The number nobody wanted to budget for
Budget 2026 dropped last week with no money committed to meeting New Zealand’s Paris Agreement pledges. Treasury warned that “substantial purchases” of offshore carbon credits would likely be needed to honour the 2030 target, but declined to include an official figure because there is “no legal obligation” to meet the target and no government commitment to buy credits.
The Ministry for the Environment’s own analysis puts the shortfall at 84 million tonnes, roughly a full year of national emissions. Filling that gap with offshore credits would cost in the order of $5 billion, a figure consistent with Treasury’s own prior modelling. In 2024, Newsroom reported that Treasury’s 2023 Climate Economic and Fiscal Assessment estimated offshore credit costs at $4 billion to $9 billion depending on the mechanism used.
That same Newsroom analysis argued the liability should already appear in the government’s books, noting that “failure to acknowledge this cost is hard to reconcile with the foundational accounting principle of presenting a true and fair view of the financial situation.”
So the government has a multi-billion-dollar contingent liability it refuses to recognise, a target it refuses to fund, and a domestic emissions trajectory that is going nowhere.
Emissions are barely moving
New Zealand’s 2024 gross emissions came in at 75.8 Mt CO2-equivalent, down just 0.1% from 2023. Agriculture accounts for 53% of gross emissions, energy for 38%, and methane from livestock alone makes up 48%. These are not sectors that transform on a four-year timeline.
The second emissions reduction plan sets a budget of 305 Mt for the 2026-2030 period. But current modelling already projects the following period will overshoot its 240 Mt limit by 9.2 Mt, meaning the trajectory is worsening, not improving.
In December 2025, the government quietly softened the biogenic methane target from a 24-47% reduction by 2050 to 14-24%. That buys the agricultural sector breathing room but widens the long-run gap.
Two ministers, two stories
The government’s position is not just inadequate. It is internally contradictory.
Finance Minister Nicola Willis stated in December 2025 that the government would not send “cheques for billions of dollars offshore”, effectively confirming New Zealand would not meet its 2030 target under current settings. That same Newsroom analysis found that meeting the target through domestic action alone would require sustained emissions cuts exceeding the Covid-19 lockdown dip, every single year until 2030.
Climate Change Minister Simon Watts, meanwhile, has pointed to a coming “renewable energy boom” and “increasing confidence” in agricultural technology. Yet he has simultaneously been signing memoranda of understanding with other jurisdictions to enable offshore mitigation access “if needed,” an action that directly contradicts the Willis line.
This is not a policy disagreement between ministers. It is the absence of a policy altogether.
Why business cannot afford to wait this out
The uncomfortable arithmetic is straightforward. The longer the government defers either buying offshore credits or implementing tougher domestic measures, the larger the eventual bill and the more disruptive the correction.
New Zealand has form. It met its 2020 climate target through forestry activities and surplus Kyoto Protocol credits, a one-off accounting manoeuvre that cannot be repeated. The 2030 target requires real reductions or real purchases.
There is also a trade dimension. New Zealand’s free trade agreements with the EU and UK contain climate conditionality provisions. The EU’s Carbon Border Adjustment Mechanism is already reshaping market access terms for exporters. A country visibly walking away from its Paris commitments is not well positioned in those negotiations.
Treasury’s 2023 assessment noted that NZ ETS auction proceeds were projected at $2.4 billion to $6.2 billion over 2023-2026. That money could have been ring-fenced for offshore credit purchases. It was not.
For businesses in energy, agriculture, transport, and heavy industry, the planning question is binary. Either the government eventually buys its way out at massive cost, or it imposes sharply tighter domestic emissions policy under time pressure. Neither outcome is painless, and neither is being planned for. The $5 billion offshore credit bill, perversely, may be the cheaper option. The alternative is a regulatory crackdown designed by politicians with their backs to the wall and the clock at zero.
Sources
- Budget 2026: No money committed to meeting Paris Agreement pledges (2026-06-10)
- Govt accused of breaching Paris climate deal after Willis rules out buying credits (2025-12-03)
- An obscure climate accounting decision with billion-dollar consequences (2024-05-06)
- GHG Inventory 2026 Snapshot (2026-04)
- New Zealand’s projected greenhouse gas emissions to 2050 (2024-12-11)
- Greenhouse gas emissions targets and reporting (2025-12-15)
- New Zealand’s second emissions reduction plan 2026-30 (2024-12)
- Ngā Kōrero Āhuarangi Me Te Ōhanga: Climate Economic and Fiscal Assessment 2023 (2023-04)