NZ Cuts ETS Forestry Costs Again, Slashing Fees 66% to Rebuild Sector Confidence

“The last Labour Government wanted forest owners to pay an excessive $30.25 per hectare per year, which forced the sector to take legal action,” Mr McClay says.

New Zealand is once again resetting the economics of carbon forestry, with the Government announcing a major second-round reduction in Emissions Trading Scheme (ETS) registry costs—significantly lowering the financial and administrative burden on forest owners.

Forestry Minister Todd McClay today confirmed that annual ETS charges for post-1989 forest land will drop from $14.90 to $10.25 per hectare, following a new consultation process. The move brings the total reduction to 66 percent since the National-led Government took office.

“The last Labour Government wanted forest owners to pay an excessive $30.25 per hectare per year, which forced the sector to take legal action,” Mr McClay says. “We’re lowering that again—for the second time—to $10.25.”

For forestry operators, carbon market participants, and climate-tech investors, the announcement signals a recalibration of ETS cost recovery toward evidence-based, operationally efficient pricing, rather than blanket levies.

The consultation, opening today, follows a second independent review into the operational costs of administering forestry within the ETS. The first review, commissioned in 2024, resulted in an initial reduction from $30.25 to $14.90 per hectare.

Key proposed changes include:

• Reducing the annual ETS charge for post-1989 forest land to $10.25 per hectare per year

• Updating service fees by lowering hourly rates and aligning time estimates with real administrative costs

• Introducing eight new targeted service fees for activities that provide direct private benefits to ETS participants

“The changes are designed to ensure cost recovery reflects the true cost of administering forestry in the ETS, while maintaining high service standards,” Mr McClay says.

The consultation also seeks feedback on an alternative, reduced annual charge for forests that no longer need to report carbon stock changes—potentially introducing a more dynamic, lifecycle-based cost model for long-term forestry assets.

From a systems and policy innovation perspective, the reforms are aimed at restoring trust in the ETS as a scalable climate instrument—one that supports exporters, incentivises sustainable land use, and reduces unnecessary compliance friction.

“Today’s announcement delivers on our promise to rebuild confidence in the forestry sector and support its role in achieving New Zealand’s export growth and emissions reduction targets,” Mr McClay says.

Updated ETS forestry cost-recovery settings are expected to take effect from mid-2026, following consultation and final decisions.

Call to action: influence the next phase of ETS reform

The Government is now inviting feedback from forest owners, carbon market participants, forestry service providers, and climate policy stakeholders on the proposed changes.

Consultation details are available here:https://www.mpi.govt.nz/review-of-forestry-in-the-emissions-trading-scheme-cost-recovery-settings

For early adopters and long-term investors in carbon forestry, this consultation is a critical opportunity to shape a lower-friction, data-aligned ETS that better reflects real-world operating costs—and supports innovation across New Zealand’s climate economy.