Pre-1990 Forestry Allocation and Exemption Update

The Ministry of Agriculture and Forestry (MAF) is now accepting applications for the pre-1990 forestry allocation and less than 50 hectare exemption. This is a one-off opportunity to claim the allocation and/or exemption. The deadline to submit applications for the allocation is the 30 November 2011 and the 30 September 2011 for the exemption. With the uncertainty over the Forestry Allocation Plan in the last 18 months and changes made from the proposed to final plan, we thought it would be good to summarise what are pre-1990 forest landowners now entitled to.

What are Pre-1990 Forest Landowners entitled to?

How many NZUs you will be allocated depends primarily on when the land was acquired.

  • 60 NZUs per hectare for land that has not changed ownership since 31 October 2002;
  • 39 NZUs per hectare for land transferred to the landowner on or after the 1 November 2002; or
  • 18 NZUs per for Crown forest licence land on 1 January 2008 that was or will be transferred to an Iwi under the Treaty of Waitangi settlement after that date.

Whether or not you receive the allocation, pre-1990 forest land owners still face the deforestation liability if they change the land use. Therefore, we strongly advise that you apply for the allocation (or exemption if eligible).

To qualify for an exemption from the ETS with your pre-1990 forest land, the forest land must be -

  • Less than 50 hectares, and
  • Owned on the 1 September 2007 by a person or persons (together with associated person) who owned less that 50 hectares of pre-1990 forest land in total.

An exemption enables land use change either now or in the future without incurring the deforestation liability. You cannot claim an allocation and exemption on the same piece of land.

When is the Pre-1990 Forestry Allocation received?

The first allocation of 38 percent of your overall entitlement will be received when your application has been processed and approved by MAF and by 31 December 2012.

The second allocation of 62 percent of your overall entitlement will be received after 31 December 2012. The Government has signalled it may reduce the second allocation if international rules permit offsetting after 2012 as the impact of the ETS on pre-1990 land values would be reduced.

Who is entitled to the Allocation or Exemption?

The legal landowner on the 20 July 2010 is eligible to apply for the allocation or less than 50 hectare exemption.

If the forest land was deforested between 1 January 2008 and 20 July 2010, it is the legal landowner at the date of deforestation that is eligible to apply for the allocation or exemption.

Important Points to Consider

  1. Ensure that you are applying for the maximum area you are entitled to. Industry forest mapping standards are not the same as the ETS mapping standards and there is the potential to gain additional area, therefore additional NZUs.
  2. If you want to use a forestry service provider to apply for your allocation or exemption, get in early to beat the inevitable rush that will occur the closer we get to the application deadline.
  3. Land that was indigenous forest land (i.e. kanuka or manuka) on the 31 December 1989, and then cleared and planted in exotic forest species prior to the 31 December 2007 is pre-1990 forest land and is entitled to the allocation or exemption (if eligible); it is not post-1989 forest land.

Carbon Market

Supply of NZUs is tight at present, which has marginally strengthened the price to mid $18 but trading volume has dropped significantly. This also corresponds to strengthening of CERs (compliance unit trades on the European exchange) which are currently trading over NZ$24 (Euro equivalent) and as such are a more expensive option for New Zealand emitters. There are reports that most emitters are holding off purchasing units until the pre-1990 forestry, fisheries and Emissions Intensive Trade Exposed (EITE) allocations become available in the expectation that the NZU price will fall.