Greenhouse Gasses - Is it just a load of hot air? Worldwide concern over global warming continues. Recent focus has been on greenhouse gases or GHGs as one of the main culprits for global warming. This is recognised as a global issue and as such has seen the United Nations develop a Framework Convention on Climate Change ("FCCC") outlining how the countries of the world can co-operate to address the concern. This has led to the development of the Kyoto Protocol for individual countries to sign on to, which outlines a detailed mechanism for reducing international GHG emissions. Under the Kyoto Protocol, those signatory countries (including New Zealand) are committed to reducing their own net GHG emissions and to have clearly demonstrated how they will achieve that commitment by Year 2005. Each signatory country is given an Individual target, expressed as some percentage of their 1990 GHG emission levels. Countries are then required to reduce their emissions for the first commitment period (2008 and 2012) to five times their emission target. This is a tight timeframe as there are no "overnight" solutions. Signatory nations must soon begin substantive actions to reduce its net emissions. Opportunity for New Zealand New Zealand is well placed to take advantage of this situation. Our country is a net absorber of GHGs, with our large tracts of plantation forests being one of the key absorbers of GHGs. These plantation forests absorb CO2 from the atmosphere and store it as wood. When harvested some CO2 is returned to the atmosphere, but a significant amount is stored while the next planting of the forest continues to absorb and store carbon. This process creates a pool of net stored carbon or a "carbon sink". With substantial reforestation of farmland since 1990, this increased planting of fast growing plantation forests has increased the New Zealand carbon sink relative to 1990, the key date in setting the reduction targets. The homogenous nature of the plantation forests and New Zealand's experience in their development allows for the very accurate calculation of the carbon stored by each forest. In broad terms, New Zealand absorbs about 30,000,000 tonnes of carbon per annum and emits only about 9,000,000 tonnes. The bulk of this absorption occurs in the fast growing plantation forests. New Zealand Carbon Exchange As companies and nations seek to meet their obligations under the Kyoto Protocol value will be ascribed to the carbon absorption capacity of these forests. These carbon credits will be able to be internationally traded by the land/forest owners. Guinness Gallagher is working with the New Zealand Carbon Exchange Limited, which has developed a mechanism for trading carbon absorption credits from new plantation forests. We are currently seeking parties interested in the purchase of carbon credits based upon these plantation forest carbon sinks. This trading mechanism can provide purchasers with "carbon credits" denominated in tonnes of CO2 based on the carbon absorbed by the post 1990 plantation forest plantings. The New Zealand Carbon Exchange mechanism will provide buyers with a secure, reliable, auditable and verifiable carbon credit that is protected under New Zealand law. Price discovery would be by a process of bid and offer in an exchange that will ensure liquidity and flexibility for both buyers and foresters. For further information contact John Third at Guinness Gallagher. Top