How to Earn Carbon Credits from a Native Forest
June 26, 2023

How to Earn Carbon Credits from a Native Forest

Explore native carbon forestry in New Zealand: buying land, earning credits, native regeneration and tree planting.

With the rise of carbon forestry, individuals are looking to buy new land or explore the option of earning carbon credits by regenerating forests on pre-owned land under the New Zealand Emissions Trading Scheme (ETS). Whether you’re a potential buyer or already own land, this blog will provide you with some introductory information and insight into navigating the world of carbon forestry. 

This blog will discuss the key aspects of earning carbon credits from native forests. We will cover the basics of carbon credits, eligibility requirements, options for existing forests, native regeneration, tree planting, tree species, land size and the associated risks and rewards of carbon farming. 

By embarking on the carbon forestry journey, you can contribute to environmental sustainability and reap financial benefits. Whether you’re just starting your research or are in the midst of acquiring land, this blog is here to help you out!

What Are Carbon Credits?

Carbon credits are a key component of carbon forestry. A carbon credit represents a unit of measurement for carbon emissions. One credit represents one metric of carbon dioxide that is subsequently removed from the atmosphere. 

Understanding NZU: The Currency Unit of the New Zealand ETS

In New Zealand, carbon credits are signified by the New Zealand Units (NZU). NZUs are the currency unit under the New Zealand Trading Scheme (ETS). NZUs are tradable units. One unit is equivalent to one metric ton of carbon dioxide that is subsequently removed from the atmosphere. They are issued by the NZ government and represent the removal of GHG. 

NZU aims to incentivise reduction and encourage sustainability by implementing monetary value on emissions. 

The New Zealand Emissions Trading Scheme (ETS) is a government-led program that aims to reduce emissions and mitigate the effects of climate change. The ETS operates by a cap-and-trade system. A cap is set on the net emissions allowed in certain sectors. Participants must hold and surrender NZUs as proof of their compliance with reduction targets. Under the ETS, participants have obligations and are required to surrender NZUs equivalents to emissions, while participants engaged in forestry can earn NZUs by sequestering carbon in growing forests. These NZUs can be sold and traded on the carbon market, which allows participants to generate financial returns and incentivise sustainable land management. The ETS is a form of regulatory framework that ensures transparency and accountability and is an effective method for managing emissions within New Zealand. It encourages people to take responsibility and participate in emission reduction efforts. 

Earning and Claiming Carbon Credits

As mentioned, landowners must register their forest under the ETS. This can be a complicated and time-consuming process, so it is often a good idea to seek third-party assistance from an expert. There are many entities that specialise in navigating the registration territory and ensuring landowners are meeting the requirements. With MyNativeForest, you can request a free land assessment, and we’ll assess your eligibility for carbon credits and estimate your carbon returns. There’s no obligation to proceed with a full ETS registration.

Once successfully registered, landowners can claim credits for the extra carbon sequestered by their forest each year. As the forest matures, the more carbon emissions it absorbs and, Therefore, the more carbon credits are earned. 

The credits can be sold or traded on the carbon market and provide an additional source of revenue to the landowners. However, a landowner must conduct diligent monitoring and reporting constantly. 

Landowners must accurately measure and report the growth of their forest and the amount of carbon sequestered. Get an estimate of your native forest carbon return potential via our calculator.  This reporting and data are verified by the ETS to ensure compliance, and then the landowners receive correspondence on the number of carbon credits they can utilise. 

The Financial Aspects of Carbon Credits

Financial returns can vary depending on a range of factors. These factors include the size and growth rate of forests, market demand and carbon credit price. Landowners must conduct thorough financial analyses and projections to assess the potential financial benefits of their project. 

Additionally, understanding the factors that influence the carbon credit value is important. Changes in legal policies, market dynamics and even international agreements can all impact the price of carbon credits. A landowner must stay informed on any updates in these areas to make more infrared decisions regarding timing, sales and purchases of credits. 

Requirements for Eligible Forest Land

There are a series of specific requirements under the ETS that a forest must meet to be eligible. To be defined as a forest under the ETS, it must

  • Cover at least 1 hectare in area.
  • Contain species that can reach at least 5 metres in height when mature in that location.
  • Have (or be expected to reach) a crown cover of more than 30% in each hectare.
  • Be at least (or expected to reach) 30 metres across on average.

