83.BRF 5356 Update on the non forest removals framework direction Redacted.pdf

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Update on the non-forest removals framework
direction
Key messages
1. The Government’s Coalition agreements commit to progressing work to recognise non-
forest carbon removals. Officials have developed a work programme to deliver these
commitments.
2. Officials previously provided you advice on what this work programme could entail [BRF-
4038].  You indicated your support for the development of an assessment framework to
determine which non-forest removal activities are suitable for recognition in the New
Zealand Emissions Trading Scheme (ETS) or other mechanisms.
3. Officials have proposed a framework to assess removals readiness for recognition and
are seeking your feedback. The framework includes assessments about:
i.
If the removal meets minimum requirements for inclusion in target accounting.
ii.
The impacts of including the removal in target accounting.
iii.
Which mechanism or mechanisms could it be recognised in (including the ETS).
4. 9(2)(f)(iv)
9(2)(f)(iv)
5. Officials are seeking your agreement to the final non-forest removals chapter of ERP2
(Appendix 1) which provides further detail including: Note: there were subsequent changes to the chapter prior to
publication in ERP2
i.
the purpose of the framework.
ii.
core design elements of the framework and
iii.
the intention to expand the Nationally Determined Contribution (NDC) to include
specific activities or non-forest land use categories, once they are deemed ready
to be included into a market system.
Recommendations
We recommend that you:
a. agree to the purpose statement of the non-forest removals recognition framework
i.
To assess non-forest removal categories readiness for recognition in the Emissions
Trading Scheme or other mechanisms to provide a recognition pathway for the
private sector and help New Zealand meet its emissions reduction targets
Yes | No
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b.  provide feedback on the core framework design elements and implementation options
(paragraphs 14 to 33)
Yes | No
c.  agree that ERP2 signals the Government’s intention as part of the framework to
periodically assess whether additional removal categories/activities should be
incorporated into New Zealand’s target accounting
Yes | No
d.  direct officials to report back to you with further detail on the assessment framework and
9(2)(f)(iv)

     Yes | No
e.  agree to the updated non-forest removals chapter of the Emissions Reduction Plan 2
     Yes | No
f.  agree to forward this briefing to the Ministers for Agriculture and Conservation
Yes | No
Signatures

Mark Vink
Hon Simon WATTS
General Manager, Markets
Minister of Climate Change
Climate Mitigation and Resource Efficiency
Date
10/10/2024

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Update on the non-forest removals framework
direction
Purpose
6.  This briefing seeks agreement to:
i.
the purpose of the framework.
ii.
the updated non-forest removals ERP2 chapter 9(2)(f)(iv)

7.  This briefing seeks direction on:
i.
the design elements of the assessment framework.
ii.
9(2)(f)(iv)

Background
8.  The Government’s Coalition agreements commit to progressing work to recognise non-
forest (non-ETS forestry) carbon removals, including on-farm sequestration. Officials
have developed a work programme to deliver on these commitments.
Framework to assess non-forest carbon removals
9.  Previously, you indicated your support for the development of an assessment framework
to determine which non-forest removal activities are suitable for recognition [BRF- 4038].
Expanding our international and domestic target accounting to include non-forest removals
10. The development of the framework can also support Ministers make decisions on the
expansion of our target accounting to include non-forest categories in future. Expanding
our accounting to include other land activities and/or categories1 beyond forestry:
i.
will provide a more accurate picture of emissions and removals
ii.
will align New Zealand with the approach taken by other developed countries
iii.
may make the targets harder to achieve in the short term, depending on the scope of
the expansion; as New Zealand would have to account for both emissions and
removals occurring in these categories,2 and

1 The Government can expand its target accounting to include specific activities or entire categories.
2 9(2)(g)(i)

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iv.
will expand opportunities to utilise non-forest removal activities to meet future
international emissions targets.
11.9(2)(f)(iv)

Developing a framework that determines which non-forest removal activities
are suitable for the ETS would safeguard the integrity of this system by only rewarding
activities which count towards our targets.
Further detail for the non-forest removals chapter of ERP2
12. The non-forest removals chapter of the ERP2 discussion document referenced an
assessment framework to support the recognition of non-forest removals and the option
to expand the NDC to include non-forest land use categories.  There is an opportunity to
provide further detail on the framework 9(2)(f)(iv)


