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There is increasing demand for carbon credits through the New Zealand Emissions Trading Scheme (ETS) to offset pollutants from business operations here and overseas. Through the ETS, carbon is sequestered from planted forests and companies can buy carbon credits to offset their emissions. Carbon offsetting and the ETS helps New Zealand meet its obligations under the Paris Agreement to mitigate the effects of climate change.

Planting more trees means the ability to offset more emissions. Increasing demand for offsetting emissions has seen the ETS carbon credit trading price skyrocket. In 2022 the cost per unit shot past the New Zealand Government’s price cap, forcing the government to release the entire year’s cost containment reserve to manage the price per carbon credit. You can read more about the skyrocketing carbon credit price in our blog here.

The current legislation coupled with demand rising beyond forecasted expectations will, if not managed correctly, create risk for other primary sectors in New Zealand as well as impact local communities, and our ecology and environment. Therefore, the government is proposing changes to the legislation established in 2018 to mitigate these risks.

What does forestry look like under the current legislation?

Currently there are two options for forestry planting.

  1. Forests are grown for both carbon and timber production. Under this scheme carbon credits can be earned by the forest owner for 16 years of growth. The trees are harvested at around 28 years of age. Forest owners will then be required to plant a second rotation forest, but with no further carbon credits. If subsequent rotations are not planted, then the original credits must be repaid at whatever the carbon price has become at that time.
  2. The second option is to plant permanent forests which would provide carbon credits to the forest owner for as long as the trees were in the ground. This is acknowledged to be around 80 years for pine, but the numbers are not evidence based and depend on location, climate and of course doesn’t consider natural events.

Both options include native and exotic species. Pine radiata is the most popular tree to plant as it’s fast growing – with the ability to gain carbon credits, and therefore, a return on investment sooner.

Why is the New Zealand Government proposing new legislation?

The government has determined a major risk that comes from planting permanent exotic forests under option two. With the demand for carbon credits increasing well above forecasted rates, the price could cause an upsurge in pine forest planting taking over premium food producing farmland and native forest and eroding rural land values across New Zealand.

This is not the Government’s intended outcome of the ETS and sees agriculture, food production, and our environment lose out in the long term.

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