Proposed regulations
The regulations and the covenant cover different aspects of the PFSI. Landowners will need to understand both the regulations and the covenant in order to understand the operation of the PFSI.
Application process and eligibility
It is intended that the regulations for the PFSI will:
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Application process
Figure 1 details the proposed application process.
Figure 1: Proposed application process
Proving eligibility
To be eligible to enter the PFSI, land must be “Kyoto compliant”. Kyoto-compliant land is defined as land that was not covered by forest on 31 December 1989. A forest is defined as:
- exceeding one hectare; with
- crown cover (or equivalent stocking level) of more than 30 percent;
- greater than 30 metres wide; and either
- containing species capable of reaching five metres or more in height at maturity in situ;6 or
- previously forested land awaiting replanting.
In addition, Kyoto-compliant land containing exotic forest is eligible to enter the PFSI only if the forest was established after 17 October 2002 (the date the PFSI was first announced). All Kyoto-compliant land containing indigenous forest is eligible to enter the PFSI.
Land that was actively farmed at 31 December 1989 and that contains areas of regenerating scrub may be eligible to enter the PFSI. This will be assessed on a case-by-case basis. A guide to the eligibility of land will be available on MAF’s website (www.maf.govt.nz/forestry/pfsi/) in the near future.
In addition the forest establishment must be consistent with the New Zealand Forest Accord. In essence, this means that the establishment of planted forests will not involve the clearance of significant regenerating indigenous forest.
Applicants must provide evidence that shows an area of land is eligible to enter the PFSI. MAF proposes that acceptable methods of proving eligibility include:
- aerial photographs taken at or close to 1990 that clearly show land use at that date;
- oblique photographs taken of the land at or close to 1990 to support aerial photographs;
- farm records and plans that show the land was not forested prior to 1990;
- planting records or nursery receipts (for establishing compliance with the 2002 eligibility date).
MAF may require more than one of the above methods to prove eligibility. A site inspection may also be needed.
Identifying land area
Accurately identifying the area of land in the application to enter the PFSI will:
- avoid the need to redefine, and disputes arising from redefining, areas in future when inaccuracies are identified;
- avoid disputes over the intended area identified by applicants (as there may be a degree of subjectivity required when interpreting applicants’ diagrams and maps);
- establish the area for carbon accounting purposes;
- avoid problems where two inaccurately defined boundaries overlap;
- reduce administration costs associated with digitising relatively complex land areas;
- maintain confidence in the PFSI mechanism.
MAF proposes that acceptable methods of identifying the area of land in the application include:
- GIS (geographic information system) data – an applicant will submit a geospatial data file (such as, ESRI shapefile or MAPINFO tab file) derived from GPS (global position system) track, ortho-corrected aerial photographs or a registered survey;
- ortho-corrected aerial photographs;
- GPS coordinates – an applicant could capture the boundary of an area using a handheld GPS receiver, and then submit the text file of bounding coordinates to MAF;
- survey plan – an applicant could submit a registered survey plan of the intended area and boundary.
Regardless of the method chosen, applicants would have to clearly identify what standardised coordinate system was used to identify the land (such as New Zealand Map Grid Projection, New Zealand Transverse Mercator Projection, latitude and longitude).
MAF proposes that hand drawn lines on Certificate of Title diagrams (or any other diagrams) would not be acceptable for identifying land area in an application. Such diagrams leave too much room for interpretation and could lead to unnecessary confusion or grievances from current or future owners of the land. Topographic maps on their own are unlikely to be acceptable for the same reasons.
MAF’s preferred standard will be a GIS shape file which is consistent with the classification of Kyoto-compliant land.
Where MAF has to digitise boundaries into GIS shape files, carry out property inspections or carry out other work in defining the boundaries of Kyoto-compliant land, this may be considered a non-standard application and additional application fees may be charged on an hourly time and cost basis.
Harvesting
It is intended that the regulations will describe approved harvesting practices that:
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Allowable harvesting levels
Participants will be allowed to harvest7 up to 20 percent of the forest’s basal area per hectare (applied to any given hectare). They will have to allow the forest to recover to the pre-harvest basal area before trees can be harvested again. This restriction will be removed from a forest after the forest has been part of the PFSI for 99 years.
Reporting and monitoring of harvesting
MAF proposes that participants who wish to harvest must submit an “intention to harvest notice” to MAF prior to harvesting and keep records pertaining to the harvest. These records must be made available to MAF on request and retained for five years.
The intention to harvest notice would advise MAF of the name of the landowner harvesting, provide a map of the location of the forest and harvest site, and provide details of the harvesting method and intended timing of harvest. This will allow MAF to monitor harvesting and carry out audits.
MAF proposes that the harvesting records to be held by the landowner include:
- a map of harvest area;
- the date of harvesting;
- the area harvested (hectares);
- pre-harvest basal area raw data measurements from within the intended harvest area;
- post-harvest basal area raw data measurements (or the diameter at breast height of all trees harvested).
