Cost to post-1989 participants registered in the ETS under the stock change accounting method and regulations

Authors: Robert Hughes, Paul Molloy
Publication: New Zealand Journal of Forestry, Volume N.Z.J.For. 2020, Issue N.Z.J.For. 65(1) 2020, pp 36-43, May 2020
Publisher: New Zealand Institute of Forestry

Abstract: The stated purpose of the Climate Change Response Act 2002 is to support and encourage efforts to reduce greenhouse gas (GHG) emissions. Despite this, the current application of the stock change accounting method on the harvest of forest is to the economic detriment of existing post-1989 ETS participants, and the negative impact increases with length of registration and an increase in the price of carbon. This is because it places the entire burden of the reduction in carbon stock on harvesting on the participant with no offsetting benefit, and this is compounded by a rigid Carbon Accounting Area (CAA) specification that is impractical for good forest management. As a transitional arrangement the rigid CAA should be relaxed by applying the practices that allow for the flexible removal of land from a CAA. As this would account for emissions using the land area harvested it is a cost-effective method of operating within a single CAA. It is recommended that the change to a Flexi-CAA approach be made immediately for participants under the stock change accounting method, and backdated for those who filed returns for the second mandatory emission return (MER) period.