Key facts
- New Zealand may need to spend up to NZ$5 billion on international carbon credits.
- Domestic emissions reductions are projected to fall short of Paris Agreement targets.
- The cost for the 2021-2030 period (NDC1) could range from NZ$4.4 billion to NZ$5 billion.
- The cost for the 2031-2035 period (NDC2) is estimated between NZ$0.2 billion and NZ$1.6 billion.
- Prime Minister Christopher Luxon indicated the government would not spend billions on overseas mitigation.
New Zealand may face significant costs, potentially up to NZ$5 billion ($2.89 billion), to purchase international carbon credits to meet its climate targets under the Paris Agreement. A paper from the New Zealand Treasury indicates that domestic emissions reductions are likely to fall short of the country's Nationally Determined Contributions (NDCs) for the periods 2021–30 (NDC1) and 2031–35 (NDC2).
For NDC1, which aims for a 50% reduction in net emissions below 2005 levels, the Treasury's modelling suggests offshore mitigation costs could range from NZ$4.4 billion to NZ$5.0 billion. This implies an average cost of international credits between NZ$7.65 and NZ$8.70 per tonne of CO2 equivalent. The NDC2 target, aiming for a 51%-55% reduction, appears more aligned with domestic budgets, with estimated offshore mitigation costs between NZ$0.2 billion and NZ$1.6 billion.
The Treasury report acknowledges substantial uncertainty in these cost estimates and emphasizes that the information is for transparency and does not represent government decisions. Domestic policy choices will directly influence the need for offshore mitigation, with factors like liquidity in voluntary carbon markets and procurement strategies being key cost drivers. However, Prime Minister Christopher Luxon has stated that the government will not spend billions of dollars overseas to meet its climate commitments.