NZARM Webinar Transcript: Make your own LUC: Land Use Under the New ETS Changes - November 2025

https://www.youtube.com/watch?v=bypd-lIRMPA

The line between land and forestry is shifting fast. With new ETS legislation now in play, knowing how to guide farmers through smarter, more diversified land use change has never been more important.

Nick Butcher spoke to Eliza Burt-Priddy from NZARM in a practical, interactive webinar on how the latest ETS updates impact farmers and the work of land managers and advisors.

Nick dug into what changes matter most for farmers right now and what to consider in land use decisions - especially around trees on farms.

Watch the recording or read the full transcript below.

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Speakers: Eliza (NZARM) and Nick Butcher (CE, CarbonCrop). This transcript has been lightly edited for readability.

[Eliza]

00:00:00  Kia ora, I'm Eliza. On behalf of the New Zealand Association of Resource Management, thank you for registering for the webinar on making every hectare count - land use under new ETS changes. For those of you who are not familiar, NZARM is an association for individuals involved in natural resource management, particularly across the land and water space.

00:00:23  We are lucky enough to have Nick Butcher here with us today. Nick is the CE of CarbonCrop and has been working alongside him and his team to make our work a little bit easier. Before I hand over, if you have any questions, would you please put them in the Q&A and we will address these towards the end.

00:00:46  Awesome, thank you. And I'll now hand over to you, Nick.

[Nick]

00:00:50  Thanks Eliza. Afternoon everybody. So to start off, I think we billed this as making every hectare count. As I read that, I felt that it was a massive overreach because obviously there's a huge amount to making every hectare count in the context of a farm, and a lot of it doesn't necessarily have anything to do with trees.

00:01:06  So this is much narrower than that. We're talking about really how to make sure that you make the most of, and avoid pitfalls associated with, the specific new regulations around exotic forest within the ETS. I've reused this title from one of our own webinars because I liked it so much. So make your own luck - it's all about LUC [Land Use Capability].

00:01:26  Basically today we're talking about working with the new LUC-based ETS registration restrictions and farm forest. And because this is a premium event, we get title animations. Avoiding the pitfalls - because there are some quite significant pitfalls. They're not obvious when you get started.

00:01:44  And they may not even be obvious until after you've completed a forest registration using the new mechanisms, and then you find out later on that you've caused an extremely expensive problem for the forest owner or the landowner. So a couple of things up front. This should very much be viewed as the start of your engagement.

00:02:03  Well, possibly not the start - you may be well across this - but it's certainly not the final word on all of these topics, and once you've listened to me rabbit on about it for 20 minutes, you don't need to do anything else. This is an incomplete summary. It's our interpretation and opinion, which I'd say is now pretty well calibrated because we're well across the legislation and the legislation is now law and is fairly clear.

00:02:24  But I'm also just presenting this for fairly generalised scenarios, so this is very case specific. Some of the details are not yet finalised, especially around ballot mechanisms and erosion considerations and exemptions. And even to the extent that it is final, what I share here may apply in quite a different way for a particular configuration of land or farm that you are working with.

00:02:47  So basically, please make sure you understand the specifics and the implications for a given scenario before you make any investment decisions or you give any advice on investment decisions - or somebody runs out and plants a whole bunch of forest with a certain understanding and then finds out that it's wrong. Because it could be pretty painful for everybody involved.

00:03:06  So I'll start with this picture, which I've used a couple of times now. What I'm really trying to highlight here, on the sort of 'make every hectare count' theme, is that every hectare is valuable. Every hectare has a certain place within a farmer's [operation], and different things, different areas on your farm can fulfil different purposes.

00:03:29  And some of those purposes involve trees and some of them don't. For the areas that are not currently in trees and you want them to become trees, there can be a number of different motivations, including potentially getting some climate change mitigation, some water quality improvements, some climate resilience improvements, some biodiversity, maybe revenue diversification, which is kind of tied in with funding.

00:03:53  One thing that all of this has in common is that you can't just get a transition of land for free. It requires some kind of - often a sacrifice of the proceeds of the current activity and often an investment to transition to the new activity. And the funding landscape in relation to forest establishment in New Zealand is changing - or rather has changed - and people are now kind of catching up with what the new landscape looks like.

00:04:23  Up until now, the potential ETS revenue streams have been a pretty strong foundation for forest establishment, and this has had mixed results. I am very conscious that in some cases they've been undesirable from certain land use change perspectives, but the opportunity that they create is there whatever your motivation is for the land use change.

00:04:42  So it could be that you're trying to achieve erosion control or shade or a woodlot, or retirement of marginal land and diversification of revenue streams. Whatever the motivation was for doing it, the ETS could help you to fund it. I would say that this potential of the ETS as a funding mechanism for afforestation initiatives is increasingly understood and appreciated across farmers and land use and resource management advisors, and is also increasingly relied upon when these parties are looking to figure out a pathway and work out what they're going to do.

00:05:16  They're starting to understand the ETS to the point that they'll go, well, we'll be able to get carbon from this and that carbon is worth money and that money can finance the activity. That has just got more complicated. Depending on the specifics, the finance pathways for that new forest may be either the same as they ever were, or much more limited.

