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Landowners Bulletin 27th May 2008
Environmental Service Providers Bulletin
Summary
This bulletin details the strategy that Queen Charlotte Wilderness Park is about to adopt with regard to the supply of carbon sequestration services. It also provides background which the Park owners think is relevant to their thinking and invites other landowners to participate.
Climate change
A couple of weeks ago over 100,000 people died in an exceptional and unseasonable storm. On almost the same day our prime minister gutted her emissions trading system of most of any practical value it may have had left. Even though it was probably human induced climate change that had caused the tragedy and even though it is certain that there will be many events like that to follow.
As far as we are aware it was in 1898 (Svante Ahrrenius) that scientists first became worried about CO2e emissions. Certainly, by the early seventies, many scientists like Lovelock were convinced and by 1990, after a painstaking peer review process by hundreds of leading scientists and experts (IPCC), the scientific basis for human induced climate change was confirmed. Since that date, we have had the Rio Convention of 1992, the Kyoto accord of 1997 and endless international conferences. Governments have been working more or less together on this for at least eighteen years. All that time emissions have increased and the problem has worsened to the point that it is now almost inevitable we will experience social and economic disruption on an unprecedented scale.
We think it is fair to say that Government action has failed and, if history is any guide, it is likely to continue to fail. The government will likely blame the public citing lack of mandate and there is some truth in that. But the public can only provide a mandate from what they know and we have only seen half hearted attempts by governments to educate properly on this matter. What we have seen is aggressive attempts to mislead by some governments (like USA and Australia) against virtual silence from others including our own.
Kyoto
In our opinion, Kyoto is a crock. Even if all governments were to participate and do what was envisaged it would not solve climate change because the objectives are not related directly to the problem Instead of Kyoto being about changing our ways so that we have healthy natural world/stable atmospheric composition/stable climate/sustainable life its objectives have become centred around how much carbon countries emitted in 1990 which doesn’t really have much to do with it at all. Kyoto, sadly, has become compromised into something that allows politicians to claim they are doing something when they really are not.
For example take our own country. Our present policy is to protect those who emit while penalising those who do not by getting them to pay for it. As a result our emissions are far more than they were in 1990 and getting worse every day.
We can of course buy “carbon credits” to “offset” those emissions. We could even become “carbon neutral” if we bought enough, theoretically overcoming the objection that 1990 levels are still too high. But “Kyoto” carbon credits do not necessarily involve systems that take CO2 from the system (like our forest restoration ) but could originate from systems that do not remove any CO2e at all. (eg wind generation) So we could and probably will have a situation that will allow us to claim Kyoto compliance without us having reduced our net impacts on climate change by one little bit. Kyoto might prevent things being worse than they could have been but it will not fix the real problem which is surely the effective survival of the human race in any form that resembles the present.
It is hard to see how Kyoto will survive even to the end of the first commitment period. For example NZ taxpayer will be faced with paying huge amounts for carbon credits, (1 billion now and rising) much of it likely to go to projects in other countries. Taxpayers could be forgiven for thinking that it would be better to spend the money on something that will do something and in our own back yard. In our opinion NZ will almost certainly pull out, probably towards the end of the period, when enough others have done the same to make it respectable. Already Canada has withdrawn and the worst polluter/capita in the world, the USA, did not even join.
Pfsi/Regulations/Hobsons choice
In our January bulletin we commented on the then freshly issued PFSI. We said then that it was not an agreement we would be happy to enter into because it was an agreement where only the landowner was committed, at the very least because (under clause 8,4) any protections which the landowner may think they have under the covenant would be worthless because they could be changed at any time by regulation at the whim of the government of the day.
We also said that the agreement (also 8.4) unreasonably demanded that landowner agree to pay to the Government whatever the government felt like, as often as they felt like, for as long as they felt like and that would probably mean that it was likely that an unrestrained bureaucracy would develop which would almost certainly get out of hand.
We have since seen the draft regulations and it looks like its getting out of hand already. The charges are already enormously inappropriate and we can say that as an expert, because after all, for the past five years, we have been doing virtually all that needs to done without any input from the government at all.
It seems that we are being asked to fund an unnecessary bureaucracy that would be more at home in an episode of “Yes Minister”. Just like Sir Humphreys award winning hospital the bureau will probably do very well as there will be no patients. Or at least no patients who have to spend and risk their own money.
We hear the government is saying that we are just frightened of the legalese in the covenant and that the government would never be unreasonable. But this agreement has perpetual obligations of great significance to the country, just like that other one negotiated by Hobson in 1840. And we know how that one turned out. And in 1840 the government didn’t ask Maori to agree to being shafted as they are asking us to do this time.
We still think that a reasonable agreement will evolve sometime, it is not the difficulties that are causing the problem, what is missing here is the governments will to make it work. But that could be a long way off, our present government seems to like a possum caught in the lights and it to us it is quite uncertain yet what the likely new one will do as it seems they are more interested in making the government stay there.
The market
As NZs first commercial carbon sink, trading successfully for the last five years, we have had quite a bit to do with the market. We have sold CO2e to the tourists that have come here and even to some that haven’t. We have formed virtual CO2e partnerships with hard hearted corporations. We have even had visits from people from foreign governments eager to see how things work. Even more significantly we have had endless discussions about the subject with our international and domestic visitors and people like them are the real market because they are consumers and it is consumers that drive all things including business and politics.
