As forests fall, emissions targets and reality are getting further apart

It seems the Government plans to rely heavily on a hoard of cheap, low-quality carbon credits to meet its current climate change target.

Or at least pretend to meet it.

In 2013 the Government undertook - under the United Nations Framework on Climate Change - to reduce New Zealand's emissions of greenhouse gases to 5 per cent below 1990 gross levels by 2020.

Averaged over the eight years after the end of the Kyoto Protocol's first commitment period in 2012, it amounts to a reduction of just over 3 per cent.

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The trouble is, as the Ministry for the Environment reported a week ago, by 2013 (the most recent year for which comprehensive data exists) gross emissions were 21 per cent above 1990 levels.

The trend is clear. Emissions have been growing by nearly 1 per cent a year since 1990.

So far New Zealand has been able to offset that growth in emissions by counting the carbon taken up by plantation forests. But those offset credits only accumulate while the trees are growing. When they are harvested, the carbon is deemed to be emitted.

And much of the plantation forest estate was planted in the early and mid-1990s, resulting in a looming "wall of wood" as those trees approach harvestable age.

The gap between gross emissions (from vehicle exhausts, smokestacks and ruminants' throats) and net emissions, which adjust that for carbon flows from forestry and land use change, allowed New Zealand to meet its Kyoto target for 2008-12 with a few million tonnes to spare.

But the gap between gross and net emissions is narrowing and is expected to cross over in the early 2020s as forests flip from being a net sink to a net source of emissions.

It is not just about the trees' age. The area of forest is shrinking.

The greenhouse gas inventory released last week records that in 2013, 4500ha was planted or replanted in trees, but 8300ha was deforested.

Since 2008, annual deforestation has averaged about 8500ha. "This is more than the average area of new forest planting over the same period," the ministry says. More timely indicators from surveys of forest owners' intentions and sales of seedlings tell us the deforestation trend has continued since then.

It gets worse. It can take up to four years between the felling of a forest and official recognition that it is not going to be replanted, and therefore counts as deforestation. There is another 20,400ha which has been "destocked" of trees between 2010 and 2012, and which is now "awaiting a land-use determination".

So we have a picture of rising emissions and an ageing and shrinking forest estate.

How then can the Government be so confident that New Zealand is "on track" to meet its pledge of a 5 per cent cut in emissions from 1990 levels by 2020?

So far, we have been talking about physical quantities and flows within New Zealand. But the arcane world of carbon accounting allows for international trading in carbon credits. The theory is sound. For the global climate it does not matter where emission reductions occur or who pays for them.

The 5 per cent reduction goal is a "responsibility" target. It allows for a country such as New Zealand - whose domestic abatement costs are high - to import carbon credits representing emission reductions elsewhere in the world. So long as those reductions are real and there is no double counting, that is fine.

The trouble is that the environmental integrity of some of the Kyoto units on the market is questionable emission reduction units, or ERUs.

These ERUSs originate mainly in former Soviet bloc countries, whose Governments have to attest that they represent real reductions in emissions, and moreover that those reductions would not have occurred without the opportunity to sell the resulting credits.

The European Union, home to much the largest emissions trading scheme, has severely limited the ability of its emitters to buy and use ERUs to meet their obligations.

The New Zealand Government opted not to follow suit, and New Zealand became the main, if not the only, international market for these units.

This had several consequences, entirely predictable and therefore presumably intended.

One was that the domestic carbon price in the New Zealand Emissions Trading Scheme (ETS) crashed to a few cents a tonne.

ERUs crowded out New Zealand units the Government has issued to forest owners and others, sending NZU prices to a fraction of the intended levels when the ETS was set up. It was a classic illustration of Gresham's law: bad money drives out good.

It completely stultified the scheme, whose purpose was to shift behaviour in a climate-friendly direction.

The other main consequence is that the Government has been able to fill its boots with this low-grade carbon. A little table on page 366 of the Greenhouse Gas Inventory published last week reveals that, as of the end of 2014, the Government had 101 million ERUs in its registry.

The majority of them were surrendered by New Zealand emitters for the 2013 year.

In all, the Government has amassed a stash of around 128 million Kyoto units in excess of what it needs to square accounts later this year with other Governments for the Kyoto Protocol's first commitment period, 2008-12.

To put that in context, the unconditional commitment for the current period out to 2020 represents a "carbon budget" of 517 million tonnes.

So the Government might think it already has enough carbon stashed away to cover a 25 per cent overshoot of that budget and that our shrinking plantation forest estate will generate enough additional credits to bridge the remaining gap.

But if that is the plan - achieved, let's remember, by completely subverting the ETS - it overlooks a provision in Kyoto's rules that the use of carbon trading is "to be supplemental" to domestic action to reduce emissions.

The Government has said it will apply the Kyoto Protocol's framework of rules to its target for 2013-20.

It is debatable whether relying on carbon sequestered by trees planted before Kyoto was even negotiated should count as domestic "action".

But there can be no doubt that "supplemental to domestic action" does not mean "entirely replace domestic action".

Stretching the rules to deliver a Clayton's compliance with an emissions target which grows ever more distant from actual emissions is worse than a waste of time.

It does nothing to set New Zealand on a path to a low-carbon future and only bulldozes the cost of that transition out into the future.