00:05:35  Or lost entirely. Or lost, but in the future and in a way that you don't necessarily expect now - which is almost the nastiest one. Because in a nutshell, as I'll get to later, you can do things now which seem good and valuable and like they're achieving the result that you need now, and then you find out later on that actually you've destroyed a whole bunch of value for the property and closed off pathways.

00:05:59  That's probably the biggest risk that I want people to leave with in their heads today. So the question up front is really, do you care about ETS registration? Do you care? Should you care? Will the people you're working with care? You probably do. And the reason for this just comes down to dollars.

00:06:16  So radiata or exotic hardwoods - established forest. Even if you take sort of just under the averaging regime, which is when you plan to harvest it and it's one of the lower-yielding management approaches - are worth nine to $10,000 per hectare. This is the approximate net present value of the carbon revenue for the first rotation, and there's a bunch of assumptions in here, including a carbon price of $60 per NZU, which for those of you who are tracking this will realise that is now substantially above the current price.

00:06:45  I think it's about $40, $41 today. So even at the current price of $40, this is now $6,000 to $6,033 - calculating it on the fly. That's still a lot. It's a lot more than what the transition would cost, and it's a lot more than some competing land uses currently go for for this kind of activity.

00:07:09  So to the extent that you want to plant forest for another reason, this revenue stream is a massive enabler. And if you don't have it, it's probably going to scuttle your plans. In a nutshell, what has changed is that there has been a ban on ETS registration of forest on Land Use Capability (LUC) classes one to six. But it's not all forest and it's not all one-to-six land.

00:07:35  The key thing is 'restricted forest', which there's a special definition of, and even if your forest is restricted, there are a bunch of exemptions under which you can register that forest anyway. Really, if this is all starting to be a bit too long - and it's a hot afternoon, certainly getting pretty hot in Christchurch - the key things to take away from the session are that if you don't have a registration pathway, you've probably lost a bunch of value that you may have relied on, and that's going to make you very sad.

00:08:02  And if you take the wrong registration pathway, you may well lose future pathways, which also loses value, which is going to make you very sad. So if I can cut to your attention - I know you're very busy in general - what can you do right now that takes you 30 seconds and gets you on track? Because it's almost Christmas and the to-do list is crazy.

00:08:21  We want to help out. Start off - and I encourage you to do this right now, you may actually get the result back within the course of the session - go to that website, that link there, carboncrop.com/lucky. Click through to get an assessment. Pick a couple of titles that are of interest to you, given some work you're doing.

00:08:40  Please keep it under 5,000 hectares, otherwise we might just not send you the report for now - though that isn't a hard constraint. Then enter your email address and we'll send through a report to you, which I will show you in detail in an example later. But it'd be fun if you can actually get one up and running and have it sitting there in a tab and kind of work through along with us as we go.

00:08:56  In terms of what could go wrong - thing number one, you can plant and then find out you're unable to register. Something else I want to emphasise is that just because you can register your forest in the ETS, all else being equal, it does not necessarily mean that you are allowed to establish that forest on this land.

00:09:22  Everything that we're talking about here doesn't negate your other compliance obligations. You're still going to make sure that you're in keeping with the NES-CF [National Environmental Standards for Commercial Forestry] and the RMA restrictions and all this kind of stuff. So definitely check that first. It's likely to be a very painful and expensive mistake otherwise.

00:09:38  So this is the sort of decision flow that we've structured up to help people work through these multiple steps. Number one, as we talked about before - do you care about ETS registration? Not everybody will. But our view is that the answer's generally going to be yes because of the financial implications.

00:09:54  Second test you need to do, given that you care, is: is my forest going to be restricted? If the answer is yes, then will it have an exemption? If the answer to that is no, then you should be reconsidering what you're doing because something about this doesn't stack up. It might be that ultimately you decide, no, I don't care about ETS registration, I'm going to go ahead anyway. But you need to be clear on that upfront.

00:10:11  There's also another one that I've added in now, which we didn't have in the first version of this flowchart - which is, will using the exemption that I plan to use negatively impact my future options? I'll get to some examples of this later on, but I'd say this is probably one of the most unexpected and most risky elements that you need to be most cautious of with what you're proposing.

00:10:34  It would be easy to destroy hundreds of thousands of dollars worth of potential value without realising it, which would obviously make you pretty upset. So we've gone through - we do care about the ETS. Next question is, will the land be restricted forest land? And what is restricted?

00:10:52  Forest land has a number of exceptions - let's call them exemptions - but anything that's on LUC seven to eight land, using the LUC map that you're using, it's not restricted. And as you can see here, stuff that is on LUC one to six land - there's a number of things which would make that forest not restricted.

00:11:12  Unfortunately - or fortunately, depending on your perspective - this is very much not to scale in general. Most LUC one-to-six land in New Zealand will be restricted. And I'm not going to go right down the rabbit hole of all of these just for the interest of time, but there are certainly pathways here that you have to figure out and they might give you a way through.

