June 12, 2023
Explore the importance of emissions returns in the ETS and how forest owners contribute to carbon reporting. This blog highlights the significance of emissions returns and the reporting process.
When it comes to mitigating climate change and promoting sustainable practices, the New Zealand Emissions Trading Scheme (ETS) has emerged as a key player. As part of this comprehensive framework, forest owners play a crucial role as participants in the ETS by claiming credits through their emissions returns. This blog will discuss the basics of emissions returns, exploring their significance, the reporting process, and the key points forest owners need to know.
In the realm of the ETS, emissions returns serve as the mechanism for forest owners to report on the carbon changes in their forest land. These returns provide a detailed account of the changes in carbon stored within the forest over time, enabling forest owners to assess the number of New Zealand Units (NZUs) earned or required to be surrendered during each emissions return period. It is through these returns that forest owners demonstrate the impact of their land on greenhouse gas emissions. Whether you are engaged in post-1989 forest land activities or involved in specific forestry practices covered by ETS rules, emissions returns are a critical aspect of compliance.
The calculations included in emissions returns are based on the change in carbon observed in each designated area of forest land covered by the return. For post-1989 forest land, the emissions returns also account for the specific carbon accounting method applied to each land area, which determines the number of units earned or required for surrender. It's important to note that one tonne of carbon dioxide, or its equivalent warming effect on the atmosphere, equals one NZU (Carbon Credit).
Forest owners can rely on the Ministry for Primary Industries (MPI) software to receive and process emissions returns for forestry activities. Acting on behalf of the Environmental Protection Authority (EPA), the MPI ensures the accurate recording and assessment of emissions returns, contributing to the effective functioning of the ETS.
Mandatory emissions returns are a requirement in the ETS for participants with post-1989 forest land. These returns involve submitting regular reports on the carbon stored in the forest land and are due annually or at least at the end of each mandatory Emissions Return Period (MERP).
The frequency of mandatory emissions returns is generally every five years. Participants must submit an emissions return after the end of each FERP. However, there is also an option to submit provisional emissions returns during MERPs, which are optional. These returns were previously known as "voluntary emissions returns" but have been renamed "provisional emissions returns" since January 1, 2023.
The periodicity of mandatory emissions returns serves several essential purposes. Firstly, it allows for regular monitoring and reporting of the carbon stored in post-1989 forest land, ensuring accurate tracking of emissions and removals. By requiring participants to submit emissions returns at set intervals, the government can gather data on the changes in forest carbon over time, enabling better assessment of the effectiveness of the ETS in achieving its emissions reduction goals.
Secondly, the five-year period aligns with the typical growth and harvest cycles of forests and the natural carbon sequestration processes. This duration provides a reasonable timeframe for significant changes in forest carbon stocks to occur, allowing for more accurate reporting of emissions and removals. It also facilitates the calculation of units to be received or surrendered based on the reported changes in forest carbon.
Moreover, the regularity of mandatory emissions returns encourages participants to actively manage and monitor their forest land. By requiring periodic reporting, the ETS ensures that participants remain accountable for their carbon emissions and removals, promoting responsible forest management practices and fostering compliance with emissions reduction targets.
The return periods in the ETS are designed to align with international timeframes, ensuring consistency and compatibility with global climate change mitigation efforts. By synchronising the reporting periods, New Zealand can contribute to international discussions, comparisons, and evaluations of emissions reduction progress cohesively.
In addition to mandatory emissions returns, the ETS also allows forest owners to submit provisional (voluntary) emission returns once a year. Provisional emissions returns are submitted by 30 June in the year following the year that the mandatory period ends. While voluntary, these returns allow forest owners to claim NZUs (Carbon Credits) regularly and to participate more actively in the ETS, contributing to New Zealand's climate change mitigation efforts.
Note:
If you have submitted provisional emissions returns during a MERP, you need to consider them when submitting your final emissions return at the end of the MERP.
If you are calculating your emissions returns outside of the ETS online system, you should:
Compliance with emissions returns requirements is of utmost importance for forest owners participating in the ETS as registered post-1989 forest land. Failing to comply with these requirements can lead to significant consequences and penalties.
Forest owners must recognise the significance of complying with emissions returns requirements. Firstly, emissions returns serve as crucial documentation of the changes in carbon stored in forest land over time. They enable the accurate measurement of carbon sequestration and play a vital role in managing greenhouse gas emissions. By complying with these requirements, forest owners contribute to the overall efforts in combating climate change and reducing New Zealand's carbon footprint. Secondly, compliance ensures the integrity and credibility of the ETS, maintaining a level playing field for all participants. Lastly, compliance allows forest owners to avoid penalties, infringements, and other negative consequences resulting from non-compliance.
Forest owners who fail to comply with emissions returns requirements may face the following penalties or implications:
Financial penalties: Non-compliance can result in monetary penalties that vary depending on the severity and duration of non-compliance. Fines can be imposed on individuals and businesses for tens of thousands of dollars, depending on the situation.
Infringement fees: Forest owners who do not submit emissions returns on time may be charged infringement fees, which serve as additional financial consequences for non-compliance.
Unit adjustments and obligations: Regarding incorrect returns, forest owners may be required to adjust the number of units they owe or have already paid. This can involve surrendering additional units within a specified timeframe or receiving reimbursements for overpaid units.
Review and appeal processes: Forest owners have the right to request a review of decisions made regarding the correction of emissions returns. The review process is formal and covered by section 144 of the Climate Change Response Act 2002. However, any obligations resulting from the original decision remain in effect during the review process.
Impaired business relationships and opportunities: Non-compliance can negatively impact business relationships and opportunities within the forestry industry. Forest owners may face challenges in securing partnerships, accessing funding, or participating in future initiatives related to carbon trading or sustainable forestry.
Emissions returns are vital for forest owners in the ETS. Accurate and timely submissions demonstrate commitment to sustainability. Active participation maximises benefits, supports climate change mitigation, and fosters a greener future.
