Liability & Selling of Carbon Credits

You may ask why would you ever sell your carbon credits, when you have to pay them all back?

These are some of the opportunities for registered owners;

  • Like all other commodities, the value of Carbon Credits (NZU’s) do change over time.
  • Close monitoring of carbon value, and any liability in the event of a sale, is essential.
  • Not all carbon necessarily has to be repaid when the forest or woodlot is harvested because;
    • The carbon calculation includes above and below ground biomass (stumps etc). For most forests between 15 and 30% of the claimed carbon is in biomass, most of which is not lost at harvest. The carbon accounting varies for each forest demographic.
    • A carbon accounting period can be every five (5) years. Therefore it is possible to harvest and replant a forest in this time-frame and then submit an emissions return based on the new forest stored carbon.
  • Selling a tonne of carbon incurs a liability. That liability is the cost of what you would have to pay to buy a tonne of carbon back from the open market.
  • Unfortunately if the value of carbon is higher than what you sold for, then your liability increases. But if the value goes down, your liability decreases and you have made money.

Here are some examples of potential carbon trading behaviour:

  • Managed wisely, income from a carbon trade can be used offset any potential future liabilities. We recommend retaining a portion of all income for these times.
  • A sale would rarely include 100% of carbon credits available. We recommend that immediately on sale, insurance is taken out to cover the potential liability.
  • Harvesting intentions are continually monitored around carbon trade to minimise liability. We recommend a range of options around modifying harvest timing, while maintaining both a carbon and timber income.