00:11:34  I'll run through them quickly. Crown afforestation land is not restricted - this is basically crown land, and there are some exceptions there. Offsetting land is not restricted for pre-1990 forest. I would say that if you don't know whether this applies to your case or not, it probably doesn't. Unfarmed land is not restricted.

00:11:52  There is a very specific definition of this at a given title level. It has to not have been farmed within the last five years and not have had exotic forest established on it within the last five years. Unmapped land is not restricted. This is basically a very small set of areas where there is no regional level or [national] NZLRI LUC mapping.

00:12:11  Erosion-prone land is not restricted, and again, a very specific definition here. For most of New Zealand, at least as far as we are aware, there are not yet the data sets in place to support this definition. Essentially, it needs to be defined as being either high or severe erosion risk in a plan that's made available by either the regional or district council.

00:12:32  Exempt Māori land - there's a bunch of specifics over what qualifies as exempt Māori land in the act, I won't go through details here, but that is not restricted. And if the forest species are not predominantly exotic - which is to say that they are predominantly indigenous - those aren't restricted at all.

00:12:53  You can plant indigenous forest, new indigenous forest, wherever you like and register it as far as this legislation's concerned. You do still need to be in line with the NES-CF. And finally, any land that was forest land already on the 31st of October 2025, regardless of whether it's already been registered in the ETS - it's not restricted forest. You can register it in the ETS as far as this legislation's concerned.

00:13:13  So if you've gone through that and you find that none of these special cases apply, and you are in fact restricted - next question: can you get an exemption? There are three major exemption pathways. The first is transitional exemptions for certain qualifying forestry investments. The second is the 25% allowance, where up to 25% of the LUC one-to-six land per individual farm by area can be allocated to your ETS registration allowance. And then finally there's a permit system for LUC six land - up to 15,000 hectares per year of permits can be issued for registrations on LUC six land, which are allocated by a ballot. And there are some details there that still need to be worked out.

00:14:03  So I'll run through these in some more detail. For the transitional exemption for qualifying investments - this is not an easy test to pass, and you shouldn't just assume that because someone made some investment at some point that you should be all right. It's quite specific.

00:14:17  Firstly, the applicant must have had a clear interest in the land, whether that's ownership of the land, a registered lease, or a forestry right, or an agreement to obtain these - a conditional or an unconditional sale and purchase agreement, or a written offer to purchase the land. And there are some details there around ongoing negotiation.

00:14:33  They must also have had a qualifying investment, which is either an emissions ruling or a resource consent application, or a permit, or an investment in preparation for afforestation. Remembering that if you've already made your investment and the trees are literally in the ground, you're fine because you've got this - anything prior to the 31st of October [2025] isn't restricted anyway.

00:14:54  Or there is a third party who's been engaged for due diligence in relation to a forestry activity on the land in question. So this is something to check before you rely on it. I would strongly suggest that.

00:15:13  But if you tick these boxes, then you are likely able to register the forest independently as an exemption pathway. There are time limits to this as well though, and I don't have these detailed now, but basically you have to have made the investment after - I think it's the 1st of January 2021 - and I think you've got until the end of 2027 to complete the registration using this pathway.

00:15:40  So I didn't put these into the slides and I don't have my notes in front of me, so you need to check that. But if you're relying on this, not only do you have to check first, but remember the clock is ticking. And that's regardless of whether you put the trees in the ground or not. So if you plant the trees next year relying on this exemption, you still have to actually get it registered before the end of 2027. You can't just say, oh well I got the trees in the ground on time, therefore I'm good.

00:15:59  So the other pathways are all around this LUC one-to-six criteria. The 25% of your individual farm is a very complicated thing I'll get to shortly - well, it's not especially complicated, but there's a lot of ways it can go wrong if you misinterpret or misapply the rules. And then finally this permit scheme, which is relatively simple, but constrained and you can't guarantee that you're going to get a permit.

00:16:21  What matters here, in terms of the legislation - basically anything from LUC one to five is equivalent as far as the new rules are concerned. LUC six is also a thing by itself, but for some of the provisions it gets lumped in with one to five. And seven to eight also. I've coloured them here the opposite to what you usually see - like usually LUC one is the bright green, beautiful lush pasture that you could grow anything on or put a vineyard on.

00:16:57  And LUC eight is the red, rocky top of the mountain - where sheep can't climb unless they've got ice axes and crampons. We've flipped the colours because LUC seven to eight is the safe stuff in terms of registration pathways under these rules. LUC one to five is the most restricted, and LUC six is pretty restricted. And these restrictions and LUC classes kind of interact in a complicated way.

00:17:16  Basically, LUC six land can access the permit pathway - so it is restricted, but you can apply for the ballot. LUC one to six land is all restricted, contributes to your 25% allowance, but you can use the 25% allowance. And LUC seven and eight - it's unrestricted and it doesn't contribute to your allowance.

00:17:39  So if you've got a farm and it's a thousand hectares and 900 hectares of that farm is LUC seven and a hundred hectares of it is LUC one to six - your 25% allowance is calculated against the one-to-six bit. So you only get 25% of a hundred hectares, which is 25 hectares to allocate across your hundred hectares of LUC one-to-six land. You can't say, oh well I've got all of this LUC seven, surely I get 25% of that to put on my one-to-six. It's ring-fenced and separated.

