ETS LUC Restriction Policy Update: Planted or Planning – Can You Still Register Exotic Forest on Farm?

In our previous blog, we covered the Government’s proposal to restrict the registration of exotic forests in the ETS based on Land Use Capability (LUC) class. On March 25th, MPI released an update on the details of these proposed changes, with particular focus on proposed ‘qualifying investment’ exemptions and ‘existing forest’ exemptions.

To recap: the stated goal of the policy is to limit full-farm conversions to exotic forestry, particularly on more productive land.

If it seems like we use the words “could” and “might” a lot in the below, it’s because in the absence of finalised legislation, risk and uncertainty remain.

New info

The ‘qualifying investment’ exemption was mentioned in the initial announcement, but the March 2025 update shared more details on how the exemptions might apply to ‘in-progress’ conversions/afforestation and investments underway.

Some potentially good news: If you started an afforestation investment before December 4 2024, you might have an exemption from the restrictions even for LUC1-6 land, and there may also be a (somewhat overlapping) exemption if your land is ‘forest’ when the law comes into effect later this year. It comes down to where in the process you are, what evidence you can provide (... and the final implementation of the rules!).

There is a list of proposed qualifying forestry investments, and a requirement that these have been made between 1 Jan 2021 and 4 Dec 2024. Where this is the case, the associated areas may be exempt from the new LUC restrictions for a limited period – even after they come into force. Currently this ‘exemption sunset’ date is proposed as 31 December 2027, suggesting that after that date even ongoing forestry investments will be constrained - which may have material implications for the scheduling of planting!

These restrictions are still expected to come into force from October 2025.

What counts as a “qualifying investment”?

The Government has proposed six types of forestry activity that might be a basis for an exemption:

• Buying farmland with the intent to afforest

• Signing a forestry right or lease

• Applying for an emissions ruling or resource consent related to planting

• Ordering seedlings or preparing the site for planting

• Receiving a recognised grant to afforest

• Contracting a third party to carry out due diligence

If you can provide sufficient evidence of one or more of these activities occurring before 4 Dec 2024, that could support an exemption - even if planting hasn’t taken place yet. You would also need to submit your ETS application for registration by 31 December 2027 for the exemption to apply, based on the current proposal.

Already planted? You might be covered.

The Government is also proposing that land already established in exotic forest before the new rules take effect may be exempt from the LUC restrictions, even if not otherwise exempt on the basis of the “qualifying investments” above or another exemption class. Hopefully this avoids a ‘rush to register’ for existing forests, but note that with 2025 being the final year of a ‘MERP’ there are still other reasons to seriously consider registering your existing forestland quickly to avoid missing out on units.

So, if I get my new forest in quickly, I’m safe?

If you’re thinking about planting this winter to take advantage of this existing forest exemption, it will be extremely important to collect strong, verifiable, dated evidence of the forest establishment, and you should also be aware that this exemption is still only a proposal - and your investment risk assessment should consider it as such. We encourage caution around this suggested ‘existing forest exemption’ for 2025 plantings in particular, especially the relevant dates and any potential timeline risks for your forestry activity.Notwithstanding the indication around ‘land that is already forest land’ above, the update also specifically says that:

“Anyone who has chosen to start the process of converting a farm to exotic forestry for registration in the ETS since the government announced this planned policy change on 4 December 2024, should expect to be subject to the new restrictions by the time they come to register in the ETS. This is because we intend for these restrictions to come into effect quickly, from October 2025."

These two indications are not in contradiction - it’s possible to both start planning after 4 Dec 2024 and have established forest by October 2025, but there’s obviously little margin for error or for variation in the final implementation of the rules.

What does this mean if you’ve worked with CarbonCrop?

That sixth exemption “contracting a third party to undertake due diligence” could cover a range of possible scenarios. Landholders who have contracted with CarbonCrop to assess land eligibility with a view to exploring exotic afforestation scenarios may be eligible for the “in process” exemption on the basis of this investment - this would similarly apply to other due diligence service providers.

For CarbonCrop, an example pathway might be:

• Submitted your land for assessment through CarbonCrop

• Received a Land Assessment Report from us (or any other provider), including exotic conversion P89 eligibility assessments and financial projections.

• Engaged CarbonCrop, or another adviser, to further explore planting options

If that work took place before 4 December 2024, it might be considered a qualifying investment. There's no guarantee that any specific report or activity will meet the criteria - that will depend on how the rules are finalised and interpreted. If you’re in this situation, it may be useful to focus in the short term on ensuring you have all the relevant evidence in a robust form, moving quickly if you’re already committed and are able to (such as with registration of existing forest), and if you’re not committed then considering deferring a final decision on your further investment until you have sufficient confidence of eligibility.

What now?

Check your records

Look for anything between Jan 2021 and Dec 2024 that shows you were planning or preparing for exotic forest planting, especially if you engaged CarbonCrop or another forestry / planting adviser, or made other related investments.

Pre-existing forest

If your forest already exists, or will be established before the  new law will come into effect (October 2025), it appears you are likely to be covered by the proposed ‘existing forest land’ exemption, but note the timing and final legislation risks - especially for new plantings intended in 2025 where these are not also supported by “Investment in process” evidence.

Keep your paperwork tidy

You’ll need clear documentation of what you did and when (e.g. assessment reports, invoices, contracts, receipts). This may be valuable if you need to demonstrate qualifying activity and could be important evidence later.

Keep informed and make a plan

There are a number of relevant timelines that have been indicated: Jan 2021 - Dec 2024; 4 Dec 2024; October 2025; 31 December 2027. The MPI update provides an excellent visual of these, which we’re including below:

Source: Ministry for Primary Industries - Te Uru Rakau; 25 March Update.

How these dates relate to you will depend on your particular situation, but if you have activities or investments that may be impacted there’s no time like the present to begin planning your path through.

Get in touch

Not sure if your CarbonCrop assessment might be relevant? We might be able help you review what’s on record and explore potential next steps.

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The rules are changing - but if you’ve already planted, planned, or even just explored options before December 2024, there might still have a pathway forward.

Tracking what’s been done, managing your risk, and staying informed will give you the best chance of navigating a good outcome through what comes next.

For more information on these proposed rules, check out MPI’s announcement here. We strongly recommend you read this original release if you’re potentially impacted by these rule changes.

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Note: This blog is an extract from our Q1 2025 CarbonCopy newsletter. View past newsletters here and subscribe to receive future newsletters here.