Proposed limits to restrict farm-to-forest conversions

The proposed bill lets you register up to 25% of LUC class 1 to 6 land on each farm as exotic forest in the ETS. The 25% allowance will be calculated as a quarter of all LUC class 1 to 6 land within a farm boundary.

A farm boundary is defined by what’s in the record of title. If a farm has more than one record of title, the titles must be adjacent and owned by the same person. The farm boundary will be defined as the outer boundary of the combined adjacent records of title.

A record of title can only be used for one 25% allowance calculation. When any land is used as part of a 25% allowance calculation, the regulator will attach a notice to the title.

You will not have to register your full 25% allowance all at once, as long as there are no changes to who owns the land or to the farm’s boundaries.

Under the bill, an additional 15,000 hectares of LUC class 6 farmland can be converted to exotic forest and registered in the ETS each year nationally. We will allocate the right to register this land by title through a yearly ballot and permit system.

The proposed bill reserves some hectares for smaller applications to register exotic forest on LUC class 6 land. The size of the reserve, and the definition of a small application, will be set in regulations. The regulations are being developed and we expect them to be in place by October.

How the ballot will work

If you enter the ballot and are successful, you will get a permit allowing you to apply to register the permitted amount of LUC class 6 farmland.

The permit will be valid until 31 December of the third year after it was issued. We can extend permits for a further 3 years if adverse weather or similar circumstances stop you from registering before the permit expires.

Permits for LUC class 6 land can be in addition to the 25% allowance per farm. This means you could:

• register 25% of LUC 1 to 6 class land on a farm, then seek a permit through the LUC class 6 ballot for the opportunity to register more land, or
• enter the ballot for LUC class 6 land and register the 25% allowance later.

More details on how the ballot works will be set out in the regulations and operational guidance.

We expect the first ballot to be in mid-2026.

The proposed bill includes temporary exemptions for people who began the investment process of converting farmland to exotic forestry before the changes were announced on 4 December 2024. These will be called transitional exemptions.

To be eligible, you will need:

• evidence that you made a qualifying forestry investment between 1 January 2021 and 4 December 2024
• to submit a valid and complete application to register in the ETS by 31 December 2027.

The proposed Bill also includes case-by-case transitional exemptions:

Climate Change Response (Emissions Trading Scheme—Forestry Conversion) Amendment Bill – NZ Legislation 

Evidence for a qualifying forestry investment

A qualifying forestry investment means any of the following:

• a registered lease or a registered forestry right, or an agreement to obtain a lease or a forestry right
• a conditional or unconditional sale and purchase agreement for land
• an emissions ruling under section 107 that land is eligible to be post-1989 forest land has been applied for or has been made by the EPA
• in relation to the establishment of a forest:
  • a resource consent has been applied for or has been granted by a local authority under the Resource Management Act 1991
  • a permitted activity notice has been given by a local authority under the Resource Management Act 1991
• investment in preparation for afforestation has been made, for example ordering seedlings or undertaking land preparation for forestry
• a recognised local or central government grant to afforest land has been received
• a third party has been contracted to undertake due diligence for the purposes of:
  • afforesting land
  • purchasing land with the intent to afforest it.

These are the only investments that we will consider for a transitional exemption. The investment must relate to the LUC class 1 to 6 land you want to register in the ETS.

There is not a specific list of evidence that the regulator will accept as proof of a qualifying investment. This is to make sure there is flexibility for a range of investment situations. We intend to publish guidance on applying to register with a qualifying forestry exemption.

Land that is existing forest land before the restrictions come into effect will be exempt.

Read about what counts as "forest land" in the ETS

The restrictions will apply to land that has been used for farming purposes in the past 5 years. Farming purposes could be:

• arable
• horticultural
• pastoral land use
• a mix of the above.

If only part of a farm meets this definition, it will count as being used for farming purposes.

Land that is not used for farming purposes will be exempt. There is a specific definition of unfarmed land in the proposed bill.

The changes do not apply to LUC class 7 and 8 land.

• Highly or severely erosion prone land identified in a regional or district plan.
• Areas not on the national-scale LUC map.
• Specific types of Māori land.
• Crown-owned land available for afforestation.
• Offsetting land.