Measurements of pre- and post- harvest basal area are to be carried out using forest industry good practice inventory methods with an appropriate level of precision which will be determined in regulations.
Landowners who carry out harvesting will provide to MAF an annual harvesting return summarising the above harvesting information.
MAF considers the above information to be the minimum level of harvest information that must be recorded and supplied to MAF to allow monitoring for compliance with the harvesting restrictions. There are penalties for breaching the allowable harvest levels. Landowners will need to safeguard themselves against unintentional over-harvesting carried out as a result of inadequate measuring and monitoring.
Penalties for breach of allowable harvesting levels
Landowners who fell or harvest timber above the allowable harvesting level will breach the covenant and will be required to replace the units for the carbon released. Any harvesting above the allowable harvesting level may also incur a penalty. A penalty may be imposed only in respect of the proportion of forest on land subject to a forest sink covenant that is harvested in breach of the covenant.
The penalty payments will be in the form of additional emissions units calculated on the basis of an annual compounding rate of 10 percent applied to each year’s sequestration, commencing from the earliest year in which the units were generated. This has been specified in legislation as the maximum penalty allowed under regulation.
MAF proposes that the penalty will be determined on the average carbon stock per hectare of the forest area subject to the covenant. Each year’s sequestration will be assumed to be a linear sequestration rate from the previously assessed carbon stock level.
Carbon accounting and entitlement to units
It is intended that regulations will set out:
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Entitlement to units
A participant’s entitlement to units will be based on an inventory and a report prepared by the participant or their agent. This report will need to:
- use the carbon sequestration accounting methodology or methodologies specified in the regulations;8
- be verified by a registered certifier.
The carbon sequestration accounting methodology will identify how changes in carbon stock on the area subject to the covenant are to be assessed. MAF proposes that all participants must use a standard carbon sequestration accounting methodology or methodologies that are transparent and auditable.
Subject to the terms of the covenant, units would be transferred to an account at the New Zealand Emission Unit Register (NZEUR).9
Subject to the terms of the covenant and verification, a participant will be entitled to receive one unit for each tonne of carbon dioxide sequestered (stored) in their forest that is in excess of the previously verified quantity sequestered. Carbon dioxide sequestered will be assessed as carbon stock changes.
As well, a participant will be liable for one unit for each tonne of carbon dioxide that is in deficit of the quantity of carbon dioxide previously verified as sequestered in their forest. In this instance, the participant will be required to transfer the appropriate number of units to the Crown.
Transfer of units
PFSI forests generate removal units10 (also known as RMUs or sink credits) for the Crown. Under the PFSI these removal units are devolved to landowners with forest sink covenants. MAF proposes that if the landowner wishes to receive assigned amount units (AAUs), the Crown may, if circumstances permit, transfer AAUs instead.
Difficulties could arise if the Crown were obliged to transfer AAUs to all landowners with forest sink covenants. For example:
- The rules of the Kyoto Protocol require the retention of 90 percent of the Crown’s AAUs.11
- Annual assessment of carbon stock changes (as well as less frequent assessments) in this environment would create a first-in first-served allocation of AAUs that may not be equitable. For example, those who assess their carbon more frequently would receive AAUs, and those who assessed less frequently may miss out.
- Devolving AAUs would limit the Government’s flexibility to devolve these units under other policy options.
If the Government were to decide to allow landowners to receive AAUs under the PFSI, then a fair basis for allocating these AAUs would need to be developed.
Date of transfer of units
Participants will be able to submit their first carbon inventory after their covenant has been registered against their land, but not before 1 January 2008. For example, applications made in 2010 will not be eligible for carbon stock changes back-dated to 1 January 2008.
The PFSI carbon sequestration accounting methodology will be aligned with New Zealand’s national accounting approach under the Kyoto Protocol. A landowner will be entitled to have RMUs transferred no earlier than 31 December 2012.
New Zealand has opted to account for carbon at five-yearly intervals under the Kyoto Protocol. New Zealand expects to receive RMUs following the submission of its 2012 national inventory report in April 2014. This report should be reviewed within a year of submission (by 15 April 2015). If a country that is party to the Kyoto Protocol is assessed as not being in compliance with its Kyoto Protocol obligations, there is a "true-up" period of 100 days in which a country can bring itself into compliance (for example, by purchasing first Commitment Period Units).
Following the Crown’s receipt of units, the Crown should be able to transfer these units to PFSI participants. The Crown will not be able to devolve RMUs before 2012 as New Zealand will not have received any RMUs to devolve.
RMUs should be able to be transferred in this 100 day "true-up" period. Participants will not be prevented from forward selling units. However, this would be a private matter between the participant and the purchaser of the units. The Crown gives no guarantee as to the tradability or value of the units.
