The rules are proposed to be backdated to when the policy changes were announced on 4 December 2024, but with important transitional provisions to exempt certain landowners/participants who began the process of converting farmland to forestry before the policy changes were announced.
Background
The latest announcement on 25 March 2025 follows the Government's earlier announcement on 4 December 2024 which flagged proposed policy changes intended to limit how much farmland is able to be converted to exotic forest and then registered in the ETS. For clarity, these rules are not aimed at farmland to forestry conversions only – they are intended to target situations where certain farmland is converted to forestry and registered in the ETS.
The initial 2024 Government announcement included the following proposed changes:
- A ban on registering exotic forest (which has been converted from farmland) in the ETS on land which has a Land Use Capability (LUC) class of 1 to 5 (inclusive). The LUC is a land classification system that evaluates the long-term agricultural productivity of rural land. There are eight LUC classes, with the more productive land having a lower LUC class.
- A national annual limit of 15,000 hectares for exotic forest land registered in the ETS if planted on LUC class 6 farmland.
- No limits for ETS registrations of LUC class 7 to 8 farmland or native (indigenous) forest.
- For each farm, exempting up to 25 per cent of that farm’s LUC 1-6 land from the above limits – thus allowing it to be planted in forestry and registered in the ETS. This proposal is intended to ensure farmers retain some flexibility for their land.
- The ability for landowners to have their LUC categorisation reassessed.
- Exempting certain specific categories of Māori-owned land, such as Māori land held under Te Ture Whenua Māori Act 1993, from the new restrictions.
Transitional measures
It is expected that the changes will be backdated to 4 December 2024, when the policy was announced. However, the latest announcement contains important information for landowners/participants who began the process of converting farmland to forestry before the policy changes were announced on 4 December 2024, and for those landowners/participants who have subsequently began the conversion process.
Landowners/participants who began conversion before 4 December 2024
Under the proposals, a landowner/participant will be eligible for an exemption from the proposed restrictions if they can show evidence of a “qualifying forestry investment” that was made between 1 January 2021 and 4 December 2024.
Examples of a qualifying forestry investment will include:
- the acquisition of a forestry right or forestry lease on farmland;
- the purchase of farmland;
- an application for an emissions ruling as to whether land is post-1989 eligible land, or an application for resource consent for the establishment of a forest; or
- the contracting of a third party to undertake due diligence for the purposes of afforesting farmland or the purchase of farmland with the intent to afforest.
It is proposed that an applicant wishing to rely on this exemption will need to lodge an application to register the relevant land in the ETS by 31 December 2027 in order to qualify for the exemption.
Landowners/participants who began conversion after 4 December 2024
Under the proposals, any landowner/participant who started the process of converting a farm to forestry after the proposed policy changes were announced on 4 December 2024 will be subject to the new restrictions.
Next steps
Legislation implementing these reforms is expected to be progressed quickly, with the Government intending the new rules to come into effect from October 2025.
These proposals come amidst other planned policy changes affecting the forestry sector, with Agriculture and Forestry Minister Todd McClay having also announced that the Government is progressing policy intended to enable the Government to partner with the private sector to plant trees on Crown land which has low environmental and farming value.
We will continue to monitor developments in this area with interest.
If you have any questions about the matters raised in this article, please get in touch with the contacts listed or your usual Bell Gully adviser.