Thank you for attending today’s launch of the Flexible Land Use Alliance, and the release of our recommendations on climate change policy.
My name is Ross Green. I am the Managing Director of Wairakei Pastoral Ltd. With me today are representatives of the companies and organisations which have established the Flexible Land Use Alliance:
Phil Taylor, CEO of Blakely Pacific Ltd
Murray Parish, Environmental Manager for Carter Holt Harvey Ltd
Sean Newland, the Sustainable Dairying Strategist from Fonterra Co-operative Group Ltd
Steve Wilton, CEO of Forest Enterprises Ltd
David Rhodes, CEO of the New Zealand Forest Owners Association Inc; and
Peter Clark, CEO of PF Olsen Ltd and a member of the Government’s Climate Change Leadership Forum.
Chris Kelly, CEO of LandCorp, our eighth member, has an unavoidable appointment clash this afternoon. He regrets he can’t be here as does the Chairman of LandCorp, Hon. Jim Sutton.
The issue that concerns our Alliance is ensuring that land use flexibility continues to be possible in New Zealand following the introduction of the Emissions Trading Scheme, when the Climate Change (Emissions Trading and Renewable Preference) Bill is passed later this year. Specifically, we are particularly concerned about the rules that will be put in place for lands that were planted in forest prior to 1 January 1990.
Land use flexibility is the backbone of the economy. For over 100 years, New Zealand has changed the proportion of land that has been devoted to our great primary industries of meat, wool, dairy, forestry and horticulture – and newer industries including everything from venison and velvet, wine, emus, ostriches and so on. If we hadn’t adapted and changed the proportion of our land devoted to different industries, we would still be over-producing frozen lamb carcasses for the UK; wool for the Korean War; and we’d still have 70 million sheep. We wouldn’t have seen the rise of new industries, including forestry, or the recent dairy boom. Without land use flexibility, the standard of living that New Zealanders enjoy today would have been severely compromised. Worse, our environment would have been compromised too – with unprofitable industries unable to invest in environmental maintenance and development.
Current climate change proposals call for the imposition of new retrospective liabilities on lands that were planted with forests prior to 1 January 1990, if that land is changed to another land use. When these liabilities were first proposed, there were fears that they might be in the vicinity of $13,000 per hectare. At $13,000 a hectare, it would not have been economically viable for a land owner to switch from forestry to another land use. At $13,000 a hectare, it would have frozen around 1.2 million hectares of land in forestry forever, regardless of whether or not that made economic, environmental or community sense in the future. At the risk of $13,000 a hectare, confidence in the forestry industry was severely undermined.
You will be aware that there has been net deforestation in New Zealand since 2004, of 40,000 hectares. That is the first time in living memory that New Zealand has experienced deforestation. Every year since the Second World War, New Zealand’s total forest cover increased. It grew by around 400,000 hectares in the 1980s and by nearly 500,000 hectares in the 1990s.
The key driver of the deforestation of recent years has been fears of the $13,000 per hectare retrospective liability. As recently as 2006, it was projected that the liabilities could be $13,000 per hectare. The Government said $13,000 per hectare was scaremongering. The latest forecasts are that the liability will be more like $20,000 per hectare. It could be as high as $65,000 per hectare depending on factors such as the value of carbon and the New Zealand dollar, and the amount of carbon that can be absorbed in a hectare of forestry. If $65,000 per hectare could be a little on the high side, $20,000 is a conservative estimate. This is not scaremongering.
If liabilities of that magnitude are imposed on owners of lands planted in pre-1990 forests, it will not be economically viable for a land owner ever to convert that land out of forestry. We will lock 1.2 million hectares of our nation’s productive land in forestry forever. When trees are harvested, they will have to be replanted. In some cases, what were plantation forests will simply be left to continue growing.
Now, some may say this is a good thing. Trees help in the fight against climate change. We want more trees. The problem is that it doesn’t make economic sense to freeze every last hectare in forestry. Nor does it make sense to send a chilling message to people that if they invest in forestry, they will be locked into it forever – and that the Government reserves the right to impose retrospective liabilities on them, many years after the investment is made.
Our first preference, then, is that lands planted in forestry prior to 1 January 1990 be excluded entirely from the Emissions Trading Scheme. Exclusion from the scheme is the only solution that will avoid Parliament establishing the chilling precedent that it would impose retrospective costs on economic activity undertaken more than 18 years ago – and, in some cases, more than 90 years ago. If Parliament proceeds with imposing those massive retrospective costs on New Zealand land owners – of up to $65,000 a hectare, remember – confidence to invest in new planting will be seriously, perhaps fatally, eroded.
