Carbon Credit Glossary - New Zealand Emissions Trading Scheme
Updated: Oct 10
Do you know your NZUs from your FMA? Or the difference between the ETS and the ETR?
If you’re researching carbon credits in New Zealand and feel like you’re drowning in acronyms, we want to help out. In this post we've compiled a list of the key terms associated with carbon credits and the Emissions Trading Scheme and tried to offer some useful definitions.
If we’ve missed any, please let us know in the comments below so we can add to this resource and make it as useful as possible for other landholders across Aotearoa.
Before we get stuck in...
There’s a reason that a growing number of Kiwi landholders use CarbonCrop to register their land for carbon credits. We specialise in this neck of the woods, so why not let us take the admin and uncertainty off your plate?
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If you or your family owns land, we can assess whether you're eligible for carbon credits.
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If you have any questions, we have an awesome team of carbon analysts who will be happy to give you a call. If you choose to join the ETS we can register your forest on your behalf.
Here's our list of key terms, in alphabetical order.
AGS - Afforestation Grant Scheme
MPI created the Afforestation Grant Scheme to assist with the establishment of 15,000 hectares of forest between 2015 and 2020. During this time, forests between 5 and 300 hectares were granted $1300 per hectare for successful forest planting. AGS goals included: increasing stored carbon, improving water quality, reducing soil erosion, supporting biodiversity, and enhancing productivity and economic development. The One Billion Trees programme replaced the Afforestation Grant Scheme. Note: If you used the AGS or other grants to fund your forest, you may have to wait for 10 years before you’re entitled to register for carbon credits under the Emissions Trading Scheme (ETS). In some cases landholders can repay grants to regain the ability to claim credits earlier.
Averaging accounting is a new method of accounting for carbon credits in the NZ Emissions Trading Scheme. Averaging has been introduced by the Ministry for Primary Industries (MPI) to make the ETS simpler and more attractive for landowners who are considering registering forest that is intended to be harvested.
Under Averaging, the landholder receives carbon credits on the first rotation as the forest grows, but only up to the equivalent of the long-term average level of carbon that remains onsite across multiple rotations. Note that not all forest will be eligible for Averaging; in the case of pines for example, your production forest must be first-rotation and younger than 16 years old (on average) at the time of registration. See our blog for more info.
CAA - Carbon Accounting Area
When land is registered in the ETS, it must be segmented into different Carbon Accounting Areas or CAAs. The carbon stock within these areas is monitored over time, and the changes within each CAA dictate whether carbon credits (NZUs) are awarded or surrendered. A participant can have an unlimited number of CAAs but each one must be at least 1 hectare in size.
CAR - Carbon Accounting Record
Each participant in the ETS has a Carbon Accounting Record held by MPI which documents the changes in carbon stock and the corresponding issuance of units for each CAA, according to voluntary or mandatory emission returns.
The ability of a ‘system’ (i.e. tree or forest), through photosynthesis, to remove and store atmospheric carbon dioxide is known as carbon sequestration. Forests sequester carbon at different rates, according to variables such as tree species, terrain and climate. This is why some forests earn more carbon credits than others.
For systems that have the ability to store and release carbon, ‘carbon stock’ refers to the amount of carbon that it contains. In the context of the ETS, carbon stock refers to carbon that has been sequestered from the atmosphere and is now stored in the living biomass of the tree (including the stem wood, bark, woody debris, stumps, roots, branches and leaves).
CCRA - Climate Change Response Act 2002
The Climate Change Response Act was passed by the New Zealand Government in 2002, and provides a legal framework focused on New Zealand's contribution to mitigating climate change through upholding the commitments of the UNFCC and the Kyoto Protocol.
CCRA - Climate Change Response (Zero Carbon) Amendment 2019
The Zero Carbon Amendment of 2019 was established to help international efforts limit warming to 1.5 degrees celsius under the Paris Climate Agreement (2015) and to help New Zealand adapt to the adverse impacts of climate change.
COP - Conference of the Parties
The prefix ‘COP-’ stands for ‘Conference of the Parties’ at the United Nations Climate Change Conference (UNFCCC). ‘The Parties’ are the 197 nations that agreed to a new environmental pact, the United Nations Framework Convention on Climate Change, in 1992.
In 2021, the COP26 Conference was held in Glasgow, Scotland. COP27 is set to take place in Cairo, Egypt, in November 2022.
COP21 - 21st Conference of the Parties
The landmark Paris Agreement was negotiated at COP21, the 21st conference of the parties. Signed in Paris in 2015, The Paris Agreement is a legally-binding treaty which aims to limit global warming to below 2 degrees celsius (ideally 1.5 degrees celsius), compared to pre-industrial levels.
