The New Zealand Government has introduced significant legislative changes aimed at restricting large-scale farm conversions into exotic forests for carbon credits. This move, announced by Agriculture and Forestry Minister Todd McClay, delivers on a key election promise and is designed to safeguard New Zealand’s productive farmland and rural communities.
What’s Changing?
The newly proposed Climate Change Response (Emissions Trading Scheme - Forestry Conversions) Amendment Bill seeks to limit the extent to which exotic forestry can be used as a carbon offset mechanism on high-value farmland. In particular:
- Land Use Class (LUC) 1-6 Land: These highly versatile land classes will no longer be eligible for entry into the Emissions Trading Scheme (ETS) for exotic forestry purposes.
- LUC 6 Land: A cap of 15,000 hectares per year will be placed on ETS registrations. Allocation will be via a ballot system, with some quota reserved for small block holders. The first ballot is expected in mid-2026.
- Partial Planting Allowance: Farmers can still register up to 25% of their LUC 1–6 land in exotic forestry under the ETS, retaining flexibility while avoiding wholesale conversions.
- Transitional Exemptions: Those with forestry investments made between 1 January 2021 and 4 December 2024 may be eligible for an exemption provided they can demonstrate that the investment was linked to the specific land they intend to register.
- Title Restrictions: Properties registering the 25% exotic forestry allowance will have this limit recorded on their title, preventing further planting on subdivision of the property.
Protecting Māori Land and Treaty Interests
The Bill also includes provisions to protect Māori-owned land, ensuring alignment with Treaty of Waitangi obligations.
When Does It Take Effect?
The new rules will take effect retrospectively from 4 December 2024 and the legislation is expected to formally come into force by October 2025.
Our Perspective
While the ETS has provided economic incentives for carbon sequestration this move endeavours to strike a new balance - supporting farming, maintaining food production, and allowing for targeted forestry development without undermining rural livelihoods.
If you have existing forestry investments or are considering registering land in the ETS, we strongly encourage you to seek our legal advice - particularly regarding transitional exemptions or the 25% land registration allowance.
Disclaimer
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