Analysis and advice
Purpose of the framework
13. In line with previous direction provided by you, officials recommend the purpose of the
framework be defined as:
i.
To assess non-forest removal categories readiness for recognition in the ETS or
other mechanisms, with the aim of providing a recognition pathway to the private
sector and of helping New Zealand meet its emissions reduction targets.
Core Framework Design
14. Currently, non-forest land is not included in New Zealand’s international and domestic
target accounting. To assess a removal category readiness for recognition, two
assessments would be undertaken concurrently (Appendix 1, Figure 2):
i.
Target Accounting Inclusion Assessments (including assessing if the removal
meets minimum requirements for credibility and the impacts of inclusion).
ii.
Mechanism Assessments (including assessing the mechanisms available, the
impacts of inclusion and determining the appropriate mechanisms).
Target Accounting Inclusion Assessments
Does the activity or category meet minimum requirements for inclusion in target accounting?
15. To assess whether to expand our target accounting to include a non-forest land use
category or specific activity, a set of criteria will be needed.  This could include ensuring:
i.
Paris Agreement principles are met, representing the expansion and increase in
ambition
ii.
the category is underpinned by robust science; with accurate emissions/removals
contribution estimates
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iii.
the minimum data requirements are met under the Intergovernmental Panel on
Climate Change (IPCC) guidelines.
16. In addition to the assessment criteria, future decisions would be needed to determine:
i.
the accounting framework that would be applied to account for these
emissions/removals, and
ii.
the timeframes in which accounting will be expanded.
17. Officials will report back with more detail on the options for these in due course.
What are the impacts of including the activity or category in target accounting?
18. Significant data improvements will be needed so that any policies to encourage a
removal activity within a land use category can be detected in the national Greenhouse
Gas (GHG) inventory and contribute to our targets. This will require investment and is
likely to have a significant impact on the magnitude of the emissions/removal contribution
estimates.
19. To determine whether a category or activity should be included in our target accounting,
analysis will need to be undertaken that weights the costs associated with expanding
accounting against the potential opportunity in the long term for increased removals for
each activity. This analysis could include the:
i.
impact of expanding our accounting on the achievement of our targets over the
short, medium and long term.
ii.
associated costs for data improvements and the possible increase in offshore
mitigation needed in the short term.
20. Expanding our target accounting and including an activity into a market system only after
it is deemed ready for recognition could partially mitigate the risk of making our targets
harder to achieve, as it is likely to decrease net emissions within that land use category.
21. If your intention is to increase ambition while also minimising costs associated with
offshore mitigation, you could choose to selectively expand the NDC once a certain
number of activities within a land use category are deemed ready for recognition.
Mechanism Assessment
Mechanism identification
22. An assessment of which mechanisms are available to recognise removal categories
would be required. At present the ETS is the only fully functioning compliance market and
only activities that are included in our target accounting can be included in the ETS.
Further policy work is needed on the range of alternative mechanisms which include:
i.
The Biodiversity Credit Market which is under development [BRF-5305 refers]. Its
establishment would provide an avenue for some forms of removals to be
recognised.
ii.
The Voluntary Carbon Market (VCM) 9(2)(f)(iv)

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9(2)(f)(iv)
VCM participants have expressed
demand for more domestic VCM offsetting options.
iii.
Public/Private partnerships to develop afforestation on crown land which is
progressing [BRF-5408 refers]. 9(2)(f)(iv)
iv.
9(2)(f)(iv)
23. As markets develop, officials could deliver a more detailed market assessment process.
Mechanism and impact assessment
24. To assess which mechanisms could recognise a removal category, an impact
assessment will be undertaken to determine the costs and benefits of recognition in
different mechanisms. The assessment will include estimates of the:
i.
potential volume of emissions and removals generated,
ii.
the rate of return for rewarding the removal (e.g. the NZU price),
iii.
monitoring and verification costs to the participants for recognising their removal,
iv.
administration costs to Government and participants for recognising the removal
in potential mechanisms,
v.
impact on the credibility of the market (e.g. market confidence and the potential
impacts of the supply of NZUs/removals and how this may affect the NZU
price/financial return),
vi.
impact on the functionality of the ETS as the Governments key tool for
incentivising emissions reduction,
vii.
impact on iwi/Māori,
viii.
perverse outcomes and costs to the Crown (e.g. if participation is voluntary then
there may be a bias to reward positive changes and not penalise negative
impacts).
25. Following the assessment of available mechanisms for recognition, impact assessment
and the NDC inclusion assessment, Ministers will be able to make an informed decision
about the following question:
26. Should the removal category be recognised
i.
in the ETS under current policy settings in line with the Government’s focus on a
least cost approach and market-led climate action
AND/OR
ii.
through an alternative policy/market mechanism to contribute additional net
emissions reductions towards achievement of domestic and international targets?
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27. Following this, officials will undertake the necessary policy development, regulatory
changes, and implementation processes to enable the activity to be recognised via the
identified mechanism.
28. Officials will report back to you with further detail about the assessment framework
following doing a trial assessment with a removal category to test the framework.
9(2)(f)(iv)

