Uncertainty around the He Waka Eke Noa (HWEN) recommendation leaves farmers with a choice to make regarding carbon credits under the Emissions Trading Scheme (ETS) - wait and see, or move forward anyway. Regardless of which way the government goes, we still think registering your forest for carbon credits under the ETS is the best way forward because the earning potential through NZU carbon credits will almost certainly be higher than what you’ll be levied under HWEN.
What Are The Options?
Of the three options being considered by the government, we believe that the farm-level, split-gas approach recommended by HWEN makes the most sense because it offers the best incentive for farms to act in the national interest to lower and/or offset their emissions. No matter which way the government goes, registering for the ETS is still the best way forward.
1 If HWEN is implemented as a farm levy for on-farm emissions, it is likely that the price per unit of those emissions will be lower than the ETS. Any units earned in the ETS can be sold to pay the farm levy, with carbon credit money left over.
For example, if ETS units are priced at approximately $75 per unit, and the HWEN farm levy model prices them at $50, then you can sell 1 NZU to pay for 1.5 units of on-farm emissions offsets.
Sequestration from other areas of vegetation that are not eligible for the ETS but are eligible under HWEN can be used to offset the farm levy on a 1:1 basis. Vegetation that is ineligible for both the ETS and HWEN may be ideal for alternative carbon credits such as our Native CCUs, which are specifically for native regeneration that might not otherwise be recognised.
2 If HWEN is implemented at a processor level, there will be no recognition of on-farm sequestration. Joining the ETS generates new cash flow that can help reduce the impact of increased fertiliser costs and decreased payouts from processors.
3 If HWEN is discarded altogether and agriculture is forced to join the ETS (the worst option for farmers) then sequestration from forests registered in the ETS can be used to offset farm emissions on a 1:1 ratio. Unfortunately, anything not registered or ineligible for the ETS won’t be recognised under this model, regardless of the potential sequestration. Although, you may have alternative carbon credit options outside of the ETS and HWEN, such as Native CCUs.
Future-Proofing
If the farm level levy is adopted by the government, we may look to apply our AI-based vegetation detection and measurement approach to forest that falls outside the ETS but is eligible under HWEN. When used in this way, our technology could significantly reduce the administrative burden of measuring on-farm sequestration. Being an existing customer of CarbonCrop puts you in a great position to take first-advantage of this.
So if you’ve been taking a wait-and-see approach, it’s time to rethink. Get in touch with CarbonCrop today to find out what you’ve got, and what it’s worth. For free.