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A review of the fiscal cost estimate of moving to averaging accounting for existing forests within the Emissions Trading Scheme

Kieran Murray and Gary Blick of Sapere were asked by the New Zealand Carbon Farming Group to review the estimates of fiscal impact relied upon by Ministers when deciding forests registered in the Emissions Trading Scheme (ETS) before 2019 would not be permitted to use ‘averaging accounting’.

They conclude that the accounting treatment underlying the fiscal impact assessments provided to Cabinet appears to be an uncorrected legacy of the Kyoto obligations as the issue and surrender of NZUs by foresters no longer impact the Crown’s net worth in substance.  If the accounting treatment is retained, the allocation of units to ETS forests under averaging and offsetting would be equivalent to what would otherwise occur over a full rotation cycle.