Budget 2026: No money committed to meeting Paris Agreement pledges

No money has been committed in this year’s Budget to pay for meeting the country’s Paris Agreement pledges.

That’s despite Treasury warning “substantial purchases” of offshore carbon credits were likely to be needed if the government chose to honour New Zealand’s 2030 target.

Treasury identified the potential cost as a specific fiscal risk to the government’s finances for several years now.

A one-off analysis prepared for the previous government in 2023 put the cost at anywhere from $3 billion to $24 billion.

However, Treasury had not included an official figure in the fiscal update released alongside Thursday’s Budget, because there was “no legal obligation” to meet the target and the government had not committed to any purchases.

“The government has not communicated a sufficiently specified plan to purchase offshore mitigation… to create a valid expectation… that it will do so,” it said.

The Greens said the government’s “inability to commit to reality” meant Treasury could not accurately forecast costs.

Previous governments also did not budget for offshore emissions.

However, the Budget’s forecast years now included the 2030 deadline for New Zealand to halve its net greenhouse gas emissions.

New Zealand could meet the target through a combination of cutting emissions at home, or by paying other countries to further lower their emissions - known as offshore mitigation.

The most recent analysis from the Ministry for the Environment showed that, even with domestic climate change policies, New Zealand would miss the target by 84 million tonnes (Mt) of emissions - a whole year’s worth.

That meant buying the remainder offshore, but current government ministers have refused to commit to any purchases, and some have expressed outright opposition.

Finance Minister Nicola Willis told reporters last year it was not in New Zealand’s best interests “to send cheques for billions of dollars offshore”.

“That’s not our priority.”

Last year, Treasury secretary Iain Rennie gave Green Party co-leader Chlöe Swarbrick an undertaking to update its 2023 analysis, but said that would likely not be done until closer to the election.

In response to Thursday’s Budget, Swarbrick said politicians had known “for years” that meeting the Paris target would require buying offshore credits.

The government’s cuts to domestic climate policies increased that cost, she said.

“But this government refuses to be up-front and honest about that. Treasury has been clear today that the government’s inability to commit to reality means that they can’t properly forecast costs.”

“Our nationally determined contribution under the Paris Agreement comes home to roost in 2030,” she said.

“Every action this government takes to shred domestic climate action results in us paying more in offshore mitigation, however, Treasury can’t forecast what that figure looks like because this government refuses to put any money where their mouth is.”

Does New Zealand have to pay?

Successive governments had never included the potential cost of offshore mitigation in their financial accounts, because Treasury said it did not meet accounting thresholds.

That was because there was no automatic punishment or action that kicked in if New Zealand failed to meet the target - 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.

Willis had blamed the need for offshore mitigation on former Climate Change Minister James Shaw, who she said signed New Zealand up to an “extravagant” target.

She also backed away from a full commitment to meeting the 2030 goal, known as a ‘nationally determined contribution’, saying only that the government was making “best endeavours”.

However, the emissions gap - and the concept of paying for it with overseas credits - was not new.

New Zealand’s 2030 target had always anticipated the government would need to purchase at least some offshore credits.

The Key government, which signed the Paris Agreement and New Zealand’s original pledge, refused to do so until it had confirmation countries would be able to buy credits offshore.

Despite Willis’ comments, the Prime Minister and Climate Change Minister Simon Watts had made unequivocal commitments to the Paris Agreement target.

Ahead of the annual COP climate summit last November, Watts said the priority was 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.

“We believe it is possible… but acknowledge it will be challenging.”

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