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PROPOSED REMOVAL OF WATER RULE
FOR FOREST CARBON CREDIT PROJECTS
VFPA Submission
4 November 2022
About VFPA
VFPA is the peak industry body representing the forestry products value chain in Victoria from those growing, managing and harvesting our sustainable plantations and multiple use natural forests to the primary and secondary processing of timber, the manufacture of pulp, paper and bioproducts, and the value-added timber and pulp and paper products supply chains.
Victoria’s Forest Products Industry
The Victorian forest products industry utilises a mix of hardwood (eucalypt) and softwood (pine) resources supplied from multiple use public forests and private plantations. Victorian forest products are manufactured into a wide range of timber products including sawn timber products, engineered wood products, pulp and paper manufacture, and high-quality wood chips.
Wood is beautiful and functional, renewable, biodegradable, and recyclable. Wood is used for new homes, buildings, furniture, paper, toiletry and sanitary products, and fuel for green energy.
With over 5000 known uses for wood, wood is simply an essential part of life and the ultimate renewable. All parts of the harvested tree are used to its highest value use – there is simply no waste.
The Victorian forest products industry is highly regulated and implements sustainable forest management practices across private and public land tenures and participates in ecological restoration for the benefit of Victorians. 0.034 per cent of Victoria’s native forests are harvested annually and all harvested areas are regenerated. Each year, approximately five per cent plantation trees are subject to final harvest with these areas replanted.
Victoria’s forest products industry has a significant role to play in the move to a net-zero carbon future. New research demonstrates that plantation trees for harvest capture three times more carbon abatement than environmental plantings over 100 years as the carbon is sequestered in trees and the subsequent harvested timber products for the life of that product.
386,000 ha 0.034% of our There is no 15 million trees Over 5000
Plantations
At 22%, the native forests Every tree is planted
plantations cover just 1.9% waste as all wood, pulp,
largest and 5% of harvested annually -
and 275,000 of Victoria or parts of the chemicals,
plantation plantations under global every tree
ha multiple 3.4% of the tree have a cellulose, and
estate in harvested certification harvested is
use native land classified use food products
Australia annually systems replaced
forests as farm land
$7.6 billion
Largest
Victoria direct sales -
exporter of 21,000 direct Our forests
Over 600 produces 7.1 $634 m gross 33% of the 70% of paper
wood at 5.3 jobs and up to and wood
businesses million m3 logs. value of logs – national and
million 50,000 across products
across the 24% of the 25% of the primary and cardboard is
m3/annum the supply store more
supply chain nation’s logs nation’s gross secondary recovered
chain than 2000 Mt
and more than value of logs manufacturing with 61%
carbon
any other reprocessed
state in Vic
VFPA Submission to Removing the Water Rule
Page 2
Introduction
The Victorian Forest Products Association (VFPA) welcomes the opportunity to make a submission to the Australian Government’s Proposed Amendments to the
Requirements for Commercial Forestry Projects – the Water Rule Consultation Paper
(the Consultation). VFPA supports the Australian Forest Products Association submission made with respect to the Consultation.
This consultation comes at an important time for commercial plantation forestry in
Victoria, given the Andrews Government’s decision to phase out native forest harvesting from 2030. Wood for construction and other uses will therefore become solely dependent on plantation sources.
The inclusion of the so-called Water Rule in the Carbon Credits (Carbon Farming
Initiative) Rule 2015 (the CFI Rule) has resulted in significant and perverse impacts on plantation forestry across Victoria. It duplicates state and local government policies and the planning frameworks (Greenwood Strategy, 2021), particularly when the
Federal Minister for Agriculture also holds a veto power.
It is imperative that perverse policies such as the Water Rule are permanently removed to avoid the current “exemption” being reinstated – it will also remove a disincentive for landholders to participate equally in carbon plantation projects.
Consequently, VFPA supports the Federal Government’s proposal to removal of the
Water Rule from the CFI Rule.
The application of the rule has disincentivised plantation development, resulting in a reduction in total plantations across Victoria since 2011, the date of the Water Rule’s inclusion in the CFI Regulation (Figure 1). Importantly, the rule does not apply to other tree plantings such as horticulture, biodiversity and permanent carbon plantings that have the same impact on surface water and groundwater resources as commercial plantations.
Figure 1 Victoria’s plantation estate 1975-2020 1
1
Data sourced from ABARES Forest & Wood Products Datasets
VFPA Submission to Removing the Water Rule
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While Victoria’s forestry regions were granted an exemption from the rule in 2021, other market influences have constrained plantation expansion, notably the increasingly high cost of land and the low carbon price. Plantation investment decisions are then driven by commercial decisions around market forces more than perverse government policies.
