Exiting the ETS
What if you change your mind? Carbon farming is voluntary for post-1989 forest — you can exit. But it’s not free. Understanding the exit process and costs helps you make informed decisions from the start.
Can You Exit?
Post-1989 Standard Forestry (Averaging)
Yes, you can exit at any time.
But you must surrender all units received for the land being removed.
Post-1989 Permanent Forestry
Restricted. You committed to 50 years of no clear-felling.
Exit options:
- Before 50 years: Surrender all units received, plus penalty units
- After 50 years: Exit with unit surrender, or transition to averaging
Pre-1990 Forest Land
Different rules. Pre-1990 forest is automatically in the ETS — you can’t “exit” in the same way. Deforestation triggers liability regardless.
The Exit Process
Step 1: Decide to Exit
Consider carefully:
- Why are you exiting?
- What are the costs?
- Are there alternatives?
Step 2: Apply to Deregister
Through Tupu-ake (MPI’s ETS online system):
- Log in
- Select “Apply to join or leave the ETS”
- Choose “Apply to deregister”
- Select your forest type
- Complete the application
Fee: $577.50 (excluding GST)
Step 3: File Final Emissions Return
Calculate carbon stock to the date of deregistration:
- Submit final emissions return
- This determines your final unit balance
Step 4: Surrender Units
The EPA will contact you with:
- How many units you must surrender
- Instructions for surrendering
- Deadline for compliance
You must transfer the required NZUs to the Crown’s holding account.
Step 5: Notify Interested Parties
Tell anyone with an interest in the land:
- Forestry right holders
- Lease holders
- The landowner (if you’re the rights holder)
What It Costs
Unit Surrender
You must return all units received for the land:
Example:
- Forest registered 10 years ago
- Received 5,000 NZUs over that period
- Sold 4,000 NZUs at various prices
- Still hold 1,000 NZUs
To exit:
- Surrender all 5,000 NZUs
- You have 1,000 in your account
- Must purchase 4,000 on the market
At $65/NZU, buying 4,000 units costs $260,000.
Deregistration Fee
$577.50 + GST
Professional Costs
If using a consultant:
- Final emissions return preparation
- Deregistration application assistance
- Advice on the process
Typically $1,000-3,000
Potential Penalties
If you haven’t been compliant:
- Outstanding returns may need filing
- Penalties for late filing
- Interest on late surrenders
Permanent Forestry Exit
Before 50 Years
If you exit permanent forestry before the 50-year commitment:
- Surrender all units received
- Plus additional penalty units
The penalty units reduce over time — the longer you’ve been in, the less you pay.
This can be extremely expensive.
After 50 Years
At 50 years, you have options:
- Extend for another 25 years
- Transition to averaging — repay the difference between permanent and averaging credits
- Exit completely — repay all units received
Before Committing
Think very carefully before choosing permanent forestry. The 50-year commitment is real and binding.
Alternatives to Full Exit
Remove Only Part of Your Land
You don’t have to deregister everything:
- Remove specific Carbon Accounting Areas
- Keep others registered
- Pay units only for removed areas
Transition Between Categories
If circumstances change:
- Permanent can transition to averaging (after 50 years)
- Different accounting methods available for new registrations
Sell Rather Than Exit
If you no longer want to manage carbon:
- Sell the land with ETS registration intact
- Buyer assumes ongoing participation
- You receive value for carbon position
Why People Exit
Change of Plans
- Decided to develop the land
- Want to return to farming
- Life circumstances changed
Economic Reasons
- Carbon prices dropped
- Costs exceed benefits
- Better use for the land
Compliance Burden
- Administration too onerous
- Rules too complex
- Tired of the hassle
Mistakes
- Registered without understanding obligations
- Didn’t realize permanent meant permanent
- Underestimated costs
Before You Exit: Think Carefully
Don’t Exit in Panic
If carbon prices drop:
- They may recover
- You don’t have to sell units
- Banking indefinitely is allowed
Consider the Long Term
Forests continue to exist even if not in ETS:
- You still own the trees
- Timber value remains
- Could re-register later
Calculate Full Costs
Include:
- Unit purchase costs (at today’s price)
- Fees
- Professional costs
- Opportunity cost of future credits
- Tax implications
Is There Another Way?
- Could you sell units gradually?
- Could you hold and wait?
- Could you sell the property?
- Could you remove only part?
If You Must Exit
Plan Ahead
- Monitor your unit balance
- Don’t sell more units than you can repurchase
- Build a reserve for potential exit
- Understand your position
Timing Matters
Unit prices fluctuate:
- Exiting when prices are high costs more
- Exiting when prices are low costs less
- But you can’t control the market
Get Advice
Before committing to exit:
- Consult a carbon advisor
- Understand all costs
- Consider alternatives
- Make an informed decision
Re-entering Later
Can You Come Back?
Yes, if the land remains eligible:
- Post-1989 status doesn’t change
- Can register again
- New registration under current rules (averaging from 2023)
Implications
If you exit and re-enter:
- Previous units surrendered are gone
- Start fresh under new accounting
- May miss years of carbon accumulation
- Rules may have changed
Generally, it’s better to stay in than to exit and re-enter.
Key Takeaways
- Exit is possible — But not free for post-1989 standard
- You surrender all units received — Even if you sold them
- Permanent forestry exit is expensive — Penalty units apply before 50 years
- Calculate total costs — Unit purchases, fees, professional costs
- Consider alternatives — Partial exit, selling, waiting
- Plan from the start — Don’t over-sell units if you might exit