Site search

Search

Establishment of an entity to apply for and hold New Zealand units on trust for the future owners of Crown Forest Licensed land
Discussion Document

1         Purpose of this Document

The purpose of this document is to seek your feedback regarding the establishment and operation of an entity to apply for and hold New Zealand units on trust for the future owners of Crown Forest Licensed (CFL) land.

Structure of document

This document has three parts:

• background information to help you understand why the Government is required to establish an entity
• proposal we want feedback on
• submission form for giving feedback on the proposal.

How to give feedback

You can make a submission on the entity using the form at the end of this document and available on www.mfe.govt.nz or www.climatechange.govt.nz.

You can also make a submission by email to entity@mfe.govt.nz, or by post to:

NZU Entity Submissions
Ministry for the Environment
PO Box 10362
Wellington 6143

Submissions close at 5pm on Monday 23 August 2010.

More information

If you have questions about the establishment of an entity to apply for and hold New Zealand units in trust for future owners of Crown Forest Licensed land, you can call the Climate Change Contact Centre on 0800 CLIMATE (0800 254 628) or email entity@mfe.govt.nz.

You can find more background information on the New Zealand Emissions Trading Scheme at www.climatechange.govt.nz.

Useful information on forestry in the Emissions Trading Scheme can be found at www.maf.govt.nz/sustainable-forestry/ets/.

2         Background

What is the emissions trading scheme?

The New Zealand Emissions Trading Scheme (NZ ETS) creates a financial incentive for people to reduce their greenhouse gas emissions. The Climate Change Response Act 2002 (the Act) provides the framework for NZ ETS participants to account for the emissions that result directly or indirectly from their activities.

The primary unit of trade in the NZ ETS is a New Zealand unit (NZU), representing one tonne of carbon dioxide equivalent. The NZ ETS requires some businesses to surrender NZUs to cover their direct greenhouse gas emissions or the emissions associated with their products. These participants may be allocated NZUs from the Government or can buy them from other businesses, such as forest owners or companies who have cut their emissions and have a surplus of NZUs.

Allocation for pre-1990 forest land

The Act provides for an allocation of NZUs from the Government to owners of eligible pre-1990 forest land. The allocation is partial compensation for the loss in value of their land as a result of the introduction of rules relating to the deforestation of pre-1990 forest land in the NZ ETS. This allocation is established by law under the Act, and is not a subject we are seeking feedback on. The pre-1990 forest land allocation plan, through which the Minister for Climate Change Issues determines a number of specific issues with regard to the allocation of NZUs to eligible pre-1990 forest landowners, comes into force on 21 July 2010. You can view this document at the Ministry of Agriculture and Forestry website, www.maf.govt.nz/sustainable-forestry/ets/.

The Act provides that the pre-1990 forest land allocation plan must provide for the number of units per hectare of eligible pre-1990 forest land to be allocated as follows:

• 18 NZUs per hectare for eligible pre-1990 Crown Forest Licensed (CFL) land transferred on or after 1 January 2008 and
• 39 NZUs per hectare for eligible pre-1990 forest land that was transferred after 31 October 2002 or
• 60 NZUs per hectare to owners of all other eligible pre-1990 forest land.

NZUs will be transferred in two tranches – approximately 38 per cent of the NZUs will be transferred to landowners before the end of 2012, and the remaining 62 per cent are to be transferred after 2012. The second tranche is subject to section 30F of the Act (which defines deforestation of pre-1990 forest land being an activity under the NZ ETS) and the Government’s signalled intention that it may reduce the allocation if offsetting is permitted internationally after 2012.

Why is the Government required to establish an entity?

The Act requires the Minister for Climate Change Issues (the Minister) to appoint a person (which may be an entity) to apply for an allocation of NZUs on behalf of future owners of eligible pre–1990 CFL land and to hold those NZUs on trust until ownership of CFL land is transferred to iwi under relevant Treaty of Waitangi settlement legislation. The entity will apply for, hold and distribute NZUs for pre-1990 CFL forest land that was pre-1990 CFL land on 1 January 2008 and that has not been transferred to iwi as part of a Treaty of Waitangi settlement by the date the pre-1990 forest land allocation plan is issued by the Governor-General, on 20 July 2010.

Iwi who are the legal owners of former pre-1990 CFL land on the date the pre-1990 forest land allocation plan is issued (including land transferred to iwi between 1 January 2008 and the date the pre-1990 forest allocation plan is issued) are responsible for applying for their own allocation, and are out of the scope of the entity.

The Act requires the person to be appointed to this role before the Minister can make a determination on the allocation of units in relation to an application associated with CFL land.
If a final entity has not been appointed before a public notice is made inviting applications for an allocation of units under the pre-1990 forest land allocation plan, then the Act requires the Minister to appoint a person to apply for NZUs as an interim measure. This interim measure is discussed later in this discussion document.

3         The Entity

The entity appointed by the Minister to apply for and hold NZUs on trust will be required to act within the bounds of its terms of appointment and a trust deed. The following section discusses the functions of the entity and the various options regarding who may be appointed, and how they will be required to function.

