Understanding NZUs

NZUs — New Zealand Units — are the currency of carbon in New Zealand. Understanding how they work is essential for anyone considering carbon farming.

What is an NZU?

An NZU is a carbon credit representing the right to emit (or the storage of) one tonne of carbon dioxide equivalent (tCO₂e).

When your registered forest absorbs carbon, you receive NZUs. When you sell those NZUs, you’re essentially selling the carbon storage service your trees provide.

For emitters, NZUs represent permission to emit. They must surrender NZUs to cover their emissions, creating demand for the units you earn.

NZU Basics

How NZUs Are Earned

For forestry participants, NZUs are allocated based on carbon stock changes in your registered forest.

The Process

1. Register your forest in the ETS through MPI
2. Open a holding account with the EPA
3. File emissions returns reporting carbon stock changes
4. Receive NZU allocations based on carbon absorbed
5. Units appear in your NZETR holding account

Calculating Your Allocation

The amount of carbon (and thus NZUs) is calculated using:

For forests under 100 hectares: Standard look-up tables provided by MPI. You look up your forest type, region, and age to find the carbon stock per hectare.

For forests over 100 hectares: Field measurement approach (FMA). Actual measurements of your forest’s carbon stock.

The difference between your current and previous carbon stock determines your allocation.

NZU Pricing

Current Price Context

As of early 2025:

• Spot price: $60-65 per NZU
• Auction reserve: $68
• Recent range: $48-80 over the past two years

What Drives Prices

Demand factors:

• Emissions levels from covered sectors
• Economic activity and fuel use
• Industrial production
• Compliance deadlines

Supply factors:

• Government auction volumes
• Forestry allocations
• Stockpiled units from previous years
• Policy decisions on supply

Policy factors:

• Auction reserve price settings
• Emissions caps and budgets
• Regulatory changes
• International commitments

Historical Price Journey

Holding and Trading NZUs

Your Holding Account

When you register in the ETS, you open a holding account in the New Zealand Emissions Trading Register (NZETR). This is where your units are stored.

You can:

• Receive allocations from MPI
• Transfer units to buyers
• Receive units from sellers
• Surrender units (if required)
• View your transaction history

Selling Your Units

Most small forest owners sell through carbon brokers or aggregators who:

• Find buyers for your units
• Handle transaction paperwork
• Provide market intelligence
• Charge a commission or margin

You can also sell directly to other participants if you find your own buyers.

Timing Your Sales

There’s no requirement to sell immediately. Many owners:

• Sell periodically as they need cash
• Hold units as a store of value
• Time sales based on price views
• Sell when they need to pay tax obligations

Tax Implications

NZUs from post-1989 forests are generally:

• Not taxable when received — no immediate tax on allocation
• Taxable when sold — sale proceeds are taxable income
• GST zero-rated — no GST on NZU transactions

This means you can defer tax by holding units, but you’ll pay tax when you eventually sell. Consider working with an accountant familiar with carbon transactions.

NZUs as an Investment

Some landowners treat NZUs as an investment asset, holding units based on expectations of future price increases.

Potential Benefits

• No storage or insurance costs (they’re digital)
• No expiry date
• Potential for price appreciation
• Inflation hedge (linked to carbon policy)

Risks

• Price volatility
• Policy changes can affect value
• Opportunity cost of capital
• No guaranteed returns

Considerations

• NZUs don’t pay dividends
• Returns depend entirely on price movement
• Liquidity varies with market conditions
• Long-term policy direction uncertain

Unit Quality and Registry

Unlike some carbon markets, NZUs are:

• Government-issued — not voluntary market credits
• Fully fungible — one NZU equals any other NZU
• Regulated — traded on a government-managed register
• Compliance-grade — accepted for legal surrender obligations

This makes NZUs more like a regulated commodity than a voluntary offset.

NZUs vs Other Carbon Credits

Practical Considerations

Minimum Trades

There’s no minimum for receiving allocations, but brokers often have minimum transaction sizes for sales (typically 100-500 units).

Settlement

Trades typically settle within a few days. Units transfer through the NZETR, with payment handled separately.

Record Keeping

Keep records of all transactions for tax purposes. The NZETR provides transaction history, but maintain your own records too.

Key Takeaways

1. 1 NZU = 1 tonne CO₂ — that’s the fundamental unit
2. Earned by foresters — based on carbon stock increases
3. Prices fluctuate — currently $60-65, historically volatile
4. Hold or sell — you choose the timing
5. Tax when sold — not when received
6. Government-backed — regulated, compliance-grade credits

Next Steps

• How the Market Works
• Market Trends & Outlook
• Contact us about your NZUs