Accounting for changes in carbon stock
Carbon accounting is how you calculate and report changes in the amount of carbon stored in your forest. This determines how many units you are entitled to earn or need to surrender. One New Zealand Unit (NZU) is equal to 1 metric tonne of CO2 stored.
You account for carbon by completing emissions returns. An emissions return calculates and reports the change in carbon stock in your forest.
You can complete an emissions return voluntarily in any year, and you must complete a return at the end of every mandatory emissions return period. A mandatory emissions return period usually lasts 5 years. The current period runs from 1 January 2018 to 31 December 2022. There will be a shorter mandatory emissions return period from 2023 to 2025, to bring the ETS mandatory emissions return periods in line with international reporting.
If you register a forest during a mandatory emissions return period, you can claim units back to the start of the period.
When you register a post-1989 forest in the ETS you will also set up a unit holding account with the Environmental Protection Authority. You will earn units for additional carbon storage from the date of registration. Your units will be deposited in your holding account.
You can hold on to your units in your holding account or sell them on the ETS market.
The amount of units a forest earns depends on several factors:
- The age when the forest was first registered – if a forest is registered when it is young it can earn more units.
- The species – faster growing species earn more units than slower growing species.
- The forest management regime – the earlier you harvest a forest the fewer units it will earn.
- The carbon accounting method – the stock change method accounts for short-term changes in carbon stock so you will earn more units but need to pay most of them back after harvest, while the averaging method accounts for long-term changes so you will earn fewer units but will not have to pay any back after harvest.
- The size of the forest – if you have less than 100 hectares registered in the ETS you will use the default carbon look-up tables to work out your carbon changes based on national and regional averages, but if you have 100 hectares or more you will have bespoke look-up tables based on actual carbon stored in your forest.
Look-up tables for pre-1990 forest land [PDF, 458 KB]
Guide to using look-up tables [PDF, 2.7 MB]
Surrendering and repaying units
Forest owners may need to surrender or repay units to the Crown for some forest management activities.
Surrendering units for pre-1990 forests
If you are a pre-1990 forest owner you may need to surrender units if you deforest pre-1990 forest land. This may apply even if you have not registered in the ETS.
Surrendering or repaying units for post-1989 forests
If you have a post-1989 forest that is registered in the ETS you may need to surrender or repay units if you:
- harvest your forest and you are using the stock change accounting method
- deforest and change land use
- deregister from the ETS.
Carbon liabilities and "low risk" units
"Carbon liabilities" are situations where you need to surrender or repay units. The most common form of carbon liabilities are:
- harvesting carbon liabilities, which must be repaid after harvest if you use the stock change accounting method
- deforestation carbon liabilities, which you need to surrender if you deforest any pre-1990 forest or a post-1989 forest that's registered in the ETS.
"Low risk" units are units a forest has earned that do not have to be surrendered to meet the forest's harvesting liability. This means they are less likely to need to be repaid or surrendered, and are considered a lower risk to sell on the carbon market.
The amount of low risk units you earn will depend on a variety of factors. The most important factor is the carbon accounting method you use – you will earn fewer low risk units under stock change than you will under averaging accounting.
Carbon accounting methods
There are two carbon accounting methods in the ETS: stock change accounting and averaging accounting. Averaging accounting will become fully available from 1 January 2023.
- If you registered your forest as a post-1989 forest in the ETS before 2019 you must continue to use stock change accounting.
- If you register between 2019 and 2022 you will use stock change accounting until 2023, when you can decide whether to move to averaging accounting or stay on stock change.
- If you register your forest as a post-1989 forest in the ETS after 1 January 2023 you’ll use averaging accounting.
If you register your forest as a Permanent Post-1989 forest you will use stock change accounting.
Stock change accounting
The stock change method accounts for short-term changes in your forest's carbon stock. You earn units as your forest grows and stores carbon, and you pay back units if the carbon in your forest decreases (such as after harvest).
Averaging accounting focuses on your forest's long-term carbon storage over several rotations of growth and harvest. You earn units until the forest reaches its long-term average carbon stock, and you don’t have to repay units after harvest so long as you replant.