2022 ETS deadline: Over $1 billion worth of carbon credits at risk for NZ farmers
Updated: Oct 10, 2022
The Mandatory Emissions Return Period 2018-2022 will soon close - and any unclaimed carbon credits will be lost.
Thinking about registering your existing forest for carbon credits? If so, you need to act soon or you could lose thousands of dollars worth of credits. This sounds dramatic - and, frankly it is! But you’re not alone.
In this post we’ll explain everything landholders need to know about the 2022 deadline and how to avoid missing out on the last five years of carbon credits.
2.8 million hectares of native bush could be eligible for carbon credits
Research by the Ministry from Primary Industries (MPI) in September 2021 concluded that 380,000 hectares of eligible forest land across Aotearoa isn’t registered for the Emissions Trading Scheme (ETS). The majority of these forests are exotic plantations, yet if only 10% of them were suitable to retain as permanent forest, we estimate that the carbon credits from the last five years would total around $406 million if registered in 2022.* (You can find more detail on our calculations at the end of this post.)
Importantly, this figure likely underestimates the opportunities for native regeneration, which tends to be classified as “woody vegetation” rather than forest.
This 2018 joint study by the Auckland University and the University of Canterbury (commissioned by Beef+Lamb) found an estimated 2.8 million hectares of indigenous vegetation on sheep and beef farms alone.
If only the most suitable 10% of this land (280,000 ha) was successfully registered in the ETS by the end of 2022, landholders would be able to claim credits for their last five years of carbon sequestration. We estimate that these credits would be worth $958 million.**
Not only would this recognise farmers for the good work they’re doing in regenerating forest and restoring land, but it would increase the long term protections for this vital natural resource.
Of course it isn’t just beef and sheep farms with eligible areas of native forest. At CarbonCrop we register land of all shapes and sizes, from deer farms to manuka forests, retired forestry plots to environmental restoration projects. Lifestyle blocks too; anyone with at least one hectare of forest can be eligible to claim credits. Just imagine how many hectares of regenerating native forest are currently unregistered across New Zealand - and how many credits are at risk.
You get the point. It’s a lot of credits. And all of these historical carbon carbon credits will be lost forever if not registered before the 2022 deadline.
Now let’s get into what this means for individual landholders - and what you need to do to start claiming carbon credits for your forest.
Are your trees eligible for credits? Find out.
At CarbonCrop we offer a free land assessment to landholders across Aotearoa.
The current Emissions Return Period closes at the end of 2022
New Zealand’s Emissions Trading Scheme (ETS) is broken into ‘Mandatory Emissions Return Periods’, which align with international carbon emissions reporting targets.
When you successfully register a new area of forest under the ETS you’re only entitled to claim carbon credits for carbon sequestered within the current return period. Once a new period starts you’re unable to access carbon credits from the previous return period.
The current Emissions Return Period runs from January 1st 2018 to December 31st 2022. Once the next period begins on January 1st 2023, newly registered land will only be entitled to credits from 2023 onwards.
Don’t miss out on carbon credits from 2018 to 2022
Landholders who successfully register existing forest under the ETS before the end of 2022 will be able to claim backdated credits for the last five years.
Provided your forest meets the ETS eligibility criteria (read more about these requirements), this means you will be able to claim carbon credits for carbon sequestered in 2018, 2019, 2020, 2021 and 2022! You’ll also keep earning into 2023 and beyond. For most landholders with existing forest this equates to a chunky upfront payment of credits.
Imagine you have 30ha of regenerating native forest on your property. If the forest was established in 2005, it would have sequestered about 62.1 tonnes per ha over the 2018-2022 period. This equates to around 1,863 carbon credits (NZU), currently worth $134,136 in New Zealand Dollars.
Alternatively, 10ha of eucalypts, planted in 2005, would have sequestered about 132 tonnes per hectare over the 2018-2022 period. If you decided to retire them as permanent forest rather than harvest them, this would equate to 1,320 carbon credits (NZU) - worth around $95,040 if sold at today’s carbon price.