Pre-1990 vs. Post-1989 Forest, Land

Post-1989 forests are land that is generated or planted after 1989 (from 1990 onwards). These forests are eligible under the ETS to earn carbon credits. 

Pre-1990 forests are land that was already forested before 1990. These types of forests do not qualify for carbon credits under the ETS requirements. However, they still hold significant value in terms of other environmental benefits and conservation efforts. 

Exploring Eligibility in Detail

Determining the eligibility of a forest under the ETS requires a detailed assessment of the previously stated factors. Landowners must evaluate their forests in comparison to the ETS guidelines and consider age, species composition, area and other factors. It may be worthwhile seeking professional guidance from expert and third-party entities to navigate the process and ensure accuracy. With MyNativeForest, you can request a free land assessment, and we’ll assess your eligibility for carbon credits and estimate your financial returns. There’s no obligation to proceed with a full ETS registration.

Conducting Due Diligence

Essential Considerations Before Buying Land

Prospective land buyers must carefully assess various factors before purchasing land for forestry. Auch consideration includes evaluating suitability for forest growth, the potential for carbon sequestration, legal or environmental constraints, and any associated financial implications. 

Carbon Liability: Assessing Potential Carbon Liabilities

A crucial component of due diligence is comprehending the land's carbon liability. The land's current carbon responsibilities, such as obligations to surrender carbon credits or possible fines for not complying with ETS regulations, must be considered by buyers. By calculating the carbon liability, sellers can make sure that buyers are informed of any possible monetary or legal responsibilities when purchasing the land.

ETS Status: Determining Existing ETS Registration

Determining the existing ETS registration status of the land is essential. It involves verifying whether the land is already registered under the ETS and whether it has any associated carbon credit obligations or benefits. This information helps buyers understand the potential carbon credit income and any requirements they would need to fulfil upon land acquisition.

Conducting due diligence before purchasing land for carbon forestry is essential for mitigating risks and maximising the potential benefits. By considering essential factors such as carbon liabilities, ETS registration status, resource consents, and tree planting schemes, prospective buyers can make informed decisions and lay a solid foundation for a successful and compliant carbon forestry venture.

Choosing the Right Pathway

Buy Existing Forest

Buying an existing forest comes with its advantages and challenges. Existing forests allows the buyer to immediately access carbon credits and their potential return. There is a shorter time frame for credit generation; there is already an existing canopy cover and biodiversity benefits.

Challenges include managing and making necessary changes to the forest to ensure it meets the ETS obligations.

Native Regeneration

Choosing native generation means allowing the land to regenerate naturally over time. The advantage of this option is that it offers environmental benefits such as habitat restoration and supporting biodiversity. 

Challenges include a longer time frame for the forest to reach maturity and generate carbon credits. Regeneration also comes with a lot of forest management, such as weed and pest control.

Tree Planting

Establishing a new forest offers the freedom to choose forest layout, species selection and management practices. It involves the change to plan the forest to optimise for carbon sequestration, which will maximise returns. 

Challenges of this option include the extensive time it will take for the forest to mature and also the time that goes into planning. It is also expensive to plant a new forest. 

Additional Land Management Considerations

Beyond the primary considerations of the chosen pathway, buyers need to assess additional land management factors. These include the potential for grazing on forested land, the presence of weeds and pests that may impact forest growth, the availability and quality of seed sources for tree planting, and any intentions to harvest timber for commercial purposes. Understanding and addressing these considerations are crucial for successful land management and optimising the potential of carbon forestry.

Landowners need to be careful when evaluating the advantages and challenges of each pathway. A deeper dive into each option is necessary to make an informed decision best suited to your goals and objectives. 

Selecting the Ideal Tree Species

Factors Influencing Species Choice

When embarking on a carbon forestry project, selecting the right tree species is crucial. Several factors influence the choice of species, including the desired objectives of the project, the specific site conditions, and the local market demand for timber or other forest products. Considerations such as growth rate, carbon sequestration potential, adaptability to the site's climate and soil conditions, and the species' ecological value should guide the decision-making process.

Site Suitability, Soil, Climate, and Biodiversity:

The suitability of the site plays a significant role in determining which tree species will thrive and provide optimal carbon sequestration outcomes. Site-specific factors such as soil type, drainage, elevation, and exposure to wind and sunlight should be evaluated. Different tree species have varying tolerances and preferences for these environmental conditions. Moreover, considering the climate of the region and its projected changes over time is crucial for selecting tree species that can adapt and remain resilient in the face of future climate scenarios.

