All emitters except households and biological emissions from agriculture are required to buy and surrender units equivalent to their emissions, known as New Zealand Units (NZU).
In addition to the ETS and forest offsets, the Government’s $240 million Billion Tree fund, a policy of coalition partner NZ First, was launched on November 30 last year.
It provides establishment and planting grants to landowners and through partnerships with landowners from which carbon credits can be earned.
Direct landowner grants of $4000 a hectare are available for planting indigenous species with $1500 a hectare for exotic trees. Another $500 a hectare is available for fencing for landowners establishing up to 300ha a year of forestry.
NZ Units are initially bought from the Government for $25 a tonne, with one NZU equivalent to one tonne of carbon dioxide.
Businesses that cut their emissions can sell surplus units to those with insufficient units to cover their emissions.
Ownership transactions are recorded by the NZ Emissions Unit Registry.
The Ministry for the Environment says traded NZUs cover about half of NZ emissions.
This week they are trading for $25.10 a unit, the price influenced by the Government selling NZUs for $25 a tonne, a measure designed to ease the transition for business but also capping the transaction price.
The international price on Wednesday was about NZ$44.
Sectors facing trade competition from producers in countries that do not price carbon have been allocated free NZUs to help them stay competitive.
Forest owners can earn income by selling NZUs from carbon-absorbing trees to businesses to offset their emissions.
They are calculated based on species and age of trees with NZUs bought and sold through carbon traders or online retailers.
Under terms of the Kyoto Protocol, only forests planted since December 31, 1989, qualify.
They must be at least 1ha in size, of species that will or have reached maturity or 5m in height, have a crown cover of more than 30% per hectare.
Because they grow fast pines quickly begin absorbing carbon, earning NZUs that can be sold.
Depending on age and growth, one hectare of pines will absorb between 15 and 26 tonnes of carbon dioxide a year. A newly planted pine forest will absorb enough carbon in the first 10 to 12 years to recoup the establishment costs.
In the first 30 years native species will absorb a third to a half the amount of carbon that pines do but by age 40 a hectare of kauri or totara will absorb 200 tonnes and 400 tonnes at age 70.
Forest owners meet all costs of administration, monitoring, auditing and compliance and if NZUs are sold or a forest is cut down the owner must either maintain the carbon stock through new planting or offset with NZUs or repay NZUs.
The Forest Owners Association calculates NZ’s plantation forests absorb 25m tonnes of carbon dioxide from the atmosphere each year. In 2017 NZ emitted 80.9m tonnes of carbon dioxide equivalent.
