The Government has recently provided further information about proposed changes to the New Zealand Emissions Trading Scheme (ETS) earmarked for 2025.
This includes:
- Indicating how existing investments in farm-to-exotic forestry conversions on highly productive land will be treated under new regulations that place a moratorium on that forest land from entering the ETS; and
- Commencing consultation on updates to the default carbon “look up” tables and the Climate Change (Forestry) Regulations 2022, designed to improve the accuracy of carbon stock estimations and streamline operational processes for ETS participants.
Registered ETS participants and those with an interest in new forestry developments should monitor these policy changes closely and consider submitting feedback during current and upcoming consultation periods.
We set out further details about these proposed changes to the ETS below.
Treatment of existing investments under moratorium restricting new farm-to-forestry conversions from entering the ETS
For those who missed it, late last year the Government announced that it would:
- place a moratorium (temporary restriction) on new farm-to-exotic forestry conversions from entering the ETS where that forest is on land with a land use capability (LUC) of 1-5; and
- limit the amount of new farm-to-exotic forestry conversions from entering the ETS where that forest is on land with a LUC of 6. An annual registration cap of 15,000ha will be imposed and will be allocated on a first in, first served basis.
The Government advised that it would progress legislation to give effect to these changes. We discussed the impetus, scope, a range of exemptions and implications of these changes in our previous article.
These announcements created some uncertainty in the market about how the new rules would be enforced, and how the policy would impact existing investments. The announcements were especially concerning for those who have already begun converting farm-to-forest for registration in the ETS, or had invested in land for that purpose, relying on previous policy.
On 25 March 2025, the Government released more information about the treatment of existing investments. We expect this update was to provide the forestry sector with some assurance and assist with long term planning.
The Government clarified that an exemption to the proposed moratorium would apply to those who:
- provide sufficient evidence of a qualifying forestry investment (discussed below) having been made between 1 January 2021 and 4 December 2024; and
- lodge a complete and valid application to register land in the ETS by 31 December 2027.
The proposed list of qualifying forestry investments is wide and includes various stages of investment, such as:
- having a forestry right or forestry lease on farmland;
- purchasing farmland;
- applying for an emissions ruling on whether the land is post-1989 eligible land;
- having a resource consent related to forest establishment;
- preparing for afforestation (e.g. ordering seedlings or site preparations);
- receiving a recognised local or central government grant for afforestation; and
- contracting a third party to undertake due diligence related to afforestation of farmland or the purchasing of farmland for afforestation.
The Government is also proposing that an exemption will apply to any land that is already classified as ‘forest land’ under the Climate Change Response Act 2002 (CCRA), when the new law takes effect. In other words, where a forest meets the specific size and tree cover requirements under the CCRA at the date the new law takes effect, then the land may be registered in the ETS.
If you started investing in farm-to-exotic forestry conversions after 4 December 2024, it is likely that the new restrictions will apply to you.
Effective date and compliance
In the Government’s second quarterly (Q2) action plan (1 April - 30 June 2025), the Government revealed its intention to introduce legislation to limit farm-to-exotic forestry conversions from entering the ETS this quarter.
The moratorium is anticipated to take effect in October 2025. From that date, all ETS registration applications will be subject to the new restrictions.
If you think you may be eligible for an exemption, you should ensure that you retain sufficient records of your ‘qualifying forestry investment’ as evidence to lodge with your application to register land in the ETS.
Consultation on proposed regulatory changes to the ETS announced
The Ministry for Primary Industries (MPI) has released a consultation document on proposed updates to the forest types and the default carbon tables for exotic forests, and other technical amendments to the Climate Change (Forestry) Regulations 2022 (CCFR).
The proposed changes to the default carbon tables form part of the four year Maximising Forest Carbon Programme (2022-2026). This joint initiative between Te Uru Rākau – New Zealand Forest Service, Ministry for the Environment, and the Department of Conservation aims to increase carbon storage in new and existing forests.
Consultation is open until 5pm on Friday, 16 May 2025 – further information on how to make a submission is available here.
Updates to default carbon “look up” tables (Default Tables)
By providing estimates of the average tonnes of carbon within forest land, default carbon tables help ETS forestry participants calculate and report the overall carbon stock in a forest for emissions returns. These tables are categorised by forest characteristics (i.e., by forest type and age). Under the CCFR, default carbon tables must be used by small-scale ETS forestry participants, who have less than 100 hectares of registered forest land, including farmers who have diversified their land use.
The default carbon tables were last updated in 2008. Since then, they have not been reviewed and updated for consistency with the best available data and science. The Government has proposed changes to the default carbon tables to increase the tool’s accuracy, and to fairly reward small-scale foresters for their contribution to carbon sequestration.
The proposed changes to the default carbon tables include:
- introducing a new forest type for redwoods (and removing it from the exotic softwoods table);
- updating the default carbon tables for exotic softwoods;
- updating and extending the default carbon tables for exotic hardwoods; and
- updating the default carbon tables for Pinus radiata.
ETS forestry participants can expect to use the new and updated default carbon tables in the next ETS mandatory emissions return period beginning 1 January 2026.
The proposed changes to the default carbon tables are intended to benefit existing ETS participants with exotic forests by improving the accuracy of the carbon sequestered and supporting the Scheme’s integrity. It is also expected to:
- increase diversification by enabling more choices of tree species;
- improve economic returns for small-scale forestry; and
- increase the number of small-scale foresters participating in the ETS.
While these changes are focused on exotic forests, MPI has indicated that once research into indigenous carbon storage is complete, it expects to seek feedback on potential improvements for indigenous forests in late 2025 or early 2026.
Proposed amendments to the Climate Change (Forestry) Regulations 2022 (CCFR)
MPI has also proposed changes to the CCFR to address technical issues, including:
- clarifying whether young forests that fail to thrive should be considered first or subsequent rotation under averaging accounting when replanted;
- updating the deadline for the input calculator (where participants use automatic calculations or system-generated returns to assist with submitting an emission return) to align more closely to the deadline for emissions returns;
- streamlining the processing of transmissions of interest by prescribing the transferee holding account number on the transmission of interest notice;
- simplifying the amalgamation of small areas by specifying in regulations that they should be combined with neighbouring areas before sub-areas are identified for carbon calculation; and
- future-proofing the method of spatial measurement used for determining land area.
These changes are proposed to streamline operational processes and ensure the efficient management of forestry within the ETS.
More guidance
For more information about the ETS reforms and how they might affect you, please contact one of our experts.