00:18:00  In addition to this, the high erosion land - because the LUC maps in particular, the regional ones, are pretty low resolution - high erosion land, depending on the derivation of it, can appear pretty much anywhere. And it basically gives you a pass for that area.

00:18:33  So which LUC [map] to use and when? There are actually two. Variously called regional level LUC mapping or national NZLRI LUC mapping. This is the one that's freely available for most of the country. When you look at your farm on this map, you'll probably go, that doesn't really capture the subtleties of my farm very well - and you'll be right.

00:18:55  It's not really intended to. It is a generalised, regional level map rather than something that's intended to capture the little steep bit on the edge of your creek. You also have the option of a farm-level map. These are not provided for you necessarily out of the box. If you already have one, you may be able to use it depending on the standard it was created in compliance with and whether you can get access to a statutory declaration from the person who prepared it saying it was prepared in line with the standard.

00:19:24  The key point is that you can choose which one you use and you can change it application by application, even for a given title - which is not what our earlier understanding was, and something that we're clarifying versus previous guidance we've given. You don't have to stick with a given LUC mapping resolution over time, but it does kind of have implications over time, which remain complex.

00:19:49  Just an example of how much regional level versus farm level can vary. This is a farm with a regional level LUC map - you can see it's hard to tell because we don't have the geometry of the farm, we don't know it particularly well, but there are rivers and valleys and hilltops and stuff going through that, and a lot of it's just lumped in as, it's pretty much all LUC six. If we look at the farm-level mapping of the same farm, you can see that it captures a lot more of the details around the property and the specific variations.

00:20:05  The interesting thing is that despite the fact that the one on the right is almost certainly more accurate, that does not mean that it's necessarily better for you or for the landowner. In terms of looking to find ways to retain flexibility around forest registration and the ETS, it all comes down to where do you want to plant exotic trees that you want to register in the ETS?

00:20:29  So if we look at this farm between the regional scale and the farm scale - the regional scale map thinks that there's a lot less LUC one-to-five land, but a lot more LUC six land, and a lot less LUC seven-to-eight land. So if you're really wanting to plant mostly on the seven-to-eight land, as far as the farm scale mapping is concerned you should use the farm scale map, because that gives you a lot of [LUC seven-to-eight] - 153 hectares - which basically you can do what you want with.

00:20:57  However, the farm scale map only gives you 210 hectares versus 235 hectares of this 25% allocation, which you can sort of distribute as you like. And it only gives you the opportunity to try for the ballot pathway for 382 hectares rather than 623. So neither one is necessarily better in and of itself. It all depends on what you're looking to achieve in terms of potential transitions and land use with post-October 31st 2025 exotic forest.

00:21:30  So how to choose? Firstly, consider if and where you might want to establish exotic forest now and into the future. Assess this against the NZLRI map. Assess it against the property scale map. And if you don't have one, have a think about whether it's likely to be to your benefit, given what you know of the farm. Remember that the regional level erosion maps may give you another sort of un-restriction pathway that can be probably more closely correlated with the LUC seven stuff on your farm-level map.

00:21:54  And then remember that the 25% allowance that you get is based on the definition of an individual farm, which we're going to get to shortly. Shortly arrived earlier than I thought.

00:22:16  So what's an individual farm? An individual farm is defined as a collection of titles with some constraints. We're adopting the convention here that when we're trying to do examples, you start with Ann who owns a whole bunch of land. These are four separate titles and they're all owned by Ann.

00:22:32  This does not mean that Ann can necessarily turn all of these into her individual farm. We're going to run through some scenarios. The titles along the top - we're assuming that the first two titles starting from the left are directly adjacent, and the third title meets the definition of adjacent in the act, which is to say that there's maybe a paper road or a river or something like that in between, but they're effectively next to each other.

00:23:14  They can be an individual farm together. This other title, which is further away - obviously I don't have a scale here - but it doesn't meet the adjacent definition. It can't be part of individual farm one because it's not adjacent.

00:23:33  Just because something is adjacent does not mean that it has to be part of the same individual farm. It could be that Ann only defines individual farm one and then individual farm two and three are left for later on, or not defined at all, or not made part of a farm yet. You can also combine them in different configurations or have four separate ones, all of which you define at different stages.

00:23:51  What you cannot do - for two reasons - firstly, the two blue farms aren't adjacent, and also the two pink farms, which I think I have another example of in a moment, aren't adjacent anymore given that the linking title is no longer part of the farm.

00:24:14  So this is the example I was just talking about. We've now tried to separate the two titles as individual farm one, so they're now no longer adjacent. You can't join them together. What you also can't do - and this can be a bit of an issue in terms of what you often see - with what farmers nominally think of in terms of their farm and who owns their farm. Like perhaps one title's owned by one party, another title's owned by the combination of two parties, and the third is owned by a trust where the beneficiaries - at least as far as we currently understand it - you cannot create an individual farm with that structure because the owners are not the same. The test is around the specific ownership. If the names on the title are different, our expectation is that that won't be able to form an individual farm unless before defining the farm you go through and change the ownership to consolidate it.

