Forest with sunlight breaking through trees.
New Zealand organisations are motivated to reduce their emissions internally and expect the price of carbon credits to rise by 2030, a report by the University of Otago Business School‘s Climate and Energy Finance Group (CEFGroup) reveals.
The report, which was not peer-reviewed, was commissioned by the Forestry Ministerial Advisory Group to understand the demand for carbon offsetting, its drivers, and the extent to which this affects the forestry sector in New Zealand.
Dr Sebastian Gehricke
The CEFGroup, led by Dr Sebastian Gehricke, conducted a survey between December 2022 and February 2023 aimed at decision-makers from a range of entities, including businesses, local councils, and iwi. Seventy organisations responded.
“These organisations were expecting prices to increase and are prioritising abatement – that is investing in emissions reductions within their own value chain – in their emission reductions plans,” Dr Gehricke says.
“Since the survey was completed, the price of carbon credits has dropped significantly, due to policy uncertainty, so there is a real risk that these plans may change.”
Most organisations believed companies should focus on emissions reductions and only consider offsetting for reductions beyond their net-zero targets.
They prioritised abatement (74 per cent of future emissions reductions) over offsetting (12 per cent) and insetting (14 per cent) in their emissions reduction plans and most started to implement or identify specific abatement projects.
Only 31 per cent of organisations bought carbon credits in the past year and most of those (79 per cent) were willing to pay a premium for credits sourced from native or transition forests.
“Since many of the organisations have a strong desire for abatement, they need support so they can deepen and entrench their actions.”
This included a combination of subsidies or payment for outcomes of abatement projects, and co-investment or guarantees to support project financial feasibility when these projects produce co-benefits.
Dr Gehricke says the insights from organisations show they care most about the effect on biodiversity, credibility, and brand value, rather than the cost when choosing between emission reduction pathways.
“To me, this is a strong signal that consumer preferences and public perception are a huge driver of how these businesses make decisions.
“It also shows that if we continue to reward carbon removals through forests, we need to ensure the forests enhance biodiversity and do not create new risks and negative consequences.”
Publication:
A market survey to ascertain offsetting demand
Dr Sebastian Gehricke, Andre Poyser, and Dr Sara Walton, of the Climate and Energy Finance Group.
