From 1 Jan 2023, MPI is going to introduce a new forest category in the ETS: the permanent forest category. Forests in this category cannot be clear-felled for at least 50 years but they can earn credits as long as they continue to sequester carbon (up to 50 years old for radiata pine and indigenous forest under MPI's existing lookup tables, but the expectation is that these will be extended).
Forests in the permanent category can likely be either indigenous or exotic, although the NZ Government has still not decided on its exact plan for exotic permanent forests in the ETS. The almost-confirmation that the permanent category will still be open to exotics from 2023 was a big change in direction by the Government and is a lifeline for exotic forests that are past their average age or are second rotation forests so wouldn't earn anything under averaging.
"...it is unlikely that we will propose closing the permanent category to exotics on 1 January 2023"
Extract from letter from Hon James Shaw and Hon Stewart Nash, 28 July 2022
Registering your forest as permanent in the ETS can be a great option if you are not planning on harvesting it. Especially for regenerating indigenous forest, which is likely to continue to sequester carbon for hundreds of years, the permanent category allows you to be rewarded for all ongoing carbon sequestration and comes with very little downside as the Forest Act will prevent you from clear-felling your forest anyway. Either way though, along with the benefits it's important you are aware of your obligations and options for the forest after the 50-year initial registration period.
First and foremost, forests in the permanent category need to remain in this category for 50 years, regardless of their age.
MPI advises you have three options after the 50-year term is up, regardless of whether you have natives or exotics. It might seem like you have choices, but for most, there’s really not much choice at all if you consider the financial implications of those choices.
Options after the 50-year period ends
When the 50-year permanent forest period ends, you have 3 options:
1 Keep the forest land in the permanent category for another 25 years
You can opt to keep your forest in the permanent category for another 25 years. This means you will continue to earn units until your forest reaches maturity and is no longer sucking up more carbon. You will use stock change accounting, and if you stay in the permanent category, you must choose between these 3 options again after 25 years.
2 Move to the standard forestry category with averaging accounting
You can move your forest to the standard post-1989 category with averaging accounting. As your forest will be at least 50 years old by this time, it will already have passed its average age. You will have earned more units than you are entitled to for the forest under averaging accounting and you’ll have to pay back the credits earned for the forest down to its average age. You can harvest your forest, so long as you replant.
3 Remove the forest from the ETS
At the end of the 50 years, you can remove your forest land from the ETS. If you choose this, you must pay the "unit balance" of the land, which is the total units earned by the forest.
You can leave, but you have to surrender your units
The most important thing for you to realise is the hefty cost of Options 2 and 3. While at the end of the 50-year period you have the option of leaving the ETS (and hence being free of its restrictions), you must also reimburse the units issued for that forest.
For a 30-hectare indigenous forest, deregistering from Permanent after 50 years will cost you around $1 million*
So sure, there's no 'obligation', but that’s an enormous bill.
Add to this that after 50 years of growth, your regenerating native forest will almost certainly be at a stage protected under the Forests Act 1949, so you still won't be able to clear it (unless you also get a sustainable forest management permit from MPI).
So you do have options, but in practical terms, in most cases, Option 1 is really the only option - extending for another 25 years. From an economic point of view, there is no 'walk away clean and clear with no costs and no strings after 50 years' option.
Permanent means permanent.
If you’re looking at the permanent category, we can help you understand the specific costs for your forest. Find out what you’ve got, and what it’s worth. For free.
* 50 year indigenous carbon stock based on the MPI lookup tables is around 323 NZU per hectare, and at current prices around $30,000 per hectare.