NZ Bans Large-Scale Farmland-to-Forest Conversions Under ETS Reform

In a landmark move to safeguard New Zealand’s food production and rural economy, the Government has advanced new legislation to halt the widespread conversion of productive farmland into pine forests for carbon credits. The Climate Change Response (Emissions Trading Scheme—Forestry Conversion) Amendment Bill passed its first reading in Parliament on Tuesday night with unanimous support from all parties.

This legislation, championed by Agriculture and Forestry Minister Todd McClay, is being hailed as a critical pivot in New Zealand's climate and land-use policy. It aims to strike a balance between meeting emissions reduction goals and preserving the nation’s core agricultural productivity.

Ending Perverse Incentives in the Emissions Trading Scheme

“For too long, ETS incentives have driven the wrong outcomes for our rural sector,” Minister McClay said during the bill's introduction. “This Bill is about protecting our most valuable land that grows food for export and sustains rural communities.”

McClay pointed to a troubling trend: over 300,000 hectares of productive farmland had been lost to afforestation under the previous government’s policies, as landowners sold properties to investors who planted pines for carbon credits rather than food production.

“Once farms are planted in trees as a result of carbon credits,” McClay said, “we lose the ability to produce the high-quality, safe food that consumers demand – and we lose rural jobs, export earnings, and the families that go with them.”

Key Measures in the Bill

The legislation introduces targeted, nuanced reforms to the forestry provisions of the Emissions Trading Scheme (ETS), including:

• Banning exotic forests from entering the ETS on LUC 1–5 land, which comprises New Zealand’s most productive soils for agriculture and horticulture.

• Capping ETS registrations on LUC 6 land—typically steeper and less arable hill country—to 15,000 hectares per year, with allocations decided via a ballot system.

• Limiting farm conversions, allowing up to 25% of a single farm to be entered into the ETS, thereby preserving landowner autonomy while halting full-scale conversions.

• Safeguarding Māori-owned land that qualifies for forestry investment, ensuring these communities are not disadvantaged by the rule changes.

• Providing temporary exemptions for previously announced investments. This will allow projects that can prove legitimate forestry development activity—such as land purchase and tree orders made jointly before 4 December 2024—to proceed.

Timeline for Implementation

The new restrictions on ETS forest registration will come into effect on 4 December 2024. The law will then be fully enacted by October 2025, giving landowners, investors, and the forestry industry a transition window to adapt to the new framework.

Rebalancing Climate Action and Agricultural Resilience

The reforms represent a significant shift in how New Zealand pursues climate action—reining in speculative forest planting and re-emphasizing the value of food production and rural livelihoods. The Government contends that poorly targeted ETS incentives have encouraged land-use changes with harmful long-term consequences, prioritizing carbon offsetting over economic and social sustainability.

Minister McClay underscored the broader implications: “We’re reversing the damage done by short-sighted, ideological policy that sacrificed long-term food security for carbon accounting.”

He reiterated the Government’s commitment to real climate progress that doesn’t come at the cost of rural communities or national food resilience.

Industry and Political Response

The Bill's first reading saw cross-party consensus, a rare occurrence in climate-related policy, reflecting the broad recognition of the importance of agricultural land to New Zealand’s future. While environmental groups and forestry investors are expected to scrutinize the details of the reforms, rural advocacy organizations and farming communities have largely welcomed the move as long overdue.

The Government now calls on all stakeholders—including farmers, iwi, investors, and climate experts—to engage constructively during the legislative process, as the Bill moves through further readings and committee stages in the coming months.