2025 Legislative Changes

The Climate Change Response (Emissions Trading Scheme – Forestry Conversions) Amendment Act 2025 represents the most significant change to forestry in the ETS since averaging accounting was introduced. If you’re involved in carbon farming, you need to understand these changes.

The Big Picture

On 23 September 2025, new legislation came into effect that fundamentally restricts exotic forestry registration on productive farmland. The law aims to address concerns about widespread conversion of farmland to forestry — particularly “carbon farming” with exotic species.

Effective date: 31 October 2025

Key impact: Landowners can no longer freely register exotic forests on LUC class 1-6 land in the ETS.

What Changed

Before October 2025

• No restrictions on registering post-1989 exotic forest in the ETS
• Any eligible land could be planted and registered
• LUC classification didn’t affect ETS eligibility

After October 2025

• LUC 1-5 land: Effective moratorium on exotic forestry registration
• LUC 6 land: Limited to national ballot system (15,000 ha/year)
• LUC 7-8 land: No restrictions (continue as before)
• Native forestry: No restrictions on any LUC class

LUC Restrictions Explained

What is LUC?

Land Use Capability (LUC) is a classification system rating land from 1-8:

The 25% Allowance

Landowners may still register up to 25% of their LUC class 1-6 land as exotic forest, calculated as a quarter of all such land within the farm boundary.

Example: If you have 100 hectares of LUC 1-6 land, you can register up to 25 hectares in exotic forestry.

The LUC 6 Ballot

For LUC class 6 land beyond the 25% allowance:

• 15,000 hectares available nationally per year
• Allocated through annual ballot
• Competitive — not guaranteed
• Application process through MPI

Exemptions

The legislation includes several important exemptions:

1. Transitional Exemption

For those who made qualifying forestry investments between 1 January 2021 and 4 December 2024:

• Must provide evidence of qualifying investment
• Must lodge complete ETS application by 31 December 2027
• Investment evidence requirements are specific — consult MPI guidance

2. Māori Land Exemption

Land exempt if it is:

• Governed by Te Ture Whenua Māori Act 1993
• Changed to general land under the Māori Affairs Amendment Act 1967
• Part of a Treaty settlement

This exemption recognises Treaty obligations and ensures Māori landowners retain economic development options.

3. Unfarmed Land

Land not currently farmed may qualify for exemption. Specific criteria apply — check MPI guidance.

4. Erosion-Prone Land

Land classified as high or severe erosion-prone may be exempt, recognising the environmental benefits of stabilising such land with forestry.

5. Offsetting Land

Land used for pre-1990 offsetting arrangements retains its offsetting eligibility.

6. Crown Land

Crown-owned land designated for afforestation remains eligible.

Impact on Different Landowners

Large-Scale Carbon Investors

• Must focus on LUC 7-8 land or native forestry
• Existing investments under transitional provisions may proceed
• Business models may need adjustment

Farmers Diversifying

• 25% allowance provides opportunity for marginal areas
• Native forestry remains fully available
• Consider permanent forest options for steep areas

Māori Landowners

• Exemptions restore options previously available
• Can continue pursuing forestry and carbon farming
• Treaty-based recognition embedded in law

Those Mid-Investment

• Transitional provisions protect existing investments
• Critical to meet December 2027 deadline
• Document evidence of qualifying investment now

Practical Steps

1. Check Your LUC Classification

• Contact your regional council
• Review S-Map or LUC maps
• Understand which classes apply to your land

2. Assess Your Options

• Calculate 25% allowance if applicable
• Consider native forestry (no LUC restrictions)
• Evaluate LUC 7-8 areas on your property

3. For Transitional Claims

• Gather evidence of investments made 2021-2024
• Prepare ETS application well before deadline
• Seek professional advice on documentation requirements

4. For Māori Land

• Confirm exemption eligibility
• Consider how this changes your options
• Engage with relevant trusts or incorporations

Native Forestry Advantage

One clear outcome of these changes: native forestry has a significant policy advantage.

• No LUC restrictions whatsoever
• Permanent forest category remains available
• Biodiversity co-benefits align with government direction
• Lower policy risk going forward

For landowners on LUC 1-6 land, native regeneration or planting may now be the most practical carbon farming pathway.

Annual Fees Update

Alongside these changes, the government reduced annual ETS participation fees:

This 50% reduction followed industry challenges and an independent review of MPI’s cost recovery model.

What Hasn’t Changed

Important continuities:

• Averaging accounting continues as before
• Stock change accounting for permanent forests unchanged
• Carbon lookup tables still apply (updates being developed)
• Compliance obligations remain the same
• Trading and surrendering NZUs unchanged
• LUC 7-8 land fully available for exotic forestry

Timeline Summary

Key Takeaways

1. Exotic forestry on productive land is now restricted — this is a fundamental change
2. Māori land has explicit exemptions — Treaty obligations recognised
3. Native forestry has no restrictions — policy favours indigenous species
4. Transitional provisions exist — but deadlines are firm
5. LUC 7-8 land remains available — focus shifts to less productive land
6. Annual fees reduced — ongoing costs lower for participants

Next Steps

• Eligibility: Post-1989 Forest Land
• Native Forestry & Regeneration
• Māori Land & Carbon Farming
• Contact us about your options