Benefits and/or impacts of the removal of the water rule
Australia, and notably Victoria, is reliant on softwood imports to meet its construction demands. The stagnant plantation estate means that the availability of softwood sawlogs is the main constraint on expanding processing to bridge the gap between sawn softwood demand and supply (Forest & Wood Products Australia, 2022).
Australia’s implied supply gap is 19.7 per cent or 1,061 million cubic metres – with much of this being supplied from imports predominantly from European countries. On average, 36 per cent of Australia’s softwood imports arrive into Victorian ports (Figure
2), of which, 87 per cent is structural timber for homes. During the first quarter of 2022, this share jumped to 44 per cent.
Moreover, by mid-century, Victoria will be home to nearly 12 million people, and
Melbourne will shortly overtake Sydney as Australia’s most populous city, creating a need for a housing pipeline for decades to come. Our current plantation estate supplies around two thirds of the new homes for today’s population. As it takes more than 30 years for a softwood plantation to reach sawlog maturity - trees planted today will supply timber after 2052.
Figure 2 Softwood Imports by State and Victoria’s Share of Total Softwood
Imports 2
Unless the current situation is changed, this growing need to house tomorrow’s population will be more reliant on imports at a time when the global demand for timber is increasing. It is estimated that global demand will be four times the ability to supply wood by 2050. In addition, being reliant on imports disadvantages Australia due to our
2
Data sourced from IndustryEdge
VFPA Submission to Removing the Water Rule
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high shipping distance from exporting countries and exposes us to the vagaries of international logistics chains.
Over the time it has taken to grow a pine plantation (1990 to 2020), new house builds have increased by 71 per cent, while the softwood plantation estate increased by just 6 per cent with no increases since 2010 – grossly insufficient to supply the demand
(Figure 3).
Figure 3 Softwood plantation estate and Victorian new house builds 1984-2021 3
Moreover, growing our plantation estate here in Victoria will contribute to the state achieving its net zero aspirations by 2050. Removal of the water rule will support project proponent confidence in the carbon investment. The current water rule creates delays in registration and uncertainty that have meant that some projects miss ordering/planting seasons and are consequently delayed more than one year. This delay increases the risk associated with the investment by the project proponent.
Victoria’s Regulatory Environment
Victoria has two main regulatory instruments that guide new plantations
The Code of Practice for Timber Production – which requires the lodgement of
either a Plantation Development Notice or a planning permit with the local
council, and
A large body of legislation and related instruments covering 36 acts, nine
regulations and nine state government policies (Greenwood Strategy, 2021).
Together, these regulatory instruments guide new plantation establishment through the regulatory process (Figure 3).
3
Data sourced from ABARES
VFPA Submission to Removing the Water Rule
Page 5
Figure 4 Victoria’s new plantation regulatory process (Greenwood Strategy, 2021)
Part of the regulatory process includes regular updating of Victoria’s Sustainable
Water Strategies (SWS). The Central Victoria and Gippsland SWS was completed in
2022, with actions applying to plantations relating to monitoring and assessing plantations impact on water resources (no change from the previous SWS).
Anecdotally, VFPA understands that there are already regulatory “caps” on plantation areas in some small catchments.
The risk of impacts on catchments in practice is low. There is little or no evidence that plantations will expand at such a significant rate to detrimentally impact catchments.
As of the date of this submission, there are only 45 (net) projects registered across all states of Australia. To date only 544,622 ACCU’s have been issued from these projects.
This represents approximately 0.5 per cent of all ACCUs issued to date. The removal of the ‘water rule’ will be helpful, however, it is unlikely that plantations will expand at such a rate as to have detrimental impacts on the water yields in catchments.
In summary, the VFPA supports the repeal of section 20AB of the CFI Rule as a permanent solution to a perverse and blunt regulation the duplicates numerous other legislations, regulations, and Victoria’s planning framework, and is only applied to plantation forestry and no other forms of permanent tree plantings in the landscape.
References
Forest & Wood Products Australia. (2022). Future Market Dynamics and Potential Impacts on
Australian Timber Imports. Melbourne: FWPA.
VFPA Submission to Removing the Water Rule
Page 6
Greenwood Strategy. (2021). Planning and Appovals Requirements for New Planations in
Australia. Melbourne: Greenwood Strategies.
VFPA Submission to Removing the Water Rule
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