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Good practice Imported

New Zealand Emissions Trading Scheme — Forestry Removals (New Zealand)

New Zealand · Wellington · See the New Zealand profile · See the Wellington profile

Evidence: Observational / pre–post Top 32% 53/100 · Ask Evidence Copilot about this practice

New Zealand's ETS has included post-1989 forests since 2008; ~349,000 ha registered (2021) earn NZUs for carbon sequestration. In 2024, 11.5 M NZUs were issued for forest removals — the world's first ETS with symmetrical afforestation/deforestation incentives.

~349,000 ha
Post-1989 forest registered (December 2021)
~50 % of eligible area
Share of eligible forest area registered (2021)
>2,200 participants
Registered post-1989 forest participants (2016)
81 % of participants
Small landowners' share of participants (2016)
11.5 million NZUs
NZUs issued for forest removals (2024)
575-690 NZD million (at NZ$50-60/NZU)
Estimated annual payment value (2024)
15,584 ha
Native forest under Permanent Forest Sink Initiative (by 2022)

Details

Maturity
Established
Promoter
Ministry for Primary Industries (MPI) / New Zealand Government
Period
2008-present
Keywords
Native and plantation forest, carbon, climate, ETS

Context

The New Zealand Emissions Trading Scheme (NZ ETS) forestry component has operated since 1 January 2008, making it the first - and still only - emissions trading scheme globally designed with symmetrical incentives for forests. It is administered by the Ministry for Primary Industries (MPI) under the Climate Change Response Act 2002.

Objectives

Forest owners earn New Zealand Units (NZUs) for carbon sequestered in post-1989 forests, while deforestation triggers a corresponding liability requiring NZU surrender, creating a symmetrical afforestation/deforestation incentive.

Activities

Native forest registered under the Permanent Forest Sink Initiative and post-1989 exotic forest both participate, with native species attracting higher per-hectare carbon table values. From 2023, all new entrants must use the averaging accounting method to prevent perverse incentives for premature harvest.

Results

As of December 2021, approximately 349,000 hectares of post-1989 forest land were registered, representing around 50% of eligible forest area. More than 2,200 post-1989 forest participants were registered by 2016, of whom 81% were small landowners (under 99 ha) accounting for 14% of registered area. In 2024, 11.5 million NZUs were issued for forest removal (sequestration) activities - at the prevailing market price of approximately NZ$50-60 per NZU, this represents an estimated NZ$575-690 million in annual payments to forest owners. Native forest registered under the Permanent Forest Sink Initiative reached 15,584 ha by 2022.

Conclusions

The scale of NZU issuance makes the NZ ETS one of the largest forestry carbon payment systems by value globally, though biodiversity and water/soil co-benefits are not measured or verified by the scheme's design.

Implementation
Indicative cost
High (€500k–€5M) — In 2024, 11.5 million NZUs were issued for forest removals; at NZ$50-60/NZU this represents an estimated NZ$575-690 million in annual payments to forest owners, funded through the carbon market rather than direct government grants.
Time to results
Long (> 3 years) — Operating continuously since 1 January 2008 (17+ years); accounting rules evolved, with all new entrants required to use the averaging method from 2023.
Staffing & skills
Ministry for Primary Industries (MPI) scheme administration, independent Climate Change Commission (biennial review)

Conditions for success

  • legally mandated under the Climate Change Response Act 2002
  • symmetrical incentive design (afforestation credited, deforestation penalised)
  • transparent public registry with NZX-tradeable units
  • averaging accounting method (from 2023) to prevent perverse harvest incentives

Common failure modes

  • biodiversity and water/soil co-benefits are not measured or verified by the scheme design

Where it fits

Governance type
national statutory market mechanism
Scale
national (~349,000 ha registered)
Income level
high-income (New Zealand)

Commonly funded by

National / regional programmes

Indicative funding routes for practices of this type — always check each programme's current calls and eligibility rules.

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Data sources

Where this practice's information was retrieved from, and when.

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