9(2)(f)(iv)

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9(2)(f)(iv)

9(2)(f)(iv)
33. 9(2)(f)(iv)


Making legislative change to include new categories of carbon
removals into the ETS
34. The CCRA defines “other (non-forest) removal activities” in Part 2 of Schedule 4. The
current definition in the schedule includes some of the activities, however, does not
include activities such as on-farm vegetation categories, wetlands or blue carbon.
35. To be a removal activity that can be added to Schedule 4, the activity must remove or not
release CO2-e GHGs or show a reduction in emissions reported in New Zealand’s annual
inventory report in accordance with the relevant international agreement.
36. To include further removal activities in the ETS, including technology-based reductions
such as Carbon Capture and Storage, legislative amendments are likely to be required to
the CCRA. This includes updating regulation making powers to support the inclusion of
any eligible ETS removal activity, such as entry or registration requirements, given the
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complexity and likely evolving nature of science and international standards as they
progress and develop.
37. 9(2)(f)(iv)

38. The revised ERP2 chapter notes that changes may be required to the CCRA and that the
Government is committed to assess those potential changes.
Draft ERP2 non-forest removals chapter
39. An updated ERP2 non-forest removals chapter has been drafted and attached at
Appendix 1. This version now includes the framework’s purpose and a description of the
two parts of the assessment framework. It also signals your intent to expand the NDC to
include non-forest removal categories when they are deemed ready for recognition.
40. Some submissions specific to non-forest removals were received as part of the ERP2
consultation. There was broad support for the progression of policy work to recognise
removals. No additional ideas were raised though the submissions which have been
included in the policy development so far.
Other considerations
Consultation and engagement
41. The development of this advice has been in consultation with the Ministry for the Primary
Industries and the Department of Conservation.
Next steps
42. Your feedback though this paper will be included in the final non-forest removals ERP2
chapter.
43. Your feedback will also inform policy development on the framework. Officials will report
back to you with further detail on aspects of the framework design and legislative options
for including categories in the ETS.
44. 9(2)(f)(iv)



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Appendix 1- ERP2 non-forest removals chapter
Non-forestry removals
Ngā tangohanga ngāherehere-kore
Introduction

