How do we address the harvest residue problem of ‘permanent’ forests in Aotearoa?
In Aotearoa afforestation continues to be incentivised by climate mitigation policies, whilst we simultaneously struggle to manage the effects of forestry waste. Forestry waste contributes to large scale harvest residue debris flows (“debris flows”), which are triggered by extreme weather events that are increasing as a result of climate change. As demonstrated during cyclones Gita (2018), Hale (2023) and Gabrielle (2023), this is becoming a serious problem in forestry regions. Given current regulations fail to adequately manage harvest residue, there is therefore the need for prompt regulatory intervention. This should include meaningfully incentivising indigenous afforestation, as a dual solution to reduce harvest residue and enable Māori to choose how they manage their own land.
Background
Afforestation refers to the establishment of forests, especially on land not previously used for this purpose. Increased afforestation for commercial purposes creates large volumes of harvest residue in the form of woody debris (approximately 15% of the total harvest volume). Woody debris refers to both merchantable and non-merchantable waste materials, including “slash”, a type of course and fine woody debris that is often used in the context of forestry waste. However, woody debris is the preferred industry term, given it is principally large woody debris (i.e. not just slash) that is responsible for damage caused downstream during debris flows.
There are two forestry types contributing to the problem: plantation and permanent forests. Plantation forests are created for the commercial harvesting of timber. Permanent forests, sometimes called carbon forests, aim to sequester and store carbon to meet emissions reduction targets. There is often uncertainty about how permanent forests earn credits under the Emissions Trading Scheme (“ETS”), and how frequently they are harvested (and thus create harvest residue). However, permanent forests do create signficant volumes of harvest residue, but are not subject to consistent regulation in the way that plantation forests are. Additionally, whilst plantation forests are more consistently regulated, current regulations still fail to prevent the impacts of harvest residue.
Regulation of harvest residue
Plantation forestry is an established industry in Aotearoa, governed by the Resource Management Act 1991 (“RMA”). The RMA is implemented via the Resource Management (National Environmental Standards for Plantation Forestry) Regulations 2017) (“NESPF”) which creates nationally consistent rules, particularly in relation to afforestation on erodible land and “clear-felling” of plantation forestry, a practice involving cutting down most or all trees in an area. This produces large volumes of harvest residue. Overall, the RMA and NESPF have failed to prevent the effects of increased harvest residue. Further to this, the RMA fails to impose adequate liability on forestry companies to compensate impacted communities after damage occurs. This can be seen in case law such as R v Ernslaw One Limited (2022) NZDC 14657, whereby communities were forced to turn to the courts for relief.
Permanent forests, by comparison, are a novel industry in Aotearoa. Increasing permanent afforestation is caused when the price of carbon rises (called New Zealand Units or “NZU” in Aotearoa). NZUs are managed by the ETS to assist in meeting mitigation targets under the United Nations Framework Convention on Climate Change. Given New Zealand is one of the worst carbon polluters on a per-capita basis in the world, forests have an essential role to play in Aotearoa’s transition to a low-emissions economy. This is because Aotearoa’s ETS is one of the few schemes globally that allows companies to offset 100% of their emissions through forestry.
Whilst permanent forests can comprise both indigenous and exotic forests, exotic forests are significantly more profitable. This has resulted in permanent exotic afforestation projections reaching double the climate commission’s recommended rates, given these will earn carbon credits and contribute to Aotearoa’s net zero target.
From 2023 onwards, the longer-term carbon potential of forests is considered in granting NZUs. By comparison, when using previous accounting methods, earnings and losses would fluctuate depending on the current carbon storage capacity of the forest. Under a new system of “average accounting”, operators may now harvest without needing to pay NZUs back to the Government if they replant. The optimum rotation age under this mechanism is 20-30 years, which is about the same as plantation forestry. Accordingly, the label of “permanent” forests can be somewhat misleading. Whilst permanent forests are not clear-felled and therefore will not create the same scale of harvest residue as plantation forests, they are still able to be harvested to up to 70% of tree cover per hectare. Therefore, permanent forests have the potential to create significant amounts of harvest residue.
Previously, permanent forests were not regulated under the NESPF, which only included plantation forests. The Ministry for Primary Industries (“MPI”) has therefore announced future amendments to the NESPF, including expanding it to include permanent forests, enabling councils to develop local rules and policies and making operational changes to better manage environmental effects (“NESPF amendments”). This will ensure nationally consistent management and mean that all future regulation to reduce the creation of harvest residue will include both forest types. However, further details on the proposed changes are limited at present. Cabinet papers providing more specifics are expected to be released in October 2023.
Thus, in the absence of further detail, the NESPF amendments should focus on preventative solutions, given the removal of harvest residue as an end of pipe approach is insufficient. Even with better commercial incentives for removal, it is a dangerous and expensive operation. Given 40% of the forestry workforce are Māori, this also poses a disproportionate risk to Māori forestry workers. Accordingly, MPI should focus on reducing the volume of harvest residue altogether.
