Creative accounting by Govt on climate guarantees a more expensive future

Sunday, 14 December 2025

Dr Rod Carr has held numerous roles including chair of the Reserve Bank and vice-chancellor of the University of Canterbury; most recently he was inaugural chair of the Climate Change Commission.

OPINION: It is the prerogative of the government of the day to decline to take the advice of the Climate Change Commission.

In certain circumstance the law requires the government to explain why they are declining to follow the commission’s advice, and a court may be asked to consider if the government has met the requirements of the law in discharging that statutory responsibility. It is always worth remembering that it is Parliament, not the government of the day, which is sovereign in New Zealand. Unless or until the law is made or changed by governments through proper process, the government must comply with the law.

In regard to obligations under international treaties, such as The Paris Agreement, the same is true. To give effect to international treaties there is domestic legislation, making them binding on future governments unless or until the law is changed. Our elected leaders cannot make or break laws by press release. Our obligations under the Paris Agreement are binding unless or until the domestic law is changed.

It is true that this minister of finance and this government are under no obligation to buy any offshore carbon credits (offshore mitigation) - not a single dollar of it. The period to which our emissions obligations under the Paris Agreement apply does not end until December 31, 2030, and the accounting for those emissions won’t be done until 2032.

Only then will we know what our total gross emissions were, what offsets we had from land use change (largely forestry) and therefore, how our net emissions compared to the emissions we signed up for in our 2030 Nationally Determined Contribution (NDC). There are at least two elections (2026, 2029) before we know that number and possibly three (2032) before we need to settle our account. I am fairly confident we will have a different government, possibly several prime ministers and a number of ministers of finance before then.

The current rhetoric is not about what we should pay, or will pay, for domestic emissions that exceed our promises to the world. It is about what and when we should budget for in the Crown accounts. This government has made strong commitments to “balance the budget” and limit the ratio of debt to the size of the economy (gross domestic product, or GDP).

By strongly asserting this government will not buy offshore carbon credits (which is true, this government won’t), the Government is seeking to avoid triggering an entry in the Crown accounts that would adversely impact their achieving accounting metrics of deficit and debt reduction.

What New Zealand will or won’t do under future governments is not for this government to determine. What this government can do is make decisions that reward the reduction of emissions this decade or encourage emissions to be higher than they might otherwise have been, making the future cost of meeting our NDC, or abrogating our responsibilities, higher or lower than it would otherwise have been.

Rather than kicking the can down the road, a failure to reduce emissions by as much as possible, as soon as possible, is like pulling the pin from a grenade and handing it to a kid saying “hold on tight, she’ll be right”.

On the assertion that the NDC signed up for by the previous government was excessively ambitious, even unrealistic, it should be remembered that when we (John Key’s government) signed the Paris Agreement, estimates at the time were that gross domestic emissions, less domestic forestry removals, would be a couple of hundred million tonnes greater than our likely NDC.

All political parties knew that we could not meet our obligations under the Paris Agreement from domestic action alone and that buying offshore mitigation was in our own self interest, as the cost of emissions reduction abroad would be less than in New Zealand. If another country could exceed its emissions reduction obligations at $20 a tonne and our cost of abatement was $50 a tonne, we should pay that country to do more so we could do less. It is now estimated that rather than a shortfall of hundreds of millions of tonnes of emissions, our shortfall will be less that half what we thought it would be when we originally signed up to the Paris Agreement a decade ago. The new information is not an overly ambitious NDC but the fact our shortfall between our domestic emissions and our self declared global contribution is half the tonnage we thought it would be.

Of course this, or a future government, could withdraw from the Paris Agreement or even not bother to withdraw but just ignore its terms. Whether we withdraw or ignore, the United Nations is not going to send in the debt collectors. The consequences will be felt as a result of decisions by other sovereign states we want to travel to, trade with, seek investments from and ask for support for other things we care about. While these costs may not immediately show up as deficits or debts in the Crown accounts they will have real costs and lost opportunities for Kiwi households and businesses.

I am less concerned about what this and indeed any government says, rather than what it does or does not do. Through its actions this government is creating delay and raising the cost of the inevitable transition to a low emissions, climate resilient society. Households and businesses will enter the next decade with higher emissions and less resilience than could have been the case. That is a failure of leadership arising from the pursuit of short term accounting fictions. The Crown accounts are like the instrument panel on an aircraft, they create simplified information about a highly complex reality.

Reality does not change because you close your eyes or cover over the dials. When you stop looking, stop counting and look the other way, the chances of avoidable bad things happening increases.

What do you think? Email sundayletters@stuff.co.nz. Please include your full name and address.