Introduction to the Emissions Trading Scheme (ETS) for forestry
There are 2 classes of forests in the Emissions Trading Scheme (ETS), each with its own obligations.
On this page
- About the Emissions Trading Scheme (ETS)
- What the ETS for forestry covers
- What the ETS means for you
The ETS is New Zealand’s main tool for meeting our international obligations around climate change. The ETS operates as domestic carbon market by putting a price on carbon. This price is referred to as a New Zealand Unit (NZU), often referred to as a carbon credit, and 1 NZU = 1 tonne CO2 equivalent.
Owners of eligible forest can register their forests with the ETS. As their forests grow and store carbon they earn NZUs from the government that they can keep or sell on the market
Greenhouse gas emitters must surrender NZUs to the government to cover their emissions. They must buy NZUs from the market if they don't have enough.
The ETS has a specific definition for what a forest is to differentiate between land managed as a forest and other trees in the landscape – this is known as the ‘forest land definition’. Under this definition a forest:
- is at least 1 hectare in size
- is mainly made up of tree species that can reach 5 metres in height in that location at maturity (does not include trees grown primarily for fruit or nuts, gorse, broom or native shrubs)
- has the potential to reach 30% tree canopy cover in each hectare at maturity
- has the potential to reach an average tree canopy cover width of 30 metres at maturity.
This definition means that some areas of land that don’t look like a forest, like farmland with regenerating native tree seedlings, may be captured under the forest land definition.
1 January 1990 was the baseline date for New Zealand’s international climate change obligations, so there are 2 classes of forests in the ETS.
- Forests existing before 1 January 1990 are considered baseline forests – they don’t count towards New Zealand’s obligations and there are penalties for deforesting (permanently removing the trees). These are classified as “pre-1990” forests.
- Forests first established after 1 January 1990 are considered new forests – they can be counted towards our obligations and forest owners can earn NZUs from their growth. These are classified as “post-1989” forests.
Each classification has different obligations for forest owners.
If you’re buying land with an existing forest, or with a forest that has been recently harvested, it’s a good idea to check with your real estate agent and lawyer for the status of that forest in the ETS as there may be carbon liabilities attached to the forest land.
You may also be able to establish whether the forests on your land are pre-1990 or post-1989 forests by accessing historical aerial imagery from as close as possible to 1990. Get in touch with Te Uru Rākau or your local council to find out what imagery is available.
You may want to consider how the ETS could work for you. Registering your forest with the ETS can provide:
- another income option for your business
- the ability to earn income from areas of retired farmland
- the ability to earn income as your forest grows (rather than only at harvest)
- an option for succession planning and future proofing.
Exotic forests established before 1 January 1990 are called “pre-1990” forests. These forests:
- can’t be registered in the ETS to earn NZUs.
- can be harvested and replanted without any ETS obligations.
- carry an obligation to pay NZUs to the Government if the trees are permanently removed (deforested), or if the forest isn’t replanted within the required time.
If you think you have a pre-1990 forest on your land, and want to change land use, it’s a good idea to get in touch with Te Uru Rākau to discuss your options before undertaking any work.
Exotic and native forests first established after 31 December 1989 are “post-1989” forests. These forests:
- can be voluntarily registered in the ETS to earn NZUs as they grow
- carry an obligation to repay a portion of units if the carbon stock decreases – for example, after harvest.
The government has recently announced some changes to the way post-1989 forests planted after 31 December 2018 can earn NZUs, to make it simpler to participate in the scheme.
If you have questions about forestry in the ETS:
- phone 0800 CLIMATE (0800 25 46 28) and select option 3.