And, remember, the people and companies who are most likely to invest in forestry in the future are the people and companies who have invested in forestry in the past. You can’t hit today’s forest owners hard, and then expect to get investment in forestry in the future.
We are also concerned that, if pre-1990 forests are included in the Emissions Trading Scheme, Maori – who are the main players in forestry in New Zealand – will quite understandably see that as a possible breach of Article Two of the Treaty of Waitangi. We understand there is a very real risk of climate change policy ending up becoming embroiled in a protracted process in the Waitangi Tribunal. We don’t believe that is desirable. We think it is much more desirable for the Crown to ensure that, in developing climate change policy, it acts at all times in a way that is consistent with the principles of the Treaty of Waitangi – including the principles of redress, utmost good faith and active protection of Maori interests by the Crown.
We don’t see that Maori are easily going to accept that the unilateral imposition of massive retrospective liabilities of up to $65,000 a hectare by the Crown is consistent with the principle that they have full, exclusive and undisturbed possession of their lands and forests. We don’t believe that any New Zealander should accept the unilateral imposition of such costs on the use of their land – and we don’t see that it is feasible for the Government to establish one rule for Maori owners of pre-1990 forests and another for other owners of pre-1990 forests.
Nevertheless, we accept that these issues may be resolved, and that it may be finally determined that pre-1990 forests will be part of the Emissions Trading Scheme. In that case, there would need to be full compensation for the loss of land value.
By effectively preventing change in land use, by including pre-1990 forestry in the scheme, the value of much of that land would be destroyed, or, at least, seriously eroded. It is a principle of justice that if the Government destroys value in land, it should offer full compensation. Our second preference, then, if pre-1990 forestry is to be included in the Emissions Trading Scheme, is for full compensation for all land value losses associated with inclusion in the scheme.
As a key part of this compensation package, we recommend a Forestry Offset Scheme be established within the Emissions Trading Scheme to ensure continued land use flexibility for individual parcels of land. Under a Forestry Offset Scheme, a land owner could meet their liabilities under the Emissions Trading Scheme either by replanting the same land, or by planting an equivalent area of unforested land with new trees. In other words, afforestation would be treated the same as reforestation. Let me explain further.
Under the Government’s current proposals, a pre-1990 forest owner is able to harvest their land and then replant, and not be required to meet the proposed liability of up to $65,000. This makes sense: You harvest; you replant and the amount of carbon on that land will at least be the same over time, or will even increase as the forestry industry becomes more productive per hectare. You don’t get credits for replanting, as the next generation of trees grows. But you don’t pay the liability up front for harvesting either. That is the Government’s current proposal. All we are saying is that it should not matter if you replant the identical piece of land, or the hill country up the road. If the same number of trees gets planted, on the same amount of land, the atmosphere knows no difference. It benefits in exactly the same way, as the next generation of trees grows. The effect on the atmosphere and on climate change should be what drives policy, not whether a tree is planted on one side of the road or the other.
We’ve had good support for this concept from the political parties we have met over the last few days. Everyone sees it as common sense. Everyone understands it is good for the environment. Everyone understands that it will allow ongoing land use flexibility for individual parcels of land, while strongly incentivising land owners to maintain at least the same total forest cover in New Zealand that we have today. In particular, it will allow us to get our focus right – on planting the estimated 800,000 hectares or more of seriously eroding hill country land which is not currently in forestry but for which forestry is likely to be the best land use. Some of the 1.2 million hectares that is currently in pre-1990 plantation forestry would deliver New Zealand higher and better returns if converted to a different land use. That’s true. We need to allow that to happen, while replacing any converted land with some of the 800,000 hectares of eroding country that should be in forestry but isn’t. Highest and best land use from both an economic and environmental point of view - that’s the principle that should guide us. That’s what the Forestry Offset Scheme would allow for individual parcels of land.
While it would not represent, on its own, adequate compensation for the loss of land value a Forestry Offset Scheme is a sound, moderate, common-sense component of our proposal that we think should get cross-party support. With the ETS changing forever how businesses need to account for environmental consequences, the test for best and highest land use will fully incorporate environmental costs and benefits into the future. There are details that would have to be worked out – including around the wording of the Kyoto Protocol and future climate change rules that will emerge from the Bali Round. We look forward to working with officials, ministers and parliamentarians on those matters in good faith in the weeks and months ahead.
As we say, we’ve had a good response from political parties. We believe progress is achievable. The Government has said, even in the Explanatory Note to the Bill, that it has an open mind on the issue of pre-1990 forests. We think that is a constructive approach from the Government and we hope that what we are doing will also be seen as constructive.
Thank you for your attention. We are very happy to answer any of your questions.
Inquiries: Ross Green
Flexible Land Use Alliance
Ph: + 64 21 458895