Emissions Trading Scheme
The Emissions Trading Scheme (ETS) rewards registered forest owners for their contribution to the environment and aims to counter the effects of climate change.
Put simply, commercial industry typically results in the emissions of carbon dioxide (CO2) referred to as greenhouse gases. The ETS puts a price on the emissions and this is called ‘The New Zealand Unit’ with 1 NZU equal to 1 tonne of CO2.
Forests absorb CO2 and store it in the wood earning NZUs. As a forest owner you may be eligible to register your forest with the ETS earning NZUs as the trees grow. This can create a revenue stream or futureproof your forest investment by selling NZUs.
Producers of greenhouse gasses (such as oil companies, cement manufacturers etc.) are required to counter their emissions either by planting forests or purchasing carbon credits from the market via the ETS.
Current EMT rules – covers forests planted Jan 1, 1990 – Dec 31, 2020
Under the current scheme, to be eligible to register your forest for the ETS Scheme it must:
- Be established on or after 1 January 1990 (forests that were planted before 1 January 1990 are ineligible for inclusion in the ETS).
- Cover at least one hectare of land and be more than 30m wide.
- Primarily be comprised of forest tree species that will reach at least 5m high at maturity in the location they are growing.
- Grown such that they cover at least 30% of the total land area
It is recommended that you support your application to the ETS scheme with aerial imagery of your property as close as possible to 1990 to establish what the land use was at the time. You may be able to source imagery from your local council or Ministry for Primary Industry.
It’s important to note that under the current scheme you will be required to maintain a Safe Carbon Level – that’s a minimum number of carbon credits you must have once your trees are harvested. Depending on how many NZU’s you sell, you may potentially have to purchase some or all of the credits back (at the going rate) when you harvest your trees.
This could be at a higher price than what you sold them for.
The number of NZU credits required to maintain a safe carbon level is determined by the size and lifespan of your planting and we can calculate what that is when we assist with your application.
New EMT rules – covers forests planted Jan 1, 2021 onwards
Under the new EMT scheme the eligibility criteria regarding specimen type, land size and minimum coverage remains the same.
The difference is that trees planted on or after Jan 1, 2021 will earn NZUs up to 18 years of age (and possibly up to 21 years of age – the final number is yet to be determined). After this age threshold the forest will not accumulate any more NZU’s.
Under the new rules, you will be able to sell all the NZU’s and if you replant after harvesting then you will not have to repay any NZUs. The second crop of trees planted on the same land will not be able to earn NZUs.
Forest owners planting between now and Jan 1, 2021 can choose which set of rules they operate under. The current rules tend to better suited to the very large-scale forest owner whereas smaller forest owners are likely to achieve a better return under the new rules.
For more information or help with an application to the Emissions Trading Scheme click here.