Budget 2025: Could new Government gas money put New Zealand trade at risk?
Friday, 23 May 2025
On Budget Day, Resources Minister Shane Jones held up a bottle of crude oil in the debating chamber and asked for permission to sniff the fumes of this locally produced crude.
The Government had just announced plans to open an investment fund to back local gas exploration. But in doing so, it has faced fierce criticism from environmentalists and also those who fear it is breaching international agreements which prohibit the state funding of fossil fuel production.
Jones and Prime Minister Christopher Luxon have dismissed those fears.
For months, Jones has spoken at length about his love of mining and fossil fuels. All of that talk was finally realised through the $200 million set aside in Budget 2025 to fund gas exploration.
And so Jones celebrated. “With your blessings Mr Speaker, I would like to take the lid off and invite the Green Party to sniff it,” Jones announced, while waving around the bottle of “Maui #1 Crude Oil” during Thursday’s Budget debate.
But the Green Party and other commentators fear Jones has just taken the lid off a very expensive can of worms. They say he is putting international trade at risk.
In various free trade deals, the New Zealand Government has made promises that it would not unnecessarily fund any fossil fuel industries. It has also promised to wind down the production and use of fossil fuels in New Zealand.
The most recent of those agreements, signed just months ago by Trade Minister Todd McClay, committed New Zealand to “eliminating harmful fossil fuel subsidies”.
Free trade deals with the European Union and United Kingdom also contain commitments to implement the Paris Agreement, which calls for Government to phase out - and not subside - the production of fossil fuels.
A spokesperson for Jones said the Government was taking these international deals seriously and would continue to meet them.
But the Ministry of Foreign Affairs and Trade has refused to release any advice or even a statement to back up the claim that this $200 million in gas money would not risk push back from trade partners.
Green co-leader Chlöe Swarbrick said this funding announcement clearly breached those deals.
“Anything that can be construed as effectively egging the fossil fuel industry on is a subsidy. There is a very strong legal grounds to say that we are breaking that agreement, which the Government celebrated signing on to last year,” Swarbrick said.
“What the minister is proposing here is taking $200 million of New Zealanders’ money and setting it on fire,” she added, as she argued that any commercially viable gas project could be funded by the private sector.
She said the Investment Boost policy, offering 20% rebates for capital investment, could also be seen as a breach of those agreements - if that was picked up by mines and oil companies.
Luxon said New Zealand faced energy insecurity and the investment in gas was a better alternative to relying on the Huntly coal power plant.
“We are very comfortable that we are meeting our obligations and our commitments. In my conversations with many leaders around the world, when I’m doing my bi-laterals, [I say] we are a top five country in terms of the amount of renewables we have - at almost 88%,” he said.
But the group Lawyers for Climate Action said the Government was opening New Zealand up to legal challenges from trading partners.
“This Budget’s $200 million investment in new gas could be considered a form of ‘fossil fuel subsidy’ - which the Agreement on Climate Change, Trade and Sustainability explicitly prohibits,” said Jessica Palairet, the group’s executive director.
That agreement was signed in November, 2024, with McClay saying it would bring major economic benefits for exporters. Likewise, the EU Free Trade Agreement was expected to bring in around $2 billion per year.