Most of us grew up in homes made of wood. We’re going to need a lot more of it for all the homes we so desperately need to build in the next few years.
As a country, we’re also getting better at constructing large and multi-storey buildings out of wood, which are both beautiful and earthquake resilient.
Increasingly, we’re also turning to wood and forestry waste as a feedstock for biofuels and bioplastics. And, forestry is New Zealand’s fourth largest export earner. In other words, it’s a critical strategic industry.
As a country, we’re also developing a deeper appreciation of the intrinsic value of permanent, native forests.
As the recent post-cyclone land use inquiry pointed out, there are parts of the country where we desperately need to restore deep-rooted indigenous forests and bush to hold up erosion-prone hillsides during the devastating storms we are experiencing more and more frequently.
Permanent indigenous forests give us biodiversity and eco-system services, as well as cultural, economic and social value.
When it comes to the climate crisis, both fast-growing exotic plantation forests and slower-growing permanent indigenous forests are nothing short of critical.
As a country we absolutely must stop chucking the pollution into the atmosphere that causes climate change in the first place. But we also need to remove as much carbon dioxide from the atmosphere as possible. And the best technology we have for that right now is forests.
To give you a sense of the scale of what’s needed, New Zealand has committed to reducing or removing about 150 million tonnes of emissions below our projected baseline by 2030.
Of that, the Climate Change Commission reckons we can reasonably cut about a third, or 50 million tonnes, from our domestic economy in that timeframe.
Of that 50 million, about half is covered by the Emissions Trading Scheme – the other half being agricultural emissions.
Of the half that is covered by the ETS, we then remove about one-fifth of that pollution from the atmosphere through forestry.
In other words, forests under the ETS currently get us one-fifth, of one-half, of one-third, of the way to our Paris Agreement goal. That’s one-30th.
If we are to have any hope at all of playing our part in the global fight to avert a climate catastrophe, we need more forests, not fewer. We’re going to need fast-growing exotics as well as slower-growing permanent indigenous forest carbon sinks.
In addition, if we want to invest in our own economy, rather than sending money offshore to buy our way out of the problem, we’re going to need to work out ways of recognising and supporting the value of both.
Right now, there’s confusion about what the reviews of the New Zealand Emissions Trading Scheme and the Permanent Forest Category within the ETS could mean for the industry’s future.
Let’s be clear.
We are not trying to restrict forestry. We are trying to ensure that its value is recognised and maintained over the coming decades.
The ETS review directly responds to the independent Climate Change Commission’s 2021 stark warning that under the status quo there could be an oversupply of forestry-generated NZUs in the 2030s which could crash the whole system.
Unlike any other system of its kind in the world, the NZ ETS does not differentiate between emissions reductions (cutting the pollution going into the atmosphere) and removals (from trees that absorb and store carbon). It also allows unlimited forestry units.
This unchecked availability has the potential to dull the incentive for industry to change to less polluting ways. It could lead to a crash in the carbon price from which it may not recover. We want to make sure the NZ ETS is fit for the job of cutting carbon pollution, while maintaining the value of forestry investments, made on the assumption of a steady or rising carbon price.
That is why we’ve kicked off the consultation on the best way to future-proof the NZ ETS.
There is some uncertainty about whether the review could lead to decisions that would be applied retrospectively to existing forests.
One thing we can say for sure is that New Zealand governments, to the left and right, have always been extremely cautious about retrospective law, particularly where they have an impact on existing property rights. This is something I recently outlined in a letter to the chief executive of the Forest Owners Association, David Rhodes.
But the sector must be future fit.
There is some unhelpful rhetoric out there suggesting the Government has made up its mind. This is not the case. The roots of the problem we’re trying to solve go back more than a decade. If we want the scheme to survive the next decade, we need to fix it now. The four broad options on the table are not mutually exclusive. None of them include removing forestry from the ETS without an alternative mechanism to incentivise forestry removals.
No decisions have been made. No decision will be made this side of the election.
Subject to the next government’s priorities, further detailed policy development will be needed before making any final decisions. Therefore, any amendments are unlikely to take effect until at least 2025.
There are 40,000 people employed in the forestry, wood transport, and processing sector. The sector has its own ‘Fit for a Better World’ sustainability roadmap. And it is a significant economic contributor, providing $6.6 billion in export earnings.
The last three years have been tough for forestry. Pressures include increased operational costs, staffing challenges, uncertainty, and market fluctuations.
Despite these challenges, if there’s only one thing you take from reading this today, it should be the strong future for forests, both exotics and natives.
No matter what happens, trees will continue to be a big part of the climate solution, as well as an income generator. But for that to happen, we need to ensure that supply and demand settings within the ETS are balanced and that we get the type and scale of afforestation we need.
There are plenty of other things we also need to do to combat the climate crisis. We also need to massively ramp up renewable energy generation, burn less fossil fuel and protect existing forests.
But protecting existing forests and planting new ones, if done properly, will be crucial, to meet our emissions reduction targets, in our fight to limit global warming to 1.5C. We cannot afford not to get this right.
James Shaw is the Minister for Climate Change, and Associate Minister for the Environment (Biodiversity).