Government facing up to $5b bill over carbon credits, Treasury reveals
Thursday, 11 June 2026
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 $1.6b may also be needed to pay for credits to meet a subsequent commitment, due by 2035.
Treasury said the figures did not reflect any government intentions or decisions, but was publishing them so there was transparency over possible future costs.
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 $3b to $24b.
Last year, Treasury secretary Iain Rennie gave Green Party co-leader Chlöe Swarbrick an undertaking to update that analysis.
The new estimate narrows the range to $4.4-$5b to meet the 2030 pledge, and $0.2-$1.6b to meet New Zealand's next pledge to lower emissions by 51%-55% by 2035.
That was based on the Ministry for the Environment's 2025 emissions projections, with and without extra policies to reduce emissions.
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.'
The government has repeatedly committed to honouring its Paris obligations, but Finance Minister Nicola Willis has said she doesn't want to see billions of dollars go offshore to pay for credits.
No money was committed in this year's Budget to pay for offshore carbon credits.
That was despite Treasury warning 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.
Following the release of the 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.
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 $51m 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.