ETR - Emissions Trading Register
The Emissions Trading Register is the national registry responsible for holding NZU (carbon credits) within the Emissions Trading Scheme. To own or trade NZUs, people and businesses must have an account within the ETR. If you register through CarbonCrop, we will get you set up on the ETR and administer your holding account as your authorised representative. Note: If you register through CarbonCrop, the holding account is still entirely yours, in your name, and you have the sole rights to all units within the account.
ETS - Emissions Trading Scheme
The Emissions Trading Scheme (ETS) was developed to reduce greenhouse gas emissions in response to New Zealand’s climate obligations under the Kyoto Protocol. The ETS is a market-based approach which quantifies and prices emissions. Businesses that emit carbon into the atmosphere must acquire and surrender one NZU for every tonne of carbon dioxide emissions (or greenhouse gas equivalent emissions).
Emitters can buy NZUs from other participants who are awarded NZUs for removing carbon from the atmosphere. In accordance with climate reduction targets, the Government reduces the number of units which are available over time. This limits the amount of NZUs available, thereby increasing the price and incentivising businesses to reduce their emissions.
Simply put, exotic tree species do not naturally originate in this country - i.e. radiata pine is not native to New Zealand. In the context of the ETS, exotic trees are split into the following categories: Pinus Radiata, Douglas Fir, Other Exotic Hardwoods and Other Exotic Softwoods.
FMA - Field Measurement Approach
The Field Measurement Approach (FMA) is a method of forest sampling that involves establishing measurement plots in the forest at predetermined locations to provide more accurate and site-specific forest carbon stock level estimations. If you register more than 100 hectares of forest under the ETS, you need to use the Field Measurement Approach (FMA) to calculate the carbon stock of your registered forest.
If you register through CarbonCrop we’ll arrange FMA for you. Note that if a landholder registers under 100 hectares of forest in total, the carbon stock is determined by the default ETS lookup tables instead of FMA, so does not require the establishment of measurement plots.
FPO - Fixed Price Option
The Fixed Price Option is a mechanism within the ETS that allows participants to pay a fixed price instead of surrendering one NZU. The FPO price is $25/unit for emissions/removals that occurred in 2019 or earlier, and $35/unit for emissions/removals in the 2020 calendar year.
The Fixed Price Option is not available for emissions/removals in 2021 or beyond.
The New Zealand Emissions Trading Scheme uses hectares when calculating land area. One hectare represents 10,000 square metres (100m x 100m). If you’re more familiar with the imperial system, one hectare equates to 2.5 acres. Here’s a handy online converter. The minimum land area which can be registered for carbon credits is one hectare (1 ha).
He Waka Eke Noa
He Waka Eke Noa is a Primary Sector Climate Action Partnership that aims to reduce greenhouse gas emissions across the sector. The programme encourages farmers and growers to understand, actively manage and reduce their on-site emissions through various tools and information. Additionally, this programme helps them to understand their potential current on-farm sequestration, and help with their adaptation to and enhancement of their resilience against climate change. At the time of writing, He Waka Eke Noa is actively consulting on the preferred method of accounting for agricultural emissions. Under the first option, farmers will pay for their net emissions at the farm level. Under option two, emissions would be calculated at the processor level, based on the quantity of product received from farms.
In the context of the ETS, indigenous forest is a category of forest composed of tree species which are native to Aotearoa. Kanuka is an example of a tree which is indigenous to New Zealand.
The Kyoto Protocol, adopted in 1997 in Kyoto Japan, embodies and facilitates the purpose of the UNFCC to reduce greenhouse gas concentrations in the atmosphere. It does this by acknowledging that climate change exists and that it is being driven primarily by anthropogenic action. It also recognises that some economies produce substantially more greenhouse gases than others, and places greater responsibility on more economically developed countries, committing them to limit their emissions through targets, reporting, mitigation strategies and policy implementation. New Zealand’s commitment to the Kyoto Protocol initiated the establishment of the Emissions Trading Scheme.
Mandatory Emissions Return Period
The ETS is divided into Mandatory Emissions Return Periods which typically run for 5 years. ETS participants must account for changes in carbon stock over each Period. The current Mandatory Emissions Return Period began in January 2018 and will end December 2022. The next one will run from the start of 2023 to the end of 2025. Participants who register in the ETS can claim NZU’s for carbon sequestration from the start of the current Period.
We've just come to the end of the current return period, landholders with existing unregistered forest risk missing out on the credits from 2018-2022 if their submissions weren't in before the April 2022 deadline. You can find out more in our blog post: 2022 ETS Deadline.
