New consultation document on the Permanent Forest Sink Initiative (PFSI)

In March, the Government released a consultation document on the regulations and forest sink covenant required for the PFSI to become operational in January 2008.

The Climate Change Response Amendment Act passed in November last year introduced the Permanent Forest Sinks Initiative (PFSI). This creates an opportunity for Kyoto-compliant landowners to gain financially through newly established permanent forest sinks. Landowners meeting the requirements of the initiative will be able to obtain tradable Kyoto Protocol compliant emission units in proportion to the carbon sequestered in their forests. However there are a number of outstanding issues to finalise before the PFSI becomes operational.

The Ministry of Agriculture and Forestry’s consultation document released in March called for submissions on proposed regulations covering the following issues on the PFSI:

• the application process and proving eligibility of Kyoto-compliant land;

• harvesting, including allowable levels, reporting and monitoring requirements and penalties for breaching levels;

• carbon accounting and entitlement to units; and

• record-keeping requirements and certifiers.

In addition, the paper outlines the options for recovering costs associated with administering the PFSI which are likely to be a combination of fixed fees and annual levies.

A draft of the forest sink covenant is also included as part of the discussion document. This covenant sets out the rights and obligations of both the landowner and the government and once signed is to be registered on the land title.

There is some concern that the PFSI might have been superseded by the Government’s latest afforestation options outlined in its December 2006 Sustainable Land Management and Climate Change discussion document (and noted in the Summer 2007 issue of Commercial Quarterly). This includes the proposal for a devolving sink credits and liabilities mechanism (DCL) for Kyoto-compliant forests established from 2007 onwards which would be run in a similar manner to the PFSI. However, this consultation document states that the PFSI will “proceed no matter what other policy options are chosen”.

Submissions on the discussion document closed on 14 May 2007. The Government hopes to have the regulations approved later this year so that MAF’s Indigenous Forestry Unit will be able to start approving PFSI applications and have the PFSI fully operational in time for the commencement of the first Kyoto commitment period in January 2008.

A copy of MAF’s consultation document is available on their website at www.maf.govt.nz/forestry. To access a copy of the Sustainable Land Management and Climate Change discussion document visit the MAF's website at  www.maf.govt.nz/climatechange. For further information on climate change issues, please contact Bell Gully partner, Simon Watt.

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For more information on any of the cases, articles and features in Commercial Quarterly, please email Diane Graham or call her on 64 9 916 8849.