Averaging vs Stock Change Accounting

Since January 2023, the ETS offers two carbon accounting methods for post-1989 forests. Understanding the difference is crucial for choosing the right pathway.

The Two Approaches

Stock Change Accounting

The original method. You earn units as the forest grows and surrender units when carbon stock decreases (e.g., at harvest).

The principle: Actual carbon in = units received. Actual carbon out = units surrendered.

Averaging Accounting

The new default for standard forestry. You earn units up to the forest’s “average” carbon stock over multiple harvest rotations.

The principle: Earn to the long-term average, then no more earning or surrendering — as long as you replant after harvest.

How Averaging Works

Imagine growing pine trees over multiple rotations:

Rotation 1: Trees grow → harvested at age 28
Rotation 2: Replant → trees grow → harvested at age 28
Rotation 3: Replant → trees grow → harvested at age 28
... and so on

Over many rotations, the average carbon stored on the land is roughly equivalent to a forest at around age 16-17 (for radiata pine). That’s the “averaging age.”

Under averaging:

• You earn units as the forest grows toward the averaging age
• Once you reach averaging, you stop earning
• At harvest, you don’t surrender units (the average is maintained by replanting)
• Replant, and the cycle continues

Practical Comparison

Example: 10 hectares of Radiata Pine

Under Stock Change (Permanent):

Under Averaging:

The averaging forest keeps units at harvest because the long-term average is maintained.

When Each Method Applies

Averaging Accounting

• Default for: Standard (non-permanent) post-1989 forests from 2023
• Required for: All new standard registrations
• Best for: Forests that will be harvested and replanted

Stock Change Accounting

• Required for: Permanent forest category
• Historical forests: Pre-2023 registered forests (unless transitioned)
• Best for: Forests that won’t be harvested

Advantages of Averaging

1. No Harvest Liability (if you replant)

The big benefit. You don’t have to surrender units at harvest as long as you replant. This removes a major financial risk from production forestry.

2. Simpler Planning

You know roughly how many units you’ll earn (to the averaging age). No need to worry about saving units for future harvest liability.

3. Tradeable Credits

Units earned under averaging aren’t encumbered by future surrender obligations. You can sell them freely without worrying about paying them back.

4. Flexibility

If you choose to leave the ETS later, you only surrender net units received (capped at what you earned).

Advantages of Stock Change

1. Higher Total Credits

If you won’t harvest, stock change earns more units over the forest’s life. No averaging cap means earning continues as long as carbon stock increases.

2. Full Recognition

Every tonne of carbon stored is credited. No “average” discount on your actual sequestration.

3. Suited to Permanence

For forests that genuinely won’t be felled, stock change makes sense. The “liability at harvest” issue doesn’t arise.

The Averaging Age

The averaging age varies by species and region. For radiata pine, it’s approximately 16-17 years. This is when the forest reaches its long-term average carbon stock.

After reaching averaging age, the forest stops earning additional units (but also doesn’t surrender any at harvest, provided you replant).

Transitioning from Old Rules

Forests registered before 2023 were on stock change accounting. Owners have options:

Stay on Stock Change

Continue earning and surrendering as before. Surrender liability at harvest remains.

Transition to Averaging

Apply to switch. MPI will calculate your units earned to date versus the averaging position. You may need to surrender excess units, or may receive additional units to reach the average.

This is a one-way transition — you can’t go back to stock change for standard forestry.

Decision Framework

Choose Averaging if:

• You plan to harvest for timber
• You want to sell carbon units without ongoing liability
• You prefer simplicity and certainty
• Commercial production forestry

Choose Stock Change (Permanent) if:

• You won’t harvest the forest
• Native forest or regeneration
• Conservation or biodiversity focus
• Maximum carbon credit income is the priority
• You’re comfortable with a 50-year commitment

Second Rotation and Older Forests

Critical: If your forest is already past the averaging age, or is on its second (or later) rotation, averaging accounting provides little to no benefit.

Why Second Rotation Forests Don’t Earn

Under averaging, you earn units until the forest reaches its average carbon stock. If you’re registering a forest that’s:

• Already past averaging age (e.g., 20-year-old radiata pine)
• On its second or subsequent rotation

…you’re already at or past the “average.” There’s nothing to earn.

The Problem for Land Buyers

If you buy land with an existing mature exotic plantation or second rotation forest:

• Under averaging: Zero or minimal units to earn
• Under stock change (sawtooth): Could earn on multiple rotations — but this option closed on 31 December 2022

This is a significant trap for buyers. A 25-year-old unregistered pine forest might look like a carbon opportunity, but under current rules, you’d earn almost nothing.

What This Means Practically

Before Buying “Carbon Land”

If you’re purchasing land specifically for carbon:

1. Check if forest is already registered (and under which accounting method)
2. Determine rotation status (first, second, or later)
3. Estimate actual earning potential under averaging
4. Don’t assume all forest = carbon income

Second rotation forests still have timber value, but carbon value under current rules is limited.

Common Questions

”Can I earn units past the averaging age?”

No. Once you reach the averaging carbon stock, you stop earning for that area.

”What if I don’t replant after harvest?”

You’ll need to surrender units — because you’re no longer maintaining the average. The land would be treated as deforested.

”Can I switch a permanent forest to averaging?”

Not really. The permanent category uses stock change accounting. Leaving the permanent category triggers penalties.

”What if my forest grows better than the lookup tables?”

Under averaging, you earn to the standard tables regardless of actual growth. Faster growth doesn’t mean more units.

”What about partial harvest?”

The rules apply to each Carbon Accounting Area. If you harvest part of a block, that area’s carbon stock decreases. How this is handled depends on your accounting method and registration structure.

Key Takeaways

1. Averaging = no harvest liability (if you replant)
2. Stock change = full credits but surrender at harvest
3. Averaging is the default for standard forestry from 2023
4. Stock change is required for permanent forest category
5. Averaging age determines when you stop earning
6. Choose based on your plans — harvest or permanence?

Next Steps

• The Permanent Forest Category
• Choosing Your Species
• Talk to us about your options