The Permanent Forest Category

The Permanent Forest Category (PFC) is designed for forests that won’t be clear-felled. If you’re committed to long-term carbon storage rather than timber production, this pathway may offer significant benefits.

What is Permanent Forestry?

From 1 January 2023, the Permanent Forest Category became part of the ETS. It’s for post-1989 forests that will remain standing for at least 50 years without clear-felling.

The concept is simple: permanent forests store carbon indefinitely. In exchange for committing to keep the forest standing, you earn credits for ongoing carbon sequestration without the complexity of harvest liabilities.

Key Features

The 50-Year Commitment

When you register forest in the PFC, you commit to:

• No clear-felling for at least 50 years from the date of registration
• Maintaining forest cover on the land
• Managing the forest to maintain carbon stocks

This doesn’t mean you can’t touch the forest — selective harvesting is allowed under certain conditions.

Stock Change Accounting

Permanent forests use “stock change” accounting. This means:

• You earn units as the forest grows and carbon stock increases
• You continue earning for the full life of the forest (not capped at an averaging age)
• Potentially higher total unit allocation over time

Higher Carbon Earnings

Because there’s no averaging cap, permanent forests can earn more credits overall. A radiata pine forest under averaging stops earning around age 16, while a permanent forest continues earning as long as carbon stocks increase.

For slow-growing native forests, this is particularly advantageous — they keep earning for decades.

Permanent vs Standard (Averaging)

Who Should Consider Permanent?

The PFC suits:

Native forest owners

• Native bush regeneration
• Planted native projects
• Indigenous ecosystem restoration

Conservation-focused landowners

• Land retired for biodiversity
• Covenant land
• Erosion control planting

Remote or uneconomic timber blocks

• Forests too small to harvest economically
• Remote locations with poor access
• Steep terrain with high harvest costs

Long-term investors

• Those with multi-generational timeframes
• Carbon-focused investment portfolios
• Climate-motivated landowners

What You Can (and Can’t) Do

Allowed Activities

• Selective harvesting of individual trees
• Thinning for forest health
• Pest and weed control
• Biodiversity enhancement
• Recreation and tourism
• Track and infrastructure maintenance

Not Allowed

• Clear-felling (removing most trees from an area)
• Conversion to another land use
• Significant reduction in carbon stocks

The Grey Areas

The rules allow some harvesting if it doesn’t constitute “clear-felling.” Guidance suggests:

• Selective harvesting of scattered trees is fine
• Small gaps for forest health are acceptable
• Systematic removal that changes land use is not

If in doubt, seek advice from MPI before undertaking any significant operations.

Penalties for Breaking the Commitment

If you clear-fell a permanent forest within 50 years, penalties apply:

• Surrender all earned units — every NZU received for that area
• Additional penalty — potentially 1.5x or more of units earned
• Can’t re-register — the land is barred from the permanent category

The penalties are designed to be severe enough that clear-felling is never economically rational.

Transitioning Between Categories

From Standard to Permanent

You can transfer registered standard forestry into the permanent category. This requires a new commitment but unlocks ongoing carbon earnings.

From Permanent to Standard

Not straightforward. Once in the permanent category, leaving typically requires meeting the 50-year commitment or facing penalties.

Native Forest and the PFC

The permanent category is particularly well-suited to native forests:

Advantages for natives:

• No averaging cap (natives grow slowly but steadily)
• Continuous earnings for decades
• No expectation of harvest
• Aligns with conservation goals

Considerations:

• Native lookup tables apply
• Slower early earnings than exotics
• 50-year commitment fits native timeframes

Many landowners with regenerating native bush find the PFC the most sensible option.

Financial Considerations

Earnings Comparison

For a 10-hectare radiata pine block:

Under Averaging:

• Earns ~5,000-6,000 NZUs total (to age 16)
• At $60/NZU = ~$300,000-360,000

Under Permanent:

• Earns ~8,000-10,000 NZUs total (to age 50)
• At $60/NZU = ~$480,000-600,000

But: You can’t harvest the timber without severe penalties.

Land Value Impact

Registering in the PFC can affect land value:

• Some buyers see permanent forests as limiting options
• Others value the secured carbon income
• Banks may view permanent registration differently for lending

Consider the long-term implications before committing.

Making the Decision

Questions to ask yourself:

1. Do I intend to harvest this forest for timber?

   • If yes → consider standard forestry
   • If no → permanent may be right

2. What species are involved?

   • Fast-growing exotics → averaging often makes sense
   • Natives/slow-growing → permanent captures more value

3. What’s my timeframe?

   • Multi-generational → permanent fits
   • Want flexibility → standard preserves options

4. What’s the land’s highest use?

   • Productive farmland → maybe don’t lock in permanently
   • Marginal, steep, remote → permanent works well

5. Am I comfortable with a 50-year commitment?

   • It’s a long time. Circumstances change.

Key Takeaways

1. 50-year commitment — no clear-felling during this period
2. Stock change accounting — earn credits for the full forest life
3. Higher total earnings — but you give up harvest option
4. Severe penalties — if you break the commitment
5. Great for natives — aligns with slow growth and conservation
6. Consider carefully — it’s a significant long-term decision

Next Steps

• Averaging vs Stock Change Accounting
• Native Forestry & Regeneration
• Discuss your options with us