Accounting for carbon in the ETS
When you have post-1989 forest land registered in the ETS, you have certain legal responsibilities. These include accounting for the amount of carbon your forest stores.
From 1 January 2023, there are 2 carbon accounting methods in the ETS. These are:
- stock change accounting
- averaging accounting.
Until 2023, only stock change accounting is available.
The carbon accounting method that applies to your forest land depends on when it was registered in the ETS.
The carbon accounting method you use determines how and when you earn New Zealand Units (NZUs or units). It also determines how and when you need to pay units to the government. This is also known as "surrendering" units.
Earning units under stock change accounting
With stock change accounting, you account for short-term changes to the carbon in your forest land. The carbon will increase as your forest grows and decrease when it is cleared.
You must account for carbon in your forest at specific times. This is done by submitting an emissions return to us. There are specific times when you must do this.
Every time you submit an emissions return, you will either:
- earn units if the amount of carbon in the forest has increased, or
- need to pay units if the amount of carbon in the forest has decreased.
Your units are held in a holding account in the New Zealand Emissions Trading Register (NZETR).
Accounting for carbon left on the land after clearing
When a forest is cleared, not all the carbon is removed straight away. Some of it remains on the forest land, in the form of woody debris. This decays over 10 years and continues to emit carbon during that time. This is known as "residual carbon".
With stock change accounting, you must account for residual carbon after clearing forest. In any emissions return that you submit within 10 years following clearance, you must include this in your calculations. After you harvest and replant, the emissions from residual carbon may be more than the carbon increase from the new growth. You won’t earn units for the new growth until it overtakes the residual carbon emissions.