The Permanent Category Redesign is a proposal to modify the existing carbon forestry regulations within the New Zealand Emissions Trading Scheme (ETS) specific to the Permanent category. CarbonCrop’s dedication to accelerating climate resilience, biodiversity restoration, and improved land use means we are particularly in favour of native forests. The Permanent category is where the majority of these forests will likely be registered, so the future of the category is important to both our business and our values. Any redesign needs to ensure that forests, especially indigenous ones, have the potential to play a significant role in New Zealand's net-zero future.
1. CarbonCrop's Stance on the Redesign
Permanent Category Eligibility
We think that the permanent category should be mostly reserved to indigenous forests, with some exceptions for some exotic forests. Existing permanent exotic forests should be allowed to remain with no additional transition requirements. Exotic forests on Maori land should be allowed in the permanent category as long as they are subject to the rules for transition forestry when developed.
Transition Forests
We are cautiously optimistic of the potential of transition forests, which shift from exotic to indigenous species. A specific new carbon accounting method is required to give clarity and confidence, and to avoid incentivising delayed transition. Because we still do not know a lot about techniques to successfully transition forests, we recommend limiting the number of hectares of transition forests allowed in the ETS initially.
Management Requirements
We think transition forests need management plans to ensure they meet key milestones. Indigenous forests do not need management plans - they already face enough barriers to enter the ETS. Exotic forests, on the other hand, should align with the NES-PF regulations.
Compliance Tools
We see a role for technology, especially AI, in monitoring forest composition and ensuring compliance. We support tools such as withholding units until management plan requirements are met, and moving non-compliant forests to the standard forest category.
2. Key Recommendations
Carbon Accounting
We think a new carbon accounting method is required for transition forests.
It must reduce the risk of surrender liabilities as transition occurs and give more clarity on the potential to earn NZUs. This would give investors and forest owners much needed confidence and certainty for forecasts.
But, it must make sure the NZUs issued are for lasting carbon sequestration only and not, for example, for peaks which are reversed as the forest transitions.
Stock Change is a good starting point, but needs to have added controls to avoid incentives to delay transition.
Management Plans
Transition forests should have a management plan, detailing risks and mitigation strategies. Indigenous forests already face barriers to registration, so shouldn't be burdened with additional management plans.
Verification
Any party with the necessary skills should be able to verify forest management plans. We think Te Uru Rakau should assess these plans during the permanent forest registration process.
Compliance
We believe in a mix of traditional and modern compliance tools. The use of AI to assess forest composition and forest loss has potential. We suggest linking re-verification to the forest's stage rather than fixed time intervals.
Existing Forests
Existing forests registered in the permanent category should not be required to move to a new accounting method and should not have added management requirements. There is a real possibility of a Catch-22 creation where existing permanent forest owners are penalised with new rules that were not present when they registered or penalised if they withdraw from the permanent category.
We believe that with the right regulations, incentives, and tools, New Zealand can harness the power of its forests to help achieve a net-zero future. The Permanent Category Redesign is an important step in that direction.