetland carbon sequestration, but changes to the ETS could be signaled now alongside research to address this problem.  Depending on the estimated sequestration and price of carbon, wetlands as a land use choice could become more financially lucrative than other less ecologically-beneficial options. 

Similarly if other nature-based solutions such as regenerating soils, sea grasses and coastal habitats were to be included in the ETS  we would require a greater understanding of how much additional carbon is  absorbed through specific  restoration activities.

Not only does ecological restoration amplify carbon sequestration and improve ecological health but in many cases (e.g. coastal wetlands) it also improves resilience to climate change impacts, for example sea level rise.  Overseas,  a range of nature-based solutions to climate change are being incentivised by “carbon+biodiversity” credits that place a premium on carbon being sequestered with associated ecological and climate resilience gains.

The last chapter of the discussion document on the proposed removal of exotic forestry from the ETS does makes reference to “government work being completed to consider opportunities to overcome barriers and incentivise indigenous planting” and asks for views.   This sounds useful but does not include any reference to other nature-based solutions. 

In summary the discussion document is asking the wrong question. 

It is asking:

Should we exclude exotic plantations from the ETS,  should there be exemptions and what is the best timing?

Yet we should be asking:

How do we modify the ETS to financially incentivise restoring our native ecosystems in ways that simultaneously sequester carbon, provide high-quality habitats for our precious endangered species and improve resilience to climate change?

The answer to this question should drive changes to our ETS and associated research work to fill any knowledge gaps.