Forestry in the Emissions Trading Scheme

Forestry entered the Emissions Trading Scheme (ETS) on 1 January 2008. It was the first sector to enter, because of the importance of forestry to New Zealand’s ability to meet its international obligations for greenhouse gas emissions.

How is forestry affected by the ETS?

The 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.

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.

Earning NZUs (post-1989 forest land)

Please see Voluntary participation for Forestry: Earning NZUs for more information.

Obligations (pre-1990 forest land)

Please see Forestry’s Obligations: Surrendering NZUs for Deforestation for more information.

Allocations (pre-1990 forest land)

Please see Forestry Allocation: NZUs for Forestry for more information.

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.

Last updated: 16 August 2010