The Emissions Trading Scheme (ETS) is the New Zealand Government's key tool for meeting international and domestic climate change targets. The scheme aims to encourage New Zealanders to grow trees to offset and reduce greenhouse gas emissions.
Through the ETS, carbon sequestration from forestry planted on eligable land can add a significant income stream to traditional forestry as more and more industries are required to offset their emissions by purchasing carbon credits.
The NZ Government has decided to disband He Waka Eke Noa and remove agriculture from the NZ Emissions Trading Scheme, replacing it with a pastoral sector group focused on biogenic methane reduction. The future of accounting for agricultural emissions remains uncertain, though planting of woodlots and regeneration of native forest enable farmers to act on opportunities which may arise going forward.
Although the ETS might seem like a straightforward opportunity to increase your forestry returns or offset emissions, there are a number of aspects that need to be understood and managed to participate in the ETS.
Morice can assist in a variety of areas when it comes to the ETS including:
Determination of land status in relation to land cover at key dates in history. This is an important starting point when considering joining the ETS. Included is a GIS mapping exercise of both forestry and greenfields land on your property with consideration of ETS mapping standards and, additionally, the NES for commercial forestry. Further economic feasibility analysis can follow an eligibility assessment.
Eligible forest land can be registered to the ETS which enables you to claim for your forest’s sequestration of carbon over time. A Holding Account with the Environmental Protection Authority will need to be established which matches the registration entity.
Emissions Returns are where you declare your carbon sequestration for a given period to MPI, who subsequently issue this equivalent sum of NZU’s to your Holding Account (one NZU is equivalent to one tonne of carbon dioxide equivalent). These are mandatory to be filed at the end of every commitment period (typically every 5 years). Provisional emissions returns can be filed annually. Whether final or provisional, these can only be filed in the first 6 months of any year.
Under the stock change accounting approach, surrender of units may be required upon forest harvest. The carbon surrender equation can become complex based on the enduring and residual carbon, and the age of the trees. Morice can help you understand your carbon profile so you can sell to a safe level and know your liabilities well in advance.
As well as having your land mapped and analysed for forestry suitability it is also highly recommended you have a feasibility report produced to determine the business case. This will put numbers around: preparation and planting costs, ongoing maintenance, carbon cash flows, harvest / yield returns, and other economic factors that contribute to the overall investment.
Morice can secure a sale of your NZU’s at a fair market rate, turning NZU’s into dollars in your bank account. We do not provide financial advice in terms of NZU price forecasting and the best time to sell.
There are many intricacies which come with remaining compliant as a participant in the ETS. Morice helps manage these and provide advice to maximise your forests potential.
Call Morice to get all your bases covered when it comes to the ETS and your farm or forest.
