In 2024 the Government announced a move to limit Emission Trading Scheme (ETS) registrations of farmland converted to exotic forestry (non-indigenous forest species)^[1]. The aim was to preserve high and medium versatility farmland for agriculture. The Climate Change Response (Emissions Trading Scheme—Forestry Conversion) Amendment Bill (Bill) is now here to do that.

The Bill allows for a continuation of ETS forestry registrations for new planting on less versatile land with the intention of supporting farmers' income while still aiming to meet emissions reduction targets. The Bill is drafted to come into effect on 31 October 2025 and will not apply to applications for ETS registration received prior to that or to applications received after that date relating to land with qualifying forestry investments (see further below).

The previously announced temporary restrictions^[2] on exotic forestry registrations for Land Use Classification (LUC) 1-5 appear to have been dropped for a permanent regime.

The key proposals in the Bill, as previously indicated, are set out below:

• Farmland eligibility for ETS registration will be based on land use capability (LUC) class, and the Bill will limit the registration of exotic forestry on high- to medium-versatility land (LUC class 1-6) with certain exceptions.
• Exotic forestry ETS registration on medium-versatility land (LUC class 6) will be limited to a national total of 15,000 hectares ETS registration annually (or as prescribed by regulations) which will be allocated through a ballot system.
• Exotic forestry ETS registrations on low-versatility farmland (LUC class 7 and 8) will be able to continue without restriction.
• The Bill does not restrict registrations of existing forest land, new indigenous forestry (forest species that naturally occur in New Zealand), and exotic forestry on land that is not actively farmed. 
• Up to 25% of new planting on LUC class 1-6 land on an individual farm (which can include more than one record or title, if adjacent and owned by the same person) will be able to be registered in the ETS as exotic forest.
• Exemptions will apply to land with high erosion risk, Crown-owned land for afforestation through partnership with the private sector (excluding productive farmland by Landcorp Farming Limited (Pāmu) or land administered under the Crown Pastoral Land Act 1998), and areas without national-scale LUC mapping (until mapped).
• Certain land is exempt from restrictions in order to comply with the Crown’s Treaty of Waitangi obligations. This includes land returned through Treaty settlements and land held under Te Ture Whenua Maori Act 1993.

The Bill clarifies that the 25% allowance for an individual farm is in addition to any LUC class 6 allocation awarded through the ballot (where applicable).

The December policy announcement noted landowners currently in the process of afforestation who can demonstrate an intent to afforest prior to 4 December 2024 would be exempt (for those afforestation registrations). 

To give effect to that, the Bill defines a qualifying forestry investment as an investment in forestry made between 1 January 2021 and 4 December 2024 and includes registered leases or forestry rights, agreements to obtain these rights, and sale and purchase agreements for land and other preparatory activities (like ordering seedlings or land preparation, receiving government grants for afforestation, and contracting third parties for due diligence related to afforestation). It also covers emission rulings confirming land is eligible to be post-1989 forest land made by the Environmental Protection Authority (EPA) or applied for during that period. 

Our view

The Bill proposes significant changes to eligibility for farmland to forestry conversions in the ETS. 

While it aims to preserve agricultural land in response to concerns from the agriculture sector, fundamentally it restricts landowner’s rights to determine how best to use their land and derive income from it, and the ballot system for medium-versatility land seems to be highly complex and will introduce uncertainty. The impact of the Bill on a farmer’s current options for making money from their property is in stark contrast to the principle in the Government’s Regulatory Standards Bill, that the law should not impair property without the consent of the landowner without, amongst other things, fair compensation. 

Time will tell whether the line has been drawn in the right place in terms of the protected land use categories and query whether LUC class 6 should have been left unrestricted given it is non-arable and often prone to erosion (which planting can protect against). These changes may also have a significant impact on New Zealand’s ability to meet its climate emission targets, as the planting of exotic trees is one of New Zealand’s few current primary tools for meeting its Paris Agreement emissions reduction commitments.

There are opportunities for landowners (both from a forestry and agricultural setting) to influence the Bill as it goes through the legislative process. Additionally, if the Bill passes, it’s likely that there will be challenges in the courts to decision-making that happens in respect of those who say they are in the process of afforestation or those whose property rights might otherwise be adversely impacted. 

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Special thanks to Leeroy Coleman Edmonds for his assistance in writing this article.