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Report Questions Govt’s Optimism On Kyoto Credits

August 4, 2004

An independent report challenges the Govt’s belief NZ will have a surplus of carbon credits to sell during the first stage of the Kyoto Protocol. NZ Energy & Environment Business Week reported two weeks ago NZ stands to gain at least $300m from trading emissions credits between 2008 and 2012, thanks to the country’s forests, which act as carbon sinks.

This was based on official figures from the NZ Climate Change Office. But a report by Castalia Strategic Advisors claims the Govt is far too optimistic in its forestry projections and is also under-estimating emissions from agriculture and energy generation in its official figures. Whereas the Climate Change Office forecasts NZ will have a net surplus of up to 55m tonnes (Mt) of CO2 during the first 5-year Kyoto period, the Castalia report predicts a deficit of 7Mt.

The report notes new plantings of Kyoto forests have fallen sharply since 2000, and are likely to remain well below the Govt’s assumed level of 30,000ha per annum, due to a slump in world timber markets. Castalia director Alex Sundakov says: “No one is planting trees right now. If anything we’re going to get deforestation.” While the Govt forecasts Kyoto forests will soak up105Mt of CO2, Castalia puts the figure at 91Mt. In addition, it believes a further 22Mt should be debited for deforestation expected to occur by 2013.

Sundakov notes the Govt is obliged under Kyoto to report deforestation but seems to be turning a blind eye to it in official reports. With regard to agricultural emissions, the Govt forecasts only a small increase – from 35.6Mt to 37.9Mt CO2 between 2000 and 2010. Castalia believes this projection is too low, if agricultural GDP grows at the expected rate of 25% between 2000 and 2010.

Given agricultural emissions grew by 11.6% between 1990 and 2000, when agricultural GDP also increased 25%, the report states:“We would expect at least similar growth in emissions to the previous decade, but the (Govt) projection would imply emissions over the same period would increase by only about 6.5%. This is half the historic relationship between the rate of growth of agricultural GDP and emissions.”

Castalia also concludes emissions from energy generation will not fall, as Govt figures predict, but will continue to increase, albeit more slowly as a result of policies to encourage renewable energy. “It therefore appears to us the Govt’s comfort over the first commitment period is misplaced.”                       

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