Legal Considerations & Contracts

Carbon farming involves legal frameworks that interact with land ownership, forestry rights, and contractual arrangements. Getting the legal structure right protects your interests and avoids costly disputes.

Who Can Register?

Landowners

The most straightforward case. If you own the land freehold, you have the right to register it in the ETS (subject to eligibility rules).

Forestry Right Holders

If you hold a registered forestry right over someone else’s land, you may be able to register the forest — but only with the landowner’s written consent.

The Forestry Rights Registration Act 1983 allows forestry rights to include rights to carbon credits. The right document should specify:

Leaseholders

Long-term lease holders may register forest if:

Short-term or uncertain leases are problematic for carbon registration because of long-term obligations.

Conservation Covenants (QEII and Others)

Having a QEII National Trust or other conservation covenant does not prevent you from earning carbon credits. The two can work together.

Key points:

Eligibility for covenanted land:

Example: A landowner on Banks Peninsula with a 26-hectare QEII covenant established in 1992 successfully registered 12.2 hectares of eligible post-1989 regeneration in the ETS.

Permanent Forest Sink Initiative (PFSI) Some landowners have used covenants in combination with the PFSI (predecessor to permanent forest category). PFSI covenants protect the forest for at least 50 years — essentially a carbon conservation covenant with particular appeal for indigenous forest owners with conservation objectives.

Adding further protection: You can register forest in the ETS and add a QEII covenant. The covenant is registered against the land title, ensuring the forest remains protected across generations and ownership changes. This provides dual protection — ETS participation plus permanent conservation status.

Check your covenant terms or contact the covenant holder.

Forestry Rights

The Forestry Rights Registration Act

This Act creates a special type of property right for forestry. A forestry right:

Creating a Forestry Right

If you want to grant someone else the right to establish and manage a forest on your land (and potentially claim the carbon), you’ll need:

Key Terms to Address

Any forestry right involving carbon should specify:

Carbon-Specific Rights

Some arrangements are purely about carbon (not timber). These “carbon rights” should clearly state:

Land Transactions

Buying Land with Registered Forest

When purchasing land with ETS-registered forest, due diligence should include:

Check the register:

Understand liabilities:

Agreement terms:

Selling Land with Registered Forest

As a seller, consider:

Standard Contract Clauses

Sale agreements for ETS-registered land should include:

Contracts for Carbon Farming

Forest Management Agreements

If someone else manages your carbon forest, your agreement should cover:

Carbon Aggregation Agreements

Some landowners join schemes where carbon is managed collectively:

Understand:

Marketing Agreements

Agreements to sell carbon units to a specific buyer should specify:

Iwi and Māori Land Considerations

Māori Freehold Land

Carbon farming on Māori freehold land involves additional considerations:

Treaty Settlement Land

Post-settlement land may have specific restrictions or obligations regarding use and disposal.

Crown Forestry Licenses

Some Māori land is subject to Crown forestry licenses that affect carbon rights.

Getting Advice

Specialist legal advice is essential for carbon farming on Māori land. Te Uru Rākau and MPI have specific guidance.

Insurance and Liability

Carbon Liability Insurance

Insurance products exist to cover ETS surrender liabilities from events like:

However, the introduction of temporary adverse event exemptions has reduced demand for this cover. Fewer insurers now offer it.

General Forest Insurance

Standard forestry insurance covers timber value but may not address carbon liabilities. Check your policy carefully.

Public Liability

If you’re establishing or managing forests, public liability insurance protects against:

Permanent Forestry and Covenants

Forest Sink Covenants

The permanent forest category can involve registering a covenant on the title. This:

50-Year Commitment

The permanent category requires no clear-felling for 50 years. Breaking this commitment creates:

The Crown can enforce permanent forest commitments. Consider carefully before making this commitment.

Dispute Resolution

Common Disputes

Carbon farming disputes arise from:

Resolution Options

Prevention

Clear, comprehensive documentation prevents most disputes. Don’t rely on verbal agreements or assumptions.

Appeals Against MPI Decisions

Requesting a Review

If MPI makes a decision about your forest land that you disagree with:

  1. Request a review under section 144 of the Climate Change Response Act 2002
  2. Submit through Tupu-ake (MPI’s ETS online system)
  3. MPI will reconsider — this is your right under the Act

Note: You cannot request a review of an emissions ruling outcome.

Court Appeals

If the review doesn’t resolve matters:

Important: You remain responsible for your ETS obligations while appealing. An appeal doesn’t suspend your requirements.

Recent Industry Action

In 2024-25, forestry industry bodies (Climate Forestry Association, NZ Institute of Forestry, Ngā Pou a Tāne, and Forest Owners Association) sought judicial review of MPI’s fee regime, calling it “excessive, unreasonable and disproportionate.” This resulted in the government reducing annual ETS participation fees by 50%.

Key Takeaways

  1. Document everything — clear contracts prevent disputes
  2. Understand rights — who owns what, who’s liable for what
  3. Due diligence on transactions — check ETS status before buying/selling
  4. Specialist advice — carbon adds complexity requiring expertise
  5. Consider insurance — especially for significant exposures
  6. Update agreements — as circumstances and rules change

Next Steps

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