ETS Forestry Package Consultation: forestry accounting Public - - PowerPoint PPT Presentation

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ETS Forestry Package Consultation: forestry accounting Public - - PowerPoint PPT Presentation

Feb 24, 2024 361 likes •637 views

ETS Forestry Package Consultation: forestry accounting Public Information Sessions 31 August - 31 September 2018 ETS forestry accounting proposals Averaging design settings Averaging accounting Accounting for new forests

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Public Information Sessions 31 August - 31 September 2018

ETS Forestry Package Consultation: forestry accounting

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SLIDE 2

ETS forestry accounting proposals

  • Accounting for ‘new’ forests
  • Accounting for ‘existing’ forests

Averaging accounting Complementary proposals Harvested Wood Products proposals Averaging design settings

  • Remove temporary adverse

event liabilities

  • Extend offsetting planting to post-

1989 forests

  • Average carbon stock and age
  • Less ongoing reporting
  • Harvested Wood Products

value in ETS averaging

  • Harvested Wood products

“industry good” fund

2

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Findings for forestry from the review:

  • Current ETS accounting barrier to

participation

  • Major issues for participants with post-

89 forests

  • Averaging accounting opportunity
  • Harvested Wood Products opportunity

ETS Review

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Current carbon accounting

  • “Carbon stock-change” accounting
  • Production forest “saw tooth”

Current ETS Accounting

200 400 600 800 1000 1200 1 3 5 7 9 111315171921232527293133353739414345474951535557596163

tCO2/ha (NZU/ha) Forest Age

Storage of carbon assumed under different accounting approaches

Current Accounting Decay Growth Safe carbon

Carbon stock-change issues

  • Accounting for harvest liabilities:
  • Reduces participation and

afforestation incentive

  • Requires ongoing reporting

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SLIDE 5

Rotation Cycle under averaging

  • Establishment/Planting
  • Growth up to the average
  • Long term average
  • Less ongoing reporting
  • Harvesting (no liabilities)
  • Deforestation/Deregistration

Averaging accounting proposal

200 400 600 800 1000 1200 1 3 5 7 9 111315171921232527293133353739414345474951535557596163

tCO2/ha (NZU/ha) Forest Age

Storage of carbon assumed under different accounting approaches

Averaging Current Accounting Decay Growth

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Proposal to use averaging in the ETS:

  • Participants only receive units on

their forests first harvest rotation

  • No units received or surrendered

for harvesting/regrowth past forests “long term average”

  • Still surrender units for

deforestation

Averaging accounting proposal

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tCO2/ha (NZU/ha) Forest Age

Units received and surrendered under different accounting approaches

Averaging Current Accounting

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safe carbon

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SLIDE 7

Questions?

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SLIDE 8

‘New’ and ‘existing’ forests

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Proposal for all people that register ‘new’ forests in the ETS to use averaging accounting

Averaging accounting for ‘new’ forests

Reduced Liability Increased Financial Incentive Afforestation Boost

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‘New’ and ‘Existing’ Forest

  • Newly established forests (i.e.

from 1 January 2020)

  • Planted on bare land/not “forest

land” (post-89 land)

  • Determined by date of

establishment, not date of registration in ETS

  • To be finalised after consultation
  • Post-89 forests which are not

‘new’

  • Post-89 forests established before

defined date for ‘new’ forests (i.e. before 1 Jan 2020)

  • Existing forests are defined by

date of establishment, not date of registration in ETS

‘New’ forest ‘Existing’ forest

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Proposal to have one of three accounting options for people with existing forests in the ETS:

  • the current accounting approach
  • averaging accounting
  • a one-off, one-way option for current or averaging

Accounting for ‘existing’ forests

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Existing forests use current accounting:

  • Business continuity
  • Short term fiscally positive; long term international misalignment
  • Two classes of post-89 forests (new + existing)

Existing forests use averaging accounting:

  • Lower harvest liabilities
  • One simple accounting approach
  • Short term unit supply impact/long term international alignment

Existing forests one-off, one-way accounting choice:

  • Ability to decide best approach
  • Short term uncertain unit supply impact; long term more internationally aligned
  • Mix of accounting approaches (two classes of forest)

Accounting for ‘existing’ forests

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Transition proposal for participants with “existing” forests:

  • Transition at end of a MERP
  • Repay “above average” NZUs

Slower NZU repayment proposal:

  • Repay NZUs over two MERP

Averaging transition for ‘existing’ forests

200 400 600 800 1000 1200 1 6 11162126 1 6 11162126 1 6 11162126 1

tCO2/ha (NZU/ha)

Current Accounting 200 400 600 800 1000 1200 1 6 11162126 1 6 11162126 1 6 11162126 1

tCO2/ha (NZU/ha)

Current Accounting Average

Examples of transition unit flow

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Questions?

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Averaging accounting design proposals

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Design details to consider:

  • Measurement/Tables
  • Carbon stock as (or at) an

age

  • Forestry types/species
  • Rotation age bands

How to calculate the average age?

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Design details to consider:

  • Average age set in regulations
  • Preferred - Government changes to

regulations not retrospective

Changes to the average age

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Current ETS reporting requirement:

  • Detailed reporting each MERP

Averaging reporting proposals for participants:

  • Detailed reporting until forests’ average age
  • Less detailed reporting after forests’ average age i.e.:
  • Confirm continued management each MERP
  • Detailed reporting for significant changes

Ongoing reporting

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Questions?

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Complementary Proposals

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No longer require participants using averaging to surrender NZUs for temporary forest carbon reductions:

  • de-risks forestry investment
  • better reflects Crown impact under

Paris Agreement

Temporary adverse event proposal

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Indicative carbon storage

Adverse Event Re-start earning Average

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ETS participants can offset deforestation emissions liabilities – by planting a carbon equivalent forest:

  • increases land use flexibility, which could:
  • increase ETS participation;
  • assist economic development and environmental

planning

  • Apply pre-1990 offsetting rules (later in presentation)

Post-89 offset planting proposal

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Questions?

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Harvested Wood Products

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Current international accounting

  • Instant oxidisation – assumes all emissions released at harvest

What is harvested wood products accounting?

  • Slow decay – recognises wood products release carbon at different

rates:

  • longer lived-wood products release carbon slowly
  • Short-lived wood products release carbon quickly

Harvested Wood Products (HWP)

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Provide NZUs to ETS participants through averaging:

  • Increases afforestation incentive:
  • The average would be higher, which

increases financial return from carbon forestry

HWP proposals

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100 200 300 400 500 600 700 800 1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91

tCO2/ha (NZU/ha) Forest Age

Averaging with HWP Averaging without HWP

OR Set up a longer-lived HWP “industry good” fund:

  • Increases incentive to create longer-lived wood products:
  • Could increase Crown value/climate change mitigation
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SLIDE 27