Emissions Trading Scheme Updates: Agriculture and Forestry

Author – Trudy Conway, Partner

The last quarter of 2024 was a busy time for the Government in the climate change space. A summary of the changes enacted, as well as the proposed changes for 2025, are below.

Removal of Agriculture from the ETS

As of 26 November 2024, the Government has removed agricultural activities from the Emissions Trading Scheme (ETS).

Before the change, agricultural processors were due to start reporting their emissions from 1 January 2025 and to pay for 5% (intially) of those emissions from 1 January 2026. For animal farmers, the dates were 1 January 2026 and 1 January 2027 respectively.

The Government has indicated that it instead plans to implement an alternative pricing system outside of the ETS for on-farm emissions by 2030.

Limits on Exotic Forest being registered in the ETS

In December 2024, the Government announced proposed law changes to limit the amount of farmland that can be converted to exotic forest and registered in the ETS. The changes were expressed as being necessary to protect rural livelihoods by protecting food production, as well as ensuring a credible ETS, due to the concern that widespread conversion of productive farmland to exotic forest was occurring.

The law changes are intended to come into effect by October 2025.

	The key points proposed are:
ONE \| tahi	Placing a moratorium on registering exotic forest situated on land use capability (LUC) classes 1 to 5 into the ETS. The LUC classes will be recorded on a default national-scale map, but a landowner will be able to undertake a property-scale assessment for determining the LUC classes on areas of their property.
TWO \| rua	Notwithstanding the moratorium, the Government would allow farmers to convert up to 25% of LUC class 1 to 6 farmland into exotic forest.
THREE \| toru	There would be a total national annual limit of 15,000 hectares of exotic forest on LUC 6 farmland being registered in the ETS. This would be available for allocation on a first-in first-served basis.
FOUR \| whā	Exemptions where parties can prove they were in the process of afforestation before the Government’s announcement, such as by way of a land purchase agreement or seedling order.
FIVE \| rima	Exemptions for certain types of Māori land.
SIX \| ono	There will be no limits on: a. ETS registrations for conversions of steeper LUC class 7 and 8 farmland; b. Forest land already registered in the ETS; c. Native forest registrations into the ETS.

Proposal to Plant Trees on Crown Land

In December 2024, the Government also announced that it is proposing to partner with the private sector to plant trees (both native and exotic) and to promote native forest regeneration on Crown land (excluding National Parks). This would only be on areas that are identified as having low farming or conservation value.

The Government’s stated goals are to:

assist in the Government’s climate change reduction targets;
encourage economic growth in the forestry and wood processing sector; and
improve native biodiversity and water quality.

The Government has requested responses to this proposal by 28 February 2025.

Click here to find out more or complete a submission to have your say

Administrative Changes to the ETS

A number of administrative changes have also been introduced:

Updated penalties for failing to surrender or repay units on time when the liability results from forestry activities carried out from 1 January 2025.

A 50% reduction in the annual charge for post-1989 forestry ETS participants down to $14.90 per hectare from January 2025. There is no change to other fees charged by MPI.

Changes to regulations to reduce costs for participants using the field measurement approach during the 2023 to 2025 reporting period, which will come into effect in March 2025.