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Media release
Tuesday, August 9, 2011
Wide reaching effects for landowners of ETS, and applications for exemptions must be made by September 30
If you have forest on your land, or have a legal interest in forests, the Emissions Trading Scheme (ETS) will affect you and there is only a limited amount of time left to apply for an exemption or compensation.
What many people do not realise, says Tax Manager Trevor Chin of Staples Rodway Waikato, is that even if they do not actively manage forests but simply happen to have a forest stand anywhere on their land, they may be liable to pay the Government if those trees are ever cut down.
“This works retrospectively as well, in that if landowners had a forest on their land which had been cut down since 2008, they too might be liable to the Government for this deforestation,” he says.
For example, if a landowner had owned a bach by the coast since 1980 that approximately two and a half hectares of pine trees grew on until 2008, when a forest fire swept through the property and cleared it, if the land was then used to graze cattle for the next five years and the trees not replanted, the landowner would be liable to pay carbon credits (emissions units) to the Government for the cleared forest.
The value of the liability to the landowner in the example above could be in excess of $34,000, based on a 19-year-old pine forest in the Gisborne area at $25 a carbon credit.
“It can become tricky for landowners to know what obligations and opportunities they have under the ETS as stands of trees that may be subject to the ETS are classified as either pre-1990 forest land or post-1989 forest land,” says Mr Chin.
Forests existing before 1990 have a definition under the Climate Change Response Act 2002 as being an area that was forest land on 31 December 1989, and that on 31 December 2007 was still forest land with predominantly exotic forest species.
For such forests, participation in the ETS is mandatory and landowners will have to pay by way of carbon credits if they decide to permanently clear an area of their forest in excess of two hectares within any five year period.
The issue for landowners is that mandatory participation will likely affect the value of their land, which may be realised at the time of any potential future sale. Landowners of pre-1990 forests should consider either obtaining an exemption from the ETS or compensation from the Government if eligible.
“Eligibility and conditions are well defined and stringent in both these cases, and landowners will need to get some advice and move fast to take advantage of either of these options as the deadline for seeking exemption closes on September 30, 2011,” says Mr Chin.
With forests grown since 1990 the landowner of forest land, a holder of a registered forestry right or a registered lease or a party to a Crown conservation contract may voluntarily register in the ETS, and has a little more time to do so in order to obtain carbon credits as their forests mature.
“Landowners who do not want to miss out on obtaining carbon credits for the period 2008 to 2012 should plan to join the ETS by 31 December 2012,” says Mr Chin.
“The credits received under the ETS can be used to offset deforestation liabilities, or may even be traded on the local or international carbon credit markets. The fact that they are generally received ahead of any deforestation provides a potential cash flow opportunity that forest owners may wish to seriously consider.”
Any forest owners or potential forest owners are invited to contact Staples Rodway Waikato for advice on exactly what the ETS will mean for them.
For further information please contact:
Trevor Chin
Tax Manager
Staples Rodway Waikato
(07) 834 6831
Melanie McKay
Star Public Relations
(09) 912 7827
021 0200 8550