Permanent forests in the ETS

The Permanent Forest Sink Initiative (PFSI) will end on 1 January 2024. In 2023 a new activity called "permanent post-1989" forest will be introduced to the ETS to replace the PFSI. This is for forests that will not be clear-felled for at least 50 years.

The permanent post-1989 category is replacing the Permanent Forest Sink Initiative

The Permanent Forest Sink Initiative (PFSI) will end on 1 January 2024. In 2023, PFSI covenant holders will need to:

  • move into the new permanent post-1989 activity in the ETS
  • move into the post-1989 activity in the ETS under averaging accounting, or
  • leave the ETS and surrender all their units.

If a PFSI participant does not tell Te Uru Rākau what they want to do by 31 December 2023, their forest land will be moved into the new permanent post-1989 activity in the ETS.

PFSI participants should contact us to discuss the implications of this decision and get help with the transition. You can contact us at 0800 CLIMATE or by emailing pfsi@mpi.govt.nz

Permanent Forest Sink Initiative

Permanent post-1989 forest

On 1 January 2023 the "permanent post-1989 forest" category is being added to the ETS. This is for post-1989 forests that will not be clear-felled for at least 50 years after they are registered in the ETS.

Permanent forests will be on the stock change accounting approach. They will earn units for as long as the forest is in the ground and the carbon stock is increasing.

The units earned from the forest will be tagged in the register as coming from a permanent forest.

Stock change accounting in the ETS

What happens if a permanent forest is harvested?

Selective and small-coup harvesting is allowed

Limited harvesting will be allowed without penalty if at least 30% tree crown cover remains in each hectare of forest. You may need to account for the carbon loss from this harvesting. The forestry regulations will determine exactly how this will work.

If you clear-fell harvest or deforest within the 50-year period you will liable for a penalty

Clear-fell harvesting is defined as harvesting so that there is less than 30% tree crown cover in any hectare.

If you clear-fell harvest before the 50-year period ends you will:

  • need to surrender units for the emissions from the area which was clear-felled
  • be liable for a clear-fell penalty based on the value and volume of the timber removed (this will be set in the forestry regulations).

If you deforest (change land use) before the 50-year period ends you will:

  • need to surrender any unit balance for the area which was deforested
  • be liable for a deforestation penalty based on the carbon stock of the area being deforested and the current carbon price (this will be set in the forestry regulations).

These penalties will not apply if:

  • the harvesting or deforestation was beyond your control
  • you could not have been reasonably foreseen the harvesting or deforestation, and
  • you could not have reasonably taken steps to prevent the harvesting or deforestation.

Leaving within the 50-year period

Small areas of permanent forest can be removed from the ETS before the 50-year period ends but this can only be done with approval from the Minister of Climate Change. The Minister must be satisfied certain conditions are met.

You will need to surrender units for the area removed.

Options after the 50-year period expires

When the 50-year non-clear-fell period expires you have 3 options.

  • You can sign up for another 25 years and continue to earn units on the stock change approach. This choice will occur again every 25 years after that date.
  • You can transition to averaging accounting. You would need to surrender some of your units back down to the average age for your forest type, but you will be able to harvest as long as you replant.
  • You can remove the forest from the ETS, surrendering the unit balance for the area removed.
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