00:25:11  I realise that I probably used the word 'individual farm' about 57 times and it all seems like way down in the minutiae - really boring and painful and not like something you want to have to figure out just when you're trying to work out a good land management strategy, which is about the real land, not the abstract representation of the land.

00:25:29  The reason that this is a big deal is that each title can only be part of one individual farm once for one owner. So if you take the wrong approach here, you can't go back - and you can basically inadvertently restrict or remove entirely this 25% pathway, which in our view is likely to be the most accessible and common pathway for people to register new exotic forest in the ETS for the foreseeable future.

00:25:57  So to look at how this can go wrong, I've come up with a very non-exhaustive set of scenarios. We could probably come up with 50 more if we sat around with a whiteboard, but just to kind of get you thinking about possible pitfalls. One example - we're just assuming for this that it's all just LUC six land.

00:26:14  Let's assume that you start off and you have a big title, and you want to register a little pocket of forest up in the corner, and you do so by defining it as an individual farm and using the 25% pathway, which requires you to say this big title is part of my individual farm. Then you subdivide off a tiny bit of the opposite [end]. This subdivision will result in two new titles. Both of those titles will have a notation on them that they have previously been part of an individual farm, which means that you cannot define them as part of a new individual farm.

00:26:34  If you want to be able to access the 25% pathway, you have to have them as part of a new individual farm, which means that after just registering this tiny little bit in the corner and then going through the subdivision, you've now lost that 25% of your whole farm.

00:27:06  And to put these numbers in perspective - let's say it's a thousand hectare farm, and let's say you proceed in good faith and use the 25% pathway to register three hectares of forest. You still have 247 hectares of entitlements left. Then you subdivide - all of those 247 hectares of entitlements are lost to the new titles, even if they're under the same owner.

00:27:32  And that 247 hectares at, let's take, $6,000 [per hectare] - I hate to think... 247 times $6,000... 1.5 million. Okay so it's not as bad as it could be, but that's still an awful lot of money to just have evaporate into thin air because you misunderstood the minutiae of a registration mechanism.

00:28:07  Obviously that's the worst case, assuming that you did want to register the whole thing at some point. Another thing that could go wrong - you could register on a single title and then decide that you want to go and plant somewhere else as well on an adjacent title. Like you might be thinking, I'm not going to turn all of my titles into a single farm because I'm worried about how it could limit my future options for those titles or create costs associated with those options.

00:28:26  I'm instead going to keep them as two separate titles. And I've got this first title here - suggesting that it's all LUC six land - but 80% of it's already forest. Now, the way this works is that you still have the rights to register up to 25% of the area of the total area in new forest. And you could define that and say, well, I'm only going to use it for this little bit here. So you've possibly only used up, say, 25% of your 25% total entitlement for the thing.

00:29:08  Later on, you decide that you want to go across and use the remaining combined 25% on the separate title next door. The problem is that you can't, because when you started, you didn't define it as part of your individual farm, and you can't go back and add it in. Which means that it can still have some 25% allocation, but it's only based on the area for that independent title by itself as a new individual farm.

00:29:32  So you'd probably find this out once you went to do the new registration - or hopefully while you're doing the forest planning. And that might mean that you go, okay fine, I'm much more limited than I thought. I'll only register the smaller area. It wouldn't necessarily lead to you having forest that you can't register, but it could lead to you having land that you can't transition to forest. And if this was the area that was most suited on your farm to being transitioned to forest - and this includes silvopastoral activities - then you're going to be very frustrated.

00:29:59  Similarly - if you have a little [area of] land that you register on a large title - let's say that you've got a thousand hectares, that gives you a 250 hectare registration entitlement - you registered three hectares of it. The new owner of that, once you sell the entire property, loses all the remaining 247 hectares. You can't hand it over to them with the sale of the land.

00:30:16  Which means that if you started on this pathway, you'd want to be quite sure that you were going to continue most of the way through using up your available registration allocation before you sold the property. Or possibly you might even want to hold off until you sold the property, so that the new owner can inherit a clean slate and it hasn't been defined as an individual farm - which means that they can still define it as a new individual farm with the benefits going to them.

00:30:43  Similarly, if you register a block of land using this pathway and you define your land as an individual farm, and then you buy an adjacent block of land off your neighbour - you still retain potentially the entitlements for those two blocks, but you can no longer combine them. Which means that if you were looking to buy the neighbour's property to help you convert the remainder of your property, that option will be off the table. Whereas if you'd just waited until after you'd acquired the neighbour's property, you would be able to define it as an individual farm and access the 25% for the full area.

00:31:18  I realise that was way down a rabbit hole. Apologies. We don't know a simpler way to explain all of this other than basically - it's complicated. There are lots of fish hooks. You really need to figure out the risks and the pathways before you get too far down any one of those pathways.

00:31:42  To reiterate - you can make more than one application using the 25% allowance. But if, since the first application in respect of an individual farm, the ownership of the record or records of title has changed, or the farm boundary has changed, you can't [make further applications]. We aren't happy about this. We think that it's going to cause all sorts of issues with succession planning and similar, and we really hope to see it amended in the future.