In addition to forestry, there are other ways in which New Zealand can remove carbon dioxide from
the atmosphere and lock it away. We are exploring the potential of other activities to remove and
store carbon.
What are non-forestry removals activities
Emissions removals are human-induced activities that draw carbon dioxide from the air or ocean and
store it in rocks, on land, in ocean reservoirs or in products such as construction materials. Non-
forestry removals include well-known practices such as rewetting drained wetlands, as well as
developing technologies such as direct air carbon capture and storage. They vary in their potential
scale, costs, co-benefits and risks. Many activities act as both a sink and a source of emissions – for
example, a carbon sink can become a source of emissions if vegetation is removed or if ecosystems
are disturbed or degraded.
Other activities, such as enhanced rock weathering and carbon capture and storage (CCS), can
remove atmospheric carbon and store it on a permanent basis.
Examples of non-forestry removal activities include:
•  On-farm vegetation. Some on-farm vegetation, such as riparian plantings (in areas adjacent
to rivers and streams) and shelterbelts, sequesters carbon and improves water quality and
biodiversity. Currently, the scientific data on how much carbon these types of vegetation can
remove is uncertain. Improving the science specific to New Zealand will require further
investigation.
•  Wetlands and peatlands. Managing and restoring wetlands and peatlands can protect
existing carbon stores, enhance carbon uptake, increase biodiversity, improve water quality
and protect against flooding and drought. Estimates show a significant potential for reducing
emissions if drained peatlands are rewet.
•  Coastal vegetation management (blue carbon). Improved management of coastal land types
such as wetlands, mangroves and sea grasses can protect existing carbon sinks and establish
new ones. Restoration can also bring benefits to coastal and marine ecosystems and social
outcomes.
•  Other categories. Some other categories include CCS technologies; enhanced rock
weathering; and biochar.
Proposed approach to enabling non-forestry
removals
The Government recognises carbon sequestration can occur through biological, geological, oceanic,
chemical and technological processes. Alongside forestry, the Government will consider other forms
of removing emissions as opportunities to reduce net emissions that may become viable in the
future. These include wetland restoration, on-farm vegetation, coastal vegetation management,
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marine ecosystems, carbon mineralisation, CCS, ocean fertilisation, direct air capture and bioenergy
with CCS.
Further detail about policy related to CCS can be found in Chapter 7- Energy.
The Government aims to reduce net greenhouse gas at least cost to meet our climate change targets.
Consistent with this approach, the Government will consider all forms of non-forestry removals
because of their scientifically verified sequestration. In practice, the Government will prioritise the
most promising non-forestry removals technologies, based on affordability, scalability, scientific
validation and overseas acceptance.
Criteria for recognising non-forestry removals technologies include:
•  robust scientific validation of sequestration at a standard that is consistent with the
Greenhouse Gas Inventory
•  additionality (the emissions reductions or removals are due to a specific intervention and
would not have occurred under business as usual)
•  recognition (or ability to achieve recognition) under New Zealand’s international
agreements.
Why it helps to recognise non-forestry removals
There is a lot of interest in recognising and rewarding non-forestry removals. Interested groups
include people restoring local habitats, farmers improving the sustainability of their land and groups
restoring the bush and the energy industry. We are considering a range of ways to encourage non-
forestry removals.
The Government aims to include non-forestry removals in the New Zealand Emissions Trading
Scheme (NZ ETS) or other mechanism. Enabling recognition of non-forest removals in the ETS will
require legislative change to the CCRA.
Recognising non-forestry removals could provide some form of incentive that rewards businesses or
landowners for their efforts. To ensure any scheme remains balanced, the incentive may also need to
be paid back if the removals are later lost (eg, when vegetation is cleared). This is the approach that
the NZ ETS takes to forestry.
Recognising non-forestry removals could also offer more options for landowners and
businesses, create incentives to shift land use or management that reduces net emissions, and offer
other co-benefits, such as better water quality, biodiversity and climate resilience from
wetlands. Non-forestry removals can also ensure New Zealand is not solely reliant on forestry
offsets.
How non-forest removals could be recognised
Different removal activities are at different stages of scientific readiness for recognition in New
Zealand. Some, such as coastal vegetation management, require further international and New
Zealand-specific data and evidence before they are ready for recognition. However, activities such as
peatland restoration are viable now and we can work towards recognising these through policies.
Exploring whether non-forestry removals can contribute to
our domestic and international targets
More work is needed to understand the role that non-forestry removals could play in reaching New
Zealand’s domestic and international targets. Compared with forestry, the potential carbon
sequestration from these categories is likely to be small in the short to medium term. Changes to our
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national accounting would also be needed so that New Zealand could count any non-forestry
removals towards our domestic and international targets. This would also mean that emissions from
these categories would count against our targets, potentially making these targets harder to meet.

Establishing a framework to support recognition non-forest
removals
There are a range of mechanisms that could recognise non-forest carbon removal activities. To help
the Government decide whether an activity is ready to be recognised, a decision-making framework
will be developed.
Purpose of the framework
The purpose of the framework is to: assess non-forest removal categories readiness for recognition
in the ETS or other mechanisms to provide a recognition pathway for the private sector and help
New Zealand meet its emissions reduction targets.
Design elements of the framework
There are two key design elements of the framework to recognize non-forest removals. The first is
the ability for a removal to count towards our Nationally Determined Contribution (NDC) and the
second is for it to be recognised in the NZ ETS or other mechanism.
Part one- Target accounting inclusion assessment
Currently, forestry is the only land use category that New Zealand count towards our international
and domestic targets. Expanding accounting to include non-forest land use categories will represent
an increase in ambition, as New Zealand will have to account for both emissions and removals
occurring on that land, and will expand opportunities to utilise removal activities other than forestry
to meet our future international emissions targets, aligning New Zealand with the approach taken by
other developed countries.
As part of the decision-making framework, we will evaluate the best approach to expanding our
target accounting to include non-forest categories prior to inclusion in a market system, protecting
the integrity of the system. To do this, we will use criteria such as ensuring the Paris agreement
principles are meet, that the category is supported by strong science, and that it meets the minimum
data requirements under the IPCC guidelines.
Part two- Recognition mechanism assessment
To  assess  which  mechanisms  could  recognise  a  removal  category,  an  impact  analysis  will  be
undertaken to determine the costs and benefits of doing so. This will include an assessment of the
volume of removals which could be generated, the cost to participants and government, the impact
on market credibility and the impact on iwi/Māori.
An  assessment  of  which  mechanisms,  other  than  the  NZ  ETS,  are  available  to  recognise  removal
categories would be required, acknowledging that further policy work is needed on some potential
mechanisms.
Following these assessments of available mechanisms for recognition, the impact assessment and the
NDC  inclusion  assessment,  the  Government  will  decide  whether  the  removal  category  should  be
recognised, and if so, whether it should be recognised
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