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

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.

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.

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.

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.

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.