00:32:07  So yeah, in a nutshell, considering the planning and use of the 25% exemption - an individual farm decision is probably the most critical and least reversible decision that you can make in respect of this legislation, with the exception of planting a whole bunch of trees in the ground. Despite that, we think that this 25% entitlement is probably going to be by far the most accessible and lowest-risk pathway to [ETS] registration for most farmers for new investments.

00:32:33  But you have to plan ahead.

00:32:37  I'm happy to say that the LUC six permitting framework is simpler, but it is not necessarily as reliably accessible. So for the LUC six land class permits - basically the way these work, and I may repeat this - if you have LUC six land on your farm, then you are allowed to apply for a permit to register that LUC six land in the ETS.

00:33:02  It does not have to be forest at the time you apply for the permit. You can apply for the permit in advance, and then if you get the permit, choose to make an application. These permits are issued annually up to a revisable - but currently set at - 15,000 hectare limit. You should apply ahead of planting. You do not need to own the land to make the application, but you do need the consent of the landowner.

00:33:18  The reason this can be relevant is that some developer may be looking at a partnership with the landowner where they're going to establish a forestry right or a forestry lease, but it needs to be conditional on receiving a permit. They can apply for the permit with the landowner's permission, and then once it's approved, they can proceed with the other activities.

00:33:50  This isn't confirmed yet, but it's likely that there is going to be a fee for the application. We don't know what that's going to be and we don't know how it's going to work - whether you can apply for free and have to pay the fee if you're selected, or whether you have to pay up front and roll the dice. We don't know how it's going to work.

00:34:10  There are also two ballots per year. Similarly, we don't know how those are going to work yet. It may be that they happen almost consecutively within the same day and it's just a legislative mechanism. It may be that there's one earlier in the year and one late in the year.

00:34:10  There is a reserve allocation for small applications - I forget the threshold that they're defined at, but it's in the - I think less than a hundred hectares. Anyway, details to come. These permits are randomly allocated to ballot applicants. They're not transferable and they're valid for the support of an application for three full years from the time of permit grant, which means that within that time you have to get the forest planted and get your registration in.

00:34:31  They can't be combined with other permits while they're active. I should say that the three full years, I think it is extensible under certain conditions, if you can prove that there were adverse events which prevented you from establishing the forest - like a weather event that meant you couldn't establish the forest.

00:34:58  A final one. So in terms of future things that could provide further options - the erosion, highly erodable land is not yet defined for most regions in the country that we're aware of. It tends to align more closely with LUC seven and eight land, and it could mean that you could use [that] - and it tends to be higher resolution as well, rather than just really broad strokes regional level.

00:35:21  You'd hope that it would be somewhat more aligned with the reality on the farm. The one on the right here shows the highly erodable land layer - which is not the layer that meets the definition. But it is a pretty high-quality layer in our view, that I think Manaaki Whenua creates and distributes - apologies if I've got that wrong.

00:35:43  You can see though that it quite closely correlates with what the farm-level LUC seven mapping concluded, as opposed to regional level LUC mapping where there's a whole bunch of highly erodable land across this sort of LUC six and even LUC one-to-five designated area.

00:36:02  So onto the free regional LUC analysis. Now I'm going to try and quickly swap screens and show you what these reports look like. If you're partway through your report already - hopefully you can see this. So this is for a farm which we've set up, and it's this report here, which is the one that you'll be able to get access to.

00:36:20  Basically it runs through the property area, the titles that are included, and it does the breakdown calculations for you. So in this case, the farm has - considering the regional level mappings - 938 hectares of it is LUC one to six and 53 of it's LUC seven to eight. You can see where those are. So this is already helping you start to think about what your planting options and implications might be.

00:36:43  We also further break down this into the LUC one-to-five versus six land. The important distinction here being that LUC six land you can apply for a permit for, [and] LUC one-to-five land you cannot. And then we calculate out what your - firstly, we look at how many distinct titles do you have, are they actually all under the same owner according to the LINZ records? Which are what's going to matter in terms of an individual farm definition.

00:37:04  And then if they are and they're adjacent, what does the result mean in terms of your LUC one-to-six allowance? Now, if this LUC one-to-six number is well in excess of any future post-October 31st 2025 afforestation that you have in mind, then you're probably in quite good shape in terms of your land use flexibility and retention of options.

00:37:31  However, you still need to make sure that all of these potential transfer-of-ownership things don't happen in a way that you are not anticipating and planning for and expecting, because this number can suddenly drop to zero unexpectedly if you follow a pathway that you didn't have in mind. We also show the remaining LUC one-to-six land and then the seven-to-eight land.

00:37:54  And basically, if you think this topic might be relevant to you and you're concerned about whether you're impacted in a particular context, just go to that website I threw out before - carboncrop.com/lucky - and it will repeat most of the information that I've shared over the course of this webinar in a much more context-specific form that will hopefully start to paint the path that you need to follow to get to answers.

00:38:22  From that point on, we anticipate there's a whole bunch of other questions that will start to come up, like: what's my restricted versus unrestricted unforested area? How much of my existing forest is ETS eligible? What would it return? What are my options for silvopastoral forestry and future forest? What are my less productive areas? I won't read these through.

