Last Friday, MPI released a proposal to significantly increase ETS fees. We believe this proposal further shifts the bias to favour large-scale exotic forestry.
This will disproportionately impact native forest registrants and small registrants - technically the pricing is tiered, but the pricing across tiers is basically flat (despite saying that the effort is largely proportional to the area).
The increase in fees will be a disincentive to participation for smaller participants and those at the early stages of growth or regeneration.
The new costs are proposed to apply from Jan 2023.
What are the Proposed Changes?
Here is a snapshot of the key proposed changes to fees:
For a full look at the proposed changes, here is the proposal.
A smaller customer of 49Ha will face fees of:
New registration = 3.2x increase
Adding a new section = 17.8x increase
Notifying MPI of a sale of part of your land = 9.7x increase
What this means and CarbonCrop’s feedback
With this proposal, smaller landholders and native forest restoration are subsidising bigger blocks. Fees should be fairly proportional to size.
We believe the proposed changes will have three big impacts:
1 New pricing disproportionately penalises smaller and/or native participants
The pricing tiers for registration and Carbon Accounting Area (CAA) addition are insufficiently separated at the low end, which will disproportionately impact and penalise small and native forest participants, who tend to be smaller.
If the effort is proportional to area, then the relative fee for smaller blocks should be significantly lower, and the tiers should be more differentiated, i.e. a 0-10ha tier, 10-25ha tier, 25-50ha tier, and then their existing tiers.
2 Annual carbon cash flow may be at risk for smaller participants
Although costs for emissions returns for existing customers are still relatively small - $165 vs $100 - it may no longer be financially worthwhile to file a return every year. This means that you may only file once at the end of the emissions return period and will have to wait longer until they are issued credits.
For smaller participants and native forest participants, adding a CAA will mostly be for small areas (under 50ha), reflecting recent regeneration of a forest since the original ETS registration. Since the price of adding a CAA is proposed to increase massively ($102 -> $1,815 for areas under 50ha), you may need to wait longer before adding areas since it could cost so much more.
3 Native participation in the ETS is further disincentivised
This proposal will disproportionately impact the incentives for native forest restoration given these areas are usually:
Smaller planted areas, due to the high costs of native forest restoration
Naturally regenerating areas, which are already very poorly served by the current MPI process constraints for forest boundary regeneration, will be even more poorly served because adding an incremental block will be prohibitively expensive for many blocks.
Responses to this proposal are due 10th October.
What’s the upside?
The price is still the same for natives vs exotics. Because they’re more complicated, applications with native forests may actually cost more per hectare to assess, and MPI is not passing that cost on, but the increases are enormous. Shouldn't MPI’s amazing new ETS platform make this easier and therefore cheaper?
CarbonCrop will be advocating for a fairer deal for smaller and native landholders, but the best deal will come from beating the deadline and having your ETS application submitted by 31 Dec this year.
Don’t miss out, and don’t let your neighbours miss out.