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Issue 14, April 2012

Hi,

Welcome to the latest issue of the Carbon Farming Group newsletter.  In this issue we discuss:

  • Changes to the CFG website
  • Announce a new trustee
  • Highlight details around the ETS consultation
  • Present a  summary of a recent EU/NZ Carbon Forestry Tour
  • And get comment on indigenous forestry carbon insurance from a landowner’s perspective.
  • Climate change workshops for rural professionals
  • Biological Farming Information Day

 

New Website

The Carbon Farming Group website has a new look and is now live.  All the popular parts are still there including the two page info sheets and the ETS calculator. The new website  will allow us to easily update information,  keeping the content  fresh.  Check out the new website here.

New Trustee - Sean Weaver

Late last year one of our founding trustees, Sam Tobin, resigned after three years of valuable input. We were sad to see Sam leave, however in his place we have been very fortunate to be able to appoint a new trustee, Sean Weaver. 

Sean is a senior environmental consultant with Carbon Partnership and brings a wealth of experience to his new role within the Carbon Farming Group. He holds a PhD in Forestry from the University of Canterbury and has received a number of awards including six for tertiary teaching excellence, whilst lecturing at Victoria University, Wellington.  His specialist areas of expertise include reducing emissions from deforestation and degradation, improved forest management, and payment for ecosystem services on the voluntary market. Sean’s experience will be hugely valuable in assisting us to continue to provide high quality up to date information on climate change issues to the farming community throughout New Zealand

 

Sean Weaver - New CFG trustee
Emissions Trading Scheme Consultation

Earlier this month, the Government announced a consultation process for changes it proposes to make to the ETS.  The Government is seeking feedback on two main areas:

  • The public’s response to a variety of amendments to the ETS legislation.  A summary of these amendments are:
    • Phase out the ‘transition measures’ (two for one) more gradually from 2013 to 2015.
    • Maintain the $25 fixed price option until at least 2015.
    • Introduce more explicit powers to enable auctioning of NZUs.
    • Provide a power to limit overseas units into the ETS.
    • Consider a domestic cap and trade system assisted by “auctioning” of government supplied NZU’s to replace overseas units.
    • Provide the ability for Pre-1990 forest landowners to undertake ‘offsetting’ (i.e. deforest in one location and plant in another).
    • Delay the entry of emissions from animal livestock and fertiliser use for up to three years.
    • Provide for a power to extend the fixed price option beyond 2015
  • Should the Government change the level of compensation to landowners of Pre-1990 forests given the option to soon be able to “offset” forests?

The deadline for submissions is 5pm, 5th of May 2012. 

To find out more details on the submission process and view relevant documents please visit the Government’s Climate Change website here.

EU/NZ Carbon Forestry Tour

The Carbon Farming group was invited to attend a European Union /NZ study tour paid for and organised by the Environmental Defense Fund (EDF) based in the USA.  Jason Funk and Bryan Weigle from EFD coordinated the trip along with Dominic Marcellino of the Ecologic Institute based in the USA.

 

The aim of the trip was to bring influential European foresters to New Zealand showcase the forestry landscape and the NZ Emissions Trading Scheme and for them to think of how some of the carbon forestry aspects could be incorporated into the EU ETS.  There were 12 Europeans on the tour from Germany, Austria, France, Italy, Ireland, Lithuania, Finland and Denmark representing a variety of private, government and non government organisations.

 

Clayton Wallwork a trustee of the Carbon Farming Group, was invited along on the trip. He has a background in developing the Permanent Forest Sink Initiative (PFSI), and is a current registered forestry consultant who specialises in carbon forestry. Clayton was on hand to answer questions, fill knowledge gaps, and keep the NZ presenters honest.  

 

The trip started in Auckland and the group travelled by bus over the duration of a week finishing in Wellington. It was a great opportunity to meet key people in the Carbon forestry Industry and   hear fresh ideas on the NZ ETS, from an EU perspective.

Members of the EU/NZ Carbon Forestry Tour

 

Insurance Case Study

By Roger Frost

 

I am a landowner in Murchison with 140 hectares of reverting native forest who has participated in the Permanent Forest Sink Initiative (PFSI) and want to share my thoughts regarding insurance.  This has been prompted after MAF published the recommendation after reviewing the PFSI of forming either a Government or private group carbon pooling insurance scheme.

 

Our experience as the owners of 140 hectares of regenerating indigenous forest under the PFSI, is that without a self-insurance scheme the benefits of entering into PFSI are largely illusory.