MER - Mandatory Emissions Return
A Mandatory Emissions Return (MER) is a declaration submitted on behalf of the ETS participant which reports the carbon stock change during the previous Mandatory Emissions Return Period. Based on the MER, carbon credits will be issued to the participant if the carbon stock has increased and will be required to be surrendered if carbon stock has decreased. MERs are submitted in the six months following a Mandatory Emissions Return Period (i.e. between January and June)
MPI - Ministry for Primary Industries
The Ministry for Primary Industries (MPI) is responsible for regulating and managing several industries across New Zealand including: biosecurity, forestry, agricultural, fisheries, food safety and animal welfare. MPI administers the ETS via Te Uru Rakau - The New Zealand Forest Service.
NZU - New Zealand Unit
ETS carbon credits are called New Zealand Units. They are often referred to as NZUs. When you register forest under the ETS in Aotearoa, you claim NZUs for increases in the carbon stock of your forest. One NZU corresponds to one metric tonne of carbon dioxide or carbon dioxide equivalent (carbon dioxide equivalent is the amount of emissions from another greenhouse gas which has the same global warming potential as one metric tonne of carbon dioxide). We get asked loads of questions about carbon credits so will post up more information about NZUs very soon.
OBT - One Billion Trees
The One Billion Trees Programme aims to plant 1 billion trees by 2028. The Programme awards direct grants to individuals or organisations who undertake successful planting and/or forest regeneration. Our understanding is that the OBT programme aims to support the planting of indigenous forest as a means to enhance biodiversity, and favours incorporating trees into existing land uses (thereby avoiding large-scale exotic plantation forestry).
Paris Climate Agreement - Paris Accord
The Paris Climate Agreement, also known as the Paris Climate Accord, is a global climate change treaty which was signed by 196 parties at COP21 (United Nations climate Change Conference) in Paris 2015. The agreement outlines the urgent need to become net-zero by mid-way through the 21st century to avoid the most serious impacts of climate change. To achieve this, global warming needs to be limited to 1.5 degrees (ideally) through the reduction of greenhouse gases. Each country is required to regularly report on its emission profiles and set decreasing emission targets.
Permanent Accounting is one of the two carbon accounting methods being introduced for new forest registrations beginning in 2023, to replace the existing Stock Change methodology. Permanent Account is essentially identical to Stock Change accounting, in that carbon sequestration is recognised and awarded for all ongoing sequestration. The distinction is around the required term of forest registration and limitations on land use change, where forest registered under the permanent forest scheme must be kept in forest for at least 50 years. See our blog for more info.
Post-1989 forest is forest that was first established after 31st December 1989. Practically, this categorisation is used when determining eligibility for ETS registration. Forest established after 1989 is eligible to earn carbon credits under the ETS if it meets additional specific requirements; such as measuring a minimum of 1 hectare in size and 30% canopy cover. For additional information, check out our post: What is Pre-1990 vs Post-1989 forest land?
Pre-1990 forest land is forest established before 1st January 1990. It isn’t eligible to register under the ETS, regardless of its size. CarbonCrop is developing an alternative, non-ETS credit for regenerating native forest which cannot be registered under the ETS. To go deeper, read our post: What is Pre-1990 vs Post-1989 forest land?
Stock Change accounting is the traditional method of carbon accounting for forestry in the ETS. It is currently being phased out. Averaging and Permanent accounting will be the only available options for areas registered from 2023 onwards. However, it is still relevant for participants currently registered under this method. See our blog for more info.
Te Uru Rakau - The New Zealand Forest Service
Te Uru Rakau is a subsidiary agency within the Ministry for Primary Industries tasked with regulating the forestry industry, developing forestry policy, managing forestry programmes like the Emissions Trading Scheme, promoting sustainable forestry in New Zealand and overseas, and managing forestry funding, grants and information services.
UNFCC - United Nations Framework Convention on Climate Change
The UNFCC is a United Nations body established in 1994 which supports international efforts against climate change. This is primarily through an international treaty which aims for the stabilisation of greenhouse gases in the atmosphere.
UNSDG - United Nations Sustainable Development Goals
The Sustainable Development Goals (SDGs) sit at the core of the 2030 Agenda for Sustainable Development (signed in 2015 by all United Nations members) which is a plan for a more sustainable, peaceful and prosperous future. The 17 SDGs recognise the dependency of human wellbeing on the state of the environment. Accordingly, these goals range from quality of education and gender inequality to climate action and protecting marine life.
VER - Voluntary Emissions Return
A Voluntary Emissions Return is a declaration submitted on behalf of the ETS participant which reports the carbon stock change during a given time period. Based on the Voluntary Emissions Return, carbon credits will be issued to the participant if the carbon stock has increased and will be required to be surrendered if carbon stock has decreased. Voluntary Returns can be submitted once per year to claim for carbon sequestration before the end of a Mandatory Emissions Return Period. At CarbonCrop we submit VERs annually on behalf of our registered landholders.
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