Note: The above examples are based on selling the carbon credits at $72, the NZ market rate at the time of writing (January 2022). To be crystal clear, the landholder receives carbon credits rather than NZ dollars, so you will need to sell the credits to monetise them. If you register through CarbonCrop, we can help you with this.
Why you can’t wait until December 2022 to submit your ETS application
If you’re reading this is in early 2022, December may sound like a long way off. But to get registered by the end of December, you need to start the process now.
First you need to find out if your forest is eligible. The easiest way to do this is by requesting a free land assessment.
Once you have identified eligible areas of forest, you need to compile evidence and prepare an application for ETS registration. CarbonCrop can manage and submit the application on your behalf; this typically takes a few weeks.
Once submitted, Te Uru Rākau - The New Zealand Forest Service will need to review and accept your application. In our experience this often takes 6-9 months.
You’ve got that right: It typically takes at least 7-10 months to register forest in the ETS!
At CarbonCrop we’re building whizzy software to speed up the process and have hired several extra team members in the last few months to help manage the rising demand from landholders seeking ETS registration support. We’re committed to processing as many high quality applications as we possibly can - but we'll need to work together to beat the deadline.
If you register in 2022, when will you receive the carbon credits for the Emissions Return Period 2018-2022?
Owners of registered ETS forests are obliged to submit emissions returns to report the change in carbon stock over a certain time period. There are two main types of return:
Mandatory Emissions Returns (MER). These happen once a period - typically every five years. We can submit them as your authorised representative.
Voluntary Emissions Returns (VER), also known as Annual Emissions Returns. At CarbonCrop we submit these every year on behalf of registered landholders to claim the maximum number of credits.
Just to complicate things further, once registered you can only claim credits between January and June, so if you register forest in 2022, the best-case scenario is that you’ll receive the backdated carbon credits in January 2023.
While this may all sound rather complicated, please don’t be deterred - CarbonCrop handles the paperwork and admin on your behalf, and can help you sell your credits too.
Goodbye Stock Change Accounting
A final reason to register before the end of the year: ETS policy changes.
The original method of carbon accounting in the ETS, ‘Stock Change’ accounting, will not be available to forests registered from 2023 onwards. It will be replaced by ‘Averaging’ and ‘Permanent’ accounting instead. For some forest owners, especially plantation forestry owners, this is a game changer.
The key thing to know: If you register ahead of the deadline, you can still change accounting methods in future, but once you miss the deadline there’s no going back. We would recommend early registration to keep your options open.
See our companion blog post which focuses on Stock Change vs Averaging Accounting.
Choosing to register forest in the ETS isn’t a decision to take lightly, but if you do want to go for it, time is of the essence.
We hope this post has helped you understand the importance of the 2022 deadline. Please share this post to help us to spread the word - and let your neighbours know.
First step: Find out your eligibility
Submit your land for a free carbon land assessment.
You'll learn whether your forest meets the ETS requirements and what your carbon credits would be worth. It takes a few minutes to apply.
Here’s how we calculated our carbon estimates at the top of this post.
*380,000 hectares of eligible forest land are not currently registered for the Emissions Trading Scheme (ETS). 10% of 380,000 ha is 38,000 ha. We assumed an average establishment date of 2000 and based our calculations on exotic tree species, using the carbon sequestration rates contained in the ETS lookup tables. We averaged their sequestration across a range of exotic species to estimate that credits from the last five years could total $406 million if registered in 2022, based on a carbon price of $72. This equates to NZ $10,686 at risk per hectare of exotic forest.
**10% of 2.8 million hectares of native vegetation is 280,000 ha. We assumed a forest establishment date of 2010 and calculated sequestration using the ETS lookup tables for indigenous forest. At a carbon price of $72 per NZU, we estimate that credits from 2018-2022 could be worth around $958 million. This equates to $3,420 at risk per hectare of regenerating native forest.