Entity functions

The entity will have three primary functions:

1. Applying for NZUs – The entity will be required to apply to the Ministry of Agriculture and Forestry (MAF) for an allocation of NZUs for all eligible pre-1990 forest land that was CFL land on 1 January 2008 and that has not been transferred to iwi on the date the pre-1990 forest land allocation plan is issued. To do this, the entity will be required to provide MAF with information as required by the pre-1990 forest land allocation plan, including shape files that map the eligible pre-1990 forest land. The Crown will carry out this mapping.   The entity would retain all rights to review, accept, reject, or otherwise modify the maps provided to it prior to submitting them with its application to MAF for an allocation. MAF will assess the application and make a determination on how many NZUs the entity will receive.
   
   
2. Hold NZUs on trust – The entity must hold the NZUs allocated in relation to the CFL land on trust until such time as the CFL land is transferred to the future landowners. In holding NZUs on trust, the entity must act in the beneficiaries’ (future owners of the land) best interests.
   
   
3. Transfer NZUs – The entity will transfer NZUs to the landowners (when land is transferred following the finalisation of a settlement, or following a binding recommendation from the Waitangi Tribunal) in accordance with the Act. This includes the requirement for NZUs to be transferred in two tranches: approximately 38 per cent of NZUs before 31 December 2012 and 62 per cent after 31 December 2012. Iwi that settle after 2012 may receive both tranches at once.
   
   NZUs will be transferred by the entity into a holding account (in the New Zealand Emissions Unit Register) authorised by a claimant group’s post-settlement entity following the landownership being transferred. Where whole titles to land are transferred, the rights to NZUs in respect of all of the eligible pre-1990 forest on that title will be transferred. Where only part of a title to land is transferred, NZUs will be transferred corresponding to the portion of eligible pre-1990 forest land being transferred.
   
   Where there is CFL land that is not transferred as part of a settlement or binding recommendation of the Waitangi Tribunal, that CFL land will return to being Crown land in accordance with the Crown Forest Assets Act 1989. Likewise, the corresponding NZUs associated with this land must be transferred to the Crown.

How the entity operates

The entity must act in the best interests of the future owners of CFL land. To ensure this, the notice of appointment and trust deed, which will set out the way in which the entity is required to operate, will include certain components. These will include a requirement for the entity to apply for NZUs for all eligible CFL land, as well as terms and conditions for how the entity will hold NZUs on trust and transfer these and any future rights to receive NZUs to claimant groups’ post-settlement entities or companies.

To comply with the intention of the Act and to best protect the interests of future owners of CFL land, the Government considers a conservative approach is required for the management of NZUs held by the entity. The Government considers this requires the entity to hold NZUs but not actively trade NZUs. This is considered to be the least risk option for both the future owners of the land and for the Crown. This approach will ensure the full entitlement of NZUs is ensured for the future owners of the land and give the future owners the option to surrender the NZUs if they change the land use.

Characteristics of and structure and composition of the entity

The Government considers it is important for the persons appointed to carry out the functions under section 73 to collectively possess the following attributes:

• appropriate capability, skills and experience in carrying out such a role
• the ability to act independently and objectively in their work as trustees in order to represent the interests of the future owners of the land
• well organised, with the ability to easily meet as required
• ability to draw on existing operational capacity
• the ability to operate in a cost-effective manner
• the ability to be established quickly.

Ideally among the appointed persons there will also be technical knowledge of forestry, the Treaty of Waitangi and climate change policy. The appointee(s) will need to be respected by, and have the confidence of, future owners of CFL land.

Proposal to appoint the persons who are also appointed as the trustees of the Crown Forestry Rental Trust (CFRT) to carry out the functions under section 73

The Crown Forestry Rental Trust (CFRT) is governed by a Board of Trustees, comprising six people. These Trustees are appointed by Crown and Māori Appointers.  The Minister of Finance appoints three Trustees. The New Zealand Māori Council and the Federation of Māori Authorities appoint three Trustees between them. The CFRT Board of Trustees has powers and duties that are defined in its Trust Deed.

The Government considers the persons who are also appointed as the trustees of the CFRT would fulfil the desired characteristics above and would be well placed to be appointed to carry out the functions under section 73 of the Act. This would be in accordance with specific terms and conditions in a separate trust deed.

Appointing the people who are the CFRT Trustees to this entity fulfils the desired characteristics in the following manner:

• CRFT Trustees already carry out similar functions in managing income from Crown forest licences, and as such, have the appropriate capability, skills and experience
• CFRT Trustees have knowledge of the forestry sector, the Treaty of Waitangi and climate change policy
• an entity comprising the same people as those appointed as CFRT Trustees could be established quickly and cost effectively and would have the ability to meet easily as required
• the persons appointed as CFRT Trustees have proven ability to act independently and objectively in order to represent the interests of future owners of the land.

4         Finalising the Entity

After the submission period closes on 23 August, the submissions will be analysed and the Minister for Climate Change Issues will make decisions on the matters discussed in this document. Once decisions are made, the structure, composition and functions of the entity and the terms and conditions upon which the entity is to apply for and hold NZUs will be notified in the New Zealand Gazette, as required by the Act.

Interim entity

As final decisions on the entity will not be made before the Minister calls for applications for an allocation of NZUs under the pre-1990 forest land allocation plan, the Minister has appointed the Secretary for the Environment as an interim entity.

This interim entity will provide a ‘holding position’ without necessarily carrying out any functions until the final entity is appointed later in 2010. Under the Act, the interim entity has the ability to apply for NZUs, but a final entity must be appointed before a determination regarding the allocation of NZUs can be made.

Published in July 2010
ME: 1022

Availability

• Download PDF
  (241 KB)
• No printed copies available
• Problems with PDFs?

This site is administered by the Ministry for the Environment.