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There is an increase in demand for carbon credits through the New Zealand Emissions Trading Scheme (ETS)

Through the ETS, carbon is sequestered from planted forests and companies can buy carbon credits to offset their emissions. ETS helps New Zealand meet its obligations under the Paris Agreement to mitigate the effects of climate change.

Planting more trees boosts emissions offsetting. Increased demand has driven up the price of ETS carbon credits. In 2022, prices surpassed the government’s cap, prompting the release of the entire year’s reserve to stabilize prices. Find more details on our blog. Current legislation together with unforeseen demand, poses risks to primary sectors and local communities, as well as to ecology and the environment. Hence, the government proposes amendments to mitigate these risks.


What does forestry look like under the current legislation?

Currently there are two options for ETS forestry planting.

Forestry under current legislation offers two options for ETS. Forests serve dual purposes: carbon sequestration and timber production. Forest owners earn credits for 16 years of growth, but subsequent rotations incur no further credits and permanent forests offer ongoing credits, typically around 80 years for pine.

Both options feature native and exotic species. Pine radiata is favored for its rapid growth and early returns on investment.


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. The demand for carbon credits increasing above forecasted rates, the price could cause an upsurge in pine forest planting. This will take 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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