Contents
- Land Use Flexibility
- Leadership in Environmental Sustainability
- Emissions Trading Scheme Under Development, After Consensus Emerges
- Policy Work Continues on Place of Pre-1990 Forests in at Least Three Forums
- Deforestation Challenges Policymakers
- Policy Uncertainty Contributes to Deforestation
- Treaty of Waitangi
- Retrospectivity
Land Use Flexibility: The Key to New Zealand’s Economic Development for Over 100 Years
The standard of living that all New Zealanders enjoy is and always will be based on the returns we earn from the use and management of our land. Our great primary export industries of dairy, meat, forestry, wool and fruit have been the backbone of the economy for more than a century, with New Zealand producers in each of them being the most environmentally and economically efficient in the world.
The returns from different land-based industries have changed cyclically for over a century and will continue to rise and fall for the foreseeable future. The New Zealand primary sector has always responded to market signals by changing the proportion of our land devoted to different products in order to achieve the highest and best returns. In the 1950s it was wool, in the 1990s forestry, in the early 2000s lamb, and more recently, there has been a dairy boom. Smaller, niche industries, including wine and deer, have also delivered superior returns in key New Zealand regions at different times.
Had New Zealand’s primary sector not been able to respond to market signals by changing how we have used land and the products we have grown from it, New Zealand would not be the first-world country we are today. Moreover, the quality of our productive land base would have been eroded by persisting with unprofitable industries unable to continually reinvest in environmental maintenance and improvement.
Even as new challenges emerge, land use flexibility continues to be an essential component of New Zealand’s future economic wellbeing, as recognised by the New Zealand Government in its various sustainable land management policy statements.
Back to topLeadership in Environmental Sustainability: The New Key to New Zealand’s Economic Development
New Zealand’s reliance on the ongoing success of our primary exporting industries also means environmental sustainability is critical for our economic future. We must protect the quality of our land and natural environment, and we must be prepared to meet the changing demands of domestic and international consumers, including those that may relate to concerns about the environmental impact of primary production. This will likely include greenhouse gas emissions. New Zealand’s primary industries must be well positioned to address these issues.
The previous and current New Zealand governments have also chosen to take leadership positions on global efforts to combat anthropogenic climate change, signing and then ratifying the Kyoto Protocol in a genuine attempt to establish international rules to reduce greenhouse emissions and increase carbon sinks. The New Zealand Government continues to lead efforts to improve these rules.
The Government and New Zealand business and scientists must also build on current efforts to lead the development of new technologies that will reduce emissions from transportation, electricity generation, manufacturing and agriculture. Not only will these help New Zealand meet its environmental targets, they offer the opportunity to earn export dollars from assisting other countries to reduce their emissions by the development and distribution of the new technologies.
Emissions Trading Scheme Under Development, After Consensus Emerges
Within New Zealand, the Government, Opposition and other political parties have a preference for managing our emissions downwards through an Emissions Trading Scheme. Parliament is currently legislating for this through the Climate Change (Emissions Trading and Renewable Preference) Bill. The Bill has come about after many years of debate and false starts. The Flexible Land Use Alliance believes political and community consensus behind a workable climate change policy is, in itself, highly desirable in order to achieve certainty in the business environment.
Policy Work Continues on Place of Pre-1990 Forests in at Least Three Forums
When introducing the Climate Change (Emissions Trading and Renewable Preference) Bill, the New Zealand Government made clear, even in the Explanatory Note to the Bill, that it has not settled on policy for how, or to what extent, the Emissions Trading Scheme will apply to forests planted before 1 January 1990, this being the baseline date for the Kyoto Protocol. The policy therefore continues to be developed through the Finance and Expenditure Committee of the New Zealand Parliament and through parallel processes involving the Treasury, the Ministry of Agriculture and Forestry and other government departments. The Government has also established a Climate Change Leadership Forum, chaired by Stephen Tindall, a former chairman of the New Zealand Business Council for Sustainable Development, to advise it on climate change policy.
At the same time, the New Zealand Government is actively promoting changes to international rules for climate change, particularly as they pertain to forestry, through negotiations launched at Bali in December 2007. Internationally, forestry is recognised as a key issue in the climate change debate, as governments seek to avoid perverse outcomes from efforts to curb damaging emissions such as the destruction of tropical forests. The Minister for Climate Change Issues, Hon. David Parker, has made clear that the current international framework is inadequate and needs to be changed.
These different streams of work will need to be unified in order for durable policy for pre-1990 forests to be agreed and finalised. Achieving plantings of new forests and replantings of harvested forests depends on investors having confidence that the rules for the industry will endure into the foreseeable future. Policy uncertainty destroys investor confidence in an industry that operates over investment horizons of at least 25 to 30 years – and, for some species, much longer – with revenue only coming at the end of that time.
