Updates and changes to the ETS

Find out about changes to the Emissions Trading Scheme (ETS) for forestry, and how these will make the ETS work better for forest owners.

Updates

1 March 2021 – Consultation on additional proposed amendments to the ETS for Forestry

Consultation has begun on proposed amendments to the regulations relating to the ETS for Forestry. These amendments include the rules and settings for averaging accounting, and technical amendments to simplify the ETS and let us implement new policies. The consultation closes on 9 April 2021.

16 December 2020 – Changes to the ETS from 1 January 2021

The Climate Change Response (Emissions Trading Reform) Amendment Act 2020 came into force in June 2020. Some new provisions under the Act come into effect on 1 January 2021.

This includes a new penalty regime covering:

  • failure to surrender or repay units on time
  • errors in emissions returns
  • failing to submit a return
  • payment of penalties
  • entitlements while an obligation is outstanding.

There are new rules for transferring leases or rights for land registered in the ETS.

The fixed price option is also being removed, so participants must meet their surrender obligations with units.


Changes to forestry in the ETS

On Monday 22 June the Emissions Trading Reform Bill received royal assent. This means it has become law, and the Climate Change Response Act will be updated to reflect the new provisions as they come into effect.

Most of the new provisions that relate to forestry will come into effect on 1 January 2023. However, some operational changes and wider ETS provisions came into effect on 23 June 2020 and 1 January 2021.

You can read the Climate Change Response (Emissions Trading Reform) Amendment Act 2020 on the New Zealand Legislation website.

Climate Change Response (Emissions Trading Reform) Amendment Act 2020 – NZ Legislation

You can also access the current ETS provisions on the New Zealand Legislation website.

Climate Change Response Act 2002 – NZ Legislation

Most of the changes to forestry that will start on 1 January 2023 require amendments to the Climate Change (Forestry Sector) Regulations 2008 to make them work in practice. Final policy recommendations on the ETS Forestry Regulations are expected in mid-2021.

If you have any questions about the upcoming changes to forestry in the Climate Change Response Act, email etsforestrychanges@mpi.govt.nz

Changes to forestry that started in June 2020

Some minor changes to forestry in the ETS started on 23 June 2020.

You have more time to surrender or repay units

When the Environmental Protection Authority issues a surrender notice you have 60 working days to surrender or repay units. The surrender notice describes your obligations and includes the due date.

You must notify "interested parties" when you join or leave the ETS, and add or remove land

You must notify any "interested parties" if you:

  • apply to join or leave the ETS
  • add or remove land from the ETS.

If you are the landowner you must notify any person with a registered forestry right or lease over the land.

If you are the holder of a registered forestry right or lease you must notify the landowner. If the Crown has an interest in the land you also need to notify the Crown.

It's now easier to ask for an emissions ruling

If you want to know if something will have ETS implications you can ask the Te Uru Rākau to make an emissions ruling. For example, before you clear some trees you can ask us if this counts as deforesting pre-1990 forest land.

The process for emissions ruling has changed. It is now easier to find out if land will be eligible before you apply to register in the ETS.

The timing for mandatory emissions return periods is being re-aligned

Emissions return periods usually last for 5 years. The current mandatory emissions return period runs from January 2018 to December 2022.

Reporting to the Paris Agreement also has a 5-year cycle, but this is from January 2026 to December 2030, then 2031 to 2035, and so on. To align our reporting with the Paris Agreement, the next mandatory emissions return period will run for 3 years from January 2023 to December 2025.

From January 2026, mandatory emissions return periods will return to a 5-year cycle.

Transmissions of interest are changing for executors or administrators of an estate

The transmission of interest process is changing for executors and administrators dealing with the ETS obligations of a participant who has died.

If you administer more than one estate you must treat them separately. This means that outstanding liabilities from one estate will not impact another. You will not become an FMA participant if you are administering estates with a combined area exceeding 100 hectares.

Executors and administrators do not need to submit an emissions return when they come into possession of the land. An emissions return is only required when the land is passed on to the successors.

Changes to forestry that started in January 2021

Further improvements to the ETS started on 1 January 2021.

You can decide whether to transfer ETS participation when you grant a forestry right or lease

It is now up to you whether you transfer your ETS participation to the other person (a "transmission of interest") when you grant a forestry right or lease over your forest. You will need to opt in to a transfer of ETS participation – if you do not opt in, participation will not be transferred.

This change does not affect the status of current forestry rights or leases. For these, participation will return to the landowner when the lease or right is finished.

Buying, selling, or transferring ETS forest land

A new definition of "re-establishment" makes it easier to include supplementary planting

Re-establishment of forest land must still happen primarily through natural regeneration of indigenous forest species. However, it can now include some supplementary planting to help this process. 

Upcoming changes to forestry in January 2023

Major changes to the ETS will take effect on 1 January 2023. The detailed rules and settings for most of these changes will be set out in amendments to the forestry sector regulations. These are being developed now.

New carbon accounting approach called "averaging accounting"

All new registrations from 1 January 2023 will use averaging account, unless the forest is registered as a permanent forest. If you register between 1 January 2019 and 31 December 2022 you will be able to switch to averaging accounting in 2023, or you can stay in stock change accounting.

Averaging accounting

New activity for permanent forests in the ETS

The permanent forestry activity will replace the Permanent Forest Sink Initiative (PFSI). It will be available for post-1989 forest land from 1 January 2023 for forests that will not be clear-felled for at least 50 years.

Permanent forests in the ETS

New exemption from carbon liabilities for temporary adverse events

If all or part of a registered post-1989 forest is cleared by a temporary adverse event such as a fire, the owner will be able to apply for an exemption from deforestation emissions. Under this exemption, the affected part of the forest will not earn any more units until it reaches the carbon stock it was at before the adverse event.

New ability to offset deforestation liabilities

When a post-1989 forest under averaging accounting is deforested, the owner will be able to establish a forest elsewhere to offset their deforestation liability.

Changes to wider ETS settings that affect forestry

New penalty regime from 1 January 2021

The Amendment Act introduced new provisions which change the penalties that apply to some ETS obligations from 1 January 2021. Obligations and activities where compliance action applies before 1 January 2021 will still use the previous legislation in relation to offences, penalties, compliance and enforcement.

This includes a new penalty regime covering:

  • failure to surrender or repay units on time
  • errors in emissions returns
  • failing to submit a return
  • payment of penalties
  • entitlements while an obligation is outstanding.

Compliance in the ETS – EPA

New price controls in the ETS

The Amendment Act introduced the ability for the Government to hold auctions of New Zealand Units to align the supply of units in the ETS with New Zealand’s emission reduction targets. The first auction was on 17 March 2021. The Amendment Act also introduced new price controls alongside auctioning.

Regulations on auctions, limits and price control settings for the NZ ETS – MfE

Keep informed with the forestry bulletin

People with an interest in forestry can stay informed by subscribing to the Sustainable forestry bulletin. Topics include forestry in the ETS and carbon forestry.

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