6.1.c Revenue from forest-based environmental services

Rationale

This indicator provides information about forest-based environmental services for which markets and revenues are emerging or currently exist. Revenues from forest-based environmental services can be an important component of the economic value of forests.

Current state

New Zealand’s forests provide a broad range of environmental services. These benefit both local communities and the national economy. Services include:

  • erosion mitigation
  • nutrient filtering
  • enhancing and protecting biodiversity
  • sequestering carbon
  • opportunities for recreation.

While New Zealanders place a high priority on these services, they have generally been treated as free or public goods. The exceptions to this have been targeted initiatives for catchment management (for erosion and flood protection) and the introduction of the New Zealand Emissions Trading Scheme (which provides tradable carbon credits).

Debate is growing on environmental services (frequently referred to as ecosystem services) and how New Zealand can maintain its natural capital through policy actions and initiatives. There is an increasing body of research on the value of non-market services from New Zealand’s natural resources and the primary sector. This work is increasing community and political awareness of these issues, particularly in the context of soil and water management.

Mitigating soil erosion

New Zealand has naturally high rates of erosion, which are compounded by extreme weather events. Hill country erosion is estimated to cost New Zealand between $100 and $150 million per year through lost production, damage to infrastructure and sedimentation. One of the most effective measures for maintaining soil cover and fertility on properties is to utilise forest and shrub cover.

Erosion management has been a public policy issue for over 80 years, and there have been several programmes to support landowners to modify their land use practices (particularly on hill country properties). Regional councils have continued this work and are engaging with landowners and communities in vulnerable catchments. Central government has put in place several targeted programmes for erosion control, for example:

  • Erosion Control Funding Programme (ECFP) (previously the East Coast Forestry Project) was initiated in 1992. The programme targets severely eroded properties with high sediment yields in the Gisborne (East Coast) region of the North Island. The ECFP uses grants to establish planted forests and wide spaced plantings and encourage the reversion of land to indigenous forest. In 2014, about 42 000 hectares have been treated.
  • Sustainable Land Management Hill Country Erosion Programme, introduced in 2006/07. This initiative is a partnership between central government and regional councils to support hill country farmers in treating soil erosion through sustainable land management practices. Management tools include whole farm plans, the use of forestry or wide spaced plantings and land retirement (through natural reversion to indigenous forest).

Avoiding erosion has significant, long-term benefits for the productive capacity of New Zealand’s pastoral and forest lands, through improving water quality and protecting the “built environment” in rural and urban communities. (See Indicator 4.1.a.)

Carbon sequestration and emissions trading

The Government operates the New Zealand Emissions Trading Scheme (ETS) to help meet its international climate change obligations and help reduce New Zealand’s net greenhouse gas emissions to below business-as-usual levels. The key sectors of the economy are being progressively brought into the scheme, and market mechanisms set the price of tradable carbon units.

The forestry sector entered the ETS in January 2008, and owners of post-1989 forests (on eligible land) have been able to register their holdings and account for changes in the carbon stocks of their forests since this date. The ETS recognises the ability of forests to sequester carbon dioxide from the atmosphere and store it in branches, tree trunks, leaves, roots and the soil. At the time of harvest, owners repay an equivalent number of units to the carbon that has been lost through harvesting.

This mechanism recognises the important role that new forests (those established after 1989) play in sequestering carbon (and offsetting emissions in other sectors). These forests are around a third of the current planted forest estate, and future plantings will add to this total. While the forest owner has to repay the carbon credits, they may gain cash flow by trading carbon credits throughout the rotation.

Climate change regulation has been ranked the third most valuable ecosystem function performed by forests in New Zealand.

Other initiatives

In 1977, the Government established the Queen Elizabeth II National Trust to protect significant natural and cultural features on private land, using open space covenants. The Trust acts as a perpetual trustee to ensure the covenanted areas remain protected. These areas include wildlife habitats, remnants of natural forest, cultural sites and grasslands. The Trust provides legal and management assistance to landowners in establishing the covenanted areas. Financial assistance may also be available to partially fund fencing costs and similar work. As at 30 June 2014, 180 845 hectares were protected through 4350 registered or approved covenants.

In 2007, the Government approved the Afforestation Grant Scheme (AGS), which ran for five years (from 2008/09). The AGS was part of the Government’s package of climate change initiatives and had the twin objectives of increasing carbon sequestration and enhancing land use sustainability. The criteria for assessing applications had a weighting towards applications that could show tangible benefits for soil conservation, improved water quality and enhanced biodiversity. The AGS was of particular benefit to hill country farmers, who were seeking to use plantings as both an economic investment and as a tool to manage soil and water issues.

Trends

  • In 1977, the Government established the Queen Elizabeth II National Trust to protect significant natural and cultural features on private land, using open space covenants.
  • The Erosion Control Funding Programme (ECFP) (previously the East Coast Forestry Project) was initiated in 1992.
  • The Sustainable Land Management Hill Country Erosion Programme was introduced in 2006/07.
  • In 2007, the Government approved the Afforestation Grant Scheme (AGS), which ran for five years (from 2008/09).
  • The forestry sector entered the ETS in January 2008.

In the initial years of the ETS, trading saw a carbon price of around $20.00 per New Zealand unit tonne of carbon dioxide equivalent). However, over the past three years (2012–2014), there has been significant price volatility and a decline in overall price. As of mid-2014, the price of a New Zealand unit was around NZ$4.00.

The role of environmental services is emerging as an important planning and policy issue in New Zealand. Government agencies, such as the Department of Conservation and Ministry for the Environment, are taking on board the need to accurately assess New Zealand’s natural capital, and to develop valuation methods that can measure non-market goods and services.

Trend Status

Data Quality L / M

Supporting Material:

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