 

When we began selling carbon credits in 2005 (pre Kyoto) some 90% were traded. The remaining 10% of the credits were put aside for a EBEX21 group insurance purposes to cover the event that a participating forest owner's forest was destroyed (for example by fire) and it was necessary to repay the units that had been sold. This seemed eminently sensible.

 

In 2008 (start of Kyoto) we choose to enter the PFSI. By doing so it was brought to our attention the fact that the responsibility for insurance was now ours, there being no comparable scheme to that which covered the period pre-Kyoto.

 

When we began to explore commercial cover, three things became obvious: annual premiums were costly (2% of accumulated carbon liability), they would increase annually as liability accumulated and they would be needed in perpetuity.

 

When projected graphically, the line for increasing premiums intersected the curve for revenue from AAU's (using MAF's look-up tables for indigenous sequestration) after just 18 years or less. In the very long term, of course the accumulated costs of insurance would inevitable exceed the total revenue generated - and would impose an ongoing annual liability, yet with no further revenue.

 

Once we grasped the full implications of the situation we became seriously concerned.

 

With or without insurance cover, any AAU's we sell create a growing actual or potential liability, which will surely come back to claim its repayment when we sell the property.

Roger and his reverting native forest

But if we do not sell units then no one benefits at all.

 

Of course insurance is only one of the expenses that need to be provided for from the sale of units. Another is the cost of monitoring sequestration under the new MAF Field Measurement Approach for forests over 100ha.

 

MAF specialists tell us that in the event of a fire we would need to pay back the net loss of carbon, which excludes the approximately 40% below ground. This represents then perhaps the maximum amount of sequestration that one could afford to sell. What this amounts to in units, will only become clear once we have a site-specific sequestration table from the Field Measurement Approach. Needless to say the fluctuating price of Carbon units only adds additional uncertainty to any of the prospects.

 

For commercial forests in the PFSI the situation is somewhat different in that a stage is reached when harvesting that removes no more than 20% of the canopy cover is permitted. So ongoing revenue is available to meet ongoing liabilities and hopefully generate a profit. This is not an option for us, as it is prohibited by our QEII covenant.

 

So all in all we are left wondering what we are doing generating AAU's of which we may eventually be able to sell confidently very few. Self-insurance again seems eminently sensible and hence we would strongly recommend that the Government take urgent action to implement the recommendation of the MAF report.

Carbon Market

Both Westpac and OMFinancial have released online updates of the New Zealand carbon price and chart recent trends. Below are the relevant websites:

 

Westpac - here

OMFinancial - here

Climate Change Workshops for Rural Professionals

AgFirst is leading a MAF-funded project involving twelve free workshops throughout New Zealand in 2012 for rural professionals on climate change issues and land management practices. Three have already been run and proved to be very successful.

 What will the workshop cover?

  • projected climate changes for your region market drivers and the latest action therenational and regional examples of how farmers are dealing with these changes, (for sheep, beef, dairy and horticulture)a fresh approach to risk management in agriculture
  • a summary of the latest research on reducing livestock emissions

We will provide a “take-home” resource kit that will act as a valuable source of reference.  

Who should be there?

Rural professionals including technical sales representatives, bankers, extension personnel, regional council staff, farm consultants, stock agents and accountants are encouraged to attend these free workshops as they will provide an informed forum for discussion of this important topic. The workshop will carry credits for Continuing Professional Education for NZIPIM members.

Dates and times are as follows:

Tuesday 24th April

Gisborne

9am -12

Thursday 26th April

Hawkes Bay

2pm-5

Friday 27th April

Palmerston  North

9am -12

 

Tuesday 1st May

Timaru

9am -12

Wednesday 2nd May

Dunedin

9am -12

Thursday 3rd May

Gore

9am -12

 

Tuesday 8th May

Whangarei

9am -12

Wednesday 9th May

Hamilton

9am -12

Thursday 10th May

New Plymouth

9am -12

 

 

 

Venue details will be emailed following registration.Registration is essential but the cost for attending the workshops is free. To register online click here.

 

For more background information on the workshops go here.

You could also contact Carla Emms on 06-872 7089 or John-Paul Praat on 0274 994 493 

Biological Farming Information Day

To be held in Rotorua on Thursday, 3 May 2012.

 

Venue: Ngongotaha Community Hall (5 School Road, Ngongotaha, Rotorua)

Time: 9.30 am to 2.30 pm.

 

Entry to the information day is FREE but people have to register their names by Monday, 30 April 2012.

Email: biologicalfarming.systems@gmail.com

If you have any questions about climate change and the rural sector, or have ideas/suggestions that you’d like to share please contact us on 0800 123 733 or info@carbonfarming.org.nz

Regards,

Clayton Wallwork

Trustee

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