00:38:36  This report is generated using the CarbonCrop platform. These additional features and many others are coming - or already exist or are coming on - the CarbonCrop platform. You may be able to access CarbonCrop, either for yourself or for landowners that you're working with, through their catchment group.

00:38:57  If you can't, and you are interested, you can express your interest again through this portal. So go there and tell us what you need. In a nutshell, I would say that while the funding landscape has changed, funding remains available for most landowners to achieve good outcomes for their farms. The key is that you have to make a plan, figure out the pathways, and understand the future implications of what you might do now.

00:39:27  Thanks very much for your time and attention. I don't know if there have been any questions that came in over the course of this because I can't see the Q&A thing, but I'll stop sharing that and maybe it'll appear. Eliza, have you -

[Eliza]

00:39:41  Thanks. We've got a couple of questions that have come through.

00:39:47  So this first one here from Michelle - what if the person who made a farm-scale LUC map can no longer provide a declaration? Are there alternatives to using farm-scale maps?

[Nick]

00:40:00  I think this is still being explored, but as best we're aware, you would have to get it essentially remapped by someone who is prepared to make a declaration.

00:40:11  It's also unclear how it works if you had the map done by a company, and the company is still around, but the person who did the map is no longer at the company. It may be that the actual person has to make the declaration. So this is a bit of a grey area, but in general - if they can no longer provide it, and you can't get a statutory declaration for that map, you have to get a new map.

00:40:30  It may be though that you can work with a new provider who can look at the map and the basis on which it's been created and go, that looks legit to me, they clearly knew what they're doing, I'm not going to reinvent every part of the wheel, I'm happy to give you a new map on the basis of your current map and I'm happy to sign off on a statutory declaration. But that's going to be at their risk - they're the one who's saying that this map has been prepared in line with the standards. And if they've got concerns about it, they might be a little bit cautious.

00:41:01  So I would say there's not a super easy pathway, but there is likely to be one in some form.

[Eliza]

00:41:10  Awesome. Another question here - for advisors supporting landowners, what information or analysis do you believe are essential before recommending forestry or land use change under the ETS?

[Nick]

00:41:24  Yeah, that's a great question.

00:41:26  There's a lot to consider. The ETS is in many ways a means to an end - it provides money. It doesn't give you a desirable outcome in and of itself. So I think there's sort of like what you want to have and how you're going to achieve it. And the outcome that you're looking for might be a new farm revenue stream - you're just saying, look, I would honestly rather that [land] stay as it is, but it seems that this could be quite a high-yielding activity and I want to transition just part of my farm so that I can get some more money.

00:41:53  But I'd say you have to check the compliance with the relevant national environmental standard provisions and the RMA, any regional constraints. You have to figure out the commercial implications - the cost to implement the activity, including fencing, planting, seedling sourcing, suitable species, survivability.

00:42:24  And then the key ETS part is that you have to figure out the likely yields. So there's the difference between: I'm going to plant a forest on that hill, and: I'm going to plant a forest on that hill and get it registered under the ETS. The latter comes with obligations under the ETS and it also comes with opportunities under the ETS. Both of those things you need to figure out - basically, how much money am I going to get potentially? And what are the uncertainties in relation to that, especially regarding the carbon price when it goes up and down? Obviously that introduces concerns for farmers.

00:43:00  I would say that there are a lot of farmers at the moment where the ETS has been a nice-to-have to an extent - like, if it's there, why not? If it's not, I wanted to do this anyway. I would say that if you only approach it with that attitude though, you're probably going to leave opportunities on the table. Because it is a pretty large revenue generator. And if you are concerned about the commercial risks or the regulatory risks -

00:43:27  That isn't a reason just not to pursue it. It might be a reason to look at potential partnerships with financing developers or similar who effectively take on the regulatory risk while still sharing some of the benefits with you. So in essence - a bunch of financial and permission, planning and modelling, and understanding of risks.

00:43:49  I realise this means a lot of work and complexity, but it's also a high-yield activity. Like if it is the right thing for you, it's often the very right thing for you. And if you don't fully explore it, it's a bit of a missed opportunity.

[Eliza]

00:44:04  Awesome. Another one here from Kurt. There's quite a bit of work going on in the regional LUC space where the NZLRI LUC is being replaced by S-Map alternatives.

00:44:16  Does the legislation talk directly to the NZLRI or just to regional-style LUC mapping products?

[Nick]

00:44:25  That's really interesting and a good question. My recollection is that the legislation specifically mentions the NZLRI LUC map. The alternative to that is a farm-scale map prepared in line with the standards.

00:44:42  Those standards obviously do consider the various soil classifications and other things, so it might be that there's some way to get to a composite. And I know there is work being done on more efficient delivery of high-resolution farm-scale maps. At the moment, I think it is explicitly the NZLRI LUC map or a farm-scale map prepared in line with the standards.

[Eliza]

00:45:07  We have one last question here. Given the structural settings of the ETS have changed, how do you expect the role of forestry - exotic, all native - to evolve in New Zealand's climate strategy over the next five to ten years?

