Pre-1990 forest is land that was in forest on 31 December 1989 and remained in predominantly exotic forest on 31 December 2007. Old-growth indigenous forest is not subject to the rules of the ETS, and therefore not pre-1990 forest.

Under the ETS, owners of pre-1990 forest land will be required to surrender NZUs if they deforest more than 2 hectares of forest land in each five-year commitment period from 1 January 2008, followed by:

• a change in land use out of forestry e.g. into dairy farming, or

• the forest species not reaching specified thresholds.

Pre-1990 forest owners do not receive NZUs as their forest grows, but the Government made available a one-off opportunity for an allocation of NZUs or an exemption to the deforestation rules of the ETS. The allocation goes some way towards compensating landowners for the potential costs of deforestation and or reduction in land value due to the regulatory encumbrance of the Forest Allocation Plan. Owners of less than 50 hectares of pre-1990 forest land in September 2007 can apply for an exemption to deforest up to that amount of land at some time in the future. The deadlines to apply for both the allocation and exemption have now passed.