Forestry in the Emissions Trading Scheme

Forestry entered the New Zealand Emissions Trading Scheme on 1 January 2008. It was the first sector to enter. New Zealand’s ability to meet its international obligations for greenhouse gas emissions. This page outlines how forestry is affected by the NZ ETS.

The Government is currently consulting on proposals for New Zealand Emissions Trading Scheme (NZ ETS) settings, including unit supply and price controls. These will be set through regulations in mid-2020. The intention is to align the NZ ETS with New Zealand’s emissions reduction targets. To review the proposal and submit feedback See Reforming the New Zealand Emissions Trading Scheme: Proposed settings.

How is forestry affected by the NZ ETS?

The NZ ETS classifies forests differently depending on whether they were first established after 1989 or before 1990 (largely mirroring the rules under the Kyoto Protocol).

Owners of post-1989 forest land:

  • can choose to enter the scheme and earn New Zealand Units (NZUs) as their forests grow, and
  • do not receive allocations of NZUs because they don’t face any mandatory obligations.

Post-1989 forest land participants may surrender NZUs when surrendering the unit balance for any land deregistered from their participation.

Owners of pre-1990 forest land:

  • face obligations under the scheme if they deforest, and
  • receive a one-off allocation of NZUs to help offset the decrease in land value due to decreased land-use flexibility.

Old-growth indigenous forest that remains in forest is not subject to the rules of the ETS.

The Government has made decisions to improve how forestry is treated in the NZ ETS.  Information on these decisions can be found on the Ministry for Primary Industries website. (Updated information will be available on Monday 17 December 2018)

Forestry and climate change

Forestry is New Zealand’s largest potential carbon ‘sink’. As trees grow, they absorb carbon dioxide from the atmosphere and store it in their trunks, branches, leaves and roots (above ground and below ground biomass).  The amount of carbon stored in a forest depends on factors such as the species, stocking, site conditions and how long it is left to grow.

When trees are harvested, carbon that is stored is released back into the atmosphere as the wood decays. At present, all harvested wood taken off site is conservatively assumed to be immediately released back into the atmosphere. Harvest residues that remain on-site are considered to decay completely over a 10-year period, under NZ conditions.

New planting initiatives will expand New Zealand’s forest estate, creating a carbon reservoir and helping New Zealand meet its obligations under the Kyoto Protocol.

The Government expects the deforestation of pre-1990 forest land to reduce substantially under the ETS. At the same time, it expects more new forests will be planted, and that existing forests will be managed in a way that increases the levels of carbon stored in them.