> What is the Permanent Forest Sink Initiative (PFSI)?

The PFSI is a separate Government scheme to the ETS. It commits privately owned forests to long term sustainable management for the primary purpose of carbon sequestration. The forests are protected and maintained for a minimum of 99 years, with restrictions on clearance and harvesting.

The PFSI is favoured for projects with native tree species and where maintenance of permanent forest cover is valued for other environmental reasons such as enhancement of biodiversity, soil conservation, water quality improvement, and flood control.

Following the ETS reform of 2020, the PFSI scheme will be incorporated as a new permanent scheme under the new ETS. PFSI participants will automatically be switched to the new permanent scheme. Learn more about the discontinuation means here.

> What is the New Zealand Emissions Trading Scheme (ETS)?

The New Zealand Emissions Trading Scheme (NZ ETS) was created in 2008. It is the main tool for New-Zealand to reduce its greenhouse gas (GHG) emissions in the long-term. The NZ ETS covers about half of total GHG emissions in New Zealand. Large polluters (like oil companies) must report annually to the Government their GHG emissions and surrender an equivalent number of carbon credits.

A major source of carbon credits is from New Zealand forests. ETS Forestry participants are entitled to receive one carbon credit (called a New Zealand Unit - or NZU) per tonne of CO2 removed for registered post-1989 forest land. Once registered, forest owners can claim NZUs for the amount of carbon stored as the forest grows, or apply to add or remove forest land in the ETS.

The ETS is currently undertaking changes which will be implemented in 2023 for the forestry sector. If you want to learn more about the ETS reform, you can click here. If you want to know more about the ETS, you can visit the Ministry of Environment's website and the Environmental Protection Agency.

> What is a carbon offset?

A carbon offset (also called a carbon credit) refers to the reduction, removal, avoidance or sequestration of a metric tonne of GHG emissions, measured in tonnes of CO2-equivalent.

Carbon offsetting has gained popularity as a tool to compensate carbon emissions. By cutting emissions beyond what is required by the NZ ETS, offsets can play an important role to reduce GHG emissions to meet the targets of the Paris Agreement.

To be credible, a carbon offset needs to follow a set of principles. Offsets need to be: transparent; real, measurable and verified; additional; not double counted; and permanent.

This is why we focus on offsets generated from permanent forests. To ensure that offsetting is effective we also regularly monitor forests within our portfolio. For large projects this includes a comprehensive site verification audit every five years. Offsets generated by PFSI Forests are called PFSI New Zealand Units (PFSI NZUs).

If you want to know more about credible carbon offsets, MfE has published a Guidance for voluntary emissions offsetting.

> What is the difference between voluntary offsetting and compliance markets?

Compliance markets are regulated by mandatory national or regional schemes, such as the NZ ETS. They are a tool for countries or states to reduce their GHG emissions faster. Compliance participants are required to reduce emissions, and if they cannot, they must purchase carbon credits.

Voluntary offsetting is a tool for anyone, either individuals, companies or the public sector, to take climate action beyond a legal requirement. Purchasing carbon credits on the voluntary market is often used to reach carbon neutrality, which means to reach a balance between emitting GHG and absorbing GHG from the atmosphere.

> Where do our carbon credits come from?

The credits that we sell come exclusively from New Zealand permanent forests. These credits all come from forests which have been registered with the PFSI which therefore ensures the highest transparency, tracability and permanence. You can learn more about the projects here.

> How Do Forests Make Carbon Credits?

Trees absorb CO2 from the atmosphere and store it in their trunks, branches, leaves and roots. The amount of carbon stored in a forest depends on species, stocking, site conditions such as soil and rainfall, and how long the forest is left to grow. The longer a forest is protected and maintained, the better the climate outcome.

The amount of CO2 absorbed each year by a forest is calculated by the New Zealand Government. Once verified the Government issues one NZU (carbon credit) to the forest owner for every tonne of CO2 that has been removed.

> More resources on climate change and forests

We have 10 years to save the planet: IPCC Special Report 2018 on global warming of 1.5C.

Forests are key to reverse global warming: find out why with the IPCC Special Report 2020 Climate Change and Land.

To learn further about the impacts of climate change and environmental degradation in New-Zealand, check out the latest report by Ministry for the Environment: Environment Aotearoa 2019