Glossary of Terms

Carbon farming comes with its own vocabulary. This glossary explains the key terms you’ll encounter.

A

Allocation

The issuance of NZUs to forestry participants based on carbon stock increases in their registered forest.

Averaging Accounting

A carbon accounting method (from 2023) where credits are earned to the forest’s average carbon stock over multiple rotations. No surrender required at harvest if you replant.

Averaging Age

The age at which a forest reaches its long-term average carbon stock under averaging accounting. Approximately 16-17 years for radiata pine.

B

Banking

Holding NZUs in your account rather than selling or surrendering them. Units don’t expire and can be banked indefinitely.

Biogenic Methane

Methane emissions from biological sources, primarily livestock digestion and manure. Subject to separate (lower) reduction targets under NZ law.

C

CAA (Carbon Accounting Area)

A defined area of forest that is the unit for carbon calculations. Each CAA contains forest of similar type and age.

Cap

The limit on total emissions units in the system. The government sets the cap, which determines overall supply.

Carbon Credit

A tradeable unit representing the right to emit (or storage of) one tonne of CO₂ equivalent. In NZ, this is the NZU.

Carbon Farming

Managing land to sequester carbon and earn carbon credits through the ETS.

Carbon Look-up Table

Pre-calculated tables showing carbon stock by forest type, age, and region. Used for forests under 100 hectares.

Carbon Stock

The total amount of carbon stored in a forest, measured in tonnes of CO₂ equivalent.

Climate Change Commission

An independent Crown entity that advises the government on climate policy, including ETS settings.

Compliance

Meeting legal obligations under the ETS, including filing returns, surrendering units, and keeping records.

Cost Containment Reserve (CCR)

A reserve of additional units that can be released if prices spike above a trigger level. Creates a soft price ceiling.

D

Deforestation

Converting forest land to another use (pasture, development, etc.) or failing to meet forest thresholds after harvest.

Dothistroma

A fungal disease (Dothistroma needle blight) affecting radiata pine, causing needle loss and reduced growth.

E

Emissions Budget

A cap on total emissions for a five-year period, set by the government on advice from the Climate Change Commission.

Emissions Return

A formal report filed with MPI showing changes in carbon stock for registered forest areas.

Emissions Trading Scheme (ETS)

New Zealand’s market-based system for pricing carbon emissions and incentivising reductions/removals.

EPA (Environmental Protection Authority)

The agency that manages the NZ Emissions Trading Register (NZETR) where carbon units are held and transferred.

F

Field Measurement Approach (FMA)

A method of calculating carbon stock through actual forest measurements rather than lookup tables. Required for forests over 100 hectares.

Forestry Right

A registered right to establish and manage a forest on someone else’s land, which may include rights to carbon credits.

Free Allocation

NZUs given to certain participants (historically including pre-1990 forest owners and emissions-intensive industries) without payment.

G

GHG (Greenhouse Gas)

Gases that trap heat in the atmosphere. In the ETS context, primarily CO₂, methane, and nitrous oxide.

H

Harvest Liability

The obligation to surrender NZUs when harvesting registered forest (applies under stock change accounting; not under averaging if replanting).

Holding Account

An account in the NZETR where your NZUs are stored.

I

Indigenous Forest

Forest of native New Zealand species. Also called “native forest.”

Infringement Fee

A monetary penalty for minor breaches of ETS rules.

K

Kyoto Protocol

The international climate agreement (1997) that established the framework for carbon accounting and trading that NZ’s system draws from.

L

LUC (Land Use Capability)

A classification system for land based on its productive potential. Classes 1-8, with 1 being most versatile. LUC restrictions limit exotic forestry registration on classes 1-6.

Lookup Table

See “Carbon Look-up Table.”

M

MER (Mandatory Emissions Return)

An emissions return that must be filed at least every five years (or more frequently if you choose).

MPI (Ministry for Primary Industries)

The government agency that manages forestry participation in the ETS.

N

NDC (Nationally Determined Contribution)

New Zealand’s international commitment under the Paris Agreement for emissions reductions.

Net-Zero

A state where emissions are balanced by removals, achieving no net addition to atmospheric greenhouse gases.

NZEUR (NZ Emissions Unit Register)

See “NZETR.”

NZETR (NZ Emissions Trading Register)

The online register managed by the EPA where NZU holdings and transfers are recorded.

NZU (New Zealand Unit)

New Zealand’s carbon credit unit. One NZU represents one tonne of CO₂ equivalent.

P

Permanent Forest Category

A registration pathway for forests committed to no clear-felling for at least 50 years. Uses stock change accounting.

PFSI (Permanent Forest Sink Initiative)

An earlier scheme (from 2006) allowing permanent forest registration. Largely superseded by the current permanent category.

Post-1989 Forest

Forest established after 31 December 1989 on land that was not forest at that date. Eligible for voluntary ETS registration.

Pre-1990 Forest

Forest that existed on 31 December 1989. Not eligible for earning credits, but deforestation triggers liabilities.

R

Radiata Pine

Pinus radiata, the dominant commercial forestry species in New Zealand.

Reserve Price

The minimum price at which the government will sell NZUs at auction. Also called “auction reserve price.”

S

Sequestration

The process by which forests absorb CO₂ from the atmosphere and store it as carbon in biomass.

Stock Change Accounting

A carbon accounting method where credits are earned as carbon stock increases and surrendered when stock decreases (e.g., at harvest). Required for permanent forests.

Surrender

Returning NZUs to the government to meet obligations (e.g., covering emissions or forest carbon decreases).

T

TAES (Temporary Adverse Event Suspension)

An exemption from surrender obligations when forest is damaged by natural events (fire, storm, etc.), provided replanting occurs within four years.

tCO₂e

Tonnes of carbon dioxide equivalent — the standard unit for measuring greenhouse gas emissions and carbon storage.

Trading Stock

For tax purposes, NZUs are treated as trading stock, affecting how they’re valued and taxed.

U

Unit

Short for NZU — a carbon credit unit.

V

Voluntary Market

Carbon credit markets outside compliance schemes, where buyers purchase credits voluntarily for offsetting. Distinct from NZ ETS compliance market.

W

Windthrow

Tree damage caused by high winds, where trees are uprooted or broken. A risk for plantation forests on exposed sites.

Z

Zero Carbon Act

The Climate Change Response (Zero Carbon) Amendment Act 2019, which established NZ’s net-zero 2050 target and the Climate Change Commission.

Quick Reference

Need More Help?

If you encounter terms not covered here or need clarification, get in touch. We’re happy to explain.