New Zealand

NOTE: We have updated the quantification of New Zealand's targets and policies based on the latest available data. Our full assessment of New Zealand will be forthcoming shortly, below is our September 2021 update but with the latest ratings. Our assessment of New Zealand's NDC update is here.

New Zealand is at a turning point, as it will release an emissions reduction plan by December 2021, which provides an opportunity to set ambitious policies to decarbonise all sectors. The country’s newly-established Climate Change Commission has reviewed the government’s climate policies, and published recommendations on a carbon budget.

New Zealand is one of the few countries to have a net zero emissions by 2050 goal enshrined in law, its Zero Carbon Act, but short-term policies cannot yet keep up with that ambition. New Zealand is increasingly relying on the mitigation potential of the land use and forestry sector to meet its target rather than focusing efforts on reducing emissions from high emitting sectors.

Although included in the Act, methane from agriculture and waste (over 40% of New Zealand's emissions) is exempt from the net zero emissions goal, and has a separate target (at least 24-47% reduction below 2017 levels by 2050), not yet covered by significant policies. Overall, the CAT rates New Zealand’s current climate targets, policies and finance as “Highly insufficient”.

The government plans to strengthen its NDC based on the Climate Change Commission’s final advice, which ambiguously recommended a target of “much more than 36%”. However, the Climate Change Commission’s advice does not comply with the Climate Change Response Act and is inconsistent with limiting warming to 1.5˚C, which would require New Zealand to set 2030 target of a reduction in gross emissions of at least 44%.

Aside from the need for a major increase in the target number itself, the government also needs to revisit its target architecture and drop the much discredited “gross net” approach to target setting. New Zealand one of only a few countries in the world using this “gross net” accounting system to calculate its 2030 target.

The CAT rates New Zealand’s climate targets, policies and finance as “Highly insufficient”. The “Highly insufficient” rating indicates that New Zealand’s climate policies and commitments are not stringent enough to limit warming to 1.5°C and need substantial improvements. New Zealand’s target is rated “Insufficient” when compared with its fair share contribution to climate action and “Almost” when compared to modelled domestic pathways. Its policies and action do not put in on track to meet this target and its climate finance is inadequate.

New Zealand should increase both its emissions reduction target and climate policies, and provide additional, predictable, finance to others to meet its fair share contribution.

The CAT rates New Zealand’s current policies as “Highly insufficient” when compared to modelled domestic pathways. The “Highly insufficient” rating indicates that New Zealand’s policies and action in 2030 are not at all consistent with the 1.5°C temperature limit. If all countries were to follow New Zealand’s approach, warming could reach over 3°C and up to 4°C. The full policy assessment is forthcoming.

New Zealand is expected to see some significant policy announcements in late 2021, including an emissions reduction plan (ERP). In June 2021, after a period of public consultation, the Climate Change Commission issued its final advice on how New Zealand can achieve a low emissions future. Many of the recommendations are economy-wide, cover short timeframes of one or two years, and if adopted will lead to substantial climate action.

The government is required, by 31 December 2021, to set out emissions reduction plans for 2022 to 2025 and three emissions budgets for the period of 2022 to 2035. As of mid 2021, New Zealand is not expected to meet its NDC under current policies and actions. The CAT rates New Zealand’s climate policies and action as “Highly insufficient”.

The government’s policy response to COVID-19 has been a mix of fossil fuel support and small steps in climate policy related to green investment and the public sector. Estimated emissions in 2020 are expected to be similar to 2019 emissions (with a 0.3% decline), as the impacts of COVID-19 on emissions have been minimal. In its response to COVID-19, the government introduced post-COVID-19 legislation to fast-track projects. Neither environmental safeguards nor climate change impacts were mandatory for the projects, risking the approval of emissions-intensive projects.

The 2021 Budget allocated NZD 300m to the Green Investment Finance Fund and NZD 100m on other climate change initiatives such as a Carbon Neutral Government Programme aiming for the public sector to be carbon neutral by 2025.

In June 2020, the government reformed the Emissions Trading Scheme, continuing to exempt the country’s largest contributor to greenhouse gas emissions – the agriculture sector – from a price on its emissions until 2025, when it was originally proposed to cover all sectors. The amendment sets a cap on emissions that can be traded, which will decrease from 2021. The reform phases out free industrial allocations of carbon units, and lifts the cap on the price of carbon from NZD 25 (USD 17) to NZD 35 (USD 23) per New Zealand unit (equal to one tonne of CO₂ equivalent). The government plans to ban new coal fired boilers by the end of 2021, and is consulting on plans to phase out fossil fuels in process heat by 2037, as recommended by the CCC, with a few exemptions.

Other climate policy highlights include the renewable electricity target of 90% by 2025 and 100% by 2035. The Government has an electric vehicle target for government fleet vehicles to be emissions free by 2025/26 and has introduced the country’s first-ever CO₂ emissions standard for imported cars in 2021. The government is developing a hydrogen roadmap. It has a vision paper in support of opportunities for domestic use and the export of green hydrogen.

New Zealand’s domestic target in 2030 is not consistent with limiting warming to 1.5°C when compared to modelled domestic pathways. The target aims for GHG emissions to be 50% below 2005 levels by 2030 (including LULUCF).

The new target equates to around 51 MtCO₂e/yr by 2030 excluding LULUCF. This is equivalent to 21% below 1990 levels by 2030. New Zealand needs to bring down its emissions level to 47 MtCO₂e/yr for a 1.5°C modelled domestic pathway. We rate this target as “Almost sufficient”, moving up from previous rating of “Insufficient”.

This rating indicates that New Zealand’s emissions in 2030 are not yet consistent with the Paris Agreement’s 1.5°C temperature limit but could be, with moderate improvements. If all countries were to follow a similar approach, warming could be held below—but not well below—2°C.

We rate New Zealand’s target as “Insufficient” when compared with its fair share emissions allocation. The “Insufficient” rating indicates that New Zealand’s emissions in 2030 needs substantial improvements to be consistent with limiting warming to 1.5°C. New Zealand’s target is at the least stringent end of what would be a fair share of global effort and is not consistent with limiting warming to 1.5°C unless other countries make much deeper reductions and comparably greater effort. If all countries were to follow similar approach, warming would reach over 2°C and up to 3°C.

With the update in NDC in 2021, New Zealand’s fair share rating has improved from “Critically Insufficient” to “Insufficient”. A fair share target would require New Zealand to nearly halve this target to 32 MtCO₂e/yr by 2030, and commit to additional financial support for emissions reductions achieved in developing countries.

The CAT rates New Zealand’s climate finance as “Highly Insufficient”. A more detailed analysis will be forthcoming.

For the past 30 years, New Zealand’s climate action has primarily relied on forests planted in the 1990s rather than effective climate policy, and the carbon removal benefits of the forests are diminishing. New Zealand’s reliance on Land Use, Land Use Change and Forestry (LULUCF) to meet its NDC target has increased from 13% to 35% since last year. Emissions reductions from emissions-intensive sectors should be a focus, rather than reliance on the uncertain mitigation potential of the LULUCF sector.

New Zealand has also faced criticism over its LULUCF carbon accounting methodology. Plantation forests have a pattern of sinking carbon during tree growth and releasing carbon when harvested. New Zealand’s LULUCF accounting methodology uses a “modified activity-based” approach which has been found to mask real emissions. This method has implications for the emissions trading scheme, the NDC, and the emissions budgets proposed by the Climate Change Commission.

The CAT evaluates the target as “Poor”. An updated assessment will be forthcoming.