Interest in signing up forests to the Emissions Trading Scheme (ETS) reached a peak in 2022.
The Ministry for Primary Industries (MPI) had a very busy 2022, spatially assessing close to 200,000ha and making their way through 1990 applications.
Driving the spike in applications, was the approaching cut-off for getting carbon credit earnings back-dated for five years.
December 2022 was the official closing date to earn NZ units (NZU)/ha from each year of the mandatory emissions return period, 2008-2022. Farmers and foresters who got in early in 2022, to register new ETS forestry areas, should get a back-dated windfall. Those who missed, have to start from 2023.
A 20ha indigenous forest sequestering a modest five tonnes of CO2 equivalent/ha would earn 700 credits for the emissions period. At $80/NZU this is $40,000.
Such was the demand, MPI indicated applications needed to be in by April to get processed by December, and that there would be an eight-month wait time.
A second reason for the spike was the attractive returns from land conversion to exotic forest. The balance of exotic versus indigenous applications for 2022 is unknown, but the historic average is that 11% of the area in the NZ ETS is indigenous forest. From January to October 2022, 152,000ha were spatially assessed. In turn, 84% of the areas were accepted as eligible for the ETS.
As monthly applications were far more than MPI could deal with, it created a processing backlog. This means assessed areas per month don’t necessarily match areas submitted that month.
MPI estimates that by January 1, 2023, 500,000ha of forest land will be entered into the NZ ETS. It took a decade to reach 300,000ha and just a year to add 200,000ha.
Mathilde Batelier-Belton, of Carbon Forest Services, has had a very busy year organising applications for the NZ ETS, for clients. There have been some successful applications but nothing major yet.
A bugbear for farmers has been the difficulty in getting reverting indigenous forest accepted into the NZ ETS. Often the reason for ineligibility was that farmed blocks grazed by stock and in grassland, had older scattered trees across the block, and these were assessed by a spatial map as a pre-existing forest. Land with pre-1990 forest is ineligible.
More land looks to be added into the NZ ETS in the future. On November 30, the Government said it would work with the primary sector on developing an onfarm sequestration strategy. Transitional arrangements would be in place from 2025, with a view to including extra sequestration into the NZ ETS.
Climate Change Minister James Shaw said what is being proposed represents a significant shift in the way the ETS works.
“It means farmers will get full recognition for scientifically proven sequestration on their farms. This should unlock a wave of research, science and innovation into forms of emissions removal that also enhance biodiversity and other important values that aren’t always achieved through exotic forestry plantations.”
Bringing new categories into the ETS may take some time, he said.
If there are 1.6 million ha of indigenous forest, shrubland or wetlands on sheep and beef farms, then applications to include a large amount of this into the NZ ETS will outstrip the 200,000ha assessed in 2022.
The s215 Report on emissions pricing will be published by the end of 2022. A series of policy decisions on He Waka Eke Noa will be made in early 2023, with the aim to introduce legislation by the middle of the year.
