ETS exotic forest restrictions: what do the new LUC rules mean for you?
- Rebecca Hunink
- 12 hours ago
- 6 min read
New rules restricting the registration of exotic forests in the Emissions Trading Scheme (ETS) came into effect on 31 October 2025. If you're farming productive land, or planning to plant exotic forest on it, these changes matter - and the decisions you make now could affect what you're able to register later.
This post gives you a practical overview of how the new rules work and what your options might be. If you want to go deeper, our full explainer guide - including worked examples and detailed exemption criteria - is available at https://carboncrop.com/lucky.
In this post we'll cover:
What is LUC and why does it matter?
Land Use Capability (LUC) is a classification system that rates land according to its versatility for farming. Classes run from 1 (highly productive, versatile land) through to 8 (very low productivity, limited use).
Before October 2025, LUC didn't affect whether you could register a forest in the ETS. Now it does. The new rules use LUC class as a gateway to registration - it doesn't guarantee eligibility, but on some land, it can block it.
One important point to be clear on upfront: these changes don't stop you from planting trees. They only affect whether you can register those forests in the ETS and earn carbon credits. That distinction matters because, for many landholders, carbon revenue is a key part of why exotic forestry makes financial sense in the first place.
Which land is restricted?
The new restrictions apply based on LUC class:
LUC 7-8: No new restrictions. You can register exotic forests on this land as before.
LUC 1-6: New exotic forest on this land cannot be registered in the ETS - unless it qualifies for an exemption.
If your land falls in LUC 1-6, that doesn't mean registration is impossible. But it does mean you'll need to check whether your forest qualifies for one of the exemptions below.
What forests are not restricted?
Even on LUC 1-6 land, several pathways to registration may still be available. Forests on LUC 1-6 land are not considered restricted if they meet any of these conditions:
The land was already forest land by 31 October 2025
The forest is predominantly native, not exotic
The land qualifies as unmapped, unfarmed, or erosion-prone (each with specific criteria - see below)
The land is specified types of Māori land
The forest is on Crown Land (though not all Crown land qualifies - Crown Pastoral Lease land and Pāmu land are not exempt)
Existing forest land is the most straightforward exemption. If your land was already classified as forest land before 31 October 2025, the new restrictions don't apply to it.
Native forests are unaffected by the new rules. You're free to plant and register native forests anywhere on your land - the restrictions only apply to exotic species.
Unmapped land - some land, such as the Chathams or parts of Stewart Island, doesn't have an LUC classification. That land is not restricted unless it gets mapped in future.
Unfarmed land means you stopped farming that area for at least five years before applying, and you haven't planted exotics in that time. Importantly, this must apply to the entire title, not just part of it.
Erosion-prone land requires official designation as "high or severe erosion risk" in a regional or district plan. It's not enough for land to look steep or erodible - your council needs to have formally classified it.
Tip: Don't assume an exemption applies to your situation without checking. The definitions for unmapped, unfarmed, and erosion-prone land are specific, and getting it wrong could mean a registration that's later challenged.
Pathways for restricted forest
If your forest is on LUC 1-6 land and doesn't meet one of the conditions above, you'll need to look at whether you qualify for one of the main exemption pathways.
The 25% allowance
For most landholders, this is the most accessible route. The 25% allowance lets you register restricted exotic forest on up to 25% of your LUC 1-6 land - calculated per Individual Farm.
An Individual Farm is defined as one or more adjacent titles, owned by the same person or entity, that are actively farmed and include LUC 1-6 land. "Adjacent" means physically touching or separated only by a legal boundary such as a paper road - land on opposite sides of a valley wouldn't qualify.
There are some important things to understand about how the 25% rule works in practice:
Your allowance is calculated based on the total LUC 1-6 area within your Individual Farm boundary at the time of each application.
You don't have to include all your adjacent titles in one Individual Farm. You can choose which titles to include now and hold others back for future registrations - but once you've started using your 25% allowance for a given farm, you can't add more titles to increase it later.
Existing forest and existing ETS registrations don't reduce your allowance. If you have 30 ha of forest registered in 2020 on a 100 ha LUC 1-6 farm, you still have a 25 ha allowance available.
If titles are sold or subdivided, any unused portion of the allowance is lost.
Tip: If your property spans multiple titles, the way you group them into Individual Farms has real long-term consequences - for your own future registrations and for future owners. Think through your title structure carefully before your first registration under the 25% rule.
The LUC 6 ballot
Alongside the 25% allowance, there's a national ballot scheme specifically for LUC 6 land. Up to 15,000 hectares of new restricted exotic forest on LUC 6 land can be permitted each year through this scheme, with permits allocated by ballot.
If you're successful, you'll receive a permit to register up to an approved area of LUC 6 land. The forest must be established by 31 December of the third full year after the permit was issued, with extensions available in some circumstances.
The ballot is in addition to - not instead of - your 25% allowance. This gives you flexibility to use them in different combinations depending on your situation. More detail on the ballot process and costs is still to be released.
The transitional investment exemption
If you made a qualifying afforestation-related investment on restricted LUC 1-6 land between 1 January 2021 and 4 December 2024, you may be eligible for a transitional exemption. The definitions of what counts as a "clear interest" in the land and a "qualifying investment" are specific and legally defined - they shouldn't be assumed.
If you think this might apply to you, seek specialist advice early. There are also deadlines for submitting your ETS application under this pathway, and missing them could mean losing the exemption.
Choosing your LUC map
To determine whether your land is restricted, you'll need an LUC map. You have two options.
The national NZLRI map is free and already available, but it's low resolution. It may miss gullies, ridgelines, and micro-variations in your land - which could mean it over- or under-estimates how much of your land is restricted.
A property-scale LUC map is higher resolution and may give a more accurate picture of your land. It must be prepared by a qualified person in accordance with regulatory methodology and include a statutory declaration. You'll need to pay for it yourself, and you're required to keep the records for 20 years.
Importantly, each registration must be accompanied by a map - but you can use different maps for different registrations. Just because you have a property-scale map doesn't mean you have to use it every time.
Tip: A property-scale map could work in your favour by showing more LUC 7-8 land than the national map suggests - but it could also work against you. It's worth getting a sense of your land's likely classification before committing to the cost.
Let's summarise
LUC 1-6 land is now "restricted" for new exotic ETS registrations, effective from 31 October 2025.
LUC 7-8 land is not subject to new restrictions.
Several exemptions exist - including existing forest land, native forests, unmapped land, unfarmed land, erosion-prone land, and some Māori land.
If your forest is restricted, the main pathways are the 25% allowance (per Individual Farm), the LUC 6 ballot (up to 15,000 ha nationally per year), and the transitional investment exemption (for qualifying investments made before December 2024).
How you define your Individual Farm and group your titles has significant long-term consequences.
You can choose between a national LUC map (free, lower resolution) and a property-scale map (paid, higher resolution) - and you can use different maps for different registrations.
What to do next
These rules are complex, and the choices you make now can affect what you're able to register in future. It's worth taking the time to understand your position before committing to any planting or registration decisions.
For a full breakdown of how the rules work - including worked examples, detailed exemption criteria, and the transitional investment timeline - download our comprehensive explainer guide and get a free initial LUC analysis for your land.
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