In addition to this, in recent weeks, we have been talking to people, business mostly, who are waiting to purchase our CO2e as soon as things are sorted out again. Business before 2008 was of course entirely a free market affair but with Kyoto and therefore the government coming into it everybody has been waiting to see what the implications are.
What we have been asking them is why they wish to purchase our CO2e and the factors that would influence the detail of their purchase. This is what we found.
They want to look after the future
For individuals this is the main reason for doing something particularly if they are younger. Not the first priority perhaps with business but we have noticed that once business does get started down this track this reason for action starts to take over.
They want to be seen to be looking after the future
Older individuals want this more than younger so they can enjoy some respect from the kids. For business starting off this is definitely the first priority. They want to derive market advantage by being seen to be “good”. For others it works in a somewhat negative sense in that they feel they the expectations of the public will make it increasingly hard to do business if they don’t do something.
What they want to purchase
Individuals or business both want to compensate or offset all or a part of their lifestyle or business. If they put up a ton of CO2e they want something to take it back down again. Most do not realise that a Kyoto credit could come from a process that didn’t actually remove CO2e but only may have contributed to less CO2 by maybe displacing some other process. When they understand that, all say that those sorts of credits would not be acceptable. All this is good news for us because as CO2e extractors by way of indigenous eco-restoration we have a far higher quality product than Kyoto contemplates.
Other factors
All business want to use the fact that they were offsetting as part of their brand. Therefore how the offset was derived is very important. For example buy locally would be important even to identifying the particular project they would be involved with. They want to say that we are doing “this” and this is resulting in “this”, complete with pictures. All the business that we spoke to were only interested in buying forest CO2e from indigenous restoration, some just because they saw that as being more “virtuous”, some seeing it as being complimentary to the nature of their business (ie eco-tourism) and a few because they saw natural restoration as being more appropriate as a solution to climate change and all the other problems around the corner.
Credibility
If individuals think that their money is going to something that works they don’t seem to care much about the paperwork. Some seem to think that the world is in so much trouble that they have to try something even if there are no guarantees. Business wants credibility because they want something to back up their claim to be carbon neutral. They want to know that if they paid for a ton of CO2e to be taken out, it will be taken out, it will be kept out and someone independent is around to make sure it all happens. Good science and no cons. They want a paper trail that is credible to their clients.
Kyoto
As long as the credibility issues are addressed no one seems to care whether offsets are authorised by government or not. That could change if the government ever gets brave enough to institute a broad based carbon tax.
To us their seems to be two markets, one is the ordinary consumer who wants the best product at the best price and judges value in quite complex ways as detailed above. The other is the Kyoto market where the main demand, if it happens, will probably be from governments who will want the cheapest way of their inaction regardless of quality.
Our strategy
We will not be committing ourselves to the government system at least as long as the way it stays the way it is. In fact given all the above we probably should be putting out the cattle and sheep again because that’s what the government seems to be wanting us to do.
But we think that would be wrong morally given the current state of the planet, spiritually, because we have come so far now on this path and are very happy with it and economically in the long term because eventually the truth always prevails. So we will carry on providing carbon sequestration as part of our environmental service portfolio and hope the government either keeps out of our way or comes round to seeing us as a new industry of great importance and starts to work with us.
We will offer to the private market at least three types of CO2e care. All will be fully audited and certified to guarantee a genuine product and covenanted to ensure the obligations are passed on if the land changes hands.
Guaranteed reduction units (GRU 1)
This will be our premium unit equivalent to 1 ton CO2e permanently extracted from the atmosphere by means of indigenous eco-system restoration. It may come from a forest system of any age as long as it is predominately indigenous (>95%). These units are introduced so that we will have income to maintain all classes of forest. It is not only forest established after 1990 that is important. GRU1 cannot be allocated where the carbon involved has already been the subject of either GRU2 or GPU1.
Guaranteed reduction units (GRU 2)
This will be the same as GRU1 except that the extraction will come from CO2e extracted in accordance with Kyoto requirements although, at least initially, they will obviously not be government backed and they will be derived from indigenous restoration even though Kyoto does not require that. We only include them in the anticipation that one day the government system will become something we might join. GRU2 cannot be allocated where the carbon involved has already been the subject of either GRU1 or GPU1.
Guaranteed preservation units (GPU 1)
These will be units, not of CO2e extracted but units of 1ton CO2e preserved. The purchase of GPU1 units will guarantee the preservation of 1 ton CO2e. These units are introduced so that we will have income to maintain mature forest, something every bit as important as establishing new forest. A mature forest of course ceases to extract CO2e. GPU1 cannot be allocated where the carbon involved has already been the subject of either GRU1 or GRU2.
Total carbon
The total amount of CO2e stored at any one time is equal to the sum of all the GRU and GPU units allocated at that time.
Total CO2e stored =GRU1+GRU2+GPU1
Other strategy
We think that the more landowners that are involved in this concept the better it will work for the normal obvious reasons. Therefore we invite anyone who may be interested to contact us, preferably by email, to discuss possible paths forward.
Probably we will all have to meet quite soon to thrash out detail at some venue suitable to the centre of interest. We have only talked about carbon sequestration by way of indigenous eco-restoration. That is because that is what we do. We do realise though that a ton of CO2e extracted through exotics is still a ton of CO2e extracted. We do not however wish to be bogged down with relationships with landowners whose prime interest is timber rather than eco-system as we see them as having quite a different view on things and anyway they are already well represented.
Our industry has something quite wonderful to offer the world and we don’t need to be beggars at the temple which is where our government is trying to keep us right now.
Ron Marriott, QCWP
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