Harvest Liabilities & Deforestation

One of the most misunderstood aspects of carbon farming is what happens when trees are harvested or forest is removed. Understanding these liabilities is essential before registering.

The Core Principle

Carbon credits represent stored carbon. If that carbon is released — through harvest, fire, or land-use change — the credits must be accounted for. This is the “liability” side of the carbon ledger.

Harvesting Registered Forest

Under Averaging Accounting (Standard Forestry)

The good news: No surrender required at harvest, provided you replant.

This is the major benefit of averaging accounting introduced in 2023. Because you only earn credits to the “average” carbon level, you don’t owe anything back when you harvest — as long as you replant and maintain the average over time.

Example:

The averaging system assumes the land will continue cycling through plantation rotations, maintaining the long-term average.

Under Stock Change Accounting (Permanent Category or Pre-2023)

Different story: You must surrender units when carbon stock decreases.

Under stock change, you earn credits for actual carbon stored. When you harvest, that carbon is released, so you surrender units.

Example:

For permanent forests, this is academic — clear-felling triggers severe penalties beyond just unit surrender. But for pre-2023 registrations still on stock change, harvest liability is a real consideration.

What “Replant” Means

Under averaging, you avoid surrender by replanting. But there are specific requirements:

Stocking thresholds:

If you fail to meet these thresholds, the land may be treated as “deforested.”

Deforestation

What Counts as Deforestation?

Your land is “deforested” if you:

Deforestation Liabilities

If you deforest registered post-1989 land, you must surrender:

The formula ensures you can’t pocket carbon credits and then convert the land.

Example:

If you’ve sold those units, you’ll need to buy them back at current market prices.

Deforestation vs Harvest

SituationAveragingStock Change
Harvest + replantNo surrenderSurrender all
Harvest + no replantSurrender net unitsSurrender all + penalties
Convert to other useSurrender net unitsSurrender all + penalties

The key distinction: replanting maintains eligibility; failure to replant or conversion triggers liabilities.

Permanent Forest Penalties

Clear-felling permanent forest within 50 years triggers severe consequences:

  1. Surrender all units earned for the affected area
  2. Pay additional penalty units (potentially 1.5× or more)
  3. Land barred from permanent category re-registration

The penalties are designed to make clear-felling economically irrational.

When It’s Allowed

Permanent forests can be selectively harvested:

But systematic removal that changes land use is not allowed.

Pre-1990 Forest Deforestation

Different rules apply to pre-1990 forest (forest that existed on 31 December 1989):

This applies even if you never voluntarily joined the ETS. Removing pre-1990 forest triggers obligations automatically.

Pre-1990 Deforestation Exemptions

Several exemptions exist that may allow deforestation without liability:

1. Small Area Clearing for Best Practice You can clear small areas without liability if you’re clearing for legitimate forest management purposes. Must report if clearing more than 2 hectares within a mandatory emissions return period.

2. Harvesting (Not Deforestation) Harvesting pre-1990 forest and replanting does not trigger deforestation liability. Only conversion to non-forest use creates liability.

3. Less Than 50 Hectare Exemption Land may qualify if the owner (and associated persons) owned less than 50 hectares of pre-1990 forest land as at 1 September 2007. Applications officially closed in 2011, but MPI may still consider submissions.

4. Tree Weed Exemption If exotic “tree weeds” (e.g., wilding pines) meet the definition of pre-1990 forest, you can apply for an exemption to clear them without liability. The exemption cannot be applied retrospectively to clearing already done.

5. Natural Events If a natural event (river course change, etc.) permanently prevents forest re-establishment, you’re not liable.

6. Heritage Covenant Exemption If a Heritage New Zealand covenant or authority requires deforestation, an exemption applies.

7. Pre-1990 Offsetting You can avoid liability by establishing a carbon-equivalent forest elsewhere — “offsetting.” The new forest must cover at least equivalent area and sequester equivalent carbon.

Note: Indigenous forest that was native forest on 31 December 1989 and remained native forest on 31 December 2007 is not pre-1990 forest land under the ETS — it’s excluded entirely.

Temporary Adverse Events

The Exemption

If your forest is damaged by fire, storm, or other natural disaster, you may qualify for a Temporary Adverse Event Suspension (TAES).

This exemption:

How It Works

  1. Event damages your forest (fire, cyclone, etc.)
  2. Apply to MPI for TAES
  3. If approved, no surrender required for damaged area
  4. Replant within 4 years
  5. Area stops earning until it reaches pre-event carbon stock
  6. Then normal earning resumes

This protects you from punishing liabilities for events beyond your control.

What Qualifies

Generally covered:

Not covered:

Managing Harvest Liability Risk

Under Averaging

Risk is low if you plan to replant. Key risks:

Mitigation: Commit to the replanting cycle. Have contingency plans.

Under Stock Change (Pre-2023 Registrations)

If you’re still on stock change accounting, consider:

Mitigation: Don’t sell all units. Keep a buffer equal to potential harvest liability.

Permanent Category

Risk is commitment-based:

Mitigation: Only use permanent for genuinely permanent forests.

Practical Scenarios

Scenario 1: Standard Pine Plantation

Averaging accounting, plan to harvest at 28 years

Scenario 2: Native Regeneration

Permanent category, never planning to clear

Scenario 3: Changed Circumstances

Registered, earned 3,000 units, sold 2,500, now want to convert to pasture

This is why understanding liabilities before selling is crucial.

Key Takeaways

  1. Averaging = no harvest liability (if you replant)
  2. Stock change = surrender at harvest
  3. Deforestation = surrender all net units
  4. Permanent = severe penalties for clear-felling
  5. Temporary adverse events = potential exemption
  6. Pre-1990 deforestation triggers liabilities even if not registered

Next Steps

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