The Prime Minister has doubled down on his insistence that the government will not spend billions of dollars offshore to meet New Zealand’s climate commitments. Treasury estimates it could cost up to $5 billion to pay for the overseas carbon credits New Zealand needs to honour its Paris Agreement commitments. An additional $1.6 billion may also be needed to pay for credits to meet a subsequent commitment, due by 2035. The government was “gonna do everything we can” to honour the country’s Paris Agreement pledge
to halve emissions by 2030, Christopher Luxon said. “But just reassuring everybody, we ain’t shutting down farms and we certainly aren’t sending billions of dollars offshore.” The Green Party said it was impossible for the government to meet the target with domestic climate policies alone. It was time for Luxon be honest about whether the government was still committed to the Paris Agreement, and – if so – to explain how it would do that, Greens co-leader leader Chlöe Swarbrick said. “Are we genuinely, honestly
going to meet the [target], do they genuinely, honestly commit us to doing that? Because if so, the reality is we will need to pay for offshore mitigation.” New Zealand has the option of meeting its pledge to halve net greenhouse gas emissions by 2030 entirely with domestic policies. However, the most recent analysis from the Ministry for the Environment showed that there was a shortfall of 84 million tonnes of emissions, that would need to be made up by paying other countries to offset
their emissions instead. Treasury has identified the potential cost of offshore credits to make up the gap as a specific fiscal risk to the government’s finances for several years now. However, it has never put an official figure on the government books, because there was “no legal obligation” to meet the target and successive governments had not committed to any purchases. A previous one-off analysis it prepared in 2023 put the cost at anywhere from $3 billion to $24 billion. Last year, Treasury secretary Iain
Rennie gave Swarbrick an undertaking to update that analysis. The new estimate narrows the range to $4.4b-$5 billion to meet the 2030 pledge, and $0.2-$1.6 billion to meet New Zealand’s next pledge to lower emissions by 51-55 percent by 2035. There was still a “high degree of uncertainty” in the estimates, Treasury said. “Actual costs will depend on future policy decisions, market developments and international arrangements, and the results do not attempt to capture the full range of possible outcomes.” It said today the figures
did not reflect any government intentions or decisions, but it was publishing them so there was transparency over possible future costs. Luxon said the government would do “everything we can to hit 2030” but not at the expense of economic growth. “We’re not here to chase emissions reduction as the end goal. Our goal is growth in this economy and growth in this country.” Treasury warned in the Budget Economic and Fiscal Update that “substantial purchases” of offshore carbon credits were likely to be needed
if the government chose to honour New Zealand’s 2030 target. Does New Zealand have to pay? There is no automatic punishment or action that kicks in if New Zealand fails to meet its Paris targets – so, theoretically, New Zealand does not ever need to pay up. However, climate groups such as Lawyers for Climate Action have warned of reputational, trade and legal risks. Earlier this month, the United Nations General Assembly endorsed the findings of a landmark International Court of Justice opinion, which found
countries could be held legally responsible for their greenhouse gas emissions. The current government has blamed the need for offshore mitigation on former Climate Change Minister James Shaw, who strengthened New Zealand’s original Paris pledge. However, the emissions gap – and the concept of paying for it with overseas credits – was not new. New Zealand’s original 2030 target also anticipated the government would need to purchase at least some offshore credits. The John Key government, which signed the Paris Agreement and the original pledge,
refused to do so until it had confirmation countries would be able to buy credits offshore. Climate Change Minister Simon Watts has said the government was prioritising reducing domestic emissions, “but we are also exploring all available options to meet our [2030] commitment”. Watts said a coming “renewable energy boom” and “increasing confidence” in agricultural technology meant the target could be achieved domestically. On Wednesday, the government announced up to $51 million of pre-committed funding would go towards an ‘Early Adopter Accelerator’ to encourage farmers
to start using methane-busting technology. It would match investment from companies and industry groups dollar-for-dollar, to roll proven, effective technologies out.
Christopher Luxon, carbon credits, offshore mitigation, Paris Agreement, New Zealand emissions, Treasury estimates, Ministry for the Environment, Chlöe Swarbrick, Green Party, Iain Rennie, James Shaw, Simon Watts, methane-busting technology, Early Adopter Accelerator, 84 million tonnes