Permanent Forst Sinks Initiative PFSI – scheme review

May 18, 2013

We attended a consultation round on the PFSI this week – Sustainable Forestry Bulletin Issue 44 – May 2013

If you are a participant in the PFSI as a forest owner or purchaser of PFSI AAU we strongly suggest you attend the consultation.

Given the recent changes at DOHA and the New Zealand Government’s decision to opt out of CP2 and join nations in a group outside the Kyoto Protocol the Government triggered a notice period to allow PFSI participants to opt out. Notice of opting out must be completed on the correct form by the 30th June 2013

The opting out of CP2 means that in 2012 the Government will not be able to issue AAU to PFSI participants. The reason why AAU were issued in the first place is the PFSI was a revision of the Forest Act 1949 and preceded the NZETS legislation that created NZU units and the ETS to comply with the Kyoto Protocol CP1.

The Government wishes to continue the PFSI post 2015 and will therefore have to issue a different type of credits – but which type? Or should a new type be created?

The consultation meeting in Christchurch was interesting in the facts and opinions offered:

The facts:

  • 88 Projects approved in CP1, 20,000ha under covenant and 1.2m AAU issued
  • Significant co benefits of the PFSI including biodiversity, erosion control, water quality improvement, flood mitigation and cultural benefits
  • Most applications occurred in 2011-2013
  • Indigenous forest dominated in later years comprising 90% of the applications by area


There were various discussions on the value of AAU with international units in the cents. However sellers reported PFSI AAU being seen has having integrity and achieving prices above those of an NZU or other kyoto units (CER 0.40, ERU 0.14)

Discussion focused on how these high quality offsets could be differentiated? Discussion covered revisions to the NZEUR and traceability of projects to allow purchasers to see the projects that resulted in the credits being created.

Opinion was divided on what unit should be issued, given all units are supposed to be fungible but this in practice has been rarely correct. A PFSI unit was preferred ahead of issuing NZU on the basis buyers could distinguish the quality at a glance – gold standard CER was raised as an example of this.

EITG view is that irrespective of the unit issued purchasers will need to be educated – whether is a gold NZU or a PFSI unit neither will be immediately understood. This of course is a common theme in New Zealand’s marketing of any product – compare with the ‘kiwifruit’ and then the gold version of the same

PFSI participants need to move quick to get submissions in for 5th June to allow Ministers to receive advice and create policy. Those opting out need to move before the 30th June.