[Nick]

00:45:26  Yeah, it's a very good question. I would say that actually the structural settings of the ETS have not changed particularly much in the last year or two. It's more that certain structural aspects are persisting and they're getting closer to the point that they might start having a significant impact on the supply-demand dynamic.

00:45:48  I am - unapologetically - one of the people who feels that the market significantly overreacted to the recent ETS announcements, which - I make a distinction there between that and the methane announcements, which in my view are quite different. And I was - maybe there's even an under-reaction there.

00:46:06  I think there are two big parts. One is just market confidence and landholder confidence in the ongoing commitment to the ETS, which the current and past governments have all signalled that it remains the key mechanism that they anticipate to help New Zealand meet its climate goals. Beyond that, the structural settings are really how much - oh, and I apologise here.

00:46:27  The structural setting to the ETS that has changed is this one that I've just spent the last 50 minutes going on about - which is, it's become much harder, there are fewer ways to register exotic forest in the ETS. And so when you look at the future climate trajectory projections for New Zealand, many of those assume that there will be a large amount of forest established in addition to the forest that we have today.

00:46:46  And that forest will create a carbon sink into the future, which will offset our emissions and will supply units into the ETS. If afforestation rates drop as a result of either general market confidence or these legislative changes, that's going to suppress supply on balance, and that's going to lead to increased prices - which will encourage increased decarbonisation activity, which will drive reduced demand, which will reduce prices, which will... so it's a really complicated, ongoing dynamic.

00:47:14  I think what we've also seen is that this market's relatively inelastic. In a nutshell though, I would expect the role of forestry that's assumed to reduce in the future under the current settings. So you should be adjusting your expectations - all else being equal - to assume that there's going to be less forest and it's going to deliver less carbon removals and be more reliant on other mechanisms.

00:47:36  All else being equal. There are multiple changes though which could change that - especially if New Zealand became more connected to international markets through some trade mechanism, for example. There was one other one I just - I think we jumped past - around significant queuing or supply-side constraints.

00:47:52  I would say queuing in general - there's the capacity to provide this guidance. I would hope that doesn't create too many constraints. We're trying to automate a lot of it and make it as widely available as we can so farmers can still access the advice without having to wait a lot.

00:48:09  The biggest supply-side constraint really is the one that's mentioned in the question - the permits are only available for 15,000 hectares a year. Recent afforestation has been significantly in excess of that. Whether or not it is this year is an open question, and whether or not it will be next year given the uncertainty is an open question.

00:48:28  But the permits themselves, because they provide optionality, are probably going to be quite valuable to have. And I would expect they'll be oversubscribed. It all comes down to a question of what does it cost to get your hands on one? And how does that cost change depending on whether you do or don't use it.

00:48:43  So yeah, the LUC six permits I'd say are the main thing where there's likely to be queuing.

[Eliza]

00:48:50  Awesome. We've just got one last question here from Sally. How does space-planted poplar and willow get affected, or the feasibility of entering the ETS? Are there any loopholes?

[Nick]

00:49:03  Yep. So space-planted, or any kind of - so to get into the ETS, you have to meet the definition of forest.

00:49:12  The definition of forest has an area constraint and the canopy cover constraint. The canopy cover constraint is 30%, so your trees have to exceed 30% canopy cover once they grow to maturity. Other than that, you can plant them in whatever density and configuration you like, in whatever combination of species you like, as long as they hit that threshold.

00:49:33  So space-planted poplars are very common historically as an erosion control and even a shade species and a fodder species. You could do space-planted tōtara, you could do space-planted mānuka, you could do space-planted eucalypts. You just have to hit these key thresholds.

00:49:52  To the extent that your space-planted or otherwise species are predominantly exotic, they are affected by this legislation the same as any other exotic forest. A key difference though is that often space planting is done for erosion control purposes, and if your regional or district council created an erosion risk map that designated the area you're looking at doing the space planting [in] as either high or severe erosion risk, then -

00:50:16  It's not because they're space-planted species, it's just that they're on high erosion risk land. You get access to this pathway and I think there'll probably be, once that matures, quite a lot of opportunities there. Because often people plant space plantings on areas where they're concerned about erosion.

00:50:32  In the fullness of time, you'd expect some correspondence. But for climate mitigation, space planting for sort of other local climate benefits like shade or alternative fodder is becoming quite common, and that won't necessarily be on erosion-prone land. There, it's effectively no different to any other forest as far as this registration pathway is [concerned].

00:50:53  A key thing is - how's the yield? Like how much carbon are you going to get for space-planted forests in the future? That's where there may be changes.

[Eliza]

00:51:03  Awesome. Thank you so much, Nick. That was all the questions that have come through today. But thank you everyone for staying tuned in. This webinar was recorded and it will be available on the NZARM website by the end of the week. I just want to thank you again, Nick, for your time and everyone else for joining in.

00:51:24  Thank -

[Nick]

00:51:24  No, my pleasure. I just want to say thanks to everybody for the flood of applications - we'll get those out to you as quickly as we can. Cheers all, and thanks a lot for the opportunity, Eliza. Really appreciate it.