Performance management bonds
One such prevention focussed solution that ought to be explored is the use of performance management bonds. This is where forestry owners or operators submit a bond that is repaid upon observed compliance with environmental standards. This should be set high enough to compensate for potential damage caused by harvest residue debris flows. This would have the dual effect of better incentivising effective harvest residue management measuresas well as requiring forestry companies to internalise the costs of the damage promptly and adequately, without the need to rely on the courts.
However, care must be taken not to impose overly stringent, prevention focussed NESPF amendments without nuance. This would be inequitable, for the reasons explored below.
The equity impacts of overly stringent permanent forestry regulation
Changes to the ETS in early 2023 introduced a “permanent forest” category into the scheme, allowing forestry operators to earn NZUs from post-1989 forests. MPI recommended the Government exclude exotic permanent forests from the category (with some exceptions) to heavily regulate the activity and encourage indigenous afforestation. However, the Government went against MPI’s advice and allowed permanent exotic forests into the category. The reasons for this are not straightforward.
Despite Treaty settlements in recent decades returning land to Māori, this constitutes less than 5% of Aotearoa’s total land area and has principally comprised less versatile, steep and erosion prone land, suitable for permanent forestry. Thus, when the price of carbon rises, such land becomes profitable in ways that it could not be historically.
Presently, 30% of Aotearoa’s forestry is on Māori land. This is expected to reach 40% as Treaty settlements are completed. Thus, regulatory changes to slow afforestation will disproportionately impact the ability of Māori to benefit from their land. Accordingly, at the start of 2023, the Government decided to allow the permanent post-1989 forest category to include exotic forests to support Māori aspirations for their land, with the intention to redesign the category later. This redesign is currently in progress, with consultations having closed on 11 August 2023.
Overall, despite the increasingly complex tensions highlighted during consultation of both the introduction and redesign of the permanent forests category, there is widespread policy support on the need to incentivise indigenous afforestation. This presents an opportunity to both honour Māori aspirations for their land and potentially avoid the devastation of future harvest residue debris flows.
Incentivising permanent indigenous forests as a prevention focused solution
There are many benefits to incentivising permanent indigenous forests over permanent exotic forests, as they avoid many of the associated environmental risks, including producing less harvest residue. Furthermore, MPI openly want to support indigenous afforestation given their role as long-term carbon sinks. However, presently there is no economic incentive to do so, given their significantly higher establishment and maintenance costs. They are also slower growing and thus begin sequestering later than exotic forests. As a solution, the concept of “transitional forests” has emerged, which are forests that transition from predominantly exotics to predominantly indigenous over time.
Indigenous forests produce less harvest residue given the strict controls on the levels of harvesting allowed. Given Māori support for indigenous forestry, transitional forests thus also address equity and environmental tensions. However, much scientific uncertainty exists about how to successfully transition from exotic to indigenous forest systems. Thus, whilst theoretically addressing multiple tensions, the unknowns surrounding transitional forests are considerable.
Accordingly, the current redesign of the permanent forest category should involve solutions such as a premium class of NZU’s generated by permanent indigenous forests. Such an approach may present a promising way forward in improving the economic incentives surrounding indigenous forests and spur further research into successful transition methods.
Further to this, the recent “Outrage to Optimism: Report of the Ministerial Inquiry into land uses associated with the mobilisation of woody debris (including forestry slash) and sediment in Tairāwhiti/Gisborne District and Wairoa District” (“Ministerial Inquiry”) also suggests the development of a biodiversity credit scheme to complement and counterbalance existing carbon markets and direct private and philanthropic capital into indigenous forests. The Ministerial Inquiry also recommends incentivising indigenous and slower growing exotics through “front-loading” the earning of credits as a loan, as well as reviewing ETS recognition of indigenous forest sequestration (Ministerial Inquiry, at 30).
Other benefits for indigenous permanent forests could also be explored, such as being granted charitable status and tax breaks to relieve high maintenance costs, or being exempt from performance bonds to relieve some of the initial establishment costs. For Māori and non-Māori alike, giving up the potential to benefit materially from permanent exotic forests should be contingent on a convincing guarantee that such opportunity costs will be adequately compensated through revenue generated by indigenous forests.
Conclusion
In recent years, harvest residue debris flows have devastated communities and ecosystems in Aotearoa’s forestry regions. The Government has neglected to regulate both plantation and permanent forests in a way that prevents the creation of harvest residue. To move away from end-of-pipe approaches, prevention-focused regulatory changes are necessary. However, care must be taken to navigate conflicting interests. Rather than preventing Māori from benefitting from their land via restrictive regulations, a better solution would be to meaningfully incentivise indigenous afforestation, as a dual solution to reduce harvest residue and enable Māori to choose how they manage their own land. This will ensure Aotearoa both honours Māori aspirations and better protects communities and ecosystems from the impacts of harvest residue.