Deforestation Challenges Policymakers
Forestry has become a particularly difficult issue for New Zealand. The country believes that increasing its forest cover is a key contribution it can make in the short term in the battle against anthropogenic climate change while new technologies are developed to manage greenhouse gas emissions downward. The forestry industry is also becoming more environmentally productive thanks to prolonged efforts to increase the amount of wood grown per hectare and, consequently, the amount of carbon that can be stored per hectare.
Despite this, in recent years, New Zealand has experienced deforestation for the first time in its modern history. In the four years since 2004, New Zealand’s forest cover has fallen by around 40,000 hectares. This compares with constant increases in its forest cover every year since the Second World War, with forest cover increasing by around 400,000 hectares in the 1980s and by nearly 500,000 hectares in the 1990s. The drop in forest cover is unfortunate given the greenhouse gas absorption, erosion control, biodiversity promotion, flood prevention and other important environmental benefits that are widely seen to accrue from forestry.
Financially, forestry remains an overall revenue earner for New Zealand under the current rules of the Kyoto Protocol, given the significant increase in forest over since 1990. However, the deforestation that has occurred since 2004 means that New Zealand’s deficit under the current rules of the Kyoto Protocol is likely to be slightly higher than it might otherwise be. The net effect of the reduction in forest cover as a result of deforestation since 2004 on New Zealand’s deficit is equivalent to 1.5 percent of New Zealand’s expected greenhouse gas emissions during the first five-year commitment period of the Kyoto Protocol.
Policy Uncertainty Contributes to Deforestation
The causes of the unprecedented collapse in forestry investment are complex but include a fall in short-term market returns from wood, improvements in dairy returns and uncertainty in the policy framework for the industry.
International export market factors are difficult for New Zealand policymakers to influence and, in any case, are likely to change over the 25 to 30 year investment horizon for forestry. The long-term outlook for prices of sustainably-produced wood and wood products is almost certainly positive, given international efforts to eliminate unsustainable production, consumers’ growing preference for natural products and their recognition of the role of trees and wood products in storing carbon and combating climate change. It is an easy extrapolation from the objective of carbon neutrality to a positive outlook for the forestry industry.
Policy uncertainty has therefore been a very significant factor in undermining investor confidence in forestry in recent times. Until September 2007, there was uncertainty about what credits and liabilities would accrue to owners of forests planted after 31 December 1989, and there remains huge uncertainty about what liabilities, if any, might be imposed on owners of pre-1990 forests who assess that they should convert their land to another use following harvest. There have been concerns that these liabilities could be anywhere between NZ$15,000 and NZ$65,000 per hectare, with a likely average cost in excess of $20,000 per hectare over the period of the ETS, depending on the price of carbon and the location of the forest. Such costs would make it economically impossible for a land owner to convert their land from forestry to another use, even if it were not best suited to forestry from an economic, environmental or community point of view.
Treaty of Waitangi
Māori are guaranteed the full, exclusive and undisturbed possession of their land and forests under Article Two of the Treaty of Waitangi. Proposals that involve the Crown imposing massive new costs on Māori for using and managing their land are seen by Māori as clearly violating this guarantee and as a confiscation of Māori wealth. In addition, those Crown forest licence lands still under Crown control are essentially held in trust while the correct ownership is determined. Imposition of a retrospective liability on land-use change from forestry ahead of return of control to Māori has the effect of precluding any decision by the rightful owners as to the most suitable use of that land.
To avoid these matters becoming the subject of contemporary claims to the Waitangi Tribunal, which would create further policy uncertainty, it is desirable that no policy be finalised without the consent of Māori. A unilateral imposition of policy would also be seen by Māori to be in clear breach of the principles of the Treaty of Waitangi, including the principles of equality, reasonable cooperation, redress, utmost good faith and active protection of Māori interests by the Crown.
Retrospectivity
The retrospective nature of current climate change policy proposals has alarmed the forestry industry and investment community more generally. The idea that Parliament would consider retrospectively imposing massive costs on those wanting to change the use of a parcel of land from forestry to another primary industry – when those involved had no indication or anticipation of such costs at the time of the original investment as long as 90 years ago – has had a chilling effect on investor confidence. It has raised questions as to what other unannounced and unanticipated costs Parliament might impose over the next quarter century on those who may be considering investing in forestry today.
Moreover, the collapse in planting rates can be expected to influence investment and reinvestment decisions in the wood processing industry, as processors worry about the availability of wood in the future. The absence of a viable processing sector will likely feed back on planting decisions, as forest growers see demand for their products dwindling, creating a vicious cycle. Confidence to plant will not be restored until satisfactory policy is agreed and finalised across political parties and through the wider community.
New Zealand would not be the first-world country we are today"
