Land Requirements for Carbon Credits in the NZ ETS

Eligibility

Firstly, it is important to understand what constitutes a forest that is eligible to earn NZUs (carbon credits) under the NZ Emissions Trading Scheme (ETS).

The land must be:

1. At least 1 hectare with an average width of at least 30 meters.
2. Not in forest cover as at 31 December 1989. (Historical aerial imagery is often used to provide evidence. Imagery sources include; Retrolens, LINZ, MfE, and Regional Council & Territorial Authorities.)‍
3. Established forest must have at least 30% canopy ground cover, and be at least 5m tall at maturity.
   

Forest land that does not meet the criteria defined above is not considered forest under the NZ ETS, therefore is not eligible to earn NZUs (carbon credits).

Examples include: 

• Narrow shelterbelts 
• Gorse or Broom 
• Horticultural tree species
• Scattered tree species are unlikely to ever reach 30% canopy ground cover.
  

MyNativeForest’s services can help determine whether forest and land is eligible to earn NZUs.

Background 

The NZ ETS is the Government’s main tool for combating climate change and reducing greenhouse gas emissions within New Zealand. The rules and regulations which govern New Zealand's ETS are in accordance with the Climate Change Response Act 2002. 

Forest land is classified differently based on the date it was first established.

The Kyoto Protocol sets 1 January 1990 as the international baseline date for net emissions. Forests established before 1990; known as ‘pre-1990 forest’, are considered part of New Zealand's baseline net emissions. These cannot be counted as additional carbon storage in the NZ ETS, therefore ‘pre-1990 forests' are not eligible for any allocations of carbon credits (NZUs).

Forests established after 1989 on previously non-forest land are considered new carbon sinks. They can be registered in the ETS to earn NZUs. These are known as ‘post-1989’ forests.

The NZ ETS puts a price on greenhouse gases; for both emitters and sequesters, this provides an incentive for participants to reduce New Zealand emissions and increase carbon storage.

The unit of trade is known as the New Zealand Unit (NZU), aka a carbon credit. 

One NZU represents one tonne of carbon dioxide. NZUs are earned by participants that help remove and store carbon from the atmosphere i.e. Forest owners.

NZUs are held in the NZ Emission Trading Register (ETR), they can be held, or bought and sold within New Zealand.

NZ ETS Classifications

Forest owners in the ETS participate in two ways which we will explain in detail below:

1. Voluntarily – Owners can apply to register their ‘post-1989’ forest land.
2. Mandatorily – Owners become participants when non-exempt ‘pre-1990’ forest land is deforested.
   
   

Post-1989 forest land

‘Post-1989 forest’ is a forest that was first established after 31 December 1989. To be considered a post-1989 forest, the land must currently be forest land and either:

• Was not forest land on 31 December 1989.
• Was forest land on 31 December 1989, but was deforested between 1 January 1990 and 31 December 2007.
• Was pre-1990 forest land that was deforested on or after 1 January 2008, and any ETS liability has been paid.

‘Post-1989 forest’ owners can apply to register as an ETS participant at any time and can add or remove forest land as they wish.  

They are then entitled to claim NZUs as the forest increases its carbon stocks (grows) but can only claim NZUs for the period in which they are registered.

There are many legal obligations of ‘Post-1989 forest’ participants in the New Zealand ETS. These include but are not limited to re-paying NZUs for decreases in carbon stock, e.g, due to harvesting or fire.

Pre-1990 forest land

A ‘pre-1990 forest’ owner does not receive NZUs for increases in their forest carbon stocks. This is because ‘pre-1990 forest’ represents part of New Zealand’s baseline emissions

Owners are able to harvest and replant their forest without being registered in the NZ ETS; safe from any carbon liability. 

But if the land is deforested and not replanted, the forest owner automatically becomes an ETS participant. 

Pre-1990 forest landowners must notify MPI of deforestation if no replanting has occurred, and either: 

1. Submit an ‘Emissions Return’ within the NZ ETR and pay the required units.
2. Apply to offset their deforestation prior to harvest, and establish a carbon equivalent forest elsewhere.
   

Summary

The New Zealand Emissions Trading Scheme classifies land differently based on an internationally agreed upon date; 1 January 1990. 

All forests established before 1 January 1990 (‘pre-1990 forest’) represent New Zealand's ‘baseline’ emissions and therefore are not eligible for allocations of NZUs.

New ETS registered forests established after 31 December 1989 (‘post-1989 forest’) represent increases in forested land, above the ‘baseline’. 

NZUs are allocated to these ‘post 1989 forests’ to incentivise continued increases in carbon sequestration, with the overall aim of lowering New Zealand's net emissions.