May 16, 2021
Learn about carbon sequestration rates under the Emissions Trading Scheme (ETS) and their Carbon Credit earning potential, per hectare.
Try our Carbon per Hectare Calculator for the NZ ETS to see your potential carbon return.
Carbon Credits earned under the New Zealand Emissions Trading Scheme (ETS) are allocated based on predefined carbon sequestration lookup tables. Unless the forest is larger than 100 hectares, in which case the forest carbon is measured.
The carbon look-up tables cover all species and forest types under the ETS and assume that 1 tonne of carbon sequestered equates to 1 tonne of forest biomass (trees & roots) growth in the forest. Each tonne of carbon sequestered due to forest growth earns the forest owner 1 New Zealand Unit (NZU Carbon Credit).
This article will focus on the carbon sequestration rates of native forests in New Zealand.
It’s important to understand that the MPI carbon look-up tables are a simplification of a complicated natural process. However, they are based on real measurement data of forest growth around New Zealand.
The current carbon look-up tables for native forests exist out to 50-years. This represents the point at which native sequestration rates plateau according to the MPI look-up tables.
The annual carbon sequestration rate beyond 50-years is currently treated as zero. This is to say that beyond 50-years, there is as much carbon being sequestered from the atmosphere from the developing parts of the forest, as there is being released from parts of the forest degrading and rotting away.
At first glance, this 50-year horizon may not appear to accurately reflect the long-term growth of a developing native forest.
It is important to remember they are a desktop simplification of a complex natural process that covers many native species, stand dynamics, and age class compositions. Not all native forests are the same.
There are many varying views on the accuracy of these current look-up table settings, but currently, it’s all we have to work with under the ETS. The look-up tables may also be updated and extended by MPI in the future.
A detailed guide to look-up tables for forestry in the Emissions Trading Scheme can be found on the Ministry for Primary Industries (MPI) website, but here is a summary below of the first 50 years:
Native forest establishment in the Emissions Trading Scheme is categorised as a ‘Permanent Post 1989’ forest.
On 1 January 2023 the ‘Permanent Post-1989’ forest category is being added to the ETS, replacing the current category; Permanent Forest Sink Initiative (PFSI). Any existing PFSI forests will be transferred to the new category.
It is a requirement that ‘Permanent post-1989’ forests will not be clear-felled for at least 50 years after they are registered in the ETS.
‘Permanent Post-1989’ forests will be on the stock change accounting approach enabling them to earn Carbon Credits in line with the MPI carbon lookup tables, as long as the forest remains in the ground.
To fully understand the legal implications of registering a ‘Permanent Post-1989’ forest in the Emissions Trading Scheme, refer to the Ministry for Primary Industries website.
Permanent native forestry under the ETS also has two distinctive forest types which earn carbon credits at varying rates.
These variations are based on the previous land use (as at 31 December 1989) of the newly established native forest:
The impact of establishing a native forest on a previously forested exotic site means that the forest does not earn any carbon credits for the first 10 years.
The reason for this is due to the look-up table assumption that the carbon remaining on the harvested site; locked up in the stumps and slash (above and below-ground woody biomass), rots away, releasing the carbon back into the atmosphere over 10 years.
Chart 1 compares the annual carbon credit allocation for both; the bare land establishment of a native forest, and the conversion establishment from exotic species to native forest.
It reiterates visually the impact of not receiving the first 10 years of carbon credits and displays the actual number of NZU’s this represents.
Chart 2 below compares the total accumulated carbon (sum of the annual allocation) for both establishment types.
It clearly shows the impact that establishing a native forest on an ex-exotic site has on the total carbon credit allocation out to 50-years.
Permanent forests are those left to develop and mature into perpetuity without ever being subject to harvesting activities. The beauty of permanent forests is that, unlike harvested areas, they will never incur a carbon liability due to harvesting activities.
This allows the forest owner to earn revenue, at very low risk, through the sale of the carbon credits earned from the forest. However, it is important to know that permanent forests are not exempt from all carbon liability risks.
Although the chances are very low, ’Acts of God’ such as fire, landslide, or wind events, could damage areas of the forest causing them to be ‘deforested’ under the ETS definition.
Carbon Credits earned from ‘Permanent Post-1989’ forests will be tagged as such in the New Zealand Emissions Trading Register (ETR). This traceability back to the land title and forest type enables access to potential price premiums for native forest carbon credits in the voluntary offsetting market.
Permanent native forests also provide a wide range of intrinsic benefits, besides carbon sequestration.
Native forests increase water quality throughout the catchment where they are features of the landscape. Permanent native forests forever protect the soil from erosion, reducing the risk of flood damage, debris flows, and sediment discharge downstream. Native forests are also a hotspot for improving flora and fauna biodiversity in New Zealand; a commodity that is not yet monetised in New Zealand but has been in other parts of the world.
There are think-tanks at a government level discussing the creation of a biodiversity credit, or a similar incentive to encourage the establishment of new native forests across New Zealand.
Watch this space.
Further protection of permanent native forests is available through 3rd party organisations such as the QEII National Trust.
Native forest registered under a QEII Covenant is registered against the legal title of the land ensuring the forest remains protected from land-use changes across generations and changing ownership structures. It’s something we can do now to ensure protection
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