NZ Forest subsidy chopped

Forest-planting subsidy gets the chop
By Brian Fallow
4:00 AM Wednesday Jul 14, 2010
The Government is winding down a scheme to subsidise the planting of new forests, saying the emissions trading scheme makes it unnecessary.
Labour forestry spokesman Stuart Nash disagrees, saying a range of options is needed to encourage planting and the ETS doesn't suit everyone.
But critics of the afforestation grants scheme say it is badly designed and open to abuse.
About $16.5 million has been allocated under the scheme so far. But this year's Budget cut the funding for 2011/12 and 2012/13 from $7 million to $5 million a year. The scheme will then be closed, a year earlier than intended.
This frees up $6 million to be "reprioritised" towards the cost of executing the forestry-related aspects of the ETS, estimated to be about $8 million over the next two years.
Forestry Minister David Carter said that was mainly for the forestry allocation plan, making sure units distributed under the ETS were accurately allocated and registered.
"We are dealing with an allocation value of something in excess of $1 billion.
So we have to do our best to get that right."
He said that under the previous Government significant net deforestation had occurred so it had developed the afforestation grants scheme, which at least got some people interested in planting trees again.
"Now we have a credible emissions trading scheme established and we are seeing a significant increase in interest from rural landowners in planting trees. I don't think we need the afforestation grant scheme to get more trees in the ground."
But under the ETS eligible forest owners who opt into the scheme to earn credits for the carbon their trees lock up while they are growing, also accept liability for the emission of that carbon when the trees are harvested.
Nash said some were deterred by those potential liabilities. "The Government needs to have options available where landowners don't necessarily take up the carbon credits."
Under the afforestation grant scheme ownership of the credits generated by a new forest for its first 10 years remained with the Crown.
One forestry consultant spoken to by the Business Herald said although the scheme was supposed to be fiscally neutral, in practice up to twice as much had been paid out in subsidies as the carbon sequestered in the trees' early years would be worth.
"The industry loves it. But it's a rort," he said.
It had, however, helped to keep forestry nurseries in business during a particularly lean time.
Nash said it was a strength of the scheme that half of the funding available was administered by regional councils and could help them to meet sustainable land management objectives such as reducing erosion or improving water quality.
Other schemes to encourage afforestation remain, though both are under review. One is the East Coast forest scheme, aimed at erosion-prone country in the eastern North Island.
"It is being scaled back quite a lot and that is a worry as well," Nash said.
The other is the Permanent Forest Sinks Initiative which awards carbon credits for new permanent, as distinct from plantation, forests.
The more stringent environmental standards which need to be met to qualify for the latter make them more attractive to European Governments fastidious about the credits engendered by plantation forestry.
Carter said it was a bit rich for Nash to accuse him of taking a chainsaw to the afforestation grants scheme when Labour had presided over more than 30,000ha of net deforestation. That was the real chainsaw massacre.
"He does have a point," Nash said. "I acknowledge that."