Circumstances in which there is no entitlement to receive units
MAF proposes that a participant will not be entitled to receive units if:
- the participant has failed to pay any fee, levy or charge under the regulations;
- the participant has breached a regulation;
- the participant is in breach of any provision of the covenant;
- the Crown is unable for whatever reason, including inability to obtain access to the forest sink, to verify a report of the carbon sequestered by the participant.
Units will not be transferred to a participant until a carbon assessment report has been completed, signed off by a certifier and approved by MAF.
Acceptable forms of units to transfer to the Crown in the case of liabilities
MAF proposes that the regulations will list the forms of unit the Crown is prepared to accept in the case of liabilities owing to the Crown. This list will not include temporary certified emission reduction units and long-term certified emission reduction units.
In the case of liabilities, payment of money in place of units
MAF proposes that the regulations state that the Crown, at its sole discretion, may determine a price at which liabilities to the Crown can be paid in place of the transfer of units.
Record keeping and certifiers
It is intended that the regulations will set out:
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Record-keeping requirements
MAF proposes that participants will be required to keep accurate and up-to-date records relating to their involvement in the PFSI for a given period of time. These records would have to:
- accurately represent the events, measurements and activities that they purport to represent or could reasonably be expected to represent;
- be complete;
- be reliable;
- be transparent.
MAF proposes that these records include:
- NZEUR account details;
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all carbon measurement records, including:
- raw data/field measurements of site/forest statistics,
- collection technique,
- persons conducting the collection;
- information about any harvesting, including:
- raw data/field measurements of basal area,
- maps showing location and boundaries of harvest areas,
- date of harvesting;
- change of land ownership;
- record-keeping requirements set out in the forest sink covenant;
- details relating to how the forest has been established.
Returns and information to be provided
MAF proposes that landowners will be required to send returns to MAF that include:
- registry account details including any change in the nominated account(s) at NZEUR;
- initial and subsequent certified carbon stock assessments;
- notice of intention to harvest;
- annual harvest summary reports;
- change of land ownership;
- any requirements set out in the forest sink covenant;
- details of any agent acting on behalf of the landowner;
- details for accessing the land – such as how access can be gained and who to contact if access is sought.
Certifiers
MAF proposes that it will register experts (certifiers) in the area of carbon accounting assessment. This should reduce the cost-recovered MAF administration costs associated with the PFSI and provide an independent assessment of carbon stocks.
All returns of carbon stocks would require certification by a registered certifier before MAF would accept and record them. Certifiers would have to maintain relevant competencies to undertake and/or sign off various tasks, including:
- carbon assessments;
- on-site audits;
- harvest assessments/ basal area measurements.
Certifiers would have to maintain independence and impartiality from participants. The independence and impartiality of these certifiers would provide confidence to the buyers of the units generated from the PFSI.
MAF would audit a proportion of the work undertaken by these certifiers. The level of audit will be reassessed over time and adjusted according to levels of compliance. MAF may also contract certifiers for various tasks, rather than rely on in-house provision of services.
MAF proposes that certifiers must be New Zealand Institute of Forestry (NZIF) registered forestry consultants12 (or have appropriate competencies). This should:
- provide an additional level of confidence in the mechanism;
- assist in reducing the time MAF spends ensuring the quality of certifiers;
- provide a means of dispute resolution that is impartial and fair;
- provide a code of ethics for certifiers.
Forestry officers employed by MAF and appointed under the Forests Act 1949 would also be able to undertake the functions of a certifier. All work undertaken by these officers in the capacity of a certifier would be cost recovered.
MAF proposes that there will be powers to deregister certifiers. For example, certifiers may be deregistered if they omit information considered material to MAF’s assessment, or provide misleading statements in order to influence decisions regarding carbon sequestration.
6 Young natural stands and all plantations that have yet to reach a crown density of 30 percent or tree height of 5 metres are included under the definition of forest.
7 Harvesting includes the felling and removal of biomass.
8 This methodology is currently being developed by MAF. It is expected that this methodology will need to be updated over time.
9 Information about the NZEUR is available from
www.nzeur.govt.nz
10 Removal units are the official name for the carbon credits generated from forests. They are also known as forest sink credits.
11 The Crown will be allocated 309 464 979 AAUs. It must retain at least 278 518 481 AAUs. 7 500 000 AAUs have already been allocated to the Projects to Reduce Emissions (PRE).
12 Further information regarding NZIF and NZIF registered consultants can be found at
www.nzif.org.nz.
Contact for Enquiries
Indigenous Forestry Unit
Ministry of Agriculture and Forestry
14 Sir William Pickering Drive
PO Box 20 280
Bishopdale
Christchurch 8053
NEW ZEALAND
Tel: 64 3 943 3700
Fax: 64 3 943 3701
Te Papa Tipu Innovation Park
99 Sala Street
PO Box 1340
Rotorua
NEW ZEALAND
Tel: 64 7 921 3400
Fax: 64 7 921 3402
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