Emissions Trading Scheme (ETS) & Carbon
It's about sustainability
It's about sustainability and achieving our commitment to reducing emissions. The primary aim of the ETS is to encourage environmentally sustainable behaviour.
Good governance that supports and maintains profitable enterprises while encouraging and protecting the environmental integrity of both our ecosystems and the social wellbeing of our communities.
The NZ Emissions Trading Scheme
On this page you will find some of the basics of the Emissions Trading Scheme (ETS).
Climate Change Response (Zero Carbon) Amendment Act
The Climate Change Response (Zero Carbon) Amendment Act 2019 provides a framework by which New Zealand can develop and implement clear and stable climate change policies that:
- contribute to the global effort under the Paris Agreement to limit the global average temperature increase to 1.5° Celsius above pre-industrial levels.
- Allow's New Zealand to prepare for and adapt too, the effects of climate change.
The original proposal was for a separate piece of legislation called the Zero Carbon Bill to be passed into law. In May 2019, the Government decided to introduce it as an amendment to the Climate Change Response Act (CCRA) 2002. The objective was to ensure that all key climate legislation is within one Act.
What is Forest land?
It's all about 'Forest Land'. This underpins the eligibility for entry into the ETS which is a voluntary scheme.
Forest land has a specific meaning under the Emissions Trading Scheme (ETS) and is classed into 2 types. Your obligations under the CCRA (2002) depend on which type you have.
- Tree Species >5m height potential at maturity
- >1 Hectare
- <15m between potential canopy edge (mapping standard)
- 30m potential average width
- >30% potential canopy cover
- >1 ha gaps removed
Under the ETS, forest land must be at least a hectare in size and have (or will have) tree crown cover:
- of more than 30% in each hectare from forest species (trees)
- with an average width of at least 30m.
Forest species in the ETS are those that can reach at least 5m in height at maturity. (This does not include trees grown primarily for fruit or nuts).
Types of Forest Land
There are two types of forest land. Forest land is classified differently depending on when it was first established – pre-1990 or post-1989 forest.
Pre-1990 forest land
This is land that:
- was forest land on 31 December 1989 (indigenous or exotic)
- remained forest land on 31 December 2007
- contained mostly EXOTIC forest species on 31 December 2007.
Land that was indigenous forest land on 31 December 1989 and remained so on 31 December 2007, is not pre-1990 forest land and does not have CCRA(2002) obligations.
Pre-1990 forest landowners can harvest and replant their forest without any liability.
But if the land (that is not exempt) is deforested, the landowner (or a third party who had deforestation rights) must:
- notify MPI of deforestation
- submit an emissions return and pay units for deforestation.(significantly higher than the pre-1990 forest land allocation plan (FAP))
Post-1989 forest land
Post-1989 landowners, or holders of registered forestry rights or leases, can apply to register as ETS participants at any time.
Once registered, they can:
- claim NZUs for the amount of carbon stored as the forest grows
- apply to add or remove forest land in the ETS at any time.
ETS Must Do's
If registered in the ETS there are things that you MUST do:
- File an emissions return once in every mandatory emissions return period (MERP) to account for changes in your forest's carbon stock.
- Pay units if your forest's carbon stock decreases (i.e. due to clearing) - dependent on carbon accounting method used.
- Tell MPI if you transfer some or all of your registered post-1989 forest land to another person or entity (for example, if you sell your forest or change the structure of the entity by more than 40%) within twenty days of doing so.
- Surrender the total number of units allocated to the forest land since registration (regardless of who received the units) if the land is withdrawn from the ETS.
- Use the Field Measurement Approach (FMA) if you have more than 100 hectares to measure and determine the actual amount of carbon sequestered by that forest.
The First Rotation Only
People talk about 10 years of carbon from the first rotation being 'safe to sell'.
This relates to the principle that after harvest the amount of carbon remaining on site in respect to the stump/roots and general slash not removed during the harvesting operation equates to 'approximately' the first 10 years of growth for the trees.
There are specific tables that calculate this amount. If you are registered in the ETS and use stock change accounting and YOU were registered and received carbon in those first 10 calendar years of growth, then potentially you will not have to surrender it at harvest. If you registered at age 8 years and received the carbon, you could potentially retain 2 years’ worth of carbon.
If you received none of the carbon allocated for years 1-10, then ALL the carbon you have received may have to be surrendered at harvest using NZU’s.
Every property is different, the answer to the same question on two different properties will often have two very different answers, depending on your management practices.
For more information on the Emissions Trading Scheme
Carbon Credits - Selling and Purchasing NZ Units (NZUs)
Orme & Associates can facilitate the sale and purchase of NZUs on your behalf. We operate on the secondary (open) market therefore sales and purchase can be made at any time.
In terms of purchasing, aside from the secondary market we can also place a bid on your behalf at the quarterly ETS auctions. The next auction will be held on 20 March 2024. NB. All four auctions in 2023 declined/failed with no winning bids.
If you are intending to sell, purchase or transfer NZUnits (NZUs) you should take professional advice (which may include tax, financial and/or legal advice) and consider:
- any surrender obligations associated with them. If you do/will have a surrender obligation and have a shortfall of units, you would need to purchase units (via auctioning or open market - if the value of units has increased since you sold yours, this may cost you additional money).
- if you use the Field Measurement Approach (FMA) i.e. changes in your participant specific tables and associated allocation of units.
- any tax implications.
- any other obligations e.g. contracts, agreements.
As at 07/12/23 - current indicative sale price ~$69.50/unit, and purchase price ~$70.50/unit - all pricing subject to fluctuation and volume.