The New Zealand Emissions Trading Scheme (ETS) has seen significant shifts over the past year, with price fluctuations, policy adjustments, and evolving market dynamics reshaping the carbon forestry landscape. As we move into 2025, understanding these changes is important for forest owners and anyone involved in carbon markets.
In this blog, we’ll break down recent ETS price trends, rule changes, and key considerations for those participating in the New Zealand carbon market.
Important:Â This blog is for informational purposes only. It is not advice, a forecast, or a prediction. We do not have special insights into future regulations, industry trends, or primary/secondary market prices. Always seek professional advice before making any trading or investment decisions.
2024 started with a slump, then moved to a slow recovery
In early 2024, ETS prices experienced a sharp decline, driven by failed carbon credit auctions and reduced market confidence. In March 2024, the government’s ETS auction failed to clear at the $64 price threshold, triggering a price drop into the low $40s. This downward trend persisted, with subsequent auctions also failing to clear.
By August 2024, market sentiment shifted following government consultations on unit supply constraints. The government signalled its intention to limit unbacked carbon units, reinforcing ETS credibility and supporting higher prices. As a result, ETS prices gradually recovered, and by December 2024, the final auction partially cleared at $64, offering a sign of renewed confidence.
What’s coming up in 2025 for the ETS
March 2025 auction
The next ETS auction has a floor price of $68, meaning no units will be sold for less than that.
Limited supply
Only 1.5 million units will be available at the base price, with additional units only accessible at significantly higher thresholds (in the mid-$100 range).
Auction and market pricing
Current secondary market prices indicate that traders expect the March auction to fail. However, short-term supply and demand fluctuations could still influence prices.
Seasonal trends
Many forestry participants receive their carbon units in the first quarter of the year and often sell them to meet cash flow needs. This seasonal sell-off can apply downward pressure on prices, contributing to an uncertain market outlook in the short term.
ETS rule changes & impacts on forest owners
1. Annual ETS Fees Have Been Reduced
The annual participation fee for registered forests has been reduced from $30.25 per hectare to $14.90 per hectare. Invoices for these fees are being sent out, and some forest owners may choose to sell carbon credits to cover these costs.
2. FMA Measurement requirements have changed
Forests registered before the end of 2022 no longer need to complete new Field Measurement Approach (FMA) assessments for the current monitoring period (2023–2025). However, future FMA assessments will still be required in later compliance cycles.
3. New Crown Land Afforestation Proposals
The government has released a request for information (RFI) regarding afforestation on Crown-owned land. The Crown is exploring public-private partnerships for afforestation projects, creating potential opportunities for private entities to participate in large-scale initiatives. Further details on how Crown land afforestation will interact with the ETS are expected in upcoming updates, with a follow-up session planned to provide more clarity.
4. Transitional Exemptions for Ongoing Afforestation Projects
Landholders in the process of afforestation before 4 December 2024 may qualify for transitional exemptions from upcoming LUC restrictions. To qualify, landowners will need to provide evidence of afforestation intent, such as:
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Land purchase agreements indicating afforestation plans
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Seedling orders dated before 4 December 2024
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Detailed business plans showing clear intent to afforest
The government has emphasised that it does not intend to penalise existing afforestation projects, but the exact qualifying criteria remain unclear.
5. Clarification on Pre-2025 Forest Registrations
Forests registered before the end of 2022 will be allowed to stay in the ETS under the current rules. This means they won’t be affected by the new restrictions being introduced, giving existing participants peace of mind that their forests will continue to qualify for carbon credits.
However, forests registered after October 2024 may face new eligibility requirements, particularly for exotic plantings on LUC 1-6 land. While the changes won’t impact forests already registered, landowners planning new registrations should keep an eye on the final legislation to ensure their forests will qualify.
ETS Emission Returns: What You Need to Know
For registered ETS participants, 2025 is another opportunity to file emissions returns and claim carbon units for their registered forest areas.
Filing Deadlines
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Provisional emissions returns can be filed between January and June 2025.
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Filing is optional this year but will be mandatory in 2026 at the end of the monitoring period (MERP).
How to claim & sell carbon units
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If CarbonCrop manages your ETS registration, you’ll be contacted to confirm any forest changes before submission.
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Once submitted, units are typically issued within a few days.
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Units can be held for potential future price increases or sold immediately through platforms like emsTradePoint or Jarden.
Looking Ahead
With 2025 shaping up to be a big year for carbon markets in New Zealand, several key factors will influence future ETS developments:
Legislation finalisation
The government is expected to finalise new legislation in 2025 that will directly impact how landowners participate in the ETS. This includes:
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Afforestation restrictionsThe upcoming land use classification (LUC) restrictions could limit exotic afforestation on certain types of farmland, particularly LUC 1-6 land. Landowners will need to assess their land’s classification carefully before committing to new plantings to ensure ETS eligibility.While the broad framework for these restrictions is in place, many details remain uncertain. The final legislation, expected later this year, will clarify how these restrictions are applied, including how exemptions, like the 15,000-hectare cap on LUC 6 land, will be allocated. Until these specifics are finalised, landowners face a degree of risk and uncertainty when planning new afforestation projects.
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ETS Unit SupplyThe government is also looking to refine policies on carbon unit supply through ETS auctions. These changes aim to limit unbacked units and strengthen the ETS’s role in reducing emissions. These adjustments could affect both unit availability and market prices.
Market reaction to the March 2025 auction
The upcoming March 2025 ETS auction will be closely watched following last year’s price fluctuations and auction outcomes. The auction has a floor price of $68, with only 1.5 million units available at that price.
Secondary market prices currently indicate that the market is expecting the auction to fail. However, the outcome will provide further clarity on market sentiment, especially after the partial clearing of the December 2024 auction at $64.
Forestry participants who receive their units in the first quarter of the year often sell to meet cash flow needs, and this seasonal sell-off can add downward pressure on prices in the short term.
Final thoughts
ETS market dynamics are shifting, and 2025 will be one to watch. Whether you're considering registering a new forest, selling carbon credits from existing forests, or navigating upcoming rule changes, staying informed is essential.
If you want to claim credits and you're already registered, but not a CarbonCrop customer, make sure you file your emissions return on time. If you're planning a new afforestation project or looking to register existing forests, it could be worth registering before the end of 2025 to access back-dated credits (for the period between 2023-2025).
CarbonCrop is closely monitoring these developments and will continue to provide insights as new policies are announced.
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Check out our full CarbonCurious session here.
