EXPERT COMMENT: Bushfires' impact on global warming and forest owners under Kyoto rules

EXPERT COMMENT: Bushfires' impact on global warming and forest owners under Kyoto rules

[The following article has been specially produced for southem.com by Richard Hayes of the New Zealand company Environmental Intermediaries & Trading Group Limited (EITG) in response to discussion about the Australian bushfires and global warming.]

The impact of the Australian Bush Fires on Global Warming and the Consequences for Forest Owners under the Kyoto Protocol

Much has been said about the recent tragic bush fires in Australia. Added to the loss in human and animal life is comment on the impact on global warming.
Global warming is all about human or so call anthropogenic emissions, that is emissions from human activities on the planet.
Wild fires have been around for eons and will still probably be around if humans ceased to exist.
Whilst many of the fires are suspected arson, the counter argument of course is man fights and therefore limits all kinds of wildfires.
So where did the CO2 come from that was emitted in the fires? Answer is it was taken out of the atmosphere recently, perhaps up to only 40 years ago.
Recycling is happening with C02 moving from the atmosphere into the trees and back again over short periods.
These emissions are unlike the emissions controlled by the Kyoto Protocol. These are a result of the burning of fossil fuels which is C02 removed from the atmosphere many millions of years ago.
At the present time 22% of global greenhouse gas (GHG) emissions are created from cutting down forest (deforestation).
Growing forestry (afforestation) removes C02 from the atmosphere by photosynthesis.
Part of the Kyoto Protocol acknowledges credit to be given for afforestation and the Government may issue ‘credits’ to those who grow forests.
Due to the 1990 start date of the UN initiatives this has been adopted as an arbitrary date as from when the tracking of the afforestation carbon credits starts. A forest planted post 31/12/1989 resulting in a change of use of the land to forestry is called a ‘Kyoto Forest’ and can attract carbon credits.
Credits from growing forest are added to the limit agreed to with the UN and can be surrendered to the UN to offset emissions above the agreed cap and therefore have a value to those who emit in excess of the 1990 levels.
Signatories to the Kyoto Protocol, of which New Zealand and Australia are two, are permitted to implement the protocol by enacting legislation that creates the outcomes required by the protocol.
How the outcomes are achieved are completely up to the host Government.

Impact on Forest Owners with Carbon Credits in Australia
Under the proposed Australian Carbon Pollution Reduction Scheme (CPRS) would forest owners be liable after the fires to surrender carbon credits if they had received them for the forest? In short the answer is no.
The reason is the CPRS is designed to grant credits on an averaging basis and the Australian Federal Government would use this averaging to smooth fluctuations in the actual carbon stored in forest.
This policy arose in part from a significant distrust on the Governments part in the forest industry and the potential inability to find the entity that was accountable for the emissions either through fire or more obviously harvest.
Some forest investment structures in Australian forestry separate land and forest ownership and leave potential disputes as to who is liable.
If the forest was non Kyoto forest this is excluded from the CPRS and no carbon credits are surrendered for deforestation or a fire causing deforestation.
Deforestation once a significant emission for Australia has slowed significantly since 1990. This is due to restrictions in new environmental regulations.

Impact on Forest Owners had the Fires been in New Zealand
So what if the fires occurred in New Zealand under the NZETS? Simply put, if the forest was pre-1990 then replanting, which is covered under most forest insurance policies, would remove any carbon liabilities.
Choosing not to replant would result in full deforestation liability.
The impact of the fires would have to be reported to the Ministry of Agriculture and Forestry (MAF) - see the Carbon Monitor volume 14 issue 1.
If the plantation was Kyoto Forest and the owner had been issued NZU units, then there would be a definite liability and requirement to surrender to the Government at the next annual forestry return credits to the amount lost in the fires.
Environmental Intermediaries & Trading Group Limited suggests a forest owner who was part of EITG Carbon Pool would not have a problem in this situation.
EITG Carbon Pool is the process of a group of forest owners binding together to achieve economies of scale and/or to manage or offset liabilities.
In its simplest of terms, the pool is analogous to insurance where the participants collectively share a party’s loss thereby reducing the likelihood of any one party having total loss of their assets.
With the harvest liabilities of the Kyoto Protocol, government officials have suggested pooling is the only mechanism where the harvest liability can be managed to give carbon credit income while managing the future harvest liabilities.
In this case the bush fires are a dramatic example of what could happened to forest owners who are part of the NZETS and not in the EITG pool.

Richard Hayes
ph 64 21 310 301
fax 64 9 920 1093
skype richardshayes
email
richard.hayes@eitg.co.nz
www.eitg.co.nz