New Rules for Farm-to-Forestry Conversions in NZ Emissions Trading Scheme

Government Announces Clear Guidelines to Safeguard Productive Land and Provide Certainty for ETS Participants.

Agriculture and Forestry Minister Todd McClay, alongside Climate Change Minister Simon Watts, have today unveiled a comprehensive set of rules aimed at limiting farm-to-forestry conversions in New Zealand’s Emissions Trading Scheme (ETS). These reforms announced as part of the government's ongoing climate strategy, are designed to protect the country’s most productive farmland while ensuring clarity and stability for forestry participants in the ETS.

“These changes deliver on a key election promise to balance the protection of our vital food production industry with providing certainty to foresters,” said Mr McClay. “By addressing the flaws of the previous government’s policies, which encouraged large-scale conversions and created unnecessary complexity, we’re protecting both the integrity of New Zealand's agriculture and its top-tier primary producers.”

The new measures aim to curb the widespread conversion of farmland to forestry while maintaining flexibility for farmers. Key elements of the reforms include:

Moratorium on Exotic Forestry: A ban on new registrations for exotic forestry on actively farmed land within Land Use Classification (LUC) 1-5. These categories include some of New Zealand’s most productive agricultural land.

Annual Registration Cap for Forestry: A limit of 15,000 hectares per year for exotic forestry registrations on LUC 6 farmland, which is less suitable for intensive agriculture.

Flexibility for Farmers: Farmers will be able to plant up to 25% of their land across LUC 1-6 categories in forestry under the ETS, ensuring they retain flexibility in land-use decisions without compromising their core agricultural production.

Property-Level LUC Reassessments: Landowners will have the option to request reassessment of their LUC categorization at the property level to reflect changing land conditions or use intentions.

Exemptions for Māori-Owned Land: Specific categories of Māori-owned land will be excluded from these restrictions, in alignment with Treaty obligations, ensuring that economic development pathways are maintained.

Transitional Measures for Afforestation Projects: Landowners who are in the process of afforestation and can prove intent to plant prior to December 4, 2024, will be able to transition smoothly without disruption.

“These measures strike a balance by protecting our best farmland while fostering sustainable forestry growth. It ensures farmers can continue to make informed, flexible decisions that support both profitability and environmental outcomes,” Mr McClay added.

Minister Simon Watts highlighted that the changes would provide essential certainty for all ETS participants, allowing farmers, foresters, and investors to plan with confidence for the future. “This reform ensures that the ETS remains credible and effective while protecting rural livelihoods,” said Mr Watts.

He emphasized that forestry and agriculture are both key pillars of New Zealand’s climate strategy, and the new rules aim to find the right balance. “By incentivizing the right kind of afforestation, we can achieve our climate goals while supporting vibrant rural communities, increased primary production, and a strong economy.”

Additionally, the government is progressing plans to partner with the private sector for afforestation on Crown land that is of low environmental or farming value. These projects aim to create productive value from Crown assets while contributing to New Zealand’s climate objectives.

“Together, these initiatives will ensure a balanced approach to afforestation that protects New Zealand’s rural economy and land use options, while supporting sustainable environmental outcomes,” Mr McClay said.

Legislation reflecting these changes will be introduced in 2025, with the reforms expected to come into force by October 2025. The government’s overarching goal is to provide a clear and effective regulatory framework that supports both New Zealand’s agricultural sector and climate targets in the years ahead.