The New Zealand forestry sector's experience in providing carbon sequestration services under the New Zealand Emissions Trading Scheme, 2008 to 2012

- The NZ ETS has a number of deficiencies that make it unattractive to the commercial forestry sector.
- The NZ ETS has not encouraged the planting of new forest in New Zealand, while subsidy schemes have.
- There are likely to be only short-term financial gains from participation in the NZ ETS, for most planted forest investors.
- Government policy should implement a strategy to significantly decrease gross emissions, and encourage planting of new forest.

The New Zealand government established the New Zealand Emissions Trading scheme (NZ ETS) as the primary mechanism for achieving New Zealand's Kyoto obligations between 2008 and 2012. The legislation made planted forests the first sector to participate in the NZ ETS, starting in 2008. At the same time, other schemes to encourage carbon sequestration through forestry were also implemented.The implementation of the NZ ETS has focussed on meeting New Zealand's international obligations between 2008 and 2012 at minimum cost, and there is little evidence it has led to any reduction in greenhouse gas emissions or investment in new planted forests in New Zealand. The NZ ETS has been most effective at facilitating the transfer of international (Kyoto compliant) carbon credits from emitters to the New Zealand government. These credits have been used to partially meet New Zealand's obligations for the first Kyoto commitment period, allowing other units to be carried over to meet obligations from 2013 to 2020.The paper shows that participation in the NZ ETS is unlikely to contribute a long-term positive impact on profitability of commercial forestry, and that the liabilities created through participation in the NZ ETS do not assist the development of the forestry sector in New Zealand. The paper suggests that the NZ ETS is not the correct policy instrument to encourage carbon sequestration by planted forests.