What carbon accounting areas are
When you apply to register in the ETS with post-1989 forest land, you will be asked to choose carbon accounting areas. Carbon accounting areas are a way you can divide your forest land into individual areas. It can be beneficial to do this for reporting purposes in the ETS.
You’ll decide how many carbon accounting areas you want. You can choose to have all the land in 1 carbon accounting area. Or, you can split the land into more than 1 carbon accounting area. You’ll also decide on the size, shape and location of these areas, within limits. We’ll explain this below.
If your application to register in the ETS is successful, we’ll confirm your carbon accounting areas. They will be recorded in our online ETS system for future transactions. You may have also heard people referring to these areas as “CAAs”.
Carbon accounting areas are not needed for transactions involving pre-1990 forest land.
What carbon accounting areas are used for
Carbon accounting areas are used in calculations when you submit emissions returns for this land. The carbon gains and losses are calculated for each carbon accounting area over time. This is reported in your emissions returns. You will receive or pay (surrender) New Zealand Units (NZUs or units) based on:
- the gains and losses in carbon for each carbon accounting area
- from 2023, the carbon accounting method that each carbon accounting area is registered under (stock change accounting or averaging accounting).
Changes coming in 2023 for carbon accounting areas
From 1 January 2023 onwards, you can choose whether a carbon accounting area in post-1989 forest land entering the ETS is:
- standard forestry
- permanent forestry.
If you registered and your post-1989 forest land entered the ETS before 1 January 2023, it will be considered standard forestry using stock change accounting unless:
- you choose to register some or all carbon accounting areas as permanent forestry after 31 December 2022 - permanent forestry also uses stock change accounting
- the land entered the ETS during 2019 and through to the end of 2022 - you will have a one-off opportunity to change the way you calculate the units you earn or must pay (surrender) for each area – by changing the carbon accounting method from stock change accounting to averaging accounting.
To switch from stock change accounting to averaging accounting, you must tell us before 30 June 2023. We’ll provide information about how to do this when the process is finalised.
All post-1989 forest land entering the ETS as standard forestry from 1 January 2023 onwards will use the averaging accounting method to calculate any units earned.
What to consider when choosing carbon accounting areas
When you apply to register in the ETS, you decide the shape, size and location of the carbon accounting areas in your land.
- You can have as many carbon accounting areas as you want.
- Each carbon accounting area must be at least 1 hectare.
There are different ways to choose your carbon accounting areas. You can:
- split an area of forest land into more than 1 carbon accounting area. For example, you may choose to do this if an area of forestry contains stands of different ages and species.
- group separate unconnected areas of forest land into 1 carbon accounting area. For example, you may choose to do this if these areas contain stands of trees of the same age and species. Each area must be at least 1 hectare.
- assign each area of forest to one carbon accounting area.
Your emissions returns will be easier to calculate if you choose carbon accounting areas containing:
- trees of the same age and species (and in the same region, if the forest is radiata pine)
- areas with the same forest management plan that you intend to carry out, for example, year of planting or harvesting, or same number of rotations.
Mapping carbon accounting areas
When you apply to add forest land into the ETS, you’ll be asked for a digital map, known as a “shapefile“. You must identify carbon accounting areas in that mapping.
There’s a particular way to map forest land in the ETS, and to supply this information to us.
Carbon accounting areas include a record and a liability cap
Every time you submit an emissions return, we keep a record for each carbon accounting area of:
- changes in the amount of carbon in the forest land
- the units earned and paid.
This record is known as the “carbon accounting record”. It means we know how many units were issued and paid (surrendered) over time for each carbon accounting area. This record must be kept for 20 years.
The carbon accounting record adds up to a cap of units for each carbon accounting area. This cap is the total number of units received for a carbon accounting area since the area began to earn units. The cap sets the maximum number of units you would have to surrender or repay for that carbon accounting area.
You may have to surrender units, for example, if you harvest or deforest the land. The cap means there’s a limit for how many units you would pay per carbon accounting area.
Note: This cap applies to the land in the carbon accounting area. This is particularly important when land in the ETS changes hands, for example when land in the ETS is sold, inherited, or when registered forestry rights or registered leases change.
Changes in carbon accounting areas and forest carbon measurements
After you have joined the ETS, you can choose to:
- add more eligible land into the ETS
- remove land from the ETS.
In general, if you hold 100 ha or more post-1989 forest land in the ETS, you must:
- ask MPI for a set of locations to measure across your forest land (sample plots)
- make measurements of the forest carbon at these locations
- send us the data so that we can create participant-specific tables for your forest land
- use these tables in the calculations when preparing emissions returns.
These tables ensure that the amount of carbon reported for larger areas of forest more accurately represents that forest land.
You may have a change in responsibilities for measuring carbon in your forest land if you:
- add more land and your total land in the ETS becomes 100 ha or more
- remove land and you have less than 100 ha remaining in the ETS
- remove land and the total land remaining in the ETS is more than 100 ha, but you have less than the minimum number left of locations to measure.