Biodiversity considerations are also important when choosing tree species for carbon forestry. Native tree species can contribute to enhancing biodiversity by providing habitat for wildlife, supporting native plant communities, and promoting ecosystem services. Assessing the potential impact of tree species on the local biodiversity and ecosystem dynamics is essential to ensure a balanced approach that integrates both carbon sequestration goals and ecological considerations.

By carefully considering the factors influencing species choice and evaluating site suitability, soil conditions, climate compatibility, and biodiversity considerations, buyers can select the ideal tree species for their carbon forestry project. This thoughtful selection process enhances the chances of successful forest establishment, long-term carbon sequestration, and ecological benefits.

Carbon Sequestration Rates for Different Native New Zealand Tree Species

Understanding the carbon sequestration rates of different native New Zealand tree species is crucial for estimating the potential carbon earnings of a carbon forestry project. Various factors, including the growth rate, biomass accumulation, and wood density of different species, influence their carbon sequestration capabilities.

Native trees play a significant role in New Zealand’s ecosystems. They support climate change mitigation by sequestering carbon and conserving our country’s unique biodiversity. Each native tree species has its own unique characteristics. However, some species are more efficient when it comes to absorbing carbon from the atmosphere. 

For example, the kahikatea (Dacrycarpus dacrydioides) has dense wood, which allows it to absorb more carbon than a lot of other trees. However, it is slow-growing, so it takes longer to reach its more efficient absorbing state.  But it is an ideal species when looking to generate carbon credits, particularly valuable when looking at long-term carbon sequestration goals. Other species, such as totara (Podocarpus totara), rimu (Dacrydium cupressinum), and tawa (Beilschmiedia tawa), also share this important characteristic. 

Case Study: Estimating Earnings for a 10-Hectare Plot

To illustrate the potential earnings from a carbon forestry project using native New Zealand tree species, let's consider a case study involving a 10-hectare plot of land. Let’s imagine this land is planted with a mix of kahikatea, totara, rimu, and tawa trees.

Based on previous historical data, we can accurately estimate the carbon sequestration rates for each species. For the first 15 years,  the kahikatea absorbs 6 tonnes per hectare per year.  The totara, rimu, and tawa trees sequester carbon at a rate of 4 tons per hectare per year. After the first 15 years, the sequestration rates are about 4 tonnes per year per hectare for all species. 

Based on these assumptions, we can estimate the total sequestration for the 10-hectare forest over any given time frame. Multiply the annual sequestration rate by the number of hectares as are sum value for each year. 

Once we have the value of carbon sequestration, we can determine the earning by considering the market value of carbon credits and the number of credits generated from the sequestered carbon. It is important to remember carbon credit prices fluctuate and is vulnerable to market conditions as well as regulatory changes. Therefore, it is advisable to consult with experts and stay updated on market trends when estimating potential earnings from carbon forestry projects.

By understanding the carbon sequestration rates of different native New Zealand tree species and conducting thorough estimations, landowners can make informed decisions regarding species selection and estimate the financial benefits associated with carbon forestry.

Determining the Land Size

The size of the land plays a significant role in carbon forestry, affecting budget considerations, carbon credit calculations, and the approach to measuring carbon sequestration. Understanding the impact of land size is crucial for prospective buyers to make informed decisions regarding their carbon forestry projects.

Budget Considerations and Minimum Area Requirements

Before embarking on a carbon forestry project, it's essential to consider the budgetary implications associated with the land size. Larger land areas generally require a higher initial investment, including the costs of land acquisition, site preparation, and tree planting. Additionally, ongoing management and maintenance expenses, such as weed control and pest management, may also increase with larger land sizes.

Furthermore, it is important to be aware of the minimum area requirements set by the ETS or relevant regulatory bodies. These requirements specify the minimum land size eligible for participation in carbon forestry schemes and earning carbon credits. Familiarising oneself with these minimum area requirements ensures compliance with regulations and maximises the potential for carbon credit generation.

Impact of Land Size on Carbon Credit Calculation

The land size directly influences the calculation of carbon credits that can be earned through carbon sequestration. The larger the land area, the more carbon can be sequestered, resulting in potentially higher credit generation. Conversely, smaller land areas may have lower carbon sequestration rates and correspondingly generate fewer carbon credits.

Small Blocks: Remote Carbon Calculation

For small land blocks, remote carbon calculation methods may be employed. Remote sensing technologies, such as satellite imagery and LiDAR (Light Detection and Ranging), can provide data on vegetation cover and biomass, which are used to estimate carbon sequestration. These methods offer cost-effective ways to estimate carbon credits for small land areas without extensive on-site field measurements.

Large Blocks: Field Measurement Approach (FMA)

In the case of large land blocks, a field measurement approach (FMA) is typically employed to accurately measure carbon sequestration. FMA involves direct measurements of tree growth, biomass, and carbon stocks on-site, providing more precise data for credit calculations. This approach requires field visits and data collection from sample plots across the land area to estimate carbon sequestration rates.

It's important to consider the trade-offs between remote carbon calculation and FMA approaches based on the land size and available resources. Remote carbon calculation methods are more suitable for small land blocks due to cost-effectiveness, while FMA is necessary for accurate measurements in large land areas.

By considering budget implications, minimum area requirements, and the choice of carbon credit calculation methods based on land size, prospective buyers can determine the optimal land size for their carbon forestry projects. This knowledge helps align project goals with available resources and maximise the potential for carbon credit generation.

Understanding the Risks of Carbon Farming

Engaging in carbon farming and participating in carbon forestry projects come with inherent risks that need to be understood and managed effectively.

Market Volatility: The Value of Carbon Credits

One main risk of carbon farming is the volatility of the market. This affects the value of carbon credits. Carbon pricing fluctuates based on a number of factors, such as global carbon markets, supply and demand and policy changes. Prospective buyers must be aware of these factors and any changes arising when considering the financial viability of their farming projects. Landowners should diversify their income streams, consider long-term contracts and stay informed on changes in the field to mitigate risks of market volatility. 

Tree Loss and Adverse Events: Mitigating Risks and Planning for Recovery

Tree loss and adverse events, such as wildfires, storms, or pest outbreaks, pose risks to carbon farming projects. These events can result in the loss of carbon stocks, reduced carbon sequestration rates, and potential financial losses. Mitigating these risks involves implementing proper land management practices, such as regular monitoring, appropriate fire risk management strategies, and pest control measures. Additionally, having contingency plans in place for post-event recovery and restoration can help minimise the impact of adverse events on carbon farming operations.

Future ETS Policy Changes: Anticipating Regulatory Shifts

The New Zealand Emissions Trading Scheme (ETS) is subject to policy changes and updates over time. Anticipating and adapting to future regulatory shifts is crucial for carbon farmers. Policy changes can influence the eligibility criteria, credit calculation methodologies, and the overall carbon credit market. Staying informed about ETS updates, engaging with industry associations and experts, and maintaining flexibility in project planning can help navigate regulatory changes effectively.

By understanding and addressing the risks associated with carbon farming, prospective buyers can develop robust risk management strategies. Assessing market volatility, implementing measures to mitigate tree loss and adverse events, and staying informed about policy changes enable landowners to make informed decisions and safeguard their carbon farming investments.


In conclusion, land acquisition for carbon farming presents both risks and rewards. Prospective buyers interested in venturing into carbon forestry projects should carefully evaluate the opportunities and challenges associated with this field. By considering the information presented in this guide, individuals can gain a deeper understanding of the key aspects involved in land acquisition for carbon farming in New Zealand.

We have explored various topics, including the concept of carbon credits, the New Zealand Emissions Trading Scheme (ETS), earning and claiming carbon credits, financial considerations, eligibility criteria for forest land, conducting due diligence, selecting the right pathway, choosing tree species, estimating carbon sequestration rates, determining land size, and understanding the risks involved.

It is important to seek feedback and guidance from experts in the field to address specific questions and concerns. Engaging with professionals, such as carbon forestry consultants, industry associations, and legal advisors, can provide valuable insights and assistance throughout the land acquisition process.

Carbon farming offers the potential for financial returns, environmental benefits, and contributions to climate change mitigation. However, it is crucial to conduct thorough research, due diligence, and risk assessment before making any land acquisition decisions. This ensures informed decision-making and maximises the chances of a successful carbon farming venture.

By carefully considering the risks and rewards, seeking feedback from experts, and addressing specific questions, prospective buyers can embark on their journey towards land acquisition for carbon farming with confidence and clarity.

Remember, each carbon farming project is unique, and individual circumstances may vary. It is advisable to consult with professionals and relevant authorities to ensure compliance with regulations